Today Market Update 08 jan 25: Sensex, Nifty, and the State of Indian Markets

This evening, the Indian stock market witnessed a decline. The Sensex dropped by 51 points to close at 78,148, while the Nifty fell by 19 points to close at 23,689. Bank Nifty also experienced a fall of 367 points, closing at 49,835.

Market Opening Performance

The market opened today at 23,750, which is close to a key resistance level. Afterward, it touched the 23,490 level, which aligns with previous support levels like 23,500 and 23,300. These levels have historically been critical, especially in June, November, and December of 2024. The market took support at these levels, followed by a sharp decline of 250-300 points. Subsequently, a V-shaped recovery was observed, particularly in Nifty.

However, mid-cap and small-cap stocks did not participate in this recovery, which limited the strength of the overall rebound in market volumes.

Key Reasons for the Decline

US 10-Year Bond Yield
Over the past four days, the US 10-year bond yield has risen consistently. Four days ago, it stood at 4.55%, and it has now increased to 4.71%. This rise in bond yields can divert investors away from the Indian markets.
Dollar Index at Record Highs
The dollar index has reached near 109.2, its highest level in recent years. A strong dollar weakens the Indian rupee, making it less attractive for foreign investments.
FII (Foreign Institutional Investors) Outflows
Higher bond yields and a weaker rupee are causing foreign investors to pull money out of the Indian market, leading to increased volatility.

Impact of US Economic Data

Economic data from the US, such as job data and service sector performance, have exceeded expectations. Meanwhile, inflation in the US remains high. These factors reduce the likelihood of the Federal Reserve cutting interest rates anytime soon.

Future Market Outlook

Due to these factors, the Indian stock market may face further declines in the near term.

Investors are advised not to fall for the recent market rallies.
Stability in the market is unlikely until bond yields and the dollar index start to cool off.
A significant recovery is only expected when foreign investors regain confidence and the rupee strengthens.

Long-Term Expectations

Historically, after significant declines in the Indian market, the BSE 500 index has delivered returns of more than double in the following 12 months. Investors should remain patient and focus on long-term strategies.

Indian Stock Market Update: Nifty, FII Data, and Interest Rates

Today's Market Update:
The Indian stock market has recently shown several significant data points. In this blog, we will discuss the position of FIIs (Foreign Institutional Investors), interest rates, the dollar index, and the status of the Indian rupee.

FII's Extreme Short Positions and Market Impact

This data has been shared earlier as well, but today it’s time to understand it once again. Whenever FIIs have maintained extreme short positions in the market, Nifty has seen an 8-10% rise in the next 3-6 months.

What Can We Learn From Past Data?

In October 2018, August 2019, February 2020, May 2022, September 2022, February 2023, October 2023, and May 2024, FIIs had taken extreme short positions.
Out of these 8 instances, Nifty gained 8-10% in the next 3-6 months in 7 cases.
This indicates a high possibility of short covering in the market, especially when FIIs maintain such positions.

Impact of Dollar Index and Bond Yields

Dollar Index:
The dollar index is at a peak of 109.2. This is putting pressure on the Indian rupee, which may discourage foreign investments.
Bond Yields:
US bond yields have risen from 4.5% to 4.7%. The graph is sharply climbing upward. Until bond yields start declining, witnessing a true market recovery could be challenging.

Is a Relief Rally Possible?

If the market gets any positive trigger, such as better corporate results or stability in global markets, short covering could happen.
However, with a weak rupee and strong bond yields, the market remains under pressure for now.

Impact on the Reserve Bank of India (RBI)

Update on Interest Rates:
Since February 2023, RBI hasn’t reduced the repo rate even once.
High-interest rates have been maintained for the last 698 days, marking the longest stretch since 2004.
What’s Next?
If the US Federal Reserve doesn’t cut interest rates, the Indian Reserve Bank may also remain cautious. This could impact the pace of investment in the Indian market.

Key Factors in the Coming Days

Corporate Results:
Financial results of major companies like TCS will determine the market's direction. The IT sector also requires close monitoring.
Global Markets:
US job data and a strong economy could influence the Indian market.

IT and Global Updates: Impact on the Indian Stock Market

Today's Market Update:
Today's market witnessed significant influence from the IT sector and global drama. This discussion highlights the performance of IT and other sectors, Reliance Industries' impact, and how the market reacted amid global developments.

Performance of the IT Sector

Today, the IT sector showed slight positivity.

Primary Reason:
There is speculation that tomorrow's quarterly results might exceed expectations.
Impact of Other Sectors:
The oil and gas sector also saw gains, with Reliance Industries playing a pivotal role.
Reliance Industries registered a nearly 2% increase this week.

Impact of Bond Yields and Dollar Index

Bond Yields:
U.S. bond yields and Federal Reserve interest rates are playing a key role in determining market direction.
Dollar Index:
The high levels of the dollar index are creating pressure on the Indian market.

Suggestions for Long-Term Investors

Support at 23,500:
Historically, whenever the market has approached the 23,500 level, it has seen a recovery.
Long-Term Strategy:
If the market reaches the 22,500–22,700 range, it could present a good buying opportunity for investors.
Advice on Risk:
If you are considering long-term investment, this could be the right time to enter the market.

What Should You Do?

Make small investments in the market now and plan for further investments if the market dips further.
Do not panic over temporary losses in your portfolio. Real losses occur only when you sell.
The Indian market will grow in the long term, so be patient.

Global Updates:

Canada and the United States:
Recently, Canadian Prime Minister Justin Trudeau clarified that Canada would never become part of the U.S. but would remain a partner for trade and security.
Elon Musk's Reaction:
A statement about the merger of Canada and the U.S. went viral on social media, with Elon Musk reportedly commenting on it. However, the authenticity of this statement remains questionable.

FID Updates:

Recently, FID data has been updated.

Key Highlights of the Data:
Their activity is close to ₹10,000 crore, whereas the usual activity is around ₹3,300 crore.
Primary Reasons:
They have sold in the market today as well.
- Bond yields, dollar index, and rupee depreciation are causing investments to pause.
- The falling rupee is prompting investors to withdraw from the market.
Impact of Global Macro Data:
In recent times, FIS has consistently been selling in Indian markets, leading to visible market weakness.

NSE Updates :

Six new stocks will be added to the FNO (Futures and Options) segment from January 31.

New Stocks:
1. Castrol
2. Gland Pharma
3. NBCC
4. FINX Mills
5. Solar Industries
6. Torrent Power
Significance of FNO Inclusion:
- These stocks provide new opportunities for traders.
- Any company included in the FNO segment also gains eligibility for inclusion in the Nifty 50.
- Being added to the FNO is seen as a positive development in the market.

Dixon Technologies, Kaynes Technology, Amber Enterprises, and Epack Durable:

Stock Performance:
These companies are currently facing a decline.
- They are key players in the Electronic Manufacturing Sector (EMS).
- However, their valuations are currently very expensive.
Opportunities After the Decline:
- When these stocks stabilize and form a base after the fall, they are likely to perform better in the future.
- Investors should study the valuations of these companies before making decisions.

Key Points:

Focus of Dixon Technologies and Others:
- In mobile and smartphone manufacturing, Google has recently approached Dixon.
- Dixon has promising growth estimates in laptops, mobile phones, and other segments.
- Amber Enterprises is strong in the AC sector, and Kaynes Technology shows potential in semiconductors.
Investment Advice:
- Considering the current expensive valuations, it is advisable to invest only when prices fall further.
- Study these companies and their businesses in detail.
- Investing at the right valuation in the future will offer better risk-to-reward outcomes.

Samsung Related Update:

This means the stock is there without any reason. They missed their profit estimates, so when some weekly data related to their business comes in, they are connected to Dixon as their client.

Expectation of Dull Business:
- There may be some decline in terms of May B and other smartphones today.
- Tata's Investment in the EMS Space:
  Tata Group has invested nearly 18 billion dollars to enter this space in the next two years.
  - Tata Group Chairman N. Chandra states this is a long game, and as Tata is entering this space, there is fear that they might take market share from existing players.
Reason for Today's Stock Sell-off:
- The main reason for the sell-off in stocks is the news updates related to Tata entering the EMS space and the competition.

OLA Electric:

Bhavish Agarwal's Tweet on December 2:
He tweeted that we are going to increase our stores from 800 to 4000.
- Expansion Plan by December 20:
  - Ola Electric announced plans to expand to 4000 stores across the country by December 20.
SEBI Update:
- SEBI has issued a warning to Ola Electric for violating disclosure norms.
- Ola Electric disclosed this information on Twitter before informing the exchanges.
- SEBI warned that this should not happen again in the future, or action will be taken.

Reliance Industries Ltd:

Growth Drivers for Reliance:
- Positive Outlook from Jefferies and Bernstein:
  - Jefferies and Bernstein are positive on Reliance, stating that it has good growth prospects at attractive valuations.
  - Reliance performed well in March 2020 with low and attractive valuations.
  - Compared to Nifty, Reliance has underperformed by nearly 15%.
Valuations and Growth Expectations:
- Jefferies has a target of ₹1690, while Bernstein has set a target of ₹1520.
- Strong Growth in Retail and Jio Spaces:
  - Reliance is expected to see stronger growth in its retail and Jio sectors.
  - However, their investments in renewable energy, hydrogen, and solar are still waiting for updates, but once they provide news, it may break through any negative sentiment surrounding the stock.

Delta Corp Ltd:

Important Decision Regarding Gaming Companies:
- On January 10, an important decision related to Delta Corp and other gaming stocks is expected.
- The GST department has issued notices to gaming companies to pay 28% GST from October 1, 2023, onward.
- These companies have taken the matter to the Supreme Court for a final ruling.
Supreme Court's Decision:
- The final ruling is expected on January 10.
- If the ruling is in favor of the companies, it could be positive for Delta Corp and other gaming stocks.
- Investors should closely track this development.

UNITED BREWERIES LTD. UPDATE:

There is bad news for alcohol drinkers in Telangana as some famous brands like Kingfisher and Heineken beer, which were sold by United Breweries Limited, will no longer be available in Telangana. The government has not increased the prices related to these brands, and they have been selling at a loss. Therefore, they have decided to stop selling in Telangana.

Reaction and Profitability:
- After hearing this, some people are thinking that if they stop selling, at least they won't incur losses, which could be a positive business move.
- If the government revises the prices, it could be a good update for the company. However, if the prices are not adjusted, their sales will decline.
- Impact on Volume and Margins:
  - If they were selling 10,000 beers in Telangana, now their total sales will drop from 1 lakh to 90,000 beers. This will reduce volume but may increase margins.
- Long-Term Impact:
  - If the government revises prices, it could be beneficial for the company in the long run. However, if the prices remain unchanged, their sales will decline, though overall profitability could improve.
- Receivables and State Dues:
  - United Breweries has receivables of around ₹2400 crores, including about ₹900 crores pending from the Telangana government.
  - The company is trying to recover this amount from the Telangana government.
- Market Impact:
  - The market is worried today as the sales stop in Telangana might affect the ₹900 crore receivable. There is uncertainty about whether they will receive this amount.
- Agreements and Future Outlook:
  - With proper agreements, the company will move forward and may earn some money.
  - Investors should keep an eye on the company’s next conference call for clarity regarding any updates from the Telangana government.

ANDHRA PRADESH UPDATES:

There is also big news from Andhra Pradesh related to Telangana. It has been observed that until now, we have had Inter First Year and Second Year exams, but from next year, only the Second Year exam will be held.

New Exam System:
- According to this decision, there will be no First Year exams, and only Second Year exams will be conducted.
- Students are saying that they will have enough time to revise the entire syllabus in the second year.
- Curriculum and Textbook Changes:
  - It will be interesting to see if there are any changes to the curriculum or textbooks as a result of this decision.

FINANCE NEWS UPDATES:

It has been observed that credit access is being provided by Grameen Bank, and although the response has been positive, today the interest rate stands at 14-15%, similar to other microfinance players like Ujjivan Small Finance Bank. However, many other players have increased their rates significantly. A meeting is scheduled with the top financing players, and all the top 10 players will attend this meeting. During this meeting, three main topics will be discussed:

Easy repayment schedules
Ways to keep the availability of funds high for them
What can be done to bring borrowings to them at a lower cost

The government is planning to support the entire microfinance and fintech industry. These companies will also be part of the discussions in the upcoming meetings. The visibility of these updates is the primary reason for the rally in these stocks today. Let's see if this is a reality or just speculation. We will get official updates in the coming times.

KALYAN JEWELLERY:

Now, let's discuss Kalyan Jewellers. Yesterday, they posted their business data, which was okay, but today, the stock experienced a huge sell-off. If we wait for a while, the management has provided clarification to CNBC TV 18. In the clarification, the management addressed rumors that they were buying planes and helicopters with money and raising concerns about corporate governance. The management denied these rumors.

The clarification can be found in a six-minute video, which I will provide in the description. You can click on the link and listen to the answer given by the management. After this clarification, the stock fell by 7% but later recovered. The management is confident and has stated that their fundamentals are strong and they don’t need to respond to rumors. They believe they will perform even better in the future, and the market will recognize this through their business performance.

However, even though the management is confident, if we look at the current valuations, the stock seems a bit expensive. Even if they deliver robust numbers in the future, given the current valuation, there is a possibility that the stock could increase by two or three times. But for now, this business does not seem to justify the current valuation. So, anyone looking to invest new money should carefully assess the valuations and determine if there is significant potential for growth.

SWIGGY LTD:

Swiggy has introduced a bold new feature, promising food delivery within 10 minutes. On the other hand, Zomato, as shown on the screen, is claiming to deliver food within 15 minutes. Swiggy has started this service in some major cities, and Zomato plans to expand it nationwide.

Zomato's 15-minute delivery service is now competing with Swiggy's 10-minute delivery service. Today, we saw a drop in Swiggy's stock due to the fear of losing its competitive edge with Zomato's 15-minute delivery.

One 97 Communications Ltd:

Today, Paytm’s share price has dropped by around 8%. The main reason for this is that they did not gain any UPI market share in the month of December. While they had good performance in October and November, their UPI business did not grow significantly in December. UBS has given Paytm a neutral rating and set a target price near ₹1000 per share. This is the main reason behind the stock fall, and I will explain it so you can understand.

In January 2024, when the RBI did not impose any restrictions on them, Paytm had nearly 10% market share in the UPI sector. However, later on, the RBI introduced restrictions for Paytm. In October, all the users left Paytm, causing their market share to drop to about 5.5%, which means they almost lost 50% of their market share. However, in October, the RBI allowed them to add users to their UPI segment. This led the market to believe that they would grow their UPI numbers in the future. But their market share remained at 5.5% in October, November, and December. If they had 100 million monthly transacting users in January 2024, by September, this number was expected to reach 68 million. They are a growing company in terms of cross-selling products. UBS’s note states that they are unable to grow in the UPI sector because the market believes they will not see much improvement. According to the data from NPCI, they are maintaining the same market share but are not able to grow. This is why the stock has fallen so much today. While there was a 91% increase in the last six months, today the stock has fallen by 8%.

Transformers and Rectifiers India Ltd:

They have posted their financial results. Year-on-year and quarter-on-quarter comparisons show strong growth, marking the highest revenue and profit in the company’s history. They are also issuing a 1:1 bonus along with the results. This means that if someone has one share, it will be converted into two shares, effectively halving the stock price. Additionally, they are planning to raise ₹750 crore through QIP. These are the updates.

Nifty and Bank Nifty Support and Resistance Levels:

Here are the current support and resistance levels for Nifty and Bank Nifty:

For Nifty, the upside is expected from levels 23760 and around 23840. If it moves higher, the next support levels would be 23640 and 23580.
For Bank Nifty, the current support is at 49360, and if it falls from here, 49580 would also be an important support level.
In the past, 50200 acted as a major resistance level, and if this level breaks, the next significant resistance would be at 50400.

Stay safe, stay informed, and invest wisely!

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