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Market Commentary 11 June 2024
Markets likely to get flat-to-positive start amid mixed global cues

After hitting fresh highs in early trade cheering Narendra Modi's continuation as the country's Prime Minister for the third term, Indian equity benchmarks ended the trading session on a lower note on Monday. The start of day was in green, as traders took encouragement after USIBC President Atul Keshap said the swearing-in of Narendra Modi as the prime minister for a historic third consecutive term sends a strong message of political and economic stability amidst rising geostrategic uncertainty. Some optimism came as retail inflation for industrial workers eased to 3.87 per cent in April compared to 4.2 per cent in March this year.  But soon, indices turned volatile and altered between green and red, as some cautiousness came in after Fitch Ratings reportedly said that 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. Finally, indices ended in red, as investors got cautious, after the Reserve Bank of India (RBI) in its latest Inflation Expectations Survey of Households (IESH) - May 2024 has showed that Households' inflation expectations for the three months and one year ahead periods increased by 20 basis points (bps) and 10 bps, respectively, but remained in single digits, while their perception on current inflation moderated by 10 bps and stood at 8.0 per cent in the latest survey round. Besides, a stronger-than-expected U.S. jobs report pushed Treasury yields higher and raised doubts about whether the Fed will be able to cut interest rates this year. Some concerns came with report stating 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. Finally, the BSE Sensex fell 203.28 points or 0.27% to 76,490.08, and the CNX Nifty was down by 30.95 points or 0.13% points to 23,259.20.

The US markets ended higher on Monday ahead of several key events later this week, including the Federal Reserve's monetary policy meeting. The Fed is due to announce its latest monetary policy decision on Wednesday, when the central bank is widely expected to leave interest rates unchanged. Besides, the Labor Department is scheduled to release its report on consumer price inflation in the month of May. Street currently expects consumer prices to inch up by 0.1 percent in May after climbing by 0.3 percent in April, while core consumer prices, which exclude food and energy prices, are expected to increase by 0.3 percent for the second straight month. The annual rate of growth by consumer prices is expected to come in unchanged at 3.4 percent, but the annual rate of core consumer price growth is expected to slow to 3.5 percent in May from 3.6 percent in April. On the sectoral front, oil service stocks showed a substantial move to the upside on the day, driving the Philadelphia Oil Service Index up by 2.9 percent. The rally by oil service stocks came amid a notable increase by the price of crude oil. An increase by the price of gold also contributed to considerable strength among gold stocks, as reflected by the 1.6 percent gain posted by the NYSE Arca Gold Bugs Index. Semiconductor stocks also turned in a strong performance, resulting in a 1.4 percent advance by the Philadelphia Semiconductor Index. Computer hardware, natural gas and retail stocks also saw some strength on the day, while telecom stocks moved notably lower, adding to the steep losses posted last Friday.

Crude oil futures ended sharply higher on Monday amid optimism about the outlook for energy demand. Meanwhile, investors looked ahead to demand forecasts from the Energy Information Administration (EIA) and the Organization of Petroleum Exporting Countries (OPEC), on Tuesday. The EIA's weekly inventory data is due on Wednesday. Markets were also awaiting the Federal Reserve's monetary policy announcement. The Fed is widely expected to hold rates unchanged. The accompanying statement is in focus for clues about the central bank's future policy moves. Benchmark crude oil futures for July delivery higher $2.21 or 2.9% to settle at $77.74 a barrel on the New York Mercantile Exchange. Brent crude for August delivery was up $2.16 or about 2.71% to $81.63 per barrel on London's Intercontinental Exchange.

Indian rupee depreciated against the US dollar on Monday following a rising American currency in overseas markets and a sluggish trend in domestic equities. Sentiments were downbeat after the Reserve Bank of India (RBI) in its latest Inflation Expectations Survey of Households (IESH) - May 2024 has showed that Households' inflation expectations for the three months and one year ahead periods increased by 20 basis points (bps) and 10 bps, respectively, but remained in single digits, while their perception on current inflation moderated by 10 bps and stood at 8.0 per cent in the latest survey round. On the global front, euro fell sharply on Monday, hit by political uncertainty after French President Emmanuel Macron called a snap legislative election, while the dollar was firm ahead of the Federal Reserve's meeting later in the week. Finally, the rupee ended at 83.51 (Provisional), weaker by 10 paise from its previous close of 83.41 on Friday.

The FIIs as per Monday's data were net buyers in both equity and debt segments. In equity segment, the gross buying was of Rs 21034.55 crore against gross selling of Rs 15678.72 crore, while in the debt segment, the gross purchase was of Rs 2728.02 crore with gross sales of Rs 1437.79 crore. Besides, in the hybrid segment, the gross buying was of Rs 12.39 crore against gross selling of Rs 19.30 crore.

The US markets ended higher on Monday although investors were cautious ahead of this week's consumer prices report and a Federal Reserve policy announcement. Asian markets are trading mixed on Tuesday as investors pondered fresh political uncertainty in European markets after right-wing gains in elections and a snap poll in France revived concerns about the cohesion of the bloc. Indian markets snapped three-day winning run and ended lower on Monday after hitting their all-time high levels in early trade amid selling in blue-chip IT stocks and HDFC Bank. Today, markets are likely to get flat-to-positive start amid lack of decisive triggers. Foreign fund inflows likely to aid sentiments. Foreign institutional investors (FIIs) extended their buying on the second day on June 10 as they bought Indian equities worth Rs 2,572.38 crore. Traders will be taking encouragement as in his first decision after taking charge for the third time, Prime Minister Narendra Modi signed a file transferring the 17th instalment of the PM-Kisan Samman Nidhi (PM-KISAN) fund, amounting to nearly Rs 20,000 crore, to around 9.3 crore farmers. Later in the day, in its first meeting, the Union cabinet under his leadership also approved government assistance for the construction of three crore houses under the Pradhan Mantri Awas Yojana (PMAY). Some support will come as Finance Ministry announced the release of an additional installment of tax devolution to states for June 2024, in a move to support state finances and spur economic development. The total amount released to states for June now stands at Rs 1,39,750 crore. Meanwhile, a private report indicated that the new coalition government is likely to stick to its medium fiscal consolidation roadmap, but with a tilt towards populism in its first budget post the elections. However, there may be some cautiousness with a private report that India consumer inflation likely snapped a four-month downward trend in May due to rapidly rising food costs, suggesting the Reserve Bank of India is still several months away from cutting interest rates. There will be some reaction in insurance industry stocks as Life Insurance Council's data showed that the life insurance industry's new business premium (NBP) increased by 15.5 per cent year-on-year (Y-o-Y) in May 2024, aided by growth across segments. The industry earned premiums worth Rs 27,034.2 crore in May 2024 compared to Rs 23,477.8 crore in the year-ago period.

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

Index

Previous close

Support

Resistance

NSE Nifty

23,259.20

23,186.94

23,371.69

BSE Sensex

76,490.08

76,220.20

76,919.51

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

742.87

180.45

177.84

182.58

Power Grid

254.79

315.80

310.49

322.24

State Bank of India

167.26

830.80

824.85

841.10

NTPC

160.73

364.20

360.64

368.94

ONGC

141.39

259.15

256.80

262.75

  • JSW Steel has reported consolidated crude steel production for the month of May 2024 at 20.98 lakh tonnes, declining by 4% Year-on-Year over 21.78 lakh tonnes in May 2023.
  • Adani Enterprises' wholly owned subsidiary -- Adani Airport Holdings handled an impressive one million tonnes of air cargo in fiscal year 2023-2024, achieving a milestone.
  • HCL Technologies has launched Enterprise AI Foundry to simplify and scale enterprise AI journeys.
  • GAIL (India) is planning to set up 1500 KTA Ethane Cracker Project at an investment of around Rs 60,000 crore in Madhya Pradesh, having product slate of various ethylene derivatives.

News Analysis