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Market Commentary 31 January 2024
Benchmarks to get cautious start ahead of key US Fed policy decision

Indian equity benchmarks ended lower on Tuesday, dragged down by Consumer Durables, Capital Goods and Power stocks amid mixed moves across global markets. After a positive start, the markets erased the gains in the initial hours itself and extended the losses as the day progress, as traders got cautious with report stating that wholesale prices of tur dal have increased 5% in the last one month despite the arrival of new crops and continuing imports from Myanmar as reduced acreage and decreased production for a second consecutive year impact supply. Some concern also came amid a private report stating that foreign Portfolio Investors (FPIs) have expressed concerns about market regulator Securities and Exchange Board of India's (Sebi) plan to introduce instant trade settlement in the equity markets. Selling intensified towards the fag end as investors further slashed their positions in key stocks ahead of key events such as the interim budget and the US Fed interest rate decision. Traders overlooked the finance ministry's statement that India is expected to become the third-largest economy in the world with a GDP of $5 trillion in the next three years and touch $7 trillion by 2030 on the back of continued reforms. Traders also paid no heed towards Union Minister of Agriculture & Farmers' Welfare and Tribal Affairs, Arjun Munda's statement that the agriculture sector in the country is making an important contribution to the economy and livelihood of crores of people. 54.6% of the country's workforce is engaged in agriculture and allied sectors' activities. The share of agriculture sector in GDP is 18.6%, while the sown area is 139.3 million hectares, out of the total geographical area of the country. Finally, the BSE Sensex fell 801.67 points or 1.11% to 71,139.90 and the CNX Nifty was down by 215.50 points or 0.99% to 21,522.10.

The US markets ended mostly lower on Tuesday as traders cashed in on some of the recent strength in the tech sector. Uncertainty ahead of the Federal Reserve's monetary policy announcement on Wednesday have also inspired traders to book tech-sector profits. The Fed is widely expected to leave interest rates unchanged, but the accompanying statement could have a significant impact on the outlook for rates. Optimism about a March rate cut has faded recently, with many economists now suggesting the Fed will wait until May to begin lowering rates. However, the uptick by the Dow came amid strong gains by financial giants JPMorgan Chase (JPM) and Goldman Sachs (GS). On the sectoral front, airline stocks saw substantial weakness on the day, resulting in a 2.6 percent nosedive by the NYSE Arca Airline Index. JetBlue Airways (JBLU) moved sharply lower after reporting a narrower than expected fourth quarter loss but forecasting lower revenues and higher costs in the first quarter. On the economic data front, Labor Department released a report this morning showing an unexpected increase in job openings in the month of December. The Labor Department said job openings rose to 9.03 million in December from an upwardly revised 8.93 million in November. Street had expected job openings to dip to 8.75 million in December from the 8.79 million originally reported for the previous month. A separate report released by the Conference Board showed a continued improvement in U.S. consumer confidence in the month of January. The Conference Board said its consumer confidence index jumped to 114.8 in January from a downwardly revised 108.0 in December. Economists had expected the consumer confidence index to climb to 114.0 from the 110.7 originally reported for the previous month.

Crude oil futures ended higher on Tuesday after International Monetary Fund rose its growth forecast for the global economic in 2024. The global economy is now projected to grow 3.1 percent this year, the same as in 2023 but an upgrade from the 2.9 percent expansion forecast in October. Meanwhile, supply concerns also persisted as markets waited for a U.S. response to the deadly attack on American troops in Jordan. Private report said that Republicans in Congress are pressuring President Joe Biden to strike back at Iran in retaliation for the drone attack on Tower 22 in Jordan that killed and wounded U.S. service members. Benchmark crude oil futures for March delivery rose $1.04 or 1.4% to settle at $77.82 a barrel on the New York Mercantile Exchange. Brent crude for March delivery gained $0.47 or 0.6% to $82.87 per barrel on London's Intercontinental Exchange.

Indian rupee ended higher against dollar on Tuesday despite muted trend in domestic equities. Traders took support with finance ministry's statement that the India is expected to become the third-largest economy in the world with a GDP of $5 trillion in the next three years and touch $7 trillion by 2030 on the back of continued reforms. On the global front, euro edged lower on Tuesday after data showed the euro zone narrowly avoided a technical recession in the fourth quarter, while the U.S. dollar edged higher, as traders awaited the Federal Reserve's monetary policy decision this week. Gross domestic product (GDP) in the 20 countries sharing the euro was flat in the fourth quarter against the previous three months, mainly thanks to strong growth in Spain and Portugal and a modest increase in Italy, while the German economy shrank in the final three months of 2023. Finally, the rupee ended at 83.11 (Provisional), higher by 5 paise from its previous close of 83.16 on Monday.

The FIIs as per Tuesday's data were net sellers in both equity and debt segments. In equity segment, the gross buying was of Rs 22001.20 crore against gross selling of Rs 26265.60 crore, while in the debt segment, the gross purchase was of Rs 1784.02 crore with gross sales of Rs 1945.18 crore. Besides, in the hybrid segment, the gross buying was of Rs 38.51 crore against gross selling of Rs 35.11 crore.

The US markets ended mostly in red on Tuesday after strong US labour data, raised doubts on how soon the Fed could cut rates. Asian markets are trading mostly lower on Wednesday following overnight weakness on Wall Street. Indian markets ended lower with significant losses on Tuesday as profit booking in financial, FMCG, pharma, and select IT stocks weighed on the sentiment. Today, markets are likely to get cautious start ahead of the key US Fed policy decision later tonight, and the announcement of Interim Budget Thursday. Foreign fund outflows likely to dent sentiments. Foreign institutional investors (FIIs) net sold shares worth Rs 1,970.52 crore on January 30, provisional data from the NSE showed. Traders will be concerned after Asia Securities Industry & Financial Markets Association (Asifma) has raised concerns about the Securities and Exchange Board of India (Sebi) proposal to introduce a T+0 settlement cycle. The industry association of top foreign portfolio investors (FPIs) has stated that this move could give rise to several issues, including the bifurcation of the market, liquidity fragmentation, and deterioration of market quality. There will be some cautiousness with report that as liquidity in the banking system continues to remain tight, a segment of the bond market is expecting open market operations (OMO) purchases from the Reserve Bank of India (RBI) in order to infuse durable liquidity. However, some respite may come later in the day as the International Monetary Fund (IMF) raised India's growth projection for 2024-25 (FY25) by 20 basis points (bps) to 6.5 per cent in its World Economic Outlook (WEO) update on Tuesday, citing buoyant domestic spending and improved global growth prospects. For FY24, the IMF raised India's growth estimate by 40 bps to 6.7 per cent compared to its October report. Traders may take note of report that the government is considering tweaking production linked incentive (PLI) schemes for certain sectors including textiles, food processing, and pharmaceuticals. MSMEs and Hospital industry stocks will be in focus as Crisil research report that revenue of micro, small, and medium enterprises (MSMEs) in the hospital segment is expected to grow 8-12 per cent Y-o-Y this financial year to Rs 4.2-4.9 trillion, driven by growing demand for elective surgeries, outpatient department care and routine treatments, as well price hikes by healthcare providers. Investors continue to keep close eye on earnings of many companies for more directional cues. Meanwhile, Nova Agri Tech will make its debut today.

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

Index

Previous close

Support

Resistance

NSE Nifty

21,522.10

21,411.59

21,722.84

BSE Sensex

71,139.90

70,763.01

71,829.52

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

ONGC

514.91

249.40

244.26

258.91

ITC

435.14

438.25

432.54

448.84

Tata Steel

357.04

134.75

133.60

136.80

BPCL

221.36

502.70

491.29

515.99

NTPC

209.18

316.10

312.41

321.86

  • NTPC has reported 7.30% rise in its consolidated net profit at Rs 5,208.87 crore for Q3FY24 as compared to Rs 4,854.36 crore for the same quarter in the previous year.
  • Bajaj Finserv's wholly owned subsidiary -- Bajaj Finserv Health has acquired 100% stake in Vidal Healthcare Services.
  • GAIL (India) has successfully concluded a long-term LNG purchase agreement for purchase of around 0.5 MMTPA LNG from ADNOC Gas.
  • Bajaj Finance has received approval to make investment up to Rs 400 crore in the equity share capital of Bajaj Financial Securities.

News Analysis