Trends on SGX Nifty indicate a gap-down opening for Indian indices

Asian stocks extended a selloff on Friday and the dollar held near a three-week high

FPJ Web DeskUpdated: Friday, June 10, 2022, 09:17 AM IST
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US stocks tumbled late Thursday to close sharply lower, with the Nasdaq skidding 2.8 percent, as jittery investors looked ahead to a reading on May inflation due Friday morning. /Representative image |

Trends on SGX Nifty indicate a gap-down opening for Indian indices. Indian markets could open sharply lower in line with negative Asian markets today and sharply lower US markets on Thursday, said Deepak Jasani, Head-Retail Research, HDFC Securities.

Nifty made a lower low on June 9 compared to the previous day but managed to close at the highest in 3 sessions. For the turnaround to sustain, Nifty will have to cross the resistance of 16,661 while 16,204 could act as a support, Jasani said.

Prashanth Tapse, Vice President (Research), Mehta Equities Ltd said, domestic equity markets may see a sharp fall in early Friday trades amid weakness across the global markets. Soaring inflation, recession fears, and the prospect of the Federal Reserve getting even more hawkish is making investors nervous worlwide.

The negativity can also be attributed to yesterday’s weak session at European stock markets which closed sharply lower, with Germany’s DAX retreating 1.7 percent after the ECB set the path to start raising borrowing costs next month. ECB confirmed asset purchases will end from July 1 and a 25 bps rate hike will follow in July as well. The US 10-year Treasury which has already doubled this year to roughly 3 percent, is expected to flirt with 4 percent by the end of 2022. Even if Nifty moves up, the overwhelming trend is down. Nifty’s immediate downside risk is seen at 16,121 mark.

Nifty snapped a four day losing streak on June 09 despite unencouraging global cues. At close, Nifty was up 0.74 percent or 121.9 points at 16478.1. In the process, Nifty was the best performer in the Asian region, Tapse added.

Mohit Nigam, Head - PMS, Hem Securities said, Benchmark Indices are expected to open on negative note as suggested by trends on SGX Nifty. US stock markets ended lower on Wednesday as investor anxiety heightened ahead of data on Friday that is expected to show consumer prices remained elevated in May. Selling picked up toward the end of the session. Mega-cap growth stocks led the drop, with Apple Inc and Amazon Inc falling 3.6 percent and 4.2 percent, respectively. Dow Jones was down by 638 points, whereas NASDAQ was down by 2.74 percent to 12269.0 levels.

On the technical front 16,100 and 16,500 are immediate support and resistance in Nifty 50. For Bank Nifty 34,400 and 35,200 are immediate support and resistance respectively, Nigam added.

BSE Sensex soared 427 points on Thursday to close at 55,320. At close, Nifty was up 0.74 percent or 121.9 points at 16478.1.

Asian stocks decline

Asian stocks fell overnight. MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.5 percent, with Australian shares finishing down 1.4 percent and Seoul's KOSPI flat. Hong Kong's Hang Seng turned around from small gains to fall 0.7 percent and Chinese A-shares fell 1percent . The other focus for investors was the declining Japanese yen, which dropped to a 20-year low against the dollar of 134.56 before paring some losses. It also neared crucial levels against China's yuan which are highly sensitive for Asia.

Asian stocks extended a selloff on Friday and the dollar held near a three-week high as the twin blows of high inflation and slowing economic growth stirred investor anxiety. Chinese tech shares slid on uncertainty over the regulatory outlook and COVID lockdowns.

China's exports surge

China's exports grew at a double-digit pace in May, shattering expectations in an encouraging sign for the world's second biggest economy, as factories restarted and logistics snags eased after authorities relaxed some COVID curbs in Shanghai.

Chinese producer inflation in May rose in line with expectations, official data showed Friday. The Chinese producer price index for May jumped 6.4 percent as compared with a year earlier. Chinese consumer inflation in May also saw an increase that was close to expectations. The consumer price index climbed 2.1 percent from a year ago.

US stocks tumble

US stocks tumbled late Thursday to close sharply lower, with the Nasdaq skidding 2.8 percent, as jittery investors looked ahead to a reading on May inflation due Friday morning. Investors were nervous about a potential slowdown in economic growth in the wake of the Federal Reserve’s monetary policy tightening, with the May consumer-price index report due Friday.

On Wall Street, the Dow Jones Industrial Average fell 0.97 percent, the S&P 500 lost 1.26 percent and the Nasdaq Composite dropped 1.63 percent. European stocks were already on the defensive, led by miners, as China imposed new COVID-19 lockdown measures in Shanghai, while the financials sector fared marginally better with banks soon able to charge higher lending rates.

Supply disruptions tied to the pandemic and the war in Ukraine, along with a revival in consumer demand for services rather than goods, have pushed prices up at the fastest pace in about 40 years. The consumer-price index is expected to show a large 0.7 percent increase when the report is released Friday morning — more than double the gain in the prior month.

ECB makes no change to deposit rates

The European Central Bank made no change to the deposit rate but prepared to hike by a quarter-point next month, and again by either that amount or more if inflation -- which now exceeds 8 percent in the euro area -- warrants a tougher stance. The ECB said it will end bond buys on July 1.

The European Central Bank raised its inflation projections once again on Thursday but cut its growth outlook as the conflict in Ukraine continues to weigh on confidence, consumption and investment.

The ECB now sees inflation over its 2 per cent target throughout its projection horizon, accepting that rapid price growth is not nearly as temporary as it had forecast for the past year.

Most rated firms have buffers to withstand further 10-15% rupee depreciation: Moody's

Moody's Investors Service on Thursday said most rated companies in India have buffers to withstand a further 10-15 per cent depreciation of the rupee.

The rupee depreciated by 8 paise to close at 77.76 against the US dollar on Thursday, weighed down by elevated crude oil prices and persistent foreign capital outflows.

In a statement, Moody's said the rupee has depreciated around 4.5 per cent since the start of the year. Higher energy prices and interest rates in developed economies have led to capital outflows and rising commodity prices, pressuring the rupee.

IMF expects further cut in global growth outlook

The International Monetary Fund expects to further cut its forecast for global economic growth in 2022 next month, an IMF spokesperson said on Thursday, following moves by the World Bank and Organization for Economic Co-operation and Development (OECD) to cut their own forecasts this week.

That would mark the IMF's third downgrade this year. In April, the IMF had already slashed its forecast for global economic growth by nearly a full percentage point to 3.6% in 2022 and 2023.

Fund spokesperson Gerry Rice told a regular IMF briefing that the overall outlook still called for growth across the globe, albeit at a slower level, but that some countries may be facing a recession.

Tax revenue collection in FY23 expected to be far better than budget estimate

Revenue Secretary Tarun Bajaj on Thursday said tax revenue collections in ongoing fiscal year are expected to be far better than the budget estimates.

Last fiscal year, indirect taxes grew at 20 per cent and direct taxes at 49 per cent. The tax-to-GDP ratio in 2021-22 jumped to 11.7 per cent -- the highest since 1999. In 2020-21, the ratio was 10.3 per cent.

The country's tax collections soared to a record high of Rs 27.07 lakh crore last year, compared to budget estimate of Rs 22.17 lakh crore.

India among top 10 global economies for FDI in 2021

Foreign Direct Investment inflows to India declined $19 billion to $45 billion in 2021 but the country still remained among the top 10 global economies for FDI last year, the United Nations said on Thursday.

According to the United Nations Conference on Trade and Development (UNCTAD) World Investment Report, flows of foreign direct investment recovered to pre-pandemic levels last year, hitting nearly $1.6 trillion.

Crude oil prices dip

Oil prices dipped on Thursday but still hovered near three-month highs after parts of Shanghai imposed new COVID-19 lockdown measures, as strong gains in refined products contributed to an ongoing bullish backdrop for crude oil. In the international markets, WTI crude settled at $121.51 per barrel and Brent settled at $122.97 per barrel. Domestic markets also ended on a weaker note at Rs9,473 per barrel, down by 0.54 percent.

Oil prices have been rallying steadily over the last two months, led by big increases in prices of refined products due to tight refining supply and surging demand. Peak summer gasoline demand in the United States continues to boost crude prices. The US and other nations have engaged in a series of releases of strategic reserves, but it has had limited effect as of yet with global crude production rising very slowly. The dollar index is also gained and crossed 103 marks again on the prospects of further rate hikes by the U.S. Federal Reserve and also restricted gains of crude oil.

Rahul Kalantri, VP Commodities, Mehta Equities Ltd., said, "We expect crude oil prices to remain strong in today’s session. Crude oil has support at $117.50-$115.40 and resistance is at $122.40-$124.90. In INR terms crude oil has support at Rs 9,350-9,080; while resistance is at Rs 9,650–9,790".

Bullion outlook

On Thursday, Gold and silver prices were lower, pressured by a rally in the US dollar index and the US Treasury yields that remain elevated. Gold and silver down-ticked a bit more following the European Central Bank's monetary policy meeting in which the central bank kept its policy rates unchanged but said it will likely raise interest rates starting July. In the international market, gold was down by 0.20 percent at $1,852.80 while silver was down by 1.14 percent at $21.84 an ounce. In the domestic market, gold eased by 0.09 percent at Rs 51,005 and silver was down by 0.94 percent at Rs 61,445

The gold market remains trapped at around $1,850 an ounce and is not seeing any new buying momentum following weaker-than-expected labour market data. Thursday, the US Labour Department said that weekly jobless claims increased by 27,000 to 229,000, down from the previous week's revised estimate of 202,000 claims.

The dollar index showed strength after the ECB press conference and crossed 103.1 marks again. Benchmark 10-year bond yields are also hovering above 3.0% and restricting gains of the precious metals. Global stock markets were mostly weaker overnight.

Rahul Kalantri, VP Commodities, Mehta Equities Ltd. said, "We expect gold and silver to remain volatile in today’s session ahead of the US inflation data," said . Gold has support at $1840-1830, while resistance is at $1862-1871. Silver has support at $21.55-21.35, while resistance is at $22.05-22.25. In INR terms gold has support at Rs 50,740–50,510, while resistance is at Rs 51,280–51,450. Silver has support at Rs61,050-60,650, while resistance is at Rs 61,880–62,410.

Dollar extends gains

The dollar index extended its gain and crossed 103 marks again to settle on a positive note at 103.297 with a gain of 0.73 percent on Thursday. The USD-INR 28 June futures contract also settled higher at 77.88 with a gain of 0.07 percent. The dollar index gained after the European Central Bank policy meeting in which the ECB left its interest rates unchanged in but hinted of raising interest rates in July and followed it up with in September to control inflation. The dollar index crossed 103 marks once again and 10-year bond yields in the United States also hovered above 3.0% and supporting the dollar.

Rahul Kalantri, VP Commodities, Mehta Equities Ltd. said: We expect the dollar index to remain volatile ahead of the U.S. inflation data and could hold its support level of 102.55 on a closing basis in today’s session. On the other hand, the rupee showed weakness against the U.S. dollar amid rising crude oil prices and the Reserve Bank of India’s upward revision of the inflation target. The rupee also plunged amid strength in the dollar index and ECB’s signal for raising interest rates from July policy meetings. We expect the rupee to remain weak in today’s session and expect to test 78.20 levels, Kalantri added.

Escorts gets approvals to change its name to Escorts Kubota

Farm machinery and construction equipment maker Escorts on Thursday said it has received requisite approvals for changing its name to Escorts Kubota Ltd.

The name change comes in the wake of Japan's Kubota Corporation increasing its stake in Escorts to 44.8 per cent by subscribing to new equity shares and through an open offer to the public shareholders of Escorts.

Kubota has also become a joint promoter of the company along with existing promoters, the Nanda family, whose shareholding in the company remains unchanged.

Nikhil Nanda continues to be the Chairman and Managing Director (CMD) of the company.

Stock under F&O ban

Delta Corp remains under NSE F&O ban for June 10.

(With inputs from Reuters, Agencies)

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