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Market Commentary 10 June 2024
Benchmarks likely to get flat to negative start amid mixed global cues

Indian equity benchmarks continued their sharp up-move for the third straight session and settled at record closing high levels on Friday. The massive rise was supported by gains across all sectors. Markets made a cautious start as traders were concerned as foreign institutional investors (FIIs) continued their selling streak, offloading shares worth Rs 6,867.72 crore. However, markets soon gained traction and inched higher throughout the day after the Reserve Bank of India (RBI) kept the lending rates unchanged at 6.5% for an eighth straight time. The RBI has also announced an increase in the projected real GDP growth for the financial year 2024-25, setting it at 7.2%, up from the previous estimate of 7%. Besides, the RBI upheld its projection for retail inflation at 4.5% for the current fiscal year, contingent on normal monsoon conditions. This stance arises amidst uncertainties in food prices, which necessitate close scrutiny. Markets extended gains in late afternoon deals, as sentiments remained optimistic with the Reserve Bank Governor Shaktikanta Das revealing that India's foreign exchange reserves have soared to an unprecedented $651.5 billion as of May 31. The overall reserves have risen by $4.83 billion since the last reported $646.673 billion on May 24.  Some support also came as Fitch Ratings projects that the election losses will not prompt major policy shifts. Instead, the upcoming budget in July is likely to offer clearer insights into the government's economic reform strategies and fiscal objectives for the next five years. Traders also took a note of credit rating agency, India Ratings and Research's (Ind-Ra) report stating that the improving liquidity outlook is expected to benefit commercial paper (CP) issuances over the coming months and reverse the decline seen in April 2024. Finally, the BSE Sensex rose 1618.85 points or 2.16% to 76,693.36, and the CNX Nifty was up by 468.75 points or 2.05% points to 23,290.15.

The US markets ended lower on Friday, extending the lackluster performance seen during Thursday's session. Traders reacted to the Labor Department's closely watched monthly jobs report. The report showed employment jumped by much more than expected in May but also showed an unexpected uptick in the unemployment rate. The Labor Department said non-farm payroll employment surged by 272,000 jobs in May after climbing by a downwardly revised 165,000 jobs in April. Meanwhile, the Labor Department said the unemployment rate crept up to 4.0 percent in May from 3.9 percent in April. The unemployment rate was expected to remain unchanged. On the sectoral front, steel stocks also showed a significant move to the downside on the day, dragging the NYSE Arca Steel Index down by 1.9 percent to a six-month closing low. Considerable weakness was also visible among interest rate-sensitive telecom stocks, as reflected by the 1.8 percent loss posted by the NYSE Arca North American Telecom Index. Networking, housing and airline stocks also saw notable weakness, while pharmaceutical and banking stocks saw modest strength.

Crude oil futures ended lower on Friday amid concerns the Federal Reserve will likely hold interest rates higher for longer as data showed a much stronger than expected increase in U.S. non-farm payroll employment in the month of May. Concerns about possible excess supply in the market also weighed on oil prices. After the Bank of Canada and the European Central Bank cut interest rates earlier this week, investors widely expected a similar move by the Federal Reserve sometime soon. However, the data from the Labor Department has dashed the expectations. The decision by OPEC+ to phase out voluntary production cuts over the course of 12 months starting in October also weighed on oil prices. Benchmark crude oil futures for July delivery fell $0.02 to settle at $75.53 a barrel on the New York Mercantile Exchange. Brent crude for August delivery was down $0.15 or about 0.19% to $79.47 per barrel on London's Intercontinental Exchange.

Indian rupee ended higher against the U.S. dollar on Friday in line with a firm trend in domestic equity markets after the Reserve Bank kept the key policy rate unchanged. Reserve Bank of India's (RBI's) Monetary Policy Committee (MPC) decided to Keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50 per cent for the eighth consecutive time. On the economic growth front, the RBI has raised projection of real gross domestic product (GDP) for the FY25 to 7.2%, from 7% estimated previously. The GDP growth in Q1FY25 is projected to be at 7.3%, 7.2% in Q2FY25, 7.3% in Q3FY25 and 7.2% in Q4FY25. On the global front, the dollar hovered around eight-week lows on Friday ahead of a crucial U.S. jobs report that could give investors a better idea of when the Federal Reserve might start cutting interest rates. Finally, the rupee ended at 83.41 (Provisional), stronger by 12 paise from its previous close of 83.53 on Thursday.

The FIIs as per Friday'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 14540.72 crore against gross selling of Rs 21311.43 crore, while in the debt segment, the gross purchase was of Rs 2472.35 crore with gross sales of Rs 1531.00 crore. Besides, in the hybrid segment, the gross buying was of Rs 3.50 crore against gross selling of Rs 7.25 crore.

The US markets ended lower on Friday as stronger-than-expected jobs data fanned fears of a delayed rate cut. Asian markets are trading mostly in red on Monday in thin trade as some markets are close for trading amid weak cues from Wall Street. Indian markets ended on positive note for the third straight session on Friday with BSE Sensex hitting all-time high while Nifty 50 index inched closer to its record high level. Today, markets are likely to get flat to negative start to the week tracking mixed global cues. The focus now shifts to the upcoming India's inflation numbers and US Fed policy meeting on Wednesday. Besides, Prime Minister Narendra Modi on Sunday took the oath of office as the head of a 72-member Council of Ministers for a third successive term. Now, all eyes will be on the Budget for 2024-25 to be presented in less than a month, under the new coalition government. There will be some cautiousness with report that after having net sold stocks worth Rs 42,200 crore in the month of May, foreign institutional investors (FIIs) so far in June have net sold shares to the tune of Rs 13,718 crore. Traders will be concerned as Fitch Ratings reportedly said as India's medium-term fiscal consolidation, critical to any ratings upgrade, is likely to get more challenging as a new coalition government comes to power. It said for a ratings upgrade, what we're looking for is a continued fiscal consolidation path and confidence that such a path will put debt on a downward trajectory over the medium-term. However, some support may come as Reserve Bank of India Governor Shaktikanta Das said India's foreign exchange reserves increased by $4.83 billion to touch a historic high of $651.5 billion as of May 31. Traders may take some optimism as retail inflation for industrial workers eased to 3.87 per cent in April compared to 4.2 per cent in March this year. Traders may take note of a private report that India stands out in the Asian growth narrative, with the RBI's projection of a 7.2 per cent growth rate for 2025 reflecting strong domestic economic fundamentals. There will be some reaction in infra stocks with report that as many as 448 infrastructure projects, each entailing an investment of Rs 150 crore or above, were hit by a cost overrun of more than Rs 5.55 lakh crore in April 2024. According to the Ministry of Statistics and Programme Implementation (MoSPI), which monitors infrastructure projects worth Rs 150 crore and above, out of 1,838 projects, 448 reported cost overruns and 792 projects were delayed.

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

Index

Previous close

Support

Resistance

NSE Nifty

23,290.15

22,946.06

23,477.21

BSE Sensex

76,693.36

75,491.73

77,345.16

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

843.20

178.85

173.21

182.06

Power Grid

380.16

309.85

300.89

314.74

Wipro

363.36

484.00

472.74

490.84

ITC

284.48

438.50

432.51

443.06

State Bank of India

250.61

829.25

816.00

837.00

  • Adani Ports and SEZ has received the LoI for the O&M of the container facility at the Netaji Subhas Dock at the Syama Prasad Mookerjee Port in Kolkata.
  • Hero MotoCorp has received approval for purchase of additional 2.2% shares of Ather Energy, an associate company, from an existing shareholder.
  • ITC has received shareholders' approval to demerge ITC Hotels into a separate entity.
  • Tata Motors has launched Altroz Racer -- the sporty avatar of the company's premium hatchback.

News Analysis