Weekly Musings – Index performance for week ended November 24, 2023

27 Nov 2023 , 09:06 AM

FED MINUTES MUTE MARKET ENTHUSIASM

The big event of the week was the publication of the minutes of the November meeting of the Federal Open Markets Committee (FOMC). Contrary to popular expectations, the Fed members did not even consider rate cuts, leave along hinting at rate cuts. The consensus was that the progress on reining in inflation was slower than expected and hence there was the need to keep the policy stance hawkish for a longer period. The minutes dampened the enthusiasm of the global markets as they were expecting some hints from the Fed about a change in the rate stance. That was not to be.

The big outcome of the Fed minutes was that the dichotomy between the Fed language and the CME Fedwatch has gradually reduced. In the previous week, the CME Fedwatch was almost hinting at the end of rate hike cycle and aggressive rate cuts to the tune of 125 to 150 bps by end of 2024. However, in the current week, the CME Fedwatch has converged towards the Fed viewpoint, assigning reasonable probability to 25 bps rate hike and much lower probability to a 50 bps rate hike. However, CME Fedwatch stays optimistic and is still betting on rate cuts to the tune of 100 bps to 125 bps by December 2024. This is in contrast to the Fed policy statements, hinting at a maximum rate hike of 50 bps by the end of 2024.

BANKING COULD BE THE SECTOR TO WATCH OUT FOR IN INDIA

The banks have a dual direction at this juncture. The broad indication that rates in India have topped out, is a positive signal. However, the concerns for the banking sector are more at a regulatory level. Last week, the RBI had tightened credit conditions by raising the risk weight on consumer loans from 100% to 125%. That could raise the cost of lending by 75 to 100 bps for consumer loans. However, this week we saw supportive data coming out too. The unsecured consumer loans have grown by 300% in the last 6 years and that poses a huge risk to banks in the event of rising consumer stress. That has been the trigger for the RBI to intervene and make credit tighter for consumer loans. However, this move is likely to hit consumer credit offtake as well as the profits of banks. (For live updates market map)

BSE SENSEX 30 INDEX – REACTS POSITIVE TO FAVORABLE GLOBAL CUES

The table captures the movement of the BSE SENSEX 30 for the week to November 24, 2023.

Date	High	Low	Close
24-Nov-23	66,101.64	65,894.05	65,970.04
23-Nov-23	66,235.24	65,980.50	66,017.81
22-Nov-23	66,063.43	65,664.85	66,023.24
21-Nov-23	66,082.36	65,849.17	65,930.77
20-Nov-23	65,844.01	65,547.80	65,655.15
17-Nov-23	66,037.69	65,639.74	65,794.73
	Weekly Returns	+0.27%

Data Source: NSE

During the latest week, the Sensex was closed with gains of just 0.27% for the week. For the week, the big boost to the Sensex came from FPI inflows in the prior week. That was largely offset by the concerns expressed over inflation by the Fed minutes. The net result was that the Sensex closed just about 196 points higher for the week, although it could not sustain above the 66,000 levels. The market has seen an overhang of short positions in the recent past, so some short covering is absolutely likely in the coming days. However, a lot of positive action has been happening in the smaller stocks, outside the Sensex ambit.

NIFTY 50 INDEX – CLOSES BELOW PSYCHOLOGICAL LEVEL OF 19,800

The table captures the movement of Nifty 50 index in the week to November 24, 2023.

Date	High	Low	Close
24-Nov-23	19,832.85	19,768.85	19,794.70
23-Nov-23	19,875.15	19,786.75	19,802.00
22-Nov-23	19,825.55	19,703.85	19,811.85
21-Nov-23	19,829.10	19,754.05	19,783.40
20-Nov-23	19,756.45	19,670.50	19,694.00
17-Nov-23	19,806.00	19,667.45	19,731.80
	Weekly Returns	+0.32%

Data Source: NSE

The latest week saw FPI selling of $127 million. This is back to the net selling trend after FPIs had turned net buyers in the previous week after nearly 11 weeks of net selling. This week had started on a positive on the back of lower inflation in the US and in India. However, the Fed minutes tended to be more hawkish than expected and that dampened the enthusiasm of the markets. The Nifty will now closely watch the PCE inflation data and the second GDP estimate in the US towards the end of the month. The second quarter GDP number is also expected to be announced by MOSPI next week. For the markets, the NSE VIX at 11.33 remains subdued and that is the good news as it promises a buy on dips market. The Nifty closed this week below 19,800, so that is the first resistance to breach before targeting 20,000; which would be a lot more challenging for the Nifty to breach next week.

NIFTY NEXT 50 INDEX – DIVERGES FROM THE NIFTY AND CLOSES LOWER

The table captures the movement of Nifty Next 50 for the week to November 24, 2023.

Date	High	Low	Close
24-Nov-23	46,819.00	46,578.10	46,607.75
23-Nov-23	46,781.40	46,549.45	46,675.55
22-Nov-23	46,851.15	46,367.85	46,541.15
21-Nov-23	46,935.15	46,683.95	46,718.25
20-Nov-23	46,948.55	46,640.45	46,716.90
17-Nov-23	46,870.75	46,422.90	46,838.25
	Weekly Returns	-0.49%

Data Source: NSE

The Nifty Next 50 has generally tended to mirror the Nifty. However, in the previous two weeks, the Nifty Next 50 had convincingly outperformed the Nifty by a margin. In the latest week, the Nifty Next 50 has diverged sharply from the Nifty. While the Nifty 50 closed with gains of 32 bps, the Nifty Next 50 closed with losses of 49 bps. The index closed the week near to 46,600 and the 47,000 mark now looks some distance away. However, the Nifty Next 50 has rallied sharply in recent weeks and some cooling was warranted. 

NIFTY MID-CAP 100 INDEX – SUBDUED WEEK OF GAINS FOR MID-CAPS

The table captures the movement of Nifty Mid-Cap 100 in the week to November 24, 2023.

Date	High	Low	Close
24-Nov-23	42,193.20	41,992.90	42,050.45
23-Nov-23	42,184.40	42,006.50	42,027.30
22-Nov-23	42,078.30	41,676.35	42,027.10
21-Nov-23	42,058.95	41,843.70	41,883.50
20-Nov-23	42,011.10	41,774.50	41,856.45
17-Nov-23	41,863.20	41,584.15	41,811.25
	Weekly Returns	+0.57%

Data Source: NSE

After gaining 2.29%, 2.89%, and 2.65% in the previous three weeks; this week the Nifty Mid-Cap 100 had a more subdue week gaining around 57 bps. However, the Mid-cap index managed to closed decisively above the 42,000 mark for the week and it remained among the best performing generic thematic indices. In the previous fall, the Nifty Mid-cap index had faced stiff resistance at 41,000 levels, so taking out that level in this week is fairly significant for its uptrend. More importantly, the Nifty Mid cap index has now scaled very close to its 52-week high and most of the stocks have shown substantial bounce from the 52-week low.

NIFTY SMALL-CAP 100 INDEX – MUCH NEEDED CORRECTION

The table captures movement of Nifty Small Cap 100 in the week to November 24, 2023.

Date	High	Low	Close
24-Nov-23	13,905.35	13,811.65	13,827.50
23-Nov-23	13,826.30	13,696.45	13,785.50
22-Nov-23	13,870.55	13,656.05	13,689.95
21-Nov-23	13,989.10	13,837.75	13,857.80
20-Nov-23	13,970.20	13,830.50	13,872.80
17-Nov-23	13,957.00	13,821.40	13,881.85
	Weekly Returns	-0.39%

Data Source: NSE

The index cooled in the latest week. The Nifty Small Cap 100 had gained 2.58%, 3.09% and 3.87% in the previous three weeks. That had taken the index within striking distance of the 52-week high, which his now less than 1% away. Some correction due to profit booking was on the cards for these small cap stocks and that is what we got to see in the latest week as the Nifty Small Cap 100 closed 57 bps lower.  However, despite the fall, it has held 13,800 and further upsides may be possible only after it breaks into a 52-week high, which is not too far off. However, retail buying in small caps has sustained. While there have been concerns about small cap funds freezing flows, that has had little practical impact.

BANK NIFTY INDEX – BANKS SEE SOME MEASURED BUYING 

The table below captures the movement of BANKNIFTY in the week to November 24, 2023.

Date	High	Low	Close
24-Nov-23	43,806.50	43,566.15	43,769.10
23-Nov-23	43,649.65	43,451.35	43,577.50
22-Nov-23	43,692.50	43,230.95	43,449.60
21-Nov-23	43,790.95	43,586.45	43,689.15
20-Nov-23	43,724.00	43,450.05	43,584.95
17-Nov-23	43,872.85	43,513.85	43,583.95
	Weekly Returns	+0.42%

Data Source: NSE

Last week, the Bank Nifty had lost 54 bps after gaining 1.25% and another 1.16% in the previous two weeks. In the latest week to November 24, 2023, the Bank Nifty is bank to its winning ways by gaining 42 bps. The fall in the previous week was due to overall concerns that the tightening of consumer lending norms by the RBI could hit cost of consumer loans and stymie the growth. That may not be too serious a challenge as the costs would be seamlessly passed on. However, NII growth has slowed and the best of NIM expansion may be done; and that remains a fundamental challenge for the banking stocks. Most banks are also expecting a slight uptick in the gross NPAs in the coming quarter. 

NIFTY IT INDEX – AFTER THE STORM, IT IS THE LULL FOR IT

The table captures the movement of Nifty IT index in the week to November 24, 2023.

Date	High	Low	Close
24-Nov-23	32,420.45	32,010.00	32,055.15
23-Nov-23	32,688.00	32,334.50	32,370.65
22-Nov-23	32,583.45	32,262.15	32,564.40
21-Nov-23	32,587.15	32,300.05	32,325.70
20-Nov-23	32,600.35	32,198.10	32,383.20
17-Nov-23	32,405.85	32,134.65	32,191.30
	Weekly Returns	-0.42%

Data Source: NSE

For quite a few weeks, the IT index had remained subdued on larger fundamental concerns. In the previous week, the IT index had gained a whopping 5.07% to make up for the NASDAQ rally of over 12%. However, this week was back to reality for the IT sector as it lost 42 bps, but closed just above the 32,000 mark. For now, markets remain concerned over factors like tepid constant currency growth in revenues, weak guidance, falling margins, and a shrinking workforce.

NIFTY OIL & GAS INDEX – MOST PSU OIL STOCKS HIT NEW HIGHS

The table captures the Nifty Oil & Gas index for the week to November 24, 2023.

Date	High	Low	Close
24-Nov-23	8,195.00	8,152.80	8,161.20
23-Nov-23	8,191.75	8,098.00	8,179.45
22-Nov-23	8,150.65	8,061.35	8,106.60
21-Nov-23	8,127.85	8,070.40	8,078.80
20-Nov-23	8,109.60	8,053.05	8,072.25
17-Nov-23	8,214.05	8,074.15	8,082.30
	Weekly Returns	+0.98%

Data Source: NSE

In the previous two weeks, the Nifty Oil & Gas index had gained 253 bps and 140 bps. The trend continued in the latest week with gains of 98 bps, making it the best performing large cap index on the NSE.  Last week, the oil & gas index had decisively broken above the psychological 8,000 mark and this week has seen consolidation of such gains. The sharp fall in Brent Crude prices to $78-80/bbl amid demand concerns, raised hopes that the gross refining margins (GRMs) and the marketing margins would improve in this quarter. PSU oil stocks were among the big gainers in the index.

NIFTY AUTO INDEX – BACK TO BULLISH WAYS

The table captures the movement of Nifty Auto index in the week to November 24, 2023.

Date	High	Low	Close
24-Nov-23	17,080.85	17,014.10	17,040.35
23-Nov-23	17,067.95	16,993.75	17,033.55
22-Nov-23	16,992.55	16,767.65	16,972.20
21-Nov-23	16,871.40	16,758.30	16,860.10
20-Nov-23	16,951.30	16,730.10	16,777.30
17-Nov-23	16,951.60	16,798.90	16,905.50
	Weekly Returns	+0.80%

Data Source: NSE

Even as rural demand has remained a concern, auto stocks saw 80 bps gains this week on the back of rising domestic demand. It is the two-wheeler stocks that have been in the limelight in the last few weeks and that has reflected in price. Early indications are that Rabi output should be above average and that has surely helped.

NIFTY FMCG INDEX – MARKETS FEAR THINNING MARGINS

The table captures the movement of Nifty FMCG index in the week to November 24, 2023.

Date	High	Low	Close
24-Nov-23	52,958.10	52,548.60	52,576.90
23-Nov-23	52,888.70	52,662.45	52,823.05
22-Nov-23	52,711.50	52,312.30	52,691.20
21-Nov-23	52,651.60	52,377.70	52,466.20
20-Nov-23	52,887.90	52,431.10	52,550.10
17-Nov-23	52,809.75	52,237.95	52,756.10
	Weekly Returns	-0.34%

Data Source: NSE

After gaining over 100 bps in each of the last 3 weeks, the FMCG index fell by 34 bps this week. The concerns were on the margins front as the coming quarters are likely to see pressure on the operating margins front. On the positive side, rural demand is gradually improving; with green shoots becoming visible.