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Market Commentary 29 December 2022
Markets likely to get negative start amid weak global cues

 

Indian equity benchmarks closed flat after a choppy session on Wednesday amid weak global markets and profit taking by investors after two straight days of gains. After making a negative start, markets altered between gains and losses for whole day, as subdued foreign flows weighted down on the domestic sentiments. Foreign institutional investors (FIIs) sold shares worth Rs 867.65 crore on December 27, according to the provisional data available on the NSE. Some cautiousness also came in as the latest data on public debt showed that the total liabilities of the government increased to Rs 147.19 lakh crore at September-end from Rs 145.72 lakh crore at the end of June this fiscal year. In percentage terms, it reflects a quarter-on-quarter increase of 1 per cent in second quarter of 2022-23. Sentiments remained in lackluster mood in late afternoon deals, as India Ratings and Research (Ind-Ra) in its Research and Ratings Compendium said that the ratio of Upgrades/Downgrades is likely to moderate, amid higher inflation, slowing exports and an improving but still weak domestic demand. The agency expects the economic growth to slow down to 4.0% - 4.5% in 2HFY23 from 9.7% in 1HFY23. Adding some worries, the Reserve Bank of India (RBI) in its 'Trends and Progress of Banking in India' report for FY22 said that retail loans, long considered a panacea for the banking system, may become a systemic risk. Further, the report stated that Indian banks' gross non-performing assets (GNPA) declined to 5.8 per cent in March 2022, but the present macroeconomic environment can impact lenders' health. It stated the GNPAs, which touched a peak in FY18 following the asset quality review, have been declining sequentially to reach 5 per cent in September 2022. Finally, the BSE Sensex fell 17.15 points or 0.03% to 60,910.28 and the CNX Nifty was down by 9.80 points or 0.05% to 18,122.50.

 

The US markets ended deeply in red on Wednesday on ongoing concerns about the economic outlook and the possibility of higher interest rates leading to a recession. Traders were also looking ahead to next week's closely watched monthly jobs report, which could shed additional light on the outlook for interest rates and the economy. On the Sectoral front, tobacco stocks moved sharply lower over the course of the session, resulting in a 3.3 percent nosedive by the NYSE Arca Tobacco Index. Significant weakness was also visible among gold stocks, as reflected by the 3.2 percent slump by the NYSE Arca Gold Bugs Index. The weakness among gold stocks came amid a decrease by the price of the precious metal, with gold for February delivery falling $7.30 to $1,815.80 an ounce. On the economic data front, a report released by the National Association of Realtors (NAR) unexpectedly showed a continued slump in U.S. pending home sales in the month of November. NAR said its pending home sales index tumbled by 4.0 percent to 73.9 in November after plunging by 4.7 percent to a revised 77.0 in October. The extended nosedive came as a surprise to participants, who had expected pending home sales to increase by 0.6 percent. Pending home sales slid for the sixth consecutive month and are now down by 37.8 percent compared to the same month a year ago. A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

 

Crude oil futures ended lower on Wednesday on concerns about the outlook for energy demand amid fears of a global recession and concerns about rising Covid-19 cases in China. According to reports, Covid-19 cases have risen sharply in China following the country moving away from its hardline zero-Covid policy. However, as Russia's decision to ban oil sales beginning February to countries that abide by a G7 price cap imposed on December 5 helped limit the downside. Benchmark crude oil futures for February delivery fell $0.57 or 0.7 percent at $78.86 a barrel on the New York Mercantile Exchange. Brent crude for February dropped $1.07 or 1.3 percent to settle at $83.26 a barrel on London's Intercontinental Exchange.

 

Indian rupee strengthened against the dollar on Wednesday, as softening crude oil prices in the global markets boosted the local currency. Traders ignored latest data on public debt showing that the total liabilities of the government increased to Rs 147.19 lakh crore at September-end from Rs 145.72 lakh crore at the end of June this fiscal year. In percentage terms, it reflects a quarter-on-quarter increase of 1 per cent in second quarter of 2022-23. On the global front, dollar touched its highest in over a week against the yen on Wednesday, boosted by a jump in Treasury yields and by anticipation among investors of a rebound in Chinese growth as COVID-19 curbs loosen. Finally, the rupee ended at 82.80 (Provisional), stronger by 7 paise from its previous close of 82.87 on Tuesday.

 

The FIIs as per Wednesday's data were net buyers in equity segment, while net sellers in debt segment. In equity segment, the gross buying was of Rs 2894.27 crore against gross selling of Rs 2732.70 crore, while in the debt segment, the gross purchase was of Rs 80.95 crore against gross selling of Rs 165.04 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.47 crore against gross selling of Rs 10.79 crore.

 

The US markets ended lower on Wednesday as traders anticipated early recession to materialise in 2023. Asian markets are trading in red on Thursday following overnight losses on Wall Street. Indian markets witnessed consolidation on Wednesday, after rising for two straight sessions, and ended flat with negative bias amid mixed global cues. Today, markets are likely to start F&O series expiry session in red amid weak global cues. Foreign fund outflows likely to dampen sentiments in the markets. Foreign institutional investors (FIIs) have net-offloaded shares worth Rs 872.59 crore on December 28, as per provisional data available on the NSE. There will be some cautiousness with RBI Monetary Policy Committee (MPC) Member Ashima Goyal's statement that the government should not go in for an aggressive fiscal consolidation in the upcoming budget as global risks have not abated. However, traders may be taking encouragement with Crisil's report that strong domestic demand, healthier corporate balance sheets, and a well-capitalised banking sector are expected to steer India towards a 7 per cent gross domestic product (GDP) print in 2022-23. Some support may come with report that the interim free trade agreement between India and Australia will come into force on December 29, providing duty-free access to thousands of domestic goods such as textiles, and leather in the Australian market. Besides, various export promotion councils (EPCs) lauded the trade agreements signed by India with the UAE and Australia, saying the pacts will help the country in boosting exports by granting preferential access to those markets for Indian products. Aviation industry stocks will be in focus Union Minister Jyotiraditya Scindia said the country's civil aviation sector is witnessing a very strong V-shaped recovery with encouraging domestic passenger numbers, and the growth will continue in the coming years. After being significantly hit by the coronavirus pandemic, the sector is on the recovery path and the daily domestic air passenger traffic has been above the 4-lakh mark for the past few weeks. There will be some reaction in coal industry stocks with report that the Coal Ministry has identified four coking coal mines to be offered in subsequent rounds of auction for the private sector to further increase domestic raw coking coal supply. Sugar industry stocks will be in limelight with a private report that recent developments in both domestic and world markets have impacted the Indian sugar industry, in which micro, small, and medium enterprises (MSMEs) dominate. While prices of sugarcane (the key raw material) have increased, the increase in price of sugar has not been commensurate. In the primary market, KFin Technologies will make its debut on the BSE and NSE on December 29. The issue price has been fixed at Rs 366 per share.

 

Support and Resistance: NSE (Nifty) and BSE (Sensex)

 

Index

Previous close

Support

Resistance

NSE Nifty

18,122.50

18,069.54

18,174.29

BSE Sensex

60,910.28

60,724.25

61,085.81

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

506.60

110.20

109.16

111.76

Power Grid Corporation of India

126.11

215.90

212.80

218.70

NTPC

96.52

165.65

164.44

167.24

Oil & Natural Gas Corporation

95.34

143.85

142.81

144.76

ICICI Bank

89.80

898.55

894.91

903.06

 

  • Coal India's subsidiary -- Northern Coalfields has commissioned two electric shovels at its coal mines. 
  • Bharti Airtel has launched cutting edge 5G services in Jammu and Srinagar. 
  • Adani Enterprises has acquired 100% stake of SIBIA Analytics and Consulting Services on December 27, 2022.  
  • Reliance Industries' telecom arm -- Reliance Jio Infocomm has entered into partnership with Xiaomi India to offer a True 5G experience to all Xiaomi 5G smartphone consumers.
News Analysis