Trends in SGX Nifty indicate a negative opening for Indian indices

The trends in SGX Nifty indicate a negative opening for Indian indices. Deepak Jasani, Head-Retail, HDFC said, the Indian markets could open flat to mildly lower in line with rangebound Asian markets today and lower US markets on Tuesday.

Prashanth Tapse, Vice President (Research), Mehta Equities Ltd, said, Going by the early action at SGX Nifty, key local benchmark indices are likely to wobble in today's early trade, as there are lingering worries over the implications of soaring inflation and tighter monetary policy on the growth momentum. The street suspects that the Fed and also the RBI will move aggressively to raise rates and that could cause a recession. India VIX, which measures the expected volatility in the market, has moved to 20.47 levels, indicating intra-day volatility.

Nifty lost the afternoon gains on May 31 amid large volume trade on NSE due to MSCI rebalancing trades. 16,677-16,690 band on the Nifty is proving to be a tough resistance for the Nifty. A downward breach of 16,506 could result in a sharper correction on the downside, said Jasani.

Mohit Nigam, Head - PMS, Hem Securities said, Benchmark indices are expected to open on a flat to slightly negative note today as suggested by early trends on SGX nifty. On Tuesday Indian indices broke its three days green streak and ended the day in negative terrain. European markets were worst affected yesterday after the economic data showed record high levels of inflation in May, making interest rate hikes by the ECB all the more important. India’s GDP data beat estimates as the economy grew at 4.1 percent in the fourth quarter compared to 5.4 percent last year. Overall economy expanded 8.7 percent in FY22.

On the technical front, the key resistance level for Nifty50 is 16,700 followed by 16750 and on the downside 16,500 and 16,400 will act as strong support. They key resistance level for bank nifty is 35,800 followed by 36,150 and on the downside 35,200 and 34,950 will act as strong support, Nigam added.

The BSE Sensex plunged 359.33 points or 0.64 percent at 55,566.41. The broader Nifty50 fell 76.90 or 0.46 percent at 16,584.50.

Asian stocks steady

Stocks in Asia were steady Wednesday, while bond yields extended their advance amid a debate about how aggressive monetary tightening will need to be to fight inflation.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.1 percent and Japan's Nikkei rose 0.5 percent. S&P 500 futures bounced 0.5 percent after the index slid 0.6 percent on Tuesday. The U.S. dollar, meanwhile, has steadied after sliding in the second half of May and it rose slightly against the euro and the yen in early trade on Wednesday.

China PMI

China’s Caixin/Markit manufacturing Purchasing Managers’ Index for May came in at 48.1 on Wednesday, an improvement over April’s reading of 46.

US stocks close lower

US stocks closed lower Tuesday, the final session of May, as Treasury yields pushed higher following last week’s equity market bounce after a historic string of weekly losses. The Dow Jones Industrial Average and the S&P 500 each eked out gains in May, while the Nasdaq Composite fell for a second straight month. In May, the Dow and S&P 500 each eked out a gain of less than 0.1% while the Nasdaq fell 2.1 percent.

The Federal Reserve’s almost $9 trillion portfolio is about to be reduced starting on Wednesday, in a process intended to supplement rate hikes and buttress the central bank’s fight against inflation.

A survey of US consumer confidence fell slightly in May to a three-month low of 106.4, reflecting worries about high inflation and a slowdown in the economy. Economists polled by The Wall Street Journal had forecast the index to total 103.9. The index was revised up to 108.6 in April.

US home prices rose again in March even as higher mortgage rates began to bite, leaving prices at all-time highs. The S&P CoreLogic Case-Shiller 20-city price index was up a record 21.2 percent year over year while the federal government’s price tracker climbed 19 percent in the same span.

India's core sectors grow 8.4%

India's eight core sectors grew 8.4 percent in April, quickening from a revised 4.9 percent in March, the commerce ministry said on May 31. Output in six of the eight core sectors grew in April. These sectors were coal, electricity, refinery products, fertilizers, cement, and natural gas.

Fiscal deficit at 6.7%

The government’s fiscal deficit for FY22 has come in at 6.7 percent of the Gross Domestic Product (GDP), skidding off the revised target of 6.9 percent.

GDP grows 4.1% in Jan-Mar quarter; FY'22 growth seen at 8.7%

India's GDP is estimated to have grown by 8.7 percent in FY22 after growth slid to 4.1 percent in January-March quarter (Q4FY22). Growth likely slowed down in the first quarter of the calendar year 2022 because of the hit to activity from the Omicron variant-led third COVID-19 wave and the Russia-Ukraine war. The high growth figure is largely due to a favourable base effect, with the economy having contracted by 6.6 percent in FY21 because of the Coronavirus pandemic and intermittent lockdowns, which restricted economic activity.

India's central government began FY23 with a fiscal deficit of Rs 74,846 crore in April – or 4.5 percent of the full-year target. The fiscal deficit had amounted to 5.2 percent of the full-year target in the first month of FY22.

Crude oil prices to remain volatile

Crude oil’s rally fizzled out following a report that OPEC members are exploring the idea of exempting Russia from its oil-production deal, which could open the door for other producers to pump more oil. Earlier, prices rallied within a hair of $120, the highest since early March, as the latest round of EU sanctions would forbid buying oil from Russia delivered by sea but includes a temporary exemption for pipelines. Exempting Russia from oil-production targets could potentially pave the way for Saudi Arabia, the UAE and other producers in the cartel to pump more crude. However, rebound in the dollar index and the US 10-year bond yields trigger profit taking in crude oil at higher levels. Market is also eyeing forthcoming OPEC+ meetings and their stance on the crude oil outputs. If the OPEC+ maintains status-quo in outputs could further support crude oil prices.

Rahul Kalantri, VP Commodities, Mehta Equities Ltd. said, We expect crude oil prices to remain volatile in today’s session ahead of the U.S. API inventory data. Crude oil is having support at $112.20–110.00 and resistance is at $116.60–118.80, in INR crude oil has support at Rs8,810-8,720; while resistance is at Rs9,140–9,230.

Bullion outlook

Gold and silver prices hit a near two-week low on Wednesday, as rising treasury yields and a strengthening US dollar continued to weigh. Both precious metals are down by 0.50 percent to 1.20 percent. Gold price has given a downside break from its previous consolidation formed in a $1,846.20-1,864.16 range. The precious metal has turned extremely volatile as investors are bracing for a rise in the extent of the hawkish stance to be dictated by the Federal Reserve (Fed) in June.

The dollar index and the U.S. 10-year bond yields rebounded again on Tuesday after hawkish comments of the U.S. Federal Reserve Governor Christopher Waller for raising interest rates in the upcoming policy meetings. He advocates for a 50 basis points rate hike in the upcoming policy meeting and also said that monetary tightening will continue until the inflation comes down.

Rahul Kalantri, VP Commodities, Mehta Equities Ltd. said, We expect both precious metals to remain volatile to negative in today’s session. Gold has support at $1832-1822, while resistance is at $1852-1865 per troy ounce. Silver has support at $21.40-21.20, while resistance is at $21.82-22.10. In INR terms gold has support at Rs 50,640–50,410, while resistance is at Rs 50,080–51,350. Silver has support at Rs61,080-61,450, while resistance is at Rs 62,380–62,910.

USD-INR

The dollar index recovered from their lows after hawkish comments from the Federal Reserve Governor. The dollar index settled on a positive note at 101.80 with a gain of 0.45 percent on Tuesday. The USD-INR 28 June futures contract also settled on a positive note at 77.89 with a gain of 0.16 percent on Tuesday. The dollar index sharply reacted to the comments of the US Federal Reserve Governor Christopher Waller for raising interest rates and monetary tightening. He advocated for raising 50 basis points in the upcoming policy meetings and also said that monetary tightening will continue until inflation comes down to the Federal Reserve’s target rate. The dollar index crossed 102 marks during the session and benchmark 10-year bond yields also crossed 2.85 percent once again.

Rahul Kalantri, VP Commodities, Mehta Equities Ltd said, "We expect the dollar index to remain volatile in today’s session and could test 102.55 levels again in the upcoming sessions. On the other hand, the rupee showed weakness after uptick in the US dollar. The rupee also plunged after Brent crude oil prices crossed $120 a barrel marks in the international markets and weakness in the domestic equities. We expect the rupee to remain volatile in today’s session and could test 78.0500-78.2200 levels".

(With inputs from Reuters, Agencies)