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Market Commentary 10 July 2024
Benchmarks get cautious start amid mixed cues from global markets

Indian equity benchmarks, after two days of profit booking, rebounded on Tuesday, hitting their fresh record closing levels on the back of gains in Auto, Consumer Durables and Realty stocks. Markets opened on a positive note and continued to inch higher throughout the day amid foreign fund inflows. Foreign institutional investors (FIIs) were net buyers in the cash segment for the fourth day in a row yesterday. They net purchased stocks worth Rs 61 crore on July 08. Traders took encouragement with the Reserve Bank of India's KLEMS database showing that the total number of employed people as a ratio of the total population has increased to 44.2 per cent in FY24 from 34.7 per cent in FY18, with the workforce growing by 168 million during the period at 643.3 million. Total employment was 596.7 million in FY23, thereby adding 46.6 million in FY24. Traders also took note of report that India's informal sector grew post-pandemic, with Andhra Pradesh, Bihar, and Chhattisgarh logging big output gains in fiscal 2022-23. The number of informal firms in India increased 9 percent to 65 million in 2022-23 from 59.7 million in 2022-21, according to the Annual Survey of Unincorporated Sector Enterprises data released by the Ministry of Statistics and Programme Implementation. Markets extended gains in second half of trading session and logged all-time closing high levels, taking support from rating agency Crisil's report stating that securitisation volume rose to Rs 45,000 crore in the first quarter of the current fiscal (Q1FY25), marking a around 17% on-year, like-to-like growth (adjusted for the exit of a large HFC and regulatory measures on gold loan securitisation). Over 95 originators, including NBFCs and banks, tapped the market to diversify funding sources, compared with around 80 in previous fiscal. Some optimism also came with report stating that area sown under major crops was 14 percent higher as of July 5 compared with the previous year, as rainfall situation improved across the country. According to data released by the Indian Meteorological Department, sowing is likely to improve further as the country faced a rainfall surplus of 1.8 percent as of July 8. Finally, the BSE Sensex rose 391.26 points or 0.49% to 80,351.64, and the CNX Nifty was up by 112.65 points or 0.46% points to 24,433.20.

The US markets ended  mostly in green on Tuesday after Federal Reserve Chair Jerome Powell appeared before the Senate Banking Committee and said more good data would strengthen the central bank's confidence inflation is moving sustainably toward its 2 percent target and lead to a potential interest rate cut. Powell said The Committee has stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2 percent. He continued Incoming data for the first quarter of this year did not support such greater confidence. The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2 percent. On the sectoral front, most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets. Banking stocks showed a significant move to the upside, however, with the KBW Bank Index climbing by 1.5 percent. Notable strength was also visible among brokerage stocks, as reflected by the 1.1 percent gain posted by the NYSE Arca Broker/Dealer Index. On the other hand, software stocks saw considerable weakness on the day, dragging the Dow Jones U.S. Software Index down by 1.6 percent. Energy stocks also moved to the downside, as the price of crude oil moved lower for the third consecutive session.

Crude oil futures ended lower on Tuesday amid concerns about the outlook for demand, and on reports that Hurricane Beryl did not cause any big damage to refineries and ports along the Gulf coast. Meanwhile, the market now awaits weekly oil reports from the American Petroleum Institute (API) and U.S. Energy Information Administration (EIA). The EIA will release its inventory data Wednesday. Benchmark U.S. crude oil futures for August delivery declined $0.92 or 1.11% to $81.41 per barrel on the New York Mercantile Exchange. Brent crude for September delivery fell $1.09 or about 1.27% to $84.66 per barrel on London's Intercontinental Exchange.

Indian rupee ended flat with a positive bias on Tuesday amid strong domestic equities. Traders took support with rating agency Crisil's report stating that securitisation volume rose to Rs 45,000 crore in the first quarter of the current fiscal (Q1FY25), marking a around 17% on-year, like-to-like growth (adjusted for the exit of a large HFC and regulatory measures on gold loan securitisation). Over 95 originators, including NBFCs and banks, tapped the market to diversify funding sources, compared with around 80 in previous fiscal. On the global front, the U.S. dollar edged higher on Tuesday from its lowest levels in almost a month versus major peers in the previous session, as traders awaited testimony from Federal Reserve Chair Jerome Powell days after an unexpectedly soft U.S. jobs report. Finally, the rupee ended at 83.49 (Provisional), stronger by 1 paisa from its previous close of 83.50 on Monday.

The FIIs as per Tuesday's data were net buyers in equity segment, while they were net sellers in debt segment. In equity segment, the gross buying was of Rs 13925.11 crore against gross selling of Rs 13763.44 crore, while in the debt segment, the gross purchase was of Rs 419.33 crore with gross sales of Rs 658.66 crore. Besides, in the hybrid segment, the gross buying was of Rs 14.73 crore against gross selling of Rs 10.46 crore.

The US markets ended mostly in green on Tuesday amid the US Fed chief Jerome Powell's testimony. Asian markets are trading mostly higher on Wednesday as investors digested inflation data from China and Japan. China's CPI saw a modest 0.2% increase in June, while Japan's corporate goods price index surged to 2.9% in June. Indian markets continued their upward momentum and ended higher on Tuesday, with sentiment buoyed by foreign fund inflows and a retreat in oil prices. Today, markets are likely to get cautious start amid mixed cues from global markets. Investor sentiment may remain cautious amid global economic indicators and recent statement by Federal Reserve Chairman Powell on Tuesday, who expressed concerns about potentially stalling economic growth if interest rates are kept high for too long. Traders will be concerned with a private report stating that India consumer price inflation probably edged up in June, snapping five months of declines, largely because of a jump in vegetable prices caused by the damage to crops wrought by extreme weather. However, fall in global crude oil prices likely to support domestic markets. Oil prices fell amid easing supply disruption concerns from Gaza ceasefire hopes and Hurricane Beryl's impact. Some support may come amid foreign fund inflows. Foreign institutional investors (FIIs) purchased shares worth Rs 314.46 crore on July 09. Traders may take note of report that India and Russia are looking to raise bilateral trade to $100 billion by 2030, balance the lopsided trade, eliminate non-tariff trade barriers, and explore the possibility of a Eurasian Economic Union (EAEU)-India Free Trade Area. Besides, Global rating agency, Moody's kept India's 2024 growth forecast unchanged at 6.8 percent from its March forecast. The rating firm predicted Indian economy to grow 6.4 percent in 2025. It said increasing domestic and overseas demand is supporting GDP growth in emerging markets (EMs), with wide variation by country. Meanwhile, markets regulator Sebi has issued a circular outlining the filing requirements for alternative investment funds (AIFs) schemes that opt for a dissolution period to deal with their unliquidated investments. Insurance industry stocks will be in focus as data released by the General Insurance Council showed non-life insurers reported a 13.7 per cent year-on-year (Y-o-Y) growth in gross direct premium, underwritten in April-June quarter of FY25 (Q1FY25). This was driven by strong performance in health and motor segments. There will be some reaction in gaming industry stocks with a private report that even as the Indian gaming industry is grappling with the newly implemented 28 per cent goods and service tax (GST), the sector is expected to grow to $8.92 billion in the next five years. India's gaming sector is currently valued at around $3.1 billion. Aviation industry stocks will be in limelight as Icra said the momentum in air passenger traffic is expected to continue and airlines' net loss is projected to be Rs 3,000-4,000 crore in the year ending March 2025, both trends similar to the previous financial year.

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

Index

Previous close

Support

Resistance

NSE Nifty

24,433.20

24,362.20

24,473.90

BSE Sensex

80,351.64

80,101.07

80,499.68

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

ITC

264.70

451.50

445.34

456.34

Tata Steel

251.28

171.94

171.06

173.25

HDFC Bank

242.75

1638.80

1623.86

1650.21

ONGC

186.86

297.35

293.19

301.69

BPCL

180.95

300.20

297.01

302.76

  • L&T's wholly owned subsidiary -- L&T Semiconductor Technologies has entered into a Share Purchase Agreement for acquisition of 100% stake in SiliConch Systems.
  • M&M's subsidiary -- Mahindra Last Mile Mobility has entered into strategic partnership with Ecofy, India's green-only NBFC backed by Eversource Capital, committed to financing India's green transition.
  • Infosys has entered into strategic five-year collaboration with Sector Alarm to transform their core enterprise business systems on the cloud.
  • JSW Steel has reported consolidated crude steel production for Q1FY25 at 6.35 million tonnes, declining by 1% Year-on-Year over 6.43 million tonnes in Q1FY24.

News Analysis