Selling pressure poses hurdles for a stock market rally

Every time the market tries to rise, the selling pressure seems to intensify. The TCS results signalled a possible decline in IT companies' revenue and profits. The drop in IT companies' ADR prices further indicates a negative outlook. Brokerage firms' reports forecasting single-digit growth in Nifty companies’ second-quarter EPS (earnings per share) could also weigh on the market.

Gift Nifty closed at 25,062 on Thursday night in the derivatives market and climbed to 25,095 today. This suggests a weak opening for the Indian markets today.

Global market outlook

European markets closed slightly lower on Thursday. Germany's finance minister has announced that the country will enter recession for the second consecutive year, with GDP expected to shrink by 0.2% this year.

US markets saw a marginal drop on Thursday following a retail inflation figure that was higher than expected. September inflation stood at 2.4%, above the expected 2.3%. Core inflation, which excludes fuel and food prices, was 3.3%, up from 3.2% in August. This persistent inflation has raised concerns that interest rate cuts will be delayed, a sentiment reinforced by several members of the Fed’s committee who argued last month’s cut was excessive.

The Dow Jones closed down 57.88 points (0.14%) at 42,454.12, while the S&P 500 lost 11.99 points (0.21%) to finish at 5,780.05. The Nasdaq Composite declined by 9.57 points (0.05%) to close at 18,282.05.

US futures were trading slightly higher this morning, with the Dow up 0.04%, the S&P up 0.07%, and the Nasdaq up 0.09%.

The US 10-year Treasury yields stood at 4.06%.

Asian markets were mixed this morning. Japan’s Nikkei rose by 0.70%, while South Korea cut interest rates by 0.25%. The Chinese market opened lower.

Indian markets see volatility as IT, pharma drag

The Indian market started with enthusiasm on Thursday but failed to sustain gains as the day progressed. Weakness in pharma, healthcare, and IT sectors pulled the market down, with the Nifty closing just below 25,000. Midcap stocks initially gained but later reversed course.

Foreign investors continued to offload stocks, selling ₹4,926.61 crore in the cash market on Thursday, bringing their total sales for the first seven days of the month to ₹54,231.90 crore. Domestic institutions made net purchases worth ₹3,878.33 crore.

At the close on Thursday, 1,560 stocks gained and 1,220 declined on the NSE, while on the BSE, 2,199 stocks advanced and 1,730 fell.

The Sensex rose 144.31 points (0.18%) to close at 81,611.41, while the Nifty added 16.50 points (0.07%) to end at 24,998.45. The Bank Nifty gained 523.90 points (1.03%) to finish at 51,530.90.

The midcap index fell 0.28% to close at 58,935.85, while the smallcap index edged up 0.19% to close at 18,900.00.

Bulls are struggling to withstand the selling pressure, with Nifty’s support levels now lower at 24,900–24,700. The index must cross 25,300 for a meaningful rally. Today, Nifty has support at 24,975 and 24,945, while resistance lies at 25,100 and 25,135.

TCS results add to concerns

Although the TCS results were satisfactory, future revenue projections are not as encouraging. Business from North America is down by 2%. Total revenue increased by 5.5% in dollars and 7.6% in rupees. While profit increased by 5% year-on-year, it was down by 1.1% compared to the previous quarter.

Indian IT company ADRs (American Depository Receipts) dropped by more than 2.5% in New York last night.

Gold rebounds

Gold, which had been falling for seven consecutive sessions, rebounded yesterday, rising by 1% to reach $2,634 an ounce, before closing at $2,630.90. This morning, it rose further to $2,637. The higher-than-expected US retail inflation has strengthened the belief that interest rate cuts will be delayed, boosting the appeal of gold.

In Kerala, gold prices fell by ₹40 per sovereign yesterday, settling at ₹56,200. Prices are expected to rise significantly today.

Silver prices also increased, reaching $31.15 per ounce.

The belief that interest rate cuts will take longer has kept the US dollar strong. The dollar index closed at 102.99 on Thursday and dropped slightly to 102.91 this morning.

The Indian rupee closed marginally lower after a slight gain earlier in the day, with the dollar rising by 1 paisa to close at ₹83.97.

Oil prices rise again

Crude oil prices rose again, driven by fears of conflict in the Middle East. Brent crude gained 3% to close at $79.40, though it dipped to $78.85 this morning. WTI was at $75.40, while UAE's Murban crude was at $78.68.

Cryptocurrencies fell again, with Bitcoin dropping below $60,300 and Ethereum trading below $2,390.

Industrial metals were mixed yesterday. Copper fell by 0.24% to $9,507 per tonne, while aluminium rose by 0.37% to $2,550.44 per tonne. Lead, nickel, and tin declined by 0.61%, 0.65%, and 0.07% respectively, while zinc increased by 0.53%.

Market indicators

Sensex 30: 81,611.41 (+0.18%)
Nifty 50: 24,998.45 (+0.07%)
Bank Nifty: 51,530.90 (+1.03%)
Midcap 100: 58,935.85 (-0.28%)
Smallcap 100: 18,900.00 (+0.19%)

Dow Jones 30: 42,454.12 (-0.14%)
S&P 500: 5,780.05 (-0.21%)
Nasdaq: 18,282.05 (-0.05%)

Dollar: ₹83.97 (+₹0.01)
Dollar index: 102.99 (+0.06)

Gold (ounce): $2,630.90 (+$22.20)
Gold (sovereign): ₹56,200 (-₹40)
Brent crude oil: $79.40 (+$2.82)