Indian markets could open sharply lower in line with lower Asian markets today and sharply negative US markets on Thursday, said Deepak Jasani, Head-Retail Research, HDFC Securities.
Nifty lost most of the opening gains on May 05 as FPIs kept pressing sales on rises. At close, Nifty was up 0.03 percent or 5 points at 16,682.6.
The fact that the markets are not able to hold and build on gains despite positive global cues (due to the US Fed cooling aggressive tightening expectations) is unnerving. Probably the impact of the RBI's surprise rate hike on May 04 is weighing on the minds of participants. A breach of 16,624 could result in more weakness towards 16,418. On bounces, 16,917-16,958 band could offer resistance, added Jasani.
Prashanth Tapse, Vice President (Research), Mehta Equities Ltd, said SGX Nifty is indicating a gap-down start for domestic stock markets thanks to overnight precarious Wall Street cues. While intra-day volatility will continue, the markets will keep an eye on Reliance Industries' earnings scheduled to be announced later today.
With most of the negative factors in play, FII selling has once picked up, as overseas investors sold shares worth Rs 2,074.74 crores on Thursday. India VIX, which measures the expected volatility in the market, has inched up to 20.2925 levels in Thursday’s trade. But we suspect the VIX to shoot up till 25 levels given the bearish outlook, said Tapse. For Nifty, the interweek support is seen only at 15,901 mark. Waterfall of selling is likely towards 15,200-15,250 mark if the index closes below 15,901 mark, he added.
Mohit Nigam, Head - PMS, Hem Securities said, benchmark Indices are expected to open on a negative note as suggested by trends on SGX Nifty. US markets witnessed a relief rally on Wednesday after FOMC meeting but it tumbled on Thursday due to more anxiety over rising interest rates. Pound also fell on fears of UK recession. Asian markets are trading in red in the early Friday trade. US non farm payrolls data and unemployment rate will be announced today which may decide the direction of global markets. Immediate support and resistance for Nifty are 16,200 and 16,800 respectively. Immediate support and resistance for Bank Nifty are 34,500 and 35,500 respectively.
On May 5, the Sensex was up 33.20 points or 0.06 percent at 55,702.23. The broader Nifty was up 5.10 points or 0.03 percent at 16,682.70.
Asian stocks
Stocks fell in Asia on Friday as high inflation, rising borrowing costs and China’s COVID lockdowns darken the economic outlook and depress investor sentiment.
US stocks fall
US stocks collapsed Thursday, with signs of panic selling emerging as the Dow and Nasdaq booked their worst daily drops since 2020, a day after the Federal Reserve delivered a widely expected interest rate increase. There is still too much uncertainty over how the Federal Reserve’s actions will tame inflation without causing a recession.
On Wall Street, the Dow Jones Industrial Average fell 3.12 percent and the S&P 500 lost 3.56 percent. The Nasdaq Composite shed 4.99 percent in its biggest single-day plunge since June 2020, and closed at its lowest level since November 2020. The technology-rich index is down 21.3 percent year to date.
US Treasury yields jumped Thursday, with the rate on the 10-year note rise to 3.066 percent, its highest since Nov. 2018. Rising yields are a negative for technology and other growth stocks in particular, cutting the present value of the future earnings and cash flow their valuations are based upon.
US productivity fell at a 7.5 percent annual rate in the first quarter [on a seasonally adjusted annual rate], the biggest drop since 1947. Unit-labor costs jumped at an 11.6 percent annual pace in the first quarter. Most forecasters in the US are optimistic that inflation currently running at its highest level in four decades will eventually ease off.
A new survey shows that sentiment among individual investors in the US is low. Only 16 percent are bullish on the stock market, the lowest reading since at least 2015, according to Truist.
China PMI for April declines
China’s Caixin purchasing managers’ index, a gauge of economic activity, read 36.2 for April, down from 42 in March.
India services sector PMI up in April
Activity in India's dominant services sector grew at its fastest pace in five months in April on strong demand, prompting firms to add jobs for the first time since November, a private survey showed, but sky-rocketing inflation remained a major concern. The S&P Global India Services Purchasing Managers' Index rose to 57.9 in April from 53.6 in March, its highest since November and surpassing the 54.0 estimate in a Reuters poll.
Bank of England raises borrowing costs to highest since 2009
In the UK the Bank of England lifted borrowing costs to the highest since 2009 (25-basis point increase by a majority of 6-3, taking the base interest rate up to 1 percent) while warning of the possibility of double-digit inflation and a prolonged period of stagnation or even recession.
LIC IPO fully subscribed on day 2
LIC's public offer, the country's biggest-ever IPO, was fully subscribed on the second day of bidding on Thursday.
Against 16,20,78,067 shares on offer, 16,68,60,765 bids were received -- translating into a subscription of 1.03 times, as per data on stock exchanges as of 7 pm. However, the Qualified Institutional Buyer (QIB) and Non-Institutional Investor (NII) portions have received a tepid response so far. Non-institutional investors' segment was subscribed 47 percent, while QIBs' portion was slightly lower at 40 percent.
Retail individual investors picked up nearly 93 percent of the 6.9 crore shares set aside for this segment. Of the total, the policyholders' portion was subscribed a little over three times, while that for employees was subscribed 2.21 times.
Crude oil up
Oil prices rose as a stronger dollar offset supply concerns after the European Union's plans for new sanctions against Russia, including an embargo on crude in six months. Traders noted OPEC+ again rebuffed consumer calls for a faster pace of output rises. U.S. crude futures rose 45 cents to settle at $108.26 a barrel and Brent settled up 76 cents at $110.90 a barrel.
Oil jumped to $111.5 per barrel for Brent–the highest price since late March–and over $108 for WTI on news of the buyback plan, along with results of an OPEC+ meeting earlier today in which the cartel refrained from increasing output quotes beyond 423,000 bpd for June. The price of WTI crude oil futures are settling at $108.26 up by 0.42 percent. In domestic market also crude oil settled at positive Rs 8,283 up by 0.71 percent. Oil jumped to the highest since late March after a report said the USplans to seek bids this fall to replenish its emergency crude reserves.
Oil prices dipped at the start of Asian trade on Friday as worries about an economic downturn that could dampen demand for crude vied with concerns over new sanctions from the European Union against Russia, including an embargo on crude oil.
Today, OPEC will meet to decide on increasing the production by 432,000 barrels. The problem is members have had trouble reaching that monthly production increase quota. In addition potential oil sanctions against Russia could continue to disrupt the supply-side of the equation. Working in favour of the demand-side would be a slower economy as a result of higher rates and disruptive markets. Natural Gas is still high at $8.79 per million British thermal units (MMBtu), the highest level since September 2008.
Rahul Kalantri, VP Commodities, Mehta Equities Ltd. said, "We expect crude oil prices to remain volatile in today’s session. Crude oil is having support at $106.20-$1004.40 and resistance is at $110.40-$112.65. In INR terms crude oil has support at Rs 8,050-7,940, while resistance is at Rs8,450–8,620."
Fuel prices unchanged
Petrol and diesel prices remained stagnant for the 30th consecutive day on Friday. In Delhi, the price of petrol and diesel remains Rs 105.41 per litre and Rs 96.67 per litre respectively.
In Mumbai, the price of petrol was held unchanged at an all-time high of Rs 120.51 per litre. Diesel price also continues to be at Rs 104.77 a litre, the highest among metros. In Chennai, petrol costs Rs 110.85 per litre and diesel Rs 100.94 per litre. In Kolkata, petrol is at Rs 115.12 per litre and diesel Rs 99.83 per litre.
Petrol and diesel prices were last hiked by 80 paise a litre each on April 6, taking the total increase in rates in 16 days to Rs 10 per litre.
Bullion likely to be volatile
On Thursday, we witnessed a roller coaster ride in Gold & Silver prices. Gold prices pulled back after rising as much as 2 percent following half-a-point interest rate hike announcement by the US Federal Reserve, the biggest in 22 years. In international markets, gold future settled at $1875 after scaling a high of $1907, while silver settled at $22.49 after touching a high of $23.27. In the domestic market, Gold ended at Rs 50,909, up by 0.59 percent and silver settled at Rs62342, up by 0.32 percent. The jump in gold price came after The Bank of England warned Thursday that Britain risks a double-whammy of a recession and inflation above 10%. Bullions lost all its gains after BOE hiked interest rates by a quarter percentage point to 1 percent.
Gold’s reversal comes amid another rally in the dollar index, which typically hurts appeal for bullion among overseas buyers, as well as the benchmark US 10-year Treasury yields. Bond yields will continue rising because of expectations that monetary policy from the Fed and other major central banks will be tightened further. This is going to hold gold back from going too high in the medium term.
Rahul Kalantri, VP Commodities, Mehta Equities Ltd. said, Today, trading in Bullions will be volatile. Gold has support at $1855-1840 and resistance at $1892-1907. Silver has support at $22.05-21.80, while resistance is at $22.62-22.80. In INR terms, gold has support at Rs 50,650–50,310, while resistance is at Rs 51,210–51,550. Silver has support at Rs 61,800-61,500, while resistance is at Rs 62,850–63,410.
Results today
The following companies will release their quarterly earnings today: Reliance Industries, Canara Bank, Sundaram-Clayton, Tata Power Company, CSB Bank, Federal Bank, Great Eastern Shipping Company, Bajaj Consumer Care, Apollo Pipes, Apollo Tricoat Tubes, Greenpanel Industries, Grindwell Norton, Hariom Pipe Industries, Kokuyo Camlin, Shipping Corporation of India, Paisalo Digital, Paushak, Reliance Home Finance, Vesuvius India, and Vikas EcoTech.
(With inputs from Reuters and Agencies)
Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
