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Market Commentary 27 May 2024
Benchmarks likely to get positive start on firm global cues

Indian equity benchmarks ended flat with a negative bias in volatile session on Friday on profit booking at record-high levels amid weak global cues. Traders also remained on sidelines ahead of the results of the Lok Sabha polls announcement. Markets made a cautious start and oscillated between gains and losses throughout the day as traders got anxious with report that India's engineering exports declined 3.2 per cent to $8.67 billion in April 2024, primarily due to lower shipments of metals, especially iron, steel and copper. The lower shipment of steel was mainly witnessed in Italy, Nepal, the UAE, the Netherlands, the USA, China, and South Korea, among others. Some cautiousness also came with another report stating that investments by private equity (PE) and venture capital (VC) funds declined by 35 per cent to $4.4 billion in April compared with $6.8 billion in the year-ago period. It said PE/VC investors continue to remain cautious due to global uncertainties, geopolitical tensions, and the ongoing Indian general elections. However, traders took some support with S&P Global Rating analyst's statement that India can get rating support over time if it utilises the highest-ever dividend of over Rs 2.11 trillion received from the Reserve Bank to reduce fiscal deficit.  The RBI board has decided to pay a record Rs 2.11 trillion dividend to the government for the fiscal ended March 2024, more than double of what was budgeted expectation of Rs 1.02 trillion. Some support came amid foreign fund inflows. Foreign institutional investors turned buyers on May 23 as they bought Indian equities worth Rs 4,670.95 crore. Traders took a note of an industry body, the Indian Staffing Federation's (ISF) statement that India should consider lowering the 18% tax imposed on recruitment agencies for providing outsourced staff to big companies, which could help boost employment and wages of contract workers. Finally, the BSE Sensex fell 7.65 points or 0.01% to 75,410.39, and the CNX Nifty was down by 10.55 points or 0.05% points to 22,957.10.

The US markets ended higher on Friday as traders looked to pick up stocks at somewhat reduced levels following the downturn seen on Thursday, which saw the Dow post its worst daily drop since March 2023. Further, some support came in as the Commerce Department released a report showing an unexpected increase in durable goods orders in the month of April, although the growth came following a significantly downwardly revised jump in March. The report said durable goods orders climbed by 0.7 percent in April following a downwardly revised 0.8 percent advance in March. Street had expected durable goods orders to decrease by 0.8 percent compared to the 2.6 percent surge originally reported for the previous month. Excluding orders for transportation equipment, durable goods orders rose by 0.4 percent in April after coming in unchanged in March. Ex-transportation orders were expected to inch up by 0.1 percent. Meanwhile, a separate report released by the University of Michigan showed consumer sentiment in the U.S. deteriorated slightly less than previously estimated in the month of May. The report said the consumer sentiment index for May was upwardly revised to 69.1 from the preliminary reading of 67.4. Street had expected the index to be unrevised. Despite the upward revision, the consumer sentiment index still fell sharply from 77.2 in April, slumping to its lowest level since hitting 61.3 last November. On the sectoral front, semiconductor stocks showed a significant move to the upside on the day, driving the Philadelphia Semiconductor Index up by 1.9 percent to a new record closing high. Chipmaker Nvidia shot up by 2.6 percent, extending the surge seen on Thursday following the AI darling's strong quarterly results.

Crude oil futures ended higher on Friday despite concerns about the outlook for demand amid rising possibility of the Federal Reserve holding its interest rates higher for longer. Recent data showing an unexpected increase in crude inventories last week has raised concerns about the outlook for demand. Meanwhile, traders now await a meeting of the Organization of Petroleum Exporting Countries and allies, collectively known as OPEC+, on June 2. Benchmark crude oil futures for July delivery rose $0.93 or more than 1.21% to settle at $77.80 a barrel on the New York Mercantile Exchange. Brent crude for July delivery gained $0.53 or 0.76% to $82.12 per barrel on London's Intercontinental Exchange.

Indian rupee ended higher against the U.S. dollar on Friday on fresh foreign fund inflows and suspected intervention by the RBI. Sentiments were positive after S&P Global Rating analyst said that India can get rating support over time if it utilises the highest-ever dividend of over Rs 2.11 trillion received from the Reserve Bank to reduce fiscal deficit.  The RBI board has decided to pay a record Rs 2.11 trillion dividend to the government for the fiscal ended March 2024, more than double of what was budgeted expectation of Rs 1.02 trillion. On the global front, pound eased on Friday after data showed wet weather hit UK consumer spending far more than expected in April, but evidence of sticky inflation, and the surprise announcement this week of a July general election kept sterling near two-month highs. Finally, the rupee ended at 83.12 (Provisional), up by 17 paise from its previous close of 83.29 on Wednesday.

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 37435.95 crore against gross selling of Rs 31544.24 crore, while in the debt segment, the gross purchase was of Rs 471.91 crore with gross sales of Rs 263.55 crore. Besides, in the hybrid segment, the gross buying was of Rs 35.20 crore against gross selling of Rs 88.18 crore.

The US markets ended in green on Friday after upbeat economic data as investors positioned themselves ahead of the long U.S. Memorial Day weekend and the unofficial start to summer. Asian markets are trading mostly higher on Monday as investors braced for a busy week of data which culminates in a key U.S. inflation report that could set the stage for a cut in interest rates there, albeit not for a few months yet. Indian markets hit fresh record highs for a second straight day amid buying in financial shares, but failed to hold the gains and ended flat with negative bias on Friday. Today, domestic indices are likely to get positive start tracking gains in Asian counterparts coupled with foreign fund inflows. Foreign institutional investors remained net buyers as they bought Indian equities worth Rs 944.83 crore worth of shares on May 24. Some support will come as the latest data published by the Reserve Bank of India showed that India's forex reserves surged by $4.54 billion to $648.7 billion as of May 17, marking an all-time high. Traders may take note of the Finance Ministry's report that the economic momentum in the April-June quarter of 2024-25 will continue with a likely boost in the merchandise exports as a result of supply chain resilience, while India's macroeconomic buffers will help navigate through the risk of volatility in oil prices. Also, India's domestic manufacturing sector is set to receive stronger external support in the upcoming months as investment in the sector to rise. According to the monthly economic review by the Ministry of Finance, a growing number of organizations in the US and Europe are focusing on reindustrialization. These organizations are primarily aiming to enhance supply chain resilience, a strategy that could significantly benefit India's manufacturing firms as part of the China Plus One strategy. Meanwhile, the Securities and Exchange Board of India (SEBI) has introduced new regulations to govern the sharing of real-time share price data with third parties, including various online platforms. However, there may be some cautiousness with report that India has recorded a trade deficit, the difference between imports and exports, with nine of its top 10 trading partners, including China, Russia, Singapore, and Korea, in 2023-24. The data also showed that the deficit with China, Russia, Korea, and Hong Kong increased in the last fiscal compared to 2022-23, while the trade gap with the UAE, Saudi Arabia, Russia, Indonesia, and Iraq narrowed. There will be some reaction in coffee industry stocks as the commerce ministry data showed that India's coffee exports rose by 12.22 per cent to $1.28 billion in 2023-24 on higher demand for Robusta coffee in the global markets. The country exported coffee worth $1.14 billion in 2022-23. Stocks related to solar power industry will be in limelight with a private report that India achieved a milestone by adding over 10 GW of solar capacity in the first quarter (Q1) of 2024, marking the highest quarterly installation to date. As per the report, this figure represents an almost 400 per cent year-over-year (YoY) increase compared to the over 2 GW installed in Q1 2023.

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

Index

Previous close

Support

Resistance

NSE Nifty

22,957.10

22,901.26

23,019.66

BSE Sensex

75,410.39

75,224.24

75,616.52

Nifty Top volumes

Stock

 

Volume

Previous close (Rs)

Support (Rs)

Resistance (Rs)

(in Lacs)

Tata Steel

386.74

174.90

173.51

176.91

Adani Ports & SEZ

191.00

1416.90

1384.39

1447.19

Hindalco Industries

159.30

678.80

669.75

689.15

HDFC Bank

155.30

1516.50

1495.04

1528.94

Power Grid

150.58

319.05

316.65

322.20

  • HCL Technologies is planning to extend its leadership in the telecom services market with Hewlett Packard Enterprise, carving out certain Communications Technology Group assets to the company.
  • Hindalco Industries' board has approved an acquisition of fabrication facility of Home Build Tech India for cash consideration of around Rs 34 crore, by way of entering into a binding MoU.
  • Shareholders of Taro have approved the company's merger agreement with Sun Pharma.
  • Dr. Reddy's Laboratories has made an investment of Rs 650 crore in AOL and AOL has allotted 9,70,14,896 equity shares of Rs 10 each at a premium of Rs 57 to the company. 

News Analysis