Weekly Musings – Index performance for week ended December 08, 2023

11 Dec 2023 , 07:22 AM

MONETARY POLICY ADDS TO THE INDIA STORY

If the previous week was about GDP data and the US data flows, the current week to December 08, 2023 was about the monetary policy announced by the RBI. First on the repo rates. For the fifth policy in succession, the RBI held repo rates at 6.5%. The last time the RBI had hiked rates was in February this year and since then it has held status quo on raters. This was true even when the inflation had surged to 7.44% in July 2023. However, the RBI was in right in retrospect. Inflation cooled sharply to 4.87% in October and the November inflation reading is expected in the coming week. Apart from keeping rates on hold, the RBI also maintained its inflation projection for FY24 at 5.4%, a clear indication of tapering.

However, what really impressed the markets about the monetary policy was the upgrade to the GDP growth for FY24. The markets were expecting a hike of 20 bps to 30 bps in the GDP estimate but the RBI decided to go the whole hog and hike the GDP estimates by 50 bps to 7.0%. with inflation estimate static at 5.4%, this boosts the effective real GDP growth. That is likely to lead to a series of GDP upgrades. With the RBI taking the lead in aggressive upping the GDP estimates, others like the rating agencies, multilateral lending agencies, brokerage houses and the industry bodies are also likely to follow suit. This only confirms that India will continue to be the fastest growing large economy in the world for the second year in succession. The overall market cap just looks that much more justifiable. 

WILL TEMASEK BE THE FIRST OF MANY INDIA ALLOCATION UPGRADES?

During the week, Singapore based Temasek opted to put its India allocation hike on fast track mode. Why is this so important? Temasek is one of the largest long-only investors with a substantial India exposure. It now plans to invest $10 billion (Rs83,000 crore) over the next 3 years. That is more than twice the allocation that Temasek has traditionally made to India in the past, so it is a meaningful and significant upgrade. Considering the important that Temasek holds for global investors, this move is likely to induce many other long only funds to invest in India. The bottom line is that India is likely to get a lot more of serious very long term money flowing into India in the coming few years. (For live updates market map)

BSE SENSEX 30 INDEX – ALL SET FOR MOUNT 70K

The table captures the movement of the BSE SENSEX 30 for the week to December 08, 2023.

Date	High	Low	Close
08-Dec-23	69,893.80	69,506.12	69,825.60
07-Dec-23	69,695.33	69,320.53	69,521.69
06-Dec-23	69,744.62	69,395.01	69,653.73
05-Dec-23	69,381.31	68,954.88	69,296.14
04-Dec-23	68,918.22	68,274.47	68,865.12
01-Dec-23	67,564.33	67,149.07	67,481.19
	Weekly Returns	+3.47%

Data Source: NSE

Sensex closed the week with gains of 3.47%. The big boost to Sensex came from a surge of FPI flows and fundamental factors like positive GDP and core sector data. Even the latest monetary policy held the rates while upping the GDP estimates for FY24 by a full 50 basis points to 7.0%. The net result was that the Sensex closed a full 2,345 points higher for the week; on top of a 1,511 points gain in the previous week. Sensex has gained a full 3,856 points in two weeks and is all poised to touch the 70,000 mark. The market has seen an overhang of short positions, so some short covering is absolutely on the cards. Sentiments will also benefit from strong action in mid-cap stocks and small caps.

NIFTY 50 INDEX – FINALLY SCALES 21,000 DURING THE WEEK

The table captures the movement of Nifty 50 index in the week to December 08, 2023.

Date	High	Low	Close
08-Dec-23	21,006.10	20,862.70	20,969.40
07-Dec-23	20,941.25	20,850.80	20,901.15
06-Dec-23	20,961.95	20,852.15	20,937.70
05-Dec-23	20,864.05	20,711.15	20,855.10
04-Dec-23	20,702.65	20,507.75	20,686.80
01-Dec-23	20,291.55	20,183.70	20,267.90
	Weekly Returns	+3.46%

Data Source: NSE

The latest week saw FPI buying of $2.01 billion, which comes on top of $2.20 billion in the previous week. The last 4 weeks have seen close to $5 billion coming in and that is changing FPI sentiments for the better. The Nifty actually crossed the 21,000 mark during the week and closed the week just below the mark. For the Nifty which was struggling to break the 19,500 mark just about a month back, this rally comes as a whiff of fresh air. The monetary policy statement also boosted FPI flows in the week taking the Nifty sharply higher. Short covering on the Nifty futures also helped the Nifty this week. For the latest week, the Nifty gained a full 701 points, coming on top of the 473 points in the previous week. In short, the Nifty has traversed close to 1,200 points in just two weeks flat. Amidst this entire frenetic rally, the Nifty VIX remained subdued at 12.47 levels. This is indicative of buy-on-dips strength in the market and that largely limits downside risks. 

NIFTY NEXT 50 INDEX – AGAIN OUTPACES THE NIFTY STORY

The table captures the movement of Nifty Next 50 for the week to December 08, 2023.

Date	High	Low	Close
08-Dec-23	51,289.55	50,079.00	50,608.75
07-Dec-23	50,987.25	50,544.35	50,920.60
06-Dec-23	50,621.80	50,184.35	50,517.35
05-Dec-23	49,956.60	49,405.70	49,937.35
04-Dec-23	49,473.10	49,071.40	49,424.80
01-Dec-23	48,565.55	48,197.45	48,486.40
	Weekly Returns	+4.38%

Data Source: NSE

The Nifty Next 50 has generally tended to mirror the Nifty. However, in the last three weeks, the Nifty Next 50 had convincingly outperformed the Nifty by a margin; and the latest week is no exception. In the latest week, the Nifty Next 50 has grown at 4.38%, coming on top of the 4.03% gain and the 2.39% gain in the previous two weeks. For the week, the Nifty convincingly closed above the 50,000 mark, even briefly crossing the 51,000 mark.

NIFTY MID-CAP 100 INDEX – UNDERPERFORMS THE NIFTY

The table captures the movement of Nifty Mid-Cap 100 in the week to December 08, 2023.

Date	High	Low	Close
08-Dec-23	44,758.35	44,033.15	44,400.20
07-Dec-23	44,516.90	44,007.95	44,495.00
06-Dec-23	44,434.75	43,989.25	44,232.45
05-Dec-23	44,187.95	43,661.10	44,122.90
04-Dec-23	44,148.90	43,727.95	43,918.60
01-Dec-23	43,469.30	43,118.25	43,382.40
	Weekly Returns	+2.35%

Data Source: NSE

It not too common to see the Nifty Mid-cap index underperforming the Nifty, but that was the story as the gains were largely macro in nature. After gaining 12%, in the last 5 weeks, the mid-cap index gained another 2.35% in the latest week to December 08, 2023. For the week, the mid-cap index gained 1,018 points, on top of gains of 1,332 points in the previous week. The mid-cap index is well above 44,000 and almost poised to break above the 45,000 mark. More importantly, the Nifty Mid cap index is now at a 52-week high.

NIFTY SMALL-CAP 100 INDEX – A GOOD WEEK, NOT A GREAT WEEK

The table captures movement of Nifty Small Cap 100 in the week to December 08, 2023.

Date	High	Low	Close
08-Dec-23	14,619.50	14,321.55	14,403.95
07-Dec-23	14,592.25	14,426.90	14,562.00
06-Dec-23	14,523.75	14,414.50	14,507.90
05-Dec-23	14,547.15	14,335.75	14,453.55
04-Dec-23	14,514.90	14,360.95	14,437.70
01-Dec-23	14,305.10	14,223.20	14,239.30
	Weekly Returns	+1.16%

Data Source: NSE

In the previous week, the small cap index gained 2.98% to scale new highs. This week it added another 1.16%, but the momentum is surely slowing and the action is in the large caps and not so much in the mid-caps or small caps during the week. After, the index had struggled around the 14,000 mark for several weeks, it is now decisively above 14,400. With the robust GDP numbers, retail buying in small caps should pick up. That should be evident in the demand picking up once the institutional euphoria subsides in the market.

BANK NIFTY INDEX – FINALLY AT HISTORIC HIGHS

The table below captures the movement of BANKNIFTY in the week to December 08, 2023.

Date	High	Low	Close
08-Dec-23	47,303.65	46,793.90	47,262.00
07-Dec-23	46,927.70	46,507.15	46,841.40
06-Dec-23	47,259.85	46,750.20	46,834.55
05-Dec-23	47,230.55	46,653.65	47,012.25
04-Dec-23	46,484.45	45,484.20	46,431.40
01-Dec-23	44,951.10	44,531.75	44,814.20
	Weekly Returns	+5.46%

Data Source: NSE

If the markets had to make a mark, it had to be driven by the Bank Nifty. That is exactly what happened in the last two weeks. After gaining 2.39% in the previous week, the Bank Nifty gained a whopping 5.46% in the current week to scale all-time highs. In the previous week, the big trigger was positive US data flows and GDP growth for the Indian economy at 7.6%. In the latest week, the trigger was the RBI holding status quo on rates in the December policy while hiking growth estimates for FY24 by 50 bps to 7.0%. 

NIFTY IT INDEX – LOOKS LIKE TECH SPENDING IS A GAMECHANGER

The table captures the movement of Nifty IT index in the week to December 08, 2023.

Date	High	Low	Close
08-Dec-23	33,452.40	33,012.70	33,392.90
07-Dec-23	33,111.65	32,891.75	32,961.60
06-Dec-23	33,073.05	32,529.30	33,022.60
05-Dec-23	32,755.20	32,252.45	32,479.15
04-Dec-23	32,888.20	32,522.45	32,665.55
01-Dec-23	32,729.80	32,478.75	32,598.70
	Weekly Returns	+2.44%

Data Source: NSE

In the last 3 weeks, IT index gained 7%, something that would have looked unlikely a few months back. What exactly has changed for the IT industry? For starters, there were a series of upgrades by brokerages who are again talking about the merits of IT sector in India. With the Q3 GDP in the US upgraded to 5.2%, the ghost of an economic slowdown is finally exorcized. That means greater tech spending by US corporates and more business flows for Indian IT companies. One emerging view is that the worst may be over for Indian IT sector. 

NIFTY OIL & GAS INDEX – PSU OIL WAS THE REAL START OF THE WEEK

The table captures the Nifty Oil & Gas index for the week to December 08, 2023.

Date	High	Low	Close
08-Dec-23	9,197.00	8,948.65	9,044.50
07-Dec-23	9,124.50	9,037.70	9,109.70
06-Dec-23	9,056.90	8,952.15	9,043.05
05-Dec-23	8,919.90	8,797.60	8,910.55
04-Dec-23	8,831.25	8,646.45	8,786.75
01-Dec-23	8,559.15	8,494.85	8,518.80
	Weekly Returns	+6.17%

Data Source: NSE

In the previous 4 weeks, the Oil & Gas index had already gained over 11% and in the latest week, the oil & gas index rallied by another 6.17%. This incredible story has been led by PSU players like BPCL, HPCL, IOCL, GAIL etc. Reliance has lent its heft, but only to some extent. With Brent Crude prices at $75-77/bbl, it looks like the marketing margins are going to benefit a lot more than the gross refining margins (GRMs).

NIFTY AUTO INDEX – ANOTHER POSITIVE WEEK FOR AUTO STOCKS

The table captures the movement of Nifty Auto index in the week to December 08, 2023.

Date	High	Low	Close
08-Dec-23	17,948.25	17,663.30	17,769.10
07-Dec-23	18,005.60	17,757.40	17,867.35
06-Dec-23	17,827.70	17,672.95	17,788.40
05-Dec-23	17,868.50	17,681.60	17,792.10
04-Dec-23	17,756.95	17,530.95	17,687.25
01-Dec-23	17,644.75	17,462.05	17,489.05
	Weekly Returns	+1.60%

Data Source: NSE

Positive gains for auto are almost passe now. After recording 2.63% growth in the previous week, the auto index gained another 1.60% in this week. Of course, rural demand has remained a concern, but the revival is more a question of when rather than whether. It is the two-wheeler stocks that have been in the limelight in the last few weeks and that has reflected in price. New model launches and EVs are likely to drive the auto story.

NIFTY FMCG INDEX – TAKES A BREATHER THIS WEEK

The table captures the movement of Nifty FMCG index in the week to December 08, 2023.

Date	High	Low	Close
08-Dec-23	54,491.30	53,568.60	53,636.35
07-Dec-23	54,728.50	54,088.20	54,173.15
06-Dec-23	54,872.90	54,201.20	54,662.55
05-Dec-23	54,557.70	54,039.60	54,110.90
04-Dec-23	54,397.55	53,967.40	54,237.70
01-Dec-23	53,917.50	53,131.65	53,851.45
	Weekly Returns	-0.40%

Data Source: NSE

The FMCG index fell -0.40% this week, but that is OK if you consider the 2.42% gains last week. Most FMCG stocks in India are close to their 52-week highs, but the sentiments were hit this week by ITC pipping other food companies in terms of sales. On the positive side, rural demand is gradually improving; with green shoots becoming visible. It still remains the best defensive bet on the Indian economy.