Trends in SGX Nifty indicate a positive opening for Indian indices

Stocks wavered in Asia Wednesday as investors reeled from a sharp selloff

FPJ Web DeskUpdated: Wednesday, May 25, 2022, 09:13 AM IST
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The Nasdaq fell 2.35 percent on additional pressure in technology stocks following a poor outlook from social media platform Snap /Representative image | AFP PHOTO / FRED DUFOUR

Indian markets could open flat to mildly higher in line with mixed Asian markets today and mixed US markets on Tuesday, said Deepak Jasani, Head-Retail Research, HDFC Securities.

Nifty faced selling pressure in the post noon session once again on May 24. It opened flat and rose in the morning to make an intra day high at 1300 Hrs. It later came under selling pressure and closed lower for the second consecutive session. At close, Nifty was down 0.55% or 89.5 points at 16125.2.

Nifty continues to run into resistance time and again and a move beyond the 16415-16142 band could result in a move in that direction, said Jasani.

Prashanth Tapse, Vice President (Research), Mehta Equities Ltd, said, Despite a sharp fall in the overnight US markets, Asian indices are exhibiting a mixed trend in today's early trades indicating that local markets are likely to remain fragile and volatile on backdrop of growth and inflation bets that continue to dominate investors’ sentiment negatively. All eyes will be on the FOMC minutes later on Wednesday which would give clarity on the Fed's rate-hike path in the near term.

Selling by the FII camp continues to be the biggest negative catalyst for Dalal Street. FIIs have sold shares worth Rs. 48,000 crores in the month of May and most importantly, have pulled out to the tune of Rs. 215,000 crores from the Indian markets in the first 5 months of 2022, Tapse added.

Mohit Nigam, Head - PMS, Hem Securities, said, according to the SGX Nifty and Global Trend, the Indian market will open higher. The US stock market was trading lower. The Nasdaq fell 2.35 percent on additional pressure in technology stocks following a poor outlook from social media platform Snap which sent shares down as much as 40 percent, putting the company on track for its worst one-day plunge on record. Global equity markets have been turbulent as investors analyse the future for monetary policy, inflation, and the impact of China's tough capital controls. Investor sentiment is unstable, with foreign institutional investors pulling out of Indian shares due to a global collapse, rising inflation, and impending central bank tightening. In these situations, investors should exercise caution and take advantage of any declines in fundamentally sound companies.

Immediate support and resistance for Nifty are 16,000 and 16,400 respectively. Immediate support and resistance for Bank Nifty are 34000 and 35,000 respectively, Nigam added.

On May 24, the Sensex was down 236.00 points or 0.43 percent at 54,052.61. The Nifty was down 89.50 points or 0.55 percent at 16,125.20.

Asian stocks trade low

Stocks wavered in Asia Wednesday as investors reeled from a sharp selloff in technology shares and mounting worries that Federal Reserve tightening will plunge the US into recession.

US stocks close lower

US stocks closed mostly lower Tuesday, with the S&P 500 and Nasdaq Composite falling, after an earnings warning from Snapchat parent Snap triggered losses across the internet sector.

The Dow Jones Industrial Average turned higher in late afternoon to end with a slight gain. Snap shares plummeted 43.1 percent Tuesday, following the company’s warning late Monday that it would likely miss quarterly estimates as the economy has “deteriorated further and faster than anticipated.”

On Wall Street, the Nasdaq Composite dropped 2.35 percent and the S&P 500 lost 0.81 percent as investors turned to defensive positions. But shares pares losses late and the Dow Jones Industrial Average managed to close up 0.15 percent. Value shares rose 0.17 percent, while growth shares fell 1.90 percent.

Shares of Snap plummeted 43.1 percent, dragging down several social media and internet stocks. Abercrombie fell 28.6 percent.

Meanwhile, sales of new homes in the US slowed in April to an annual rate of 591,000, tumbling 16.6 percent from 709,000 in March (vs 7.5 lakhs expected). In U.S. economic data, businesses expanded at the slowest pace in several months, reflecting the effects of high inflation, ongoing supply shortages and some softening in customer demand, according to the S&P flash US purchasing managers indexes.

Crude oil prices inch lower

Oil prices inched lower late Tuesday after a choppy trade as tight supply worries offset concerns over a possible recession and China's COVID-19 curbs. In the international market, WTI crude settled at $109.77 and Brent settled at $110.95. In the domestic market, crude price settled at Rs 8,512 per barrel, down by 0.36 percent. The market was down since opening but recovered early losses after the US energy secretary said Washington has not ruled out export restrictions to lower fuel prices.

The American Petroleum Institute’s (API) weekly inventory reported unexpectedly rose by 5,67,000 barrels last week. However, gasoline inventories fell by 4.2 million barrels and distillate stocks fell by 9,49,000 barrels. Rahul Kalantri, VP Commodities, Mehta Equities Ltd. said, Crude oil also gets support from the weakness in the dollar index. We expect crude oil prices to remain strong in today’s session. Crude oil price has support at $107.20-$105.40 and resistance at $112.40-$114.95, In INR terms, crude oil has support at Rs8,410-8,280, while resistance is at Rs 8,690–8,820.

Bullion outlook

Gold and silver prices rose to their highest in two weeks on Tuesday, with the safe-haven metal benefiting from a wilting USdollar and as Treasury yields declined on subdued risk appetite. In the international market, Gold settled at $1,865.40, up by 0.95% and silver closed at $22.06, up by 1.63 percent. Domestically too, the prices of bullion settled on a positive note. Gold settled at Rs 51,157, up by 0.49 percent and silver ended at Rs 61,976, up by 1.10 percent. Gold and silver prices rose amid weaker US economic data.

The US housing sector continues to lose momentum as fewer consumers bought new homes last month. New home sales fell to a seasonally adjusted annualized rate of 591,000 homes in March down 16.65, the U.S. Commerce Department said on Tuesday. February’s sales were revised to rate of 709,000 units.

Gold has recorded solid gains and stays above the 20-day moving average (DMA) at $1854.50 amidst a dismal market sentiment, falling US Treasury yields, and a weaker US dollar. The $1867.22 level is an important obstacle to watch out for, and above the same it will test $1888-$1900. Rahul Kalantri, VP Commodities, Mehta Equities Ltd. said, Gold has support at $1852-1840, while resistance is at $1872-1880. Silver has support at $21.74-21.55, while resistance is at $22.28-22.48. In INR terms, gold has support at Rs 50,840–50,650, while resistance is at Rs 51,340–51,550. Silver has support at Rs 61,510-60,950, while resistance is at Rs 62,380–62,710.

Rupee to remain volatile

The dollar index extended its fall and slipped below 102 marks for the first time in four weeks. The dollar index settled on a weaker note at 101.760 with a loss of 0.30 percent on Tuesday. The USD-INR 27 May futures contract settled on a slightly positive note at 77.58 with a gain of 0.02 percent on the National Stock Exchange on Tuesday. The dollar index plunged again and slipped to fresh four week lows amid downbeat US economic data and weakness in the US bond yields.

There was another sell-off in the US equity markets amid fear of rising inflation and Fed rate hikes. Rahul Kalantri, VP Commodities, Mehta Equities Ltd., said, "We expect the dollar index to remain volatile in today’s session ahead of the FOMC meeting minutes and it could hold 101.20 levels on a closing basis. On the other hand, the rupee traded steady on Tuesday. Despite weakness in the dollar index and U.S. bond yields, the rupee was unable to show strength. The rupee is struggling due to rising domestic inflation, higher global energy prices and rising imports. We expect the rupee to remain volatile this week and could hold its major support level of 78.1000 against the US dollar. We suggest closely watching the levels of 77.15-78.10 for taking fresh positions in the pair, either side breakout of the range would give further directions".

Results today

The following companies will release their quarterly earnings today: BPCL, Coal India, Deepak Fertilisers, Apollo Hospitals Enterprises, HEG, NHPC, Easy Trip Planners, Fortis Healthcare, NALCO, GMM Pfaudler, InterGlobe Aviation, Jai Corp, Kolte-Patil Developers, Bata India, PFC, Suzlon Energy, Torrent Pharma, Whirlpool, MSTC, MOIL and Peninsula Land will be in focus ahead of their March quarter earnings on May 25.

Stock under F&O ban

Indiabulls Housing Finance is under the F&O ban for May 25.

(With inputs from Reuters, Agencies)

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