Trends on SGX Nifty indicate a negative opening for Indian indices

Wall Street's three major indexes closed lower on Wednesday

FPJ Web DeskUpdated: Thursday, June 02, 2022, 09:13 AM IST
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Asian share markets fell on Thursday on widespread investor worries over high inflation and the threat of recession |

The Indian stock markets are expected to open gap-down. Trends on SGX Nifty indicate a negative opening for Indian indices.

Indian markets could open lower in line with negative Asian markets today and lower US markets on Wednesday, said Deepak Jasani, Head-Retail Research, HDFC Securities. Nifty closed lower for the second consecutive session on June 01. At close Nifty was down 0.23 percent or 37.9 points at 16,546.7

Nifty has corrected the earlier upmove gradually and could see the next leg up soon after some more weakness. 16,414 is an important support, Jasani said.

Prashanth Tapse, Vice President (Research), Mehta Equities Ltd, said, Markets are likely to open lower on Thursday in tandem with weakness in SGX Nifty and overnight fall in the US markets. Inflation fears along with interest rate hikes going ahead are back on front pages. FPI outflows too are seen denting sentiments, as they sold shares worth Rs 1903 crores while DIIs bought shares worth Rs. 984 crores on Wednesday.

With renewed uptick in WTI crude prices, India's rising crude oil import bill will continue to have a bearing on the deficit front. India's oil imports bill has doubled to $119 billion in FY22. Technically speaking, bears may turn bulls only if Nifty closes above its biggest hurdles at 16,721 mark, Tapse added.

Mohit Nigam, Head - PMS, Hem Securities, said, the domestic equity market continued to reel under selling pressure for the second consecutive session on June 1. The market also remained volatile for the second straight session with India VIX rising 1.8 percent to 20.85 levels, indicating the discomfort for bulls going ahead. Indian markets have seen some recovery in the past few days as investors grabbed stocks at low valuations, but choppiness continues.

On the technical front, the key resistance level for Nifty 50 is 16,700, and on the downside, 16,400 can act as strong support. The key support and resistance levels for Bank Nifty are 35,000 and 36,200 respectively, Nigam added.

On June 1, the benchmark Sensex slipped 185.24 points or 0.33 percent at 55,381.17. The broader Nifty shed 61.70 points or 0.37 percent at 16,522.80.

Stocks to watch out for

Some stock specific actions can be witnessed in Eicher Motors (The company sold 63,643 units of Royal Enfield in May 2022, registering a growth of 133 percent compared to 27,294 units sold in same month last year), Reliance Industries (Reliance Brands and Plastic Legno SPA have signed a joint venture through which Reliance Brands will acquire a 40 percent stake in Plastic Legno SPA's toy manufacturing business in India), said Mohit Nigam.

Asian stocks decline

Asian share markets fell on Thursday on widespread investor worries over high inflation and the threat of recession, while oil prices slumped following a report of reassurances from Saudi Arabia over production.

Stocks in Asia fell Thursday as central bankers amplify hawkish messages in their quest to rein in inflation and JPMorgan Chase & Co.’s Jamie Dimon sounded alarm bells on the economy.

US stocks close lower

US stocks seesawed Wednesday to kick off June, ending the first trading session of June in negative territory as investors weighed the outlook for the economy, inflation and the Federal Reserve’s interest rate path. Investors bet that the latest economic data would do nothing to push the Federal Reserve off track from its aggressive interest rate hiking cycle aimed at taming run-away inflation.

Wall Street's three major indexes closed lower on Wednesday as investors bet that the latest economic data would do nothing to push the Federal Reserve off track from its aggressive interest rate hiking cycle aimed at taming run-away inflation. Data showed that while US job openings fell in April, they remained at high levels, suggesting continued wage increases contributing to uncomfortably high inflation as companies scramble for workers.

The Dow Jones Industrial Average fell 176.89 points, or 0.54%, to 32,813.23, the S&P 500 lost 30.92 points, or 0.75%, to 4,101.23 and the Nasdaq Composite dropped 86.93 points, or 0.72%, to 11,994.46. Among the S&P's 11 major industry sectors energy was the sole gainer, finishing up 1.8% as oil prices rose.

The Institute for Supply Management’s Manufacturing PMI, a closely followed index of U.S.-based manufacturing activity, rose to 56.1 percent in May from 55.4 percent in the prior month. Economists polled by The Wall Street Journal had forecast a decline to 54.5 percent.

The US economy showed “slight or modest” growth in May, but labor and supplies were still in short supply and rapid inflation remained a big problem, according to the Fed’s regular survey of the economy known as the Beige Book.

The yield on the 10-year US Treasury note rose 8.2 basis points to 2.922% on Wednesday.

Crude prices skid

Global benchmark Brent crude was last down more than 2 percent a barrel at $113.86 ahead of a meeting of oil producing countries later in the day, which is expected to pave the way for output increases. U.S. crude also dipped more than 2 percent to $112.55 per barrel.

The fall in oil prices gathered pace after the Financial Times reported that Saudi Arabia may be prepared to raise oil production in the event of a sharp drop in Russia's output. "This will be well received by Western leaders given inflation – and inflation expectations – remain eye wateringly high, and central banks try to raise rates at the risk of tipping their economies into a recession," said Matt Simpson, senior market analyst at City Index in Sydney.

Rahul Kalantri, VP Commodities, Mehta Equities Ltd said, "We are expecting crude may open lower by around 2 percent down continuing with the Wednesday's trend. On Wednesday, crude oil settled on a mixed note in the international markets as WTI crude settled at $115.26 per barrel and Brent settled at $115.81 per barrel. Domestic markets settled on a slightly weaker note at Rs8,986 down by (-)0.44 percent. Crude oil showed very high volatility ahead of the OPEC+ scheduled meeting today.

Media reports are also suggesting that Saudi Arabia could raise crude oil outputs in the coming months. On the other hand decline in the U.S. oil stocks and increased demand after easing lockdown restrictions in China are supporting crude oil prices. API still reported a draw this week for crude oil of 1.181 million barrels, while analysts predicted a draw of 67,000 barrels. We expect crude oil prices to remain volatile in today’s session ahead of the OPEC+ meeting. Crude oil is having support at $110. 50-$108.40 and resistance is at $114.40-$115.95, In INR terms crude oil has support at Rs8,810-8,680; while resistance is at Rs 9,080–9,170.

Positive momentum seen in gold, silver

On Wednesday, gold and silver settled on a slightly positive note after a high volatility session. Gold prices bounced from multi-day lows under $1830 to the $1850 area in evening session despite higher US yields. Silver rose by 1.45 percent, erasing most of Tuesday’s losses. Gold and Silver hold near daily highs even as Wall Street extends losses and as the US dollar strengthens.

Gold prices rose sharply finding resistance under $1850 after a pullback to $1838 while silver bottomed at $21.44 during the morning session and recently peaked at $21.97 following the release of better-than-expected US economic, prices turned again to the upside. The positive US ISM Manufacturing report triggered a decline in equity prices as the figures reinforced expectations of aggressive monetary policy tightening from the Federal Reserve. Gold and silver prices were also supported after Bank of America said that higher global crude oil prices could push the global economy into recession.

Rahul Kalantri, VP Commodities, Mehta Equities Ltd. said, The positive momentum for gold and silver remains intact even despite the negative context for the metal. The US 10-year yield stands at weekly highs at 2.93 percent. The US dollar trades at daily highs across the board. The dollar index is up by 0.80 percent above 102.55.

Wednesday’s rally in metal could turn into a reversal if gold manages to break and hold above $1850 and silver does the same with $22.00. Gold has support at $1834-1822, while resistance at $1858-1870. Silver has support at $21.55-21.40, while resistance is at $22.10-22.35. In INR terms gold has support at Rs 50,640–50,410, while resistance is at Rs51,180–51,350. Silver has support at Rs61,080-61,550, while resistance is at Rs 62,680–63,110.

Dollar index to remain volatile

The dollar index settled on a positive note at 102.57 with a gain of 0.76 percent on Wednesday. The USD-INR 28June futures contract settled on a weaker note at 77.74 with a loss of 0.19 percent on Wednesday. The dollar index extended its gain and crossed its resistance level of 102.55 once again. Anticipation of an aggressive monetary tightening by the US Federal Reserve supported the dollar. The US 10-year bond yields also gained and crossed 2.90 apercentgain. The US dollar also gets support after the latest report of the Bank of America. They said that if the global oil prices remain higher for a longer period, it could push the global economy into recession.

Rahul Kalantri, VP Commodities, Mehta Equities Ltd said, "We expect the dollar index to remain volatile in today’s session and if it sustains above 102.55 could show further strength towards 102.80-103.00. On the other hand, the rupee showed some recovery from the lower levels. Indian GDP grew 8.7 percent in the financial year 2021-22 highest in the world and supported the rupee at lower levels. We expect the rupee to remain volatile in today’s session and expected to hold 78.10 levels. We suggest closely watching the levels of 77.40-78.10 for taking fresh positions in the pair, either side breakout of the range would give further directions".

(With inputs from Reuters, Agencies)

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