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Market Commentary 31 May 2024
Benchmarks to get positive start on firm Asian cues; GDP data eyed

Continuing their falling streak, Indian equity benchmarks ended lower by around a percent on Thursday due to profit booking amid growing nervousness among investors ahead of the results of the Lok Sabha polls on June 4. Market participants also remained on sidelines ahead of India's gross domestic product (GDP) data for Q4FY24.  After a weak start, the markets extended the losses as the day progressed as traders got anxious with exchange data showing that foreign Institutional Investors (FIIs) offloaded equities worth Rs 5,841.84 crore on Wednesday. Some pessimism also came with data showing that foreign direct investment (FDI) equity inflows in India declined 3.49 per cent to $44.42 billion in 2023-24 due to lower infusion in sectors such as services, computer hardware and software, telecom, auto and pharma. FDI inflows stood at $46.03 billion during 2022-23. Inflows during January-March FY24, however, rose by 33.4 per cent to $12.38 billion as against $9.28 billion in the year-ago period. Sentiments remained down-beat in late afternoon deals even as S&P Global Ratings revised outlook for the Indian economy to positive from stable and has affirmed the overall rating at BBB- citing robust growth and improved quality of government expenditure. Traders overlooked Finance Minister Nirmala Sitharaman's statement that S&P Global Ratings' revision of its outlook on India from stable to positive is a welcome development. She said this reflects India's solid growth performance and a promising economic outlook for the coming years. The minister noted that it has been possible due to the series of macroeconomic reforms undertaken since 2014, along with substantial outlay for capex, fiscal discipline, and decisive and visionary leadership. Traders also paid no heed towards credit rating agency, India Ratings and Research's (Ind-Ra) latest report that the expected mammoth dividend transfer by the Reserve Bank of India (RBI) to the central government and subsequent spending by the latter, is likely to reduce the ongoing pressure on the banking system deposit accretion and overall rates in the system, a few days after the RBI approving the transfer of Rs 2,10,874 crore as surplus to the government for the accounting year 2023-24. Finally, the BSE Sensex fell 617.30 points or 0.83% to 73,885.60, and the CNX Nifty was down by 216.05 points or 0.95% points to 22,488.65.

 

Magnifying their previous session's losses, the US markets ended lower on Thursday with the Dow once again falling to its lowest closing level in almost a month. A fall in shares of Salesforce (CRM) weighed on the Dow, with the cloud-based software company plunging by 19.7 percent to its lowest closing level in over five months. Salesforce came under pressure after reporting weaker than expected fiscal first quarter revenues and providing disappointing fiscal second quarter guidance. Concerns about the outlook for interest rates also continued to weigh on the markets ahead of the release of closely watched inflation data on Friday. The Commerce Department is due to release its report on personal income and spending in the month of April, which includes readings on inflation said to be preferred by the Federal Reserve. Street expect consumer prices to rise by 0.3 percent in April, matching the increase seen in March, while the annual rate of consumer price growth is expected to come in unchanged at 2.7 percent. On the economic data front, the Labor Department released a report showing first-time claims for U.S. unemployment benefits crept modestly higher in the week ended May 25th. The report said initial jobless claims rose to 219,000, an increase of 3,000 from the previous week's revised level of 216,000. Street had expected jobless claims to inch up to 218,000 from the 215,000 originally reported for the previous week. Meanwhile, the Commerce Department said gross domestic product climbed by 1.3 percent in the first quarter compared to the previously reported 1.6 percent jump. The downwardly revised increase, which was in line with market participants, compares to the 3.4 percent surge in GDP in the fourth quarter of 2023. A separate report released by the National Association of Realtors showed a sharp pullback by pending home sales in the U.S. in the month of April.

 

Crude oil futures ended significantly lower on Thursday despite data showing a sharp drop in U.S. crude inventories in the week ended May 24th, as a jump in gasoline inventories weighed on oil prices. Data from the Energy Information Administration (EIA) said crude oil inventories slumped by 4.2 million barrels last week after climbing by 1.8 million barrels in the previous week. Meanwhile, gasoline inventories increased by 2.0 million barrels last week but remain about 1% below the five-year average for this time of year. Investors now await the meeting of the Organization of Petroleum Exporting Countries and allies, collectively known as OPEC+, this Sunday. The group is widely expected to extend its production cuts beyond the second quarter. Benchmark crude oil futures for July delivery fell $1.32 or about 1.7% to settle at $77.91 a barrel on the New York Mercantile Exchange. Brent crude for July delivery was down 2.1% to $81.86 per barrel on London's Intercontinental Exchange.

 

Indian rupee settled higher on Thursday on the back of softening American currency as well as crude oil prices in the overseas market. Investors took support with Finance Minister Nirmala Sitharaman's statement that S&P Global Ratings' revision of its outlook on India from stable to positive is a welcome development. She said this reflects India's solid growth performance and a promising economic outlook for the coming years. The minister noted that it has been possible due to the series of macroeconomic reforms undertaken since 2014, along with substantial outlay for capex, fiscal discipline, and decisive and visionary leadership. On the global front, the dollar soared to a two-week high against its major peers on Thursday, as a rout in Treasuries improved the currency's allure due to both higher U.S. yields and demand for safe haven assets. Finally, the rupee ended at 83.30 (Provisional), stronger by 10 paise from its previous close of 83.40 on Wednesday.

 

The FIIs as per Thursday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 15489.50 crore against gross selling of Rs 19800.91 crore, while in the debt segment, the gross purchase was of Rs 2507.74 crore with gross sales of Rs 1070.87 crore. Besides, in the hybrid segment, the gross buying was of Rs 13.15 crore against gross selling of Rs 27.07 crore.

 

The US markets ended lower on Thursday with the Nasdaq falling more than 1% and technology shares leading declines after a disappointing Salesforce forecast. Asian markets are trading higher on Friday as investors parsed data from major economies across the region. Indian markets ended lower on Thursday due to weak global cues and on eve of monthly F&O expiry. Today, markets are likely to get positive start tracking gains in Asian counterparts, as weaker U.S. growth data sent the dollar and bond yields tumbling and revived hopes for rate cuts by the Federal Reserve later this year. Domestically, investors will closely watch the release of Q4FY24 GDP data today. Besides, they will adjust their portfolios ahead of the release of exit polls tomorrow. Sentiments will get a boost as the Reserve Bank of India (RBI), in its annual report, projected Indian economy to grow at 7 percent in the current financial year with risks evenly balanced. Further, the report said India' GDP has expanded at a robust pace in 2023-24, with real GDP growth accelerating to 7.6 percent from 7 percent in the previous year - the third successive year of 7 percent or above growth. Besides, the Economist Intelligence Unit's (EIU) Global Outlook report has forecast India to be the fastest growing major economy in 2024-2028, with its growth expected to outpace China's. The report suggests that as India's economic heft expands, there would be a crossover in the mid-2040s with BRICS nations taking over the G7 in terms of nominal gross domestic product (GDP). Some support will come with report that the southwest monsoon set in over the Kerala coast and parts of the Northeast earlier than the forecast, marking the start of its four-month journey over India. An early and timely onset of monsoon is also a good sign for 2024 kharif crop production. However, foreign fund outflows likely to dent sentiments. Foreign institutional investors (FIIs) sold shares worth Rs 3,050.15 crore on May 30. traders will be concerned as foreign direct equity investments fell to a five-year low in the financial year ended March 31, 2024 (FY24) to $44.42 billion due to external factors such as high interest rates in advanced economies, and a limited absorptive capacity in various sectors in India. Data released by the Department for Promotion of Industry and Internal Trade (DPIIT) showed inflows contracted 3.5 per cent year-on-year (Y-o-Y) in FY24. Electric-vehicle related stocks will be in limelight after the NSE launched a new thematic index called Nifty EV & New Age Automotive index. The 33-stock index will track the performance of companies which form a part of the electric vehicle (EV) ecosystem, and led by stocks such as Bajaj Auto, Tata Motors, Mahindra & Mahindra and Maruti Suzuki. Banking sector stocks will be in focus after the Reserve Bank's annual report showed that the number of frauds in the banking sector went up to 36,075 in 2023-24 year-on-year, but the amount involved reduced by 46.7 per cent to Rs 13,930 crore. The RBI report also said that with an aim to curb frauds and enhance the payment experience further, the introduction of real-time payee name validation before the actual fund transfer will be explored in compliance with02 newly enacted The Digital Personal Data Protection Act, 2023.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

22,488.65

22,368.51

22,657.26

BSE Sensex

73,885.60

73,538.37

74,363.19

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

1088.14

165.20

161.70

170.35

Power Grid

227.69

308.95

302.61

316.46

ITC

205.24

424.85

421.15

429.75

State Bank of India

178.19

828.90

820.14

836.84

HDFC Bank

168.78

1518.30

1502.76

1528.71

 

  • Tata Steel has received approval for proposal to infuse funds up to $2.11 billion (around Rs 17,407.50 crore), by way of subscription to equity shares of T Steel Holdings during FY25. 
  • JSW Steel has rolled out zinc-magnesium-aluminium alloy coated steel and aimed to capture 50 per cent market share in the segment within one year's time.
  • Hero MotoCorp's financial services arm -- Hero FinCorp has approved a Rs 4,000 crore IPO. 
  • Axis Bank has launched NFC Soundbox in collaboration with MasterCard.
News Analysis