Dear
Trader…
The 30-share BSE benchmark Sensex declined 1,190 points or
1.48% to settle at 79,043. The broader NSE Nifty dropped 322 points or 1.32% to
end at 24,115.
The market capitalization of all listed companies on the BSE
declined by Rs 1.21 lakh crore, to Rs 443.27 lakh crore.
Overnight, US inflation data signaled that the pace of rate
cuts will be slower than expected, dragging IT stocks down by up to 4%. The
Nifty IT index dropped 2.3%, weighed down by LTTS, Infosys, Tech Mahindra, and
HCL Tech.
Infosys, ICICI Bank, Reliance Industries, HDFC Bank, TCS, and
M&M collectively contributed 710 points to the overall decline in the Sensex.
Bajaj Finance, Axis Bank, HCL Tech, and Bharti Airtel also weighed on the
index.
The conglomerate’s stocks gained about $14 billion on
Wednesday after losing nearly $34 billion since the indictment till Tuesday.
1)
Consumer spending rises, raising inflation concerns –
US consumer spending rose more than expected in
October, but progress on curbing inflation has stalled in recent months,
raising concerns over future interest rate cuts.Consumer spending grew by 0.4%
in October, surpassing the 0.3% market expectation, following a revised 0.6%
increase in September. While this underscores the resilience of the U.S.
economy, inflation remains above the Federal Reserve’s 2% target.
The combination of persistent inflation and potential higher
tariffs on imports may limit the Federal Reserve’s ability to cut interest
rates in 2024.
2)
Fed divided on rate cuts – The
Federal Reserve is widely expected to implement a third rate cut in December,
but minutes from the Federal Open Market Committee’s November 6-7 meeting
revealed divisions among officials on the extent of further rate reductions.
This uncertainty has heightened investor concerns.
According to LSEG data, traders are pricing in a 65% chance
of a rate cut next month and are forecasting a total of 75 basis points of
easing by the end of 2025.
3)
Decline in IT stocks – The
Nifty IT index dropped 2.4% in today’s trade as US inflation data indicated a
slower-than-expected pace of rate cuts. All 10 constituents of the index ended
in the red, with LTTS and Infosys leading the losses, each dropping nearly
3.5%. Other major stocks, including HCL Tech, LTIMindtree, Mphasis, Tech
Mahindra, and TCS, saw declines between 1% and 2.5%.A slowdown in US rate cuts
directly impacts consumer spending, which in turn affects sectors like Indian
IT.
4)
Global Markets – Indian markets mirrored the losses
in Asian shares as concerns grew that the Fed might adopt a cautious approach
to rate cuts following persistently strong US inflation data. Sentiment also
remained weak as investors grappled with the possibility of a tariff war
triggered by US President-elect Trump’s policies and reports of explosions in
Ukrainian cities.
MSCI’s broadest index of Asia-Pacific shares outside Japan
was down 0.4%. Overnight, U.S. markets also declined, with the S&P 500
falling 0.38%, the Nasdaq Composite down 0.59%, and the Dow Jones Industrial
Average slipping 0.31%.
5)
High bond yield and Dollar index – The high US Treasury bond yields, with the 10-year yield at 4.25% and
the 2-year yield at 4.23%, along with a stronger US dollar, have placed added
pressure on Indian equities. The dollar index is currently at 106.39. Higher
bond yields make US assets more attractive, prompting capital outflows from
emerging markets like India.
Additionally, a stronger dollar increases the
cost of foreign capital, further discouraging investment and dampening market
sentiment.
6)
FII Buying Momentum Eases – After
weeks of persistent selling, foreign institutional investors (FIIs) made a
notable comeback in Indian equities, purchasing stocks worth Rs 11,100 crore
over three consecutive trading sessions. This marked a significant turnaround
from the 38 straight sessions of net outflows.
However, on the third day of buying, FII purchases slowed to
just Rs 7.78 crore, suggesting that the buying momentum may be tapering off,
with potential for selling in the coming sessions.
Despite this recent surge, foreign portfolio investors (FPIs)
have been net sellers in November, offloading equities worth Rs 15,845 crore.
This follows a similar trend in October when FPIs sold shares worth Rs 94,017
crore. Year-to-date, FPIs remain net sellers, with total outflows of Rs 9,252
crore.)
7)
Monthly expiry – Selling pressure could also be
attributed to Thursday being a monthly expiry day.We have seen a lot of swings
and market volatility. Of course, the monthly expiry cannot be ruled out. The
factors still indicate that there will be mixed cues for the rest of the day,
and we are looking at 24,000 as a crucial make-or-break zone.
Nifty futures opened at 24460 points against the previous
close of 24437 and opened at a low 24056 points. Nifty Future closed with an
average movement of 454 points and decline of around 322 points and closed 24115
points…!!
Meanwhile, Even though the market has largely moved on from the US
inflation story, a sticky reading will add to doubts that the Fed needs to cut
in December after all.
Technically, the
important key resistances are placed in Nifty future are at 24115 levels, which
could offer for the market on the higher side. stainability above this zone
would signal opens the door for a directional up move with immediate
resistances seen at 24272 – 24303 levels. Immediate support is placed at 24008 –
23880 levels.
Past Performance is not an Indicator of Future Returns. The
securities quoted are for illustration only and are not recommendatory. Investment
in securities market are subject to market risks. Read Disclaimer and related
all the documents carefully before investing, mentioned on www.nikhilbhatt.in
