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Nifty stumbled from life time high on negative global cues
Hawkish talks by ECB policymakers and increasing geopolitical tensions between Houthi rebels/Iran and US/Israel dragged the risk sentiment
India’s benchmark stock index Nifty scaled a new life time high around 22123.25 in the opening session trade Tuesday (16th January) on tech earnings optimism after upbeat report card by IT/tech majors INFY, TCS, Wipro, and HCL Tech. Overall, Nifty gained +1.38% in January (till 16th) on hopes of blockbuster earnings/report cards, Fed/RBI pivot/rate cuts in 2024, and Modinomics optimism.
On Tuesday, Nifty stumbled from life time high (LTH) amid negative global cues after ECB policymakers talked down an early rate cut and as geopolitical tensions escalated again after a fresh confrontation between Houthi Rebels/Iran and Israel/US in the Red Sea area. Nifty stumbled from around 22123 to almost 21971 but also recovered from the session low to close around 22031.50 as US/Europe stock Futures also recovered after a report that China may unveil fresh fiscal stimulus of around $130B soon to support the domestic economy.
On Tuesday, Nifty was boosted by HDFC Bank (hopes of blockbuster report card), ITC, LT, Titan, Tata Steel (hopes of Chinese stimulus positive for metals), Tata Motors, Maruti, and BPCL, while dragged by RIL, INFY, TCS, HCL Tech, NTPC, Bharti Airtel, Sun Pharma, Wipro, SBI Life and Adani ENT.
In the last few weeks, India’s Dalal Street was also boosted by RBI’s Governor Das’s comments assuring the market that RBI is not overdoing banking regulation, especially on fast-growing unsecured personal/retail lending. RIL also helped with hopes of an upbeat refining margin and no official announcement of significantly fresh CAPEX in the Vibrant Gujrat Investor summit. Nifty recovered almost +673 points from the recent low around 21450, scaled a few weeks ago.
On Monday (15th January), Nifty was boosted by HDFC Bank (hopes of blockbuster report card), RIL, INFY, Bharti Airtel, HCL Tech, ICICI Bank, Wipro, ONGC (reports of the fresh discovery of two NG wells in the Mahanadi Basin Deepwater block in the Bay of Bengal), Kotak Bank, HUL, SBI, NTPC, TCS and Maruti, while dragged by Bajaj Finance, LT, HDFC Life, Bajaj Fin Service, Hindalco and Tata Motors.
In the last two weeks, Nifty was boosted by RIL, INFY, Adani Ports, Bharti Airtel, Bajaj Finance, TCS, Tata Motors, HCL Tech, ONGC, Sun Pharma, Adani Enterprise, Bajaj Auto, LT, Axis Bank, ICICI Bank, and Indusind Bank, while dragged by HDFC Bank, Kotak Bank, HUL, M&M, Ultra cement, Asian Paints, Maruti, JSW Steel, Hindalco, Nestle India, Eicher Motors, Tata Steel and SBIN.
In the last month, the Indian market was boosted by realty (upbeat report of real estate sales), techs/IT (hopes of blockbuster report card amid higher USDINR, AI optimism, and a record rally in Nasdaq), energy (lower oil good for Indian refiners/OMCs including RIL, ONGC), infra (increasing infra stimulus by the govern, pharma, metals (Chinese stimulus optimism), Banks & financials, automobiles, FMCG, while dragged by media stocks.
The Indian market was also boosted by hopes of RBI rate cuts in H2CY24, in line with the Fed as core inflation (core CPI) is now hovering around +4%, although headline inflation (total CPI) continues to hover around +5.00%, while the economy is growing much above +6.0% trend rate.
On 3rd January, the S&P Global/HSBC data shows India’s Manufacturing PMI slid to 54.9 in December from 56.0 sequentially, below the market consensus of 55.9 and the lowest since June’22. The S&P said output expanded the least since Oct’22 even as it remained above its long-run average, and new orders growth was at its lowest level in 18 months. Also, merchandise exports rose at a moderate pace that was the joint-slowest in 8 months while buying activity increased at the softest pace since November 2022.
Further, the outstanding business was marginally higher amid a lack of pressure on the capacity and stable employment. On prices, input cost continued to rise but the inflation level was negligible by historical standards and was the second-weakest in 3-1/2 years. The rate of charge inflation eased to a 9-month low, surpassing that of input prices for the fourth month running. Finally, confidence stood at a 3-month peak, lifted by advertising efforts, better customer relations, and new inquiries.
The S&P Global/HSBC India comments about India’s December Manufacturing PMI:
"India’s manufacturing sector continued to expand in December, although at a softer pace, following an uptick in the previous month. Growth of both output and new orders softened, but on the other hand, the future output index rose since November. Rates of increase in input and output prices were broadly unchanged."
On 5th January, the S&P Global/HSBC data shows India’s Services PMI surged to 59.0 in December from 56.9 sequentially, above market forecasts of 56.5 and the strongest reading since Sep’23 as new business grew to its quickest in three months due to favorable economic conditions and positive demand trends. Moreover, new service export orders continued to increase, although slowing, and were the softest since June.
At the same time, job creation extended into a nineteenth successive period and faster than the rate seen in November. On prices, input cost pressures receded further, reaching its lowest in nearly three-and-a-half years. Still, there was a mild pick-up in output charge inflation and above the long-run average. Looking ahead, forecasts for output were upbeat, underpinned by expectations that the strong demand will carry forward to 2024, coupled with advertising and better customer relationships.
Finally, the S&P Global/HSBC data shows India’s composite PMI rose to 58.5 in December from 57.4 sequentially and the highest since September’23. Faster growth in the Indian private economic activity was mainly supported by higher service activities, as factory production rose at the slowest pace in 14 months. New orders expanded the most in three months, with service providers registering an upturn in demand while goods producers saw a weaker rise in new business. On prices, input price inflation was the least pronounced in 40 months. Cost pressures remained more pronounced in the service sector. Meantime, prices charged for both Indian goods and services rose further despite the rates of inflation little changed since November. The combined increase across the private sector was solid, but the second-weakest in nine months.
The S&P Global/HSBC India comments about India’s December Service PMI:
“India’s services sector ended the year on a high note, with an uptick in business activity, led by a three-month high new orders index. Input costs rose at a slower pace than in November, continuing the softening trend which began in mid-2023. But output prices rose at a faster pace, indicating improved corporate margins in December.”’
Overall, India’s private manufacturing activities topped out in Aug’23 ahead of the Festival shopping season from Sep’23, which should again pick up gradually from March’24 onwards, while service activities led by travel & leisure topped out in Jully’23 (after the summer holiday ends), but again surged in Sep’23 and Dec’23 due to Festival holiday/winter travel season.
Whatever the narrative, technically Nifty Future (22025) now has to sustain over 22300 for a further rally to 22450-22550*/22675-22850/23025 and 23260-23575 levels in the coming days; otherwise sustaining below 22250-22150, may fall to 21700/21600-21475/21300, further 21125/20850-20725/20575-20350. And sustaining below 20350, Nifty Future may again fall to 20150/20000-19900/19650 and 19400/19150-18850/18700 in the coming days.
I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Stocx Research Club). I have no business relationship with any company whose stock is mentioned in this article.
ALL DATA FROM ORIGINAL SOURCE
I am not a SEBI Registered individual/entity and the above research article is only for educational purpose and is never intended as trading/investment advice.
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