Stock Market Highlights 29 Aug 2022: Nifty ends near 17,300, Sensex drops over 850 points; FMCG stocks shine in falling market
(By: Ravi Kant Kumar)
The Indian market fell around one and half per cent amid weak global cues and huge selling pressure on IT stocks on Monday. Benchmark Nifty50 ended near 17,300, while barometer Sensex dropped around 800 points, tracking weakness in global markets after US Federal Reserve Chairman hawkish commentary during Jackson Hole Symposium 2022.
In the broader market, Nifty Midcap and Smallcap trimmed some losses as the formed ended lower by 0.7% and the latter declined by 0.8% respectively.
Nifty FMCG gained around half percent, while IT index dropped around three and half per cent. Nifty Oil & Gas was another sector that ended flat to positive. All other indices ended up dip in the red.
Britannia, Maruti Suzuki, HUL, Asian Paints, Tata Consumer and Mahindra & Mahindra were among few gainers on Monday.
IT stocks led the drag with Tech Mahindra leading the IT pack with more than for per cent drop. Infosys, Wipro, Kotak Bank and HCL Tech were the top laggards.
Vinod Nair, Head of Research at Geojit Financial Services, said on Modnay that Powell’s hawkish tone during the Jackson Hole symposium pointed towards a stricter rate hike while investors were expecting a milder policy action post the release of the softer July inflation reading.
"This has increased concern about an economic slowdown, which has caused a significant sell-off in the US market and spillover effects on markets around the world. The sell-off in emerging markets like India was exacerbated by concerns over the possible withdrawal of foreign funds, which was the backbone of the recent market rally," the expert pointed out.
#JacksonHole : महंगाई पर काबू पाने में समय लगेगा, जरूरत के मुताबिक फेड दरें बढ़ाता रहेगा : जेरोम पॉवेल,चेयरमैन,फेडरल रिजर्व#DowJones #JeromePowell pic.twitter.com/VqRZQFNueg
— Zee Business (@ZeeBusiness) August 29, 2022
Markets expected US Fed chair Jerome Powell to remain hawkish at Jackson Hole but the ultra-hawkish tone of the Fed chief's message and his warnings that Fed's policy will "cause some pain to households and businesses" and this is "the unfortunate costs of reducing inflation" were not expected and factored-in by the markets, said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
He said the 17% rally in S&P 500 from mid-June to mid-August was mainly driven by expectation that with declining inflation, the Fed would pivot towards lower interest rates by early 2023. This expectation has been belied by Powell's message that rates will go up and remain there for 'sometime', he said.
"The sharp rise in the Dollar index above 109 and the 10-year bond yield spiking to 3.1 % are negative for capital flows to EMs like India. FPIs are unlikely to continue buying in India in this scenario. The 'buy on dips' texture of the market is unlikely to hold. Investors should not rush in to buy the dips now. Better wait for the dust to settle," he added.
(By: Ravi Kant Kumar)
The Indian market fell around one and half per cent amid weak global cues and huge selling pressure on IT stocks on Monday. Benchmark Nifty50 ended near 17,300, while barometer Sensex dropped around 800 points, tracking weakness in global markets after US Federal Reserve Chairman hawkish commentary during Jackson Hole Symposium 2022.
In the broader market, Nifty Midcap and Smallcap trimmed some losses as the formed ended lower by 0.7% and the latter declined by 0.8% respectively.
Nifty FMCG gained around half percent, while IT index dropped around three and half per cent. Nifty Oil & Gas was another sector that ended flat to positive. All other indices ended up dip in the red.
Britannia, Maruti Suzuki, HUL, Asian Paints, Tata Consumer and Mahindra & Mahindra were among few gainers on Monday.
IT stocks led the drag with Tech Mahindra leading the IT pack with more than for per cent drop. Infosys, Wipro, Kotak Bank and HCL Tech were the top laggards.
Vinod Nair, Head of Research at Geojit Financial Services, said on Modnay that Powell’s hawkish tone during the Jackson Hole symposium pointed towards a stricter rate hike while investors were expecting a milder policy action post the release of the softer July inflation reading.
"This has increased concern about an economic slowdown, which has caused a significant sell-off in the US market and spillover effects on markets around the world. The sell-off in emerging markets like India was exacerbated by concerns over the possible withdrawal of foreign funds, which was the backbone of the recent market rally," the expert pointed out.
#JacksonHole : महंगाई पर काबू पाने में समय लगेगा, जरूरत के मुताबिक फेड दरें बढ़ाता रहेगा : जेरोम पॉवेल,चेयरमैन,फेडरल रिजर्व#DowJones #JeromePowell pic.twitter.com/VqRZQFNueg
— Zee Business (@ZeeBusiness) August 29, 2022
Markets expected US Fed chair Jerome Powell to remain hawkish at Jackson Hole but the ultra-hawkish tone of the Fed chief's message and his warnings that Fed's policy will "cause some pain to households and businesses" and this is "the unfortunate costs of reducing inflation" were not expected and factored-in by the markets, said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
He said the 17% rally in S&P 500 from mid-June to mid-August was mainly driven by expectation that with declining inflation, the Fed would pivot towards lower interest rates by early 2023. This expectation has been belied by Powell's message that rates will go up and remain there for 'sometime', he said.
"The sharp rise in the Dollar index above 109 and the 10-year bond yield spiking to 3.1 % are negative for capital flows to EMs like India. FPIs are unlikely to continue buying in India in this scenario. The 'buy on dips' texture of the market is unlikely to hold. Investors should not rush in to buy the dips now. Better wait for the dust to settle," he added.
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Reliance AGM: Mukesh Ambani's succession plan
"A highlight of the AGM was Mukesh Ambani's emphasis on succession planning. He concluded his address by seeking everyone's blessings for the " Gen next taking over the reins confidently. " With Akash heading Jio, Isha heading Retail and Anant heading Energy the plans are clearly spelt out. Mukesh Ambani's promise to double the value of the company by 2027 is reassuring. His commitment to India and faith in the India Growth Story remains as strong as ever"-
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Nifty:17350-17400 is an immediate resistance zone
The Nifty had seen a minor degree bounce in the last week that retraced nearly 61.8% of the first leg of the fall. Structurally, the index was gearing up for a down move. Accordingly, the index had a huge gap down opening on August 29. On the way down, the index breached the swing low of 17345, which got retested with an intraday bounce. Although, the index witnessed some recovery intraday, it is unlikely to sustain going ahead. 17350-17400 is an immediate resistance zone where the index is likely to attract another round of selling. Overall short term target continues to be pegged at 17000. -
Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas
"Nifty Outllook: Index may drift down towards 17000-16950 over short term"
"Nifty slipped sharply lower as it broke down from consolidation on the daily chart suggesting a rise in the bearish bet in the market. The momentum oscillator RSI is in bearish crossover and falling towards the oversold zone. The short-term trend at the juncture looks weak, on the lower end, the index may drift down towards 17000-16950 over the short term. On the higher end, resistance is visible at 17500."- Rupak De, Senior Technical Analyst at LKP Securities
"Overall structure is bullish, correction a buying opportunity"
Indian market kicked off a new week with a deep cut followed by a sharp sell-off in global markets on the back of hawkish commentary by US Fed chairman Jerome Powell. Nifty witnessed profit booking from a psychological level of 18000 and slipped below 20-DMA where 17150 is an important support level then 200-DMA of 17000 is a sacrosanct support level. 38.2% retracement of the previous rally comes around 16900 therefore bulls will try to defend the 17150-16900 area to come back in the game. The overall structure is bullish therefore this correction is a buying opportunity because the market may try to approach a fresh all-time high near Diwali. In terms of sector Banking, Capital goods, Infra, Auto, and Consumption may continue to outperform while IT may also see buying interest from lower levels. The market is already discounting a hike in interest rates while cool off in inflation may help to improve sentiments.- Santosh Meena, Head of Research, Swastika Investmart Ltd.
Bank Nifty: Immediate hurdle is 38,500
"After a big gap down, the index traded in a range on an intraday basis and held the support of 38,000. The index is stuck in a broad range between 38,000-39,000 levels where the demand and supply are visible. The index if fails to hold the support of 38,000 on a closing basis will see an extension of the current sell-off. The immediate hurdle on the upside is placed at 38,500 and if breached can witness some short covering move toward 38,800-39,000 levels," said Kunal Shah, Senior Technical Analyst at LKP Securities.
Rupee likley to trade negative on strong Dollar, weak global cues
USDINR (CMP Rs 79.97 spot): Indian rupee depreciated today and touched an all-time low of 80.1325 on strong Dollar and deteriorating global risk sentiments. Global markets fell sharply by more than 2% amid hawkish speech by Fed Chair Powell. He reiterated Fed’s hawkish stance and said that the FOMC’s focus is to bring down inflation to their goal of 2% and that the central bank will keep tightening till inflation in controlled. This may lead to slower growth, higher interest rates and softer labour market conditions along with pain to households and businesses.
We expect Rupee to trade on negative note on strong Dollar and weak global market sentiments. Concerns over global economic slowdown and inflation worries may also put pressure on Rupee. Markets may also remain cautious ahead of India’s GDP, manufacturing PMI and trade deficit data later this week. Traders may also remain alert ahead of US consumer confidence, ISM Manufacturing PMI and non-farm payrolls data this week. USDINR spot price is expected to trade in a range of Rs 79.20 to Rs 80.80 in next couple of sessions.-
Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas
Stock Market Outlook: How to navigate current market volatility?
Post peaking out at ~18K mid-August, markets are now at around 17300 levels. IT sector has seen more pain than other sectors on fears of weaker economic growth given the hawkish stance of the FED and the firm resolve to control inflation in the US. The US market had rallied ~18% over mid-June -mid August on the expectation that the US rate hike trajectory would be more measured going ahead. But the message last Friday belied these hopes. This was unexpected and hence globally markets have seen weakness today. This weakness has been accentuated by the fact that the USDINR rate moved to a new low today accompanied by the dollar index hitting a new multi-year high and the US 10 year seeing a sharp spike this month over the preceding month. The immediate fallout of this could be a reversal of the solid FPI inflows seen this month. Our market has already digested a fair share of the global weakness which began around 10 months back. We believe a systematic allocation to equities is the best way to navigate these alternate bouts of market decline and recovery.-
Vineet Bagri, Managing Partner- TrustPlutus Wealth
Oil price outlook: WTI Crude oil (October) CMP $93.34
WTI October futures posted a 2.5% weekly gains for the week ended 26 August. It traded higher in Asian hours and continued to maintain the momentum in mid-European trading hours to trade around $93.35. Oil prices have been moving higher by the notion of OPEC nations agreeing to a supply cut talks signalled by Saudi oil minister last week. The oil minister warned of supply demand imbalance due to anticipated supplies from Iran once the N-deal is signed. Iran could add 1 mbpd of oil supplied to the world supplies. The unrest in capital city of Libya is also lending some support as the chaos could turn into full blown conflict. On macro front, dollar index hit fresh 20 year high of 109.44 as the Fed chief signalled of hiking the interest rates until the inflation reached at Fed’s comfort level. For the day prices are expected to trade higher and we see strong resistance at $96 followed by $98, while the downside is supported by $90.-
Mohammed Imran, Research Analyst at Sharekhan by BNP Paribas
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