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Market Commentary 08 July 2024
Benchmarks to get cautious start amid weak Asian cues

Indian equity benchmarks rebounded significantly from intraday lows and ended flat on Friday, driven by strong performances from index heavyweights SBI, Reliance Industries and Hindustan Unilever. After opening with a downside gap, markets slipped into further weakness in the early part of the session, as investors traded with caution ahead of Q1FY25 earnings and key macroeconomic data due next week. Traders took note of former Chief Economic Advisor Arvind Subramanian's statement that the Centre has sacrificed a large portion of revenue from Goods and Services Tax (GST), up to 1 per cent of GDP, every year since the rollout of the new indirect tax regime to fund a 14 per cent compensation guarantee provided to states. Subramanian, who was actively involved in the implementation of the GST regime, also said that it would not be advisable at this point in time to bring petrol and alcohol under the GST. Markets trimmed some of their losses in late morning deals but continued to trade in red for almost the entire trading session, as rising crude oil prices weighed on the sentiments. Investors also remained on sidelines ahead of the US non-farm payroll data which could give some indication on the interest rate direction going ahead. However, key indices demonstrated sharp intraday upside bounce from the lows towards the end and settled flat. Traders found support with exchange data showing that Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Thursday, as they purchased shares worth Rs 2,575.85 crore. Some support also came with CRISIL Ratings' report stating that the fast-moving consumer goods (FMCG) sector is expected to see a revenue growth of 7 to 9 per cent this fiscal, helped by higher sales volume and a revival of rural markets. It said volume growth from urban consumers will also remain steady at 7 to 8 per cent supported by rising disposable incomes and continued focus on premium offerings by the industry players, especially in the personal care and home care segments. Finally, the BSE Sensex fell 53.07 points or 0.07% to 79,996.60, and the CNX Nifty was up by 21.70 points or 0.09% points to 24,323.85.

The US markets, after showing a cautious performance in early deals, managed to end the session with decent gains on Friday as the Labor Department's closely watched monthly employment report for June generated optimism about the outlook for interest rates. While employment jumped by more than expected in June, the report also showed downward revisions to job growth in April and May as well as another unexpected uptick by the unemployment rate. The Labor Department said non-farm payroll employment shot up by 206,000 jobs in June compared to street estimates for an increase of about 190,000 jobs. However, the report also showed the increases in employment in April and May were downwardly revised to 108,000 jobs and 218,000 jobs, respectively, reflecting a net downward revision of 111,000 jobs. The unemployment rate also rose for the third straight month, inching up to 4.1 percent in June from 4.0 percent in May. Economists had expected the unemployment rate to remain unchanged. With the unexpected uptick, the unemployment rate reached its highest level since hitting a matching rate in November 2021. Overall trading activity was somewhat subdued on the day, as some traders remained away from their desks following the Independence Day holiday on Thursday. On the sectoral front, Gold stocks moved sharply higher over the course of the session, resulting in a 2.6 percent surge by the NYSE Arca Gold Bugs Index. The strength among gold stocks came as the price of the precious metal climbed to its highest levels in a month. Significant strength also emerged among software stocks, as reflected by the 1.4 percent gain posted by the Dow Jones U.S. Software Index. Pharmaceutical and retail stocks also showed notable moves to the upside, with the NYSE Arca Pharmaceutical Index and the Dow Jones U.S. Retail Index climbing by 1.3 percent and 1.1 percent, respectively. On the other hand, airline stocks showed a substantial move to the downside, dragging the NYSE Arca Airline Index down by 2.5 percent.

Crude oil futures ended lower on Friday amid concerns the rain and wind impacts of Hurricane Beryl could disrupt Mexico's offshore oil production, and also hurt infrastructure and tighten supply. Recent data by the U.S. Energy Information Administration (EIA) showed. Street had expected crude oil inventories to edge down by 0.2 million barrels. At 448.5 million barrels, U.S. crude oil inventories are about 4% below the five-year average for this time of year. The EIA data also said gasoline inventories decreased by 2.2 million barrels last week and are 1% below the five-year average for this time of year. Meanwhile, a report from Baker Hughes said the oil and gas rig count in the U.S. rose by four to 585 this week. While oil rigs were unchanged at 479 this week, gas rigs rose by four. Benchmark U.S. crude oil futures for August delivery declined $0.72 or 0.86% to $83.16 per barrel on the New York Mercantile Exchange. Brent crude for September delivery fell $0.89 or about 1.02% to $86.54 per barrel on London's Intercontinental Exchange.

Indian rupee ended flat on Friday amid muted domestic equities. Traders took note of report that the government is working towards streamlining the application process for Indian business visas for companies that are not beneficiaries under the production-linked incentive (PLI) scheme but have set up manufacturing units across the 14 sectors covered under the scheme. Meanwhile, former Chief Economic Advisor Arvind Subramanian said that the Centre has sacrificed a large portion of revenue from Goods and Services Tax (GST), up to 1 per cent of GDP, every year since the rollout of the new indirect tax regime to fund a 14 per cent compensation guarantee provided to states. On the global front, the dollar fell to a three-week low on Friday ahead of U.S. payrolls data that could influence how quickly the Federal Reserve cuts interest rates, while the pound firmed as the Labour party secured a landslide victory in the UK general election. Finally, the rupee ended flat with its previous close of 83.50 on Thursday.

The FIIs as per Friday's data were net buyers in both equity and debt segments. In equity segment, the gross buying was of Rs 16289.44 crore against gross selling of Rs 10777.90 crore, while in the debt segment, the gross purchase was of Rs 2413.86 crore with gross sales of Rs 481.29 crore. Besides, in the hybrid segment, the gross buying was of Rs 30.70 crore against gross selling of Rs 25.32 crore.

The US markets ended higher on Friday as the jobs data raised hopes of a rate cut by the US Federal Reserve. Asian markets are trading mostly in red on Monday as investors awaited key economic data from the U.S. and China later this week, while election results in France overnight signaled a hung parliament. Indian markets recovered from early losses and ended flat on Friday as gains in Reliance Industries, State Bank of India, and Hindustan Unilever offset losses in HDFC Bank. Today, markets are likely to get cautious start amid weakness in Asian counterparts. Now, investors' focus will shift to the corporate earnings with TCS kick-in the Q1 result season on Thursday. Market participants will also be looking ahead to the upcoming Union Budget. Finance Minister Nirmala Sitharaman is scheduled to present the first Budget of the Modi 3.0 on July 23, 2024. The Parliament's Budget Session will take place from July 22 to August 12. Traders will be concerned as the Reserve Bank of India (RBI) said India's forex reserves dropped $1.713 billion to $651.997 billion for the week ended June 28. In the previous reporting week, the overall kitty had dropped $2.922 billion to $652.895 billion. The reserves had touched an all-time high of $655.817 billion as on June 7 this year. There will be some cautiousness with a private report that India will struggle to create enough jobs for its growing workforce over the next decade even if the economy grows at a rapid pace of 7 per cent, and it suggested the world's most-populous nation will need more concerted steps to boost employment and skills.  It estimates India will need to create about 12 million jobs a year over the next decade to absorb the number of new entrants to the labor market. However, some respite may come later in the day with report that foreign investors infused over Rs 7,900 crore in Indian equities in the first week of the month amid a healthy economic and earnings growth momentum. With this, total FPI investment in equities reached Rs 1.16 trillion so far this year, data with the depositories showed. Traders may take note of Ministry of Electronics and Information Technology, Secretary, S Krishnan's statement that India has the talent and deep expertise to become a global player in the semiconductor industry which is a vital sector for the country. He said the government was helping industries to create the ecosystem to build the semiconductors. There will be some buzz in auto industry stocks as the Federation of Automobile Dealers Associations (FADA) said automobile retail sales in India grew 0.73 per cent year-on-year (Y-o-Y) in June as heatwaves deterred customers from purchases despite substantial discounts. Coal sector stocks will be in focus with a private report that India's coal import rose 5.3 per cent to 52.29 million tonnes (MT) in the first two months of the ongoing fiscal as against the year-ago period. There will be some reaction in defence industry stocks as the Ministry of Defence (MoD) said India's annual defence production hit a record high of almost Rs 1.27 trillion in 2023-24 (FY24), up 16.7 per cent over the previous year's figure of about Rs 1.09 trillion. FMCG stocks will be in limelight as a report released by CRISIL Ratings showed that the fast-moving consumer goods (FMCG) sector is expected to see revenue growth of 7-9 per cent this fiscal. The expected revenue increase this financial year (2024-25) will be supported by higher volume growth on the back of a revival in rural and steady urban demand.

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

Index

Previous close

Support

Resistance

NSE Nifty

24,323.85

24,207.46

24,401.61

BSE Sensex

79,996.60

79,600.41

80,271.32

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

HDFC Bank

411.21

1649.40

1632.74

1675.54

ONGC

397.82

288.30

280.10

292.90

Tata Steel

381.23

175.00

173.54

176.34

State Bank of India

248.74

859.60

843.99

868.24

NTPC

159.46

379.60

373.31

383.56

  • IndusInd Bank's net advances stood at Rs 3,48,107 crore (provisional) as of June 30, 2024, posting a 16% rise in year-on-year (YoY) terms against Rs 3,01,317 crore as of June 30, 2023.
  • Bajaj Auto has launched Freedom 125, the world's first CNG motorcycle.
  • Titan Company has clocked a standalone revenue growth of 9 per cent in the first quarter ended June 30, 2024 (Q1FY25).   
  • Power Grid Corporation of India's Board of Directors to consider increasing the borrowing limits for FY25 and raising funds for FY26.

News Analysis