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Market Commentary 14 January 2022
Markets likely to start session on weak note on Friday

 

Indian benchmark indices ended a choppy session higher, managing to take their winning streak to a fifth straight day on Thursday, led by gains in Metal, Capital Goods and Power stocks. After making cautious start, markets gained some traction, as traders got some support with the World Bank's statement that Narendra Modi government's Production-Linked Incentive (PLI) Scheme will likely help India's economy grow at 8.7% in the next financial year 2022-23, beating emerging market peers including China. Some support also came with Commerce and Industry Minister Piyush Goyal's statement that startups of the country will help India transition from an assembly economy, particularly in the digital world, to a knowledge-based economy. In this digital age, technology has removed boundaries and barriers. However, key indices erased initial gains amid volatility due to subdued macro-economic data. India's industrial production growth remained subdued for the third straight month and expanded by 1.4 per cent in November, mainly due to the waning low base effect. Also, rising prices of essential kitchen items pushed the retail inflation to a six-month high of 5.59 per cent in December, close to the Reserve Bank's upper tolerance limit of 6 per cent. Traders also remain concerned as a private report revised downwards its India's growth forecast for the current financial year to 9.1 per cent from 9.5 per cent earlier, citing the massive surge in Omicron infections and the resultant impact on overall economic activities in the March quarter. But, markets managed to end in green, taking support from India's Bharat Biotech statement that the booster shot of its Covaxin COVID-19 vaccine administered six months after the last of two doses neutralises both the Omicron and Delta variants of the coronavirus. Finally, the BSE Sensex rose 85.26 points or 0.14% to 61,235.30 and the CNX Nifty was up by 45.45 points or 0.25% to 18,257.80.

                                            

The US markets settled in red on Thursday. The tech-heavy Nasdaq showed a particularly steep drop, ending the day at its lowest closing level in three months. Software stocks turned in some of the worst performances on the day, dragging the Dow Jones US Software Index down by 4.3 percent. The index tumbled to its lowest closing level in almost six months. Substantial weakness also emerged among semiconductor stocks, as reflected by the 2.3 percent slump by the Philadelphia Semiconductor Index. Outside of the tech sector, healthcare, brokerage and retail stocks also came under pressure, while significant strength remained visible among airline stocks. Further, weakness also prevailed in the markets as first-time claims for U.S. unemployment benefits unexpectedly increased in the week ended January 8th, according to a report released by the Labor Department. The report said initial jobless claims rose to 230,000, an increase of 23,000 from the previous week's unrevised level of 207,000. Street had expected jobless claims to edge down to 200,000. With the unexpected increase, jobless claims reached their highest level since hitting 270,000 in the week ended November 13th. Meanwhile, the Labor Department released a report showing only a slight uptick in US producer prices in the month of December. The Labor Department said its producer price index for final demand edged up by 0.2 percent in December after jumping by an upwardly revised 1.0 percent in November. Street had expected producer prices to rise by 0.4 percent compared to the 0.8 percent increase originally reported for the previous month.

 

Crude oil futures ended lower on Thursday as investors took profits after two days of gains amid fears of aggressive US interest rate hikes. However, the losses were cushioned by expectations that a strong economic recovery will boost demand. Meanwhile, there is speculation that Omicron is not severe enough to derail a global demand recovery and cold weather in North America. Benchmark crude oil futures for February delivery fell $0.52 or 0.6 percent to settle at $82.12 a barrel on the New York Mercantile Exchange. Brent crude for March delivery declined $0.49 or 0.24 percent to settle at $84.47 a barrel on London's Intercontinental Exchange.

 

Indian rupee ended stronger against dollar due to fresh selling of the American currency by banks and exporters. Traders got some support with the World Bank's statement that Narendra Modi government's Production-Linked Incentive (PLI) Scheme will likely help India's economy grow at 8.7% in the next financial year 2022-23, beating emerging market peers including China. However, upside remain capped as retail inflation quickened to a six-month high of 5.59% in December from a year before and industrial production growth nosedived to a nine-month low of 1.4% in November, presenting a double whammy for policy-makers as they brace for the next year's Budget. On the global front, dollar fell further on Thursday to two-month lows after U.S. inflation proved weaker than feared in December, prompting investors to cut crowded long positions in the currency. Finally, the rupee ended 73.90, stronger by 3 paise from its previous close of 73.93 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 7154.16 crore against gross selling of Rs 7879.63 crore, while in the debt segment, the gross purchase was of Rs 891.58 crore with gross sales of Rs 568.24 crore. Besides, in the hybrid segment, the gross buying was of Rs 2.06 crore against gross selling of Rs 5.34 crore.

 

The US markets ended lower on Thursday as investors took profits, particularly in technology stocks after a three-day rally, while multiple Federal Reserve officials were out talking about inflation and interest rate hikes. Asian markets are trading mostly in red on Friday tracking major losses on Wall Street overnight. Indian markets extended gains to a fifth straight session on Thursday, though gains in oil & gas and metal shares were offset by losses in financial and consumer stocks. Today, markets are likely to start session on a weak note following lackluster trade in global markets. Investors will be eyeing on the Wholesale Price Index (WPI) data to be out later in the day for further cues. There will be some cautiousness with United Nations' report that India is forecast to grow at 6.5 per cent in fiscal year 2022, a decline from the 8.4 per cent GDP estimate in previous financial year, and while the country's economic recovery is on a solid path amid rapid vaccination progress, coal shortages and high oil prices could put the brakes on economic activity in the near term. Traders may take note of report that the FSDC sub-committee headed by Reserve Bank Governor Shaktikanta Das has reviewed the economic situation in the backdrop of the COVID-19 pandemic and resolved to keep a close watch on the unfolding developments with a view to ensure financial stability. Meanwhile, Niti Aayog Vice-Chairman Rajiv Kumar said the country needs much more equitable growth as inequality could lead to tensions in society. NBFCs and housing finance companies stocks will be in focus with the central bank's statement that eight Non-Banking Financial Companies (NBFCs) and one housing finance company have surrendered their certificates of registration to RBI. There will be some reaction in aviation industry stocks as ratings agency Crisil said the ongoing third pandemic wave led by Omicron could pose fresh turbulence for air traffic, pushing its full recovery into fiscal 2024. The agency had earlier expected the full recovery to happen in fiscal 2023. Auto component industry stocks will be in limelight as rating agency Icra revised downwards the revenue growth forecast for the auto components industry in the current fiscal to 15-17 per cent, citing the impact of the Omicron wave, delayed recovery in semiconductors shortage and muted two-wheelers demand.

 

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

 

Index

Previous close

Support

Resistance

NSE Nifty

18,257.80

18,190.31

18,298.76

BSE Sensex

61,235.30

61,007.21

61,405.97

 

Nifty Top volumes

 

Stock

 

Volume

Previous close (Rs)

Support  (Rs)

Resistance (Rs)

(in Lacs)

Wipro

307.52

650.05

643.36

661.36

Tata Motors

275.72

512.55

500.30

519.30

HDFC Bank

209.81

1529.00

1,514.60

1,549.20

Coal India

202.71

164.55

160.21

167.66

Tata Steel

157.23

1,219.00

1,172.26

1,245.61

 

  • Wipro is planning to hire about 30,000 freshers in FY23.  
  • TCS has reported 12.36% rise in its consolidated net profit at Rs 9,806 crore for Q3FY22 as compared to Rs 8,727 crore for Q3FY21. 
  • Reliance Industries signed MoU with the Government of Gujarat for a total investment of Rs 5.955 lakh crore as part of Investment Promotion Activity for Vibrant Gujarat Summit 2022. 
  • Infosys is working closely with the Income Tax Department on the next set of areas related to the I-T portal as new modules will be added to it.
News Analysis