Weekly Musings – Index performance for week ended September 29, 2023

2 Oct 2023 , 08:48 AM

September 2023 was an eventful month for the Nifty. It started at a low of 19,253 and then rallied all the way to the 20,100 levels in just 2 weeks. However, the Nifty failed to hold on to the highs and gave up most of the gains. For the latest week, the Nifty gyrated sharply but closed almost where it started. For the month, the Nifty closed with 2% gains, but that glossed over the fact that this was amidst a high level of volatility in the markets. To an extent, it was the positive data getting offset by negative event risks. On the domestic data front, the current account deficit at 1.1% of GDP was lower than expected. Also, the core sector growth came in at 12.1%, after growing at 8.3% for 2 months in a row. Government focus on infrastructure and prioritizing capex over revenue spending is working. Central government reported a revenue surplus in August with fiscal deficit just about inching up from 34% to 36%. Even in the US, GDP and PCE inflation were favourable.

The week saw two major event risks. Firstly, the US came close to a shutdown before the House and the Senate passed a temporary bill to give 45-day respite, allowing the US government to function. This kind of governance is not making people too comfortable. Also, Fed hawkishness has not reduced but has just taken a different form. Now the Fed is talking of keeping rates above 5% till the end of 2024; making global markets jittery. India saw net FPI selling for the first time in 6 months, as FPIs net sold equities of $1.78 billion in September 2023. This may look small in front of the inflows of $20.67 billion in previous 6 months, but that is small consolation. FPI flow triggers continue to be on the negative side and that is likely to keep the pressure on the markets. (For live impact, check market map)

NIFTY 50 INDEX – ENDS THE WEEK ON A FLAT NOTE

The table captures the movement of Nifty 50 index in the week to September 29, 2023.

Date	High	Low	Close
29-Sep-23	19,726.25	19,551.05	19,638.30
28-Sep-23	19,766.65	19,492.10	19,523.55
27-Sep-23	19,730.70	19,554.00	19,716.45
26-Sep-23	19,699.35	19,637.45	19,664.70
25-Sep-23	19,734.15	19,601.55	19,674.55
22-Sep-23	19,798.65	19,657.50	19,674.25
	Weekly Returns	-0.18%

Data Source: NSE

It was a lacklustre week with a number of banking and clearing holidays. That impacted market volumes and the willingness to commit to delivery trades. Also, the end of the quarter and the rather long weekend kept traders cautious. Nifty had a sharp fall on Thursday but recouped most of the losses on Friday, to close almost where it started the week. The fall was triggered by IT stocks, but select heavyweights in the market like HDFC Bank and Reliance have also been under pressure and that is an overhang for the Nifty. The Nifty weekly sentiments were largely defined by the gyrations in the last 2 days of the week.

NIFTY NEXT 50 INDEX – CLOSES THE WEEK NEAR 45,000

The table captures the movement of Nifty Next 50 for the week to September 29, 2023.

Date	High	Low	Close
29-Sep-23	45,163.70	44,672.65	45,036.65
28-Sep-23	45,311.85	44,469.90	44,548.80
27-Sep-23	45,245.00	44,896.75	45,222.60
26-Sep-23	45,285.05	45,085.10	45,158.90
25-Sep-23	45,281.45	44,876.40	45,070.95
22-Sep-23	45,506.85	45,008.05	45,176.00
	Weekly Returns	-0.31%

Data Source: NSE

In last few weeks, the Nifty Next 50 may have shown the tendency to mirror the Nifty, and that has continued in the current week also. The story appeared to be of profit booking in non-Nifty stocks. The Nifty Next-50 is a collection of stocks with the potential to become Nifty stocks at a future date; or Nifty aspirants. The Nifty Next-50 has faced resistance at the 46,000 mark and that continued in the current week also. There has been a lot of mutual funds churning their non-large cap stocks and that has had an impact on this index. 

NIFTY MID-CAP 100 INDEX – MID-CAPS MAINTAINED A POSITIVE NARRATIVE

The table captures the movement of Nifty Mid-Cap 100 in the week to September 29, 2023.

Date	High	Low	Close
29-Sep-23	40,663.25	40,165.50	40,537.05
28-Sep-23	40,766.75	40,051.65	40,104.05
27-Sep-23	40,678.40	40,311.40	40,640.80
26-Sep-23	40,546.60	40,312.85	40,338.85
25-Sep-23	40,456.35	39,909.85	40,405.70
22-Sep-23	40,399.55	39,909.25	40,139.15
	Weekly Returns	+0.99%

Data Source: NSE

To be fair the Mid-Cap index could not break above the 41,000 levels during the week, but it was a good feeling that the index closed nearly 1% higher despite the FPI selling pressure. Remember, the mid-cap index gained more than 35% since the start of the year, so some profit taking is par for the course. The bounce in the mid-cap index after 2 weeks of selling goes to show that alpha hunting is still a positive feature of the Indian markets. It remains to be seen how the vulnerability of these stocks to oil prices and the USDINR volatility play out.

NIFTY SMALL-CAP 100 INDEX – RETAINS THE CROWN OF TOP PERFORMER

The table captures movement of Nifty Small Cap 100 in the week to September 29, 2023.

Date	High	Low	Close
29-Sep-23	12,790.10	12,655.30	12,748.50
28-Sep-23	12,794.80	12,597.35	12,623.75
27-Sep-23	12,685.65	12,554.00	12,675.50
26-Sep-23	12,596.50	12,503.40	12,552.15
25-Sep-23	12,543.65	12,443.75	12,481.55
22-Sep-23	12,532.70	12,333.85	12,476.25
	Weekly Returns	+2.18%

Data Source: NSE

Like the mid-cap index, even the small-cap index saw sustained buying in specific sub-sectors like railways, healthcare, and defence stocks. The small cap index has also gained more than 35% since the start of the year, but in the last one month it has been in a tight range between 12,000 and 13,000 levels.  The underlying theme for this segment is still capex spending and that is not going away in a hurry. This index has a direct bearing on the participation of the retail and small investors and hence holds the key to the market mood. With the NSE adding 1 crore active investors in 8 months, the massive army of 8 crore active retail investors are likely to keep the demand for small cap stocks robust in coming weeks. 

BANK NIFTY INDEX – HDFC BANKS HOLDS THE INDEX DOWN

The table below captures the movement of BANKNIFTY in the week to September 29, 2023.

Date	High	Low	Close
29-Sep-23	44,755.05	44,344.90	44,584.55
28-Sep-23	44,756.80	44,248.20	44,300.95
27-Sep-23	44,668.00	44,182.50	44,588.30
26-Sep-23	44,773.80	44,532.45	44,624.20
25-Sep-23	44,936.55	44,400.90	44,766.10
22-Sep-23	44,996.75	44,548.90	44,612.05
	Weekly Returns	-0.06%

Data Source: NSE

Just 2 weeks back, Bank Nifty saw sharp gains on the back of RBI announcing phased withdrawal of the Incremental cash reserve ratio (I-CRR). In the previous week, the banking stocks saw a lot of pressure after the hawkish undertone of the Fed. In the previous week, the Bank Nifty had fallen from above 46,000 levels to the 44,500 levels. That is where the Bank Nifty closed this week, absolutely flat. While select banks did try to trigger a rally, the pressure came from HDFC Bank holding down the index. There have been concerns that HDFC Bank may struggle to maintain its growth and margin story post the merger with HDFC Ltd. That is making a lot of investors jittery, as HDFC Bank is the most owned stock in India.

NIFTY IT INDEX – TECHNOLOGY SELL-OFF CONTINUES

The table captures the movement of Nifty IT index in the week to September 29, 2023.

Date	High	Low	Close
29-Sep-23	32,020.35	31,514.90	31,784.40
28-Sep-23	32,623.35	31,808.75	31,879.60
27-Sep-23	32,651.00	32,339.95	32,594.65
26-Sep-23	32,693.25	32,391.45	32,471.00
25-Sep-23	32,960.95	32,581.15	32,648.60
22-Sep-23	33,109.65	32,664.40	32,906.30
	Weekly Returns	-3.41%

Data Source: NSE

If the IT index fell by -1.35% in the previous week, it fell by another -3.41% in the latest week. Other than the Bank Nifty, the IT index remains the big heavyweight in the index. In the past, the Nifty IT index has largely tried to mirror the NASDAQ. Since the peak of September 13, 2023, the NASDAQ has lost over 900 points in just 12 trading sessions and that had a rub-off impact on Indian IT stocks. The secular view on IT is still favourable, if you go by the number of IT funds being launched. However, that does not change the fact that concerns over growth and margins continue to be the big worry ahead of the Q2 results that will be starting in the second week of October. That is likely to keep IT under pressure.

NIFTY OIL & GAS INDEX – OIL & GAS INDEX STAYS BELOW 8,000 LEVELS

The table captures the Nifty Oil & Gas index for the week to September 29, 2023.

Date	High	Low	Close
29-Sep-23	7,942.45	7,848.35	7,902.80
28-Sep-23	7,915.60	7,793.00	7,810.55
27-Sep-23	7,898.55	7,838.95	7,878.10
26-Sep-23	7,899.55	7,861.10	7,877.20
25-Sep-23	7,906.25	7,843.60	7,864.40
22-Sep-23	7,961.15	7,878.30	7,884.45
	Weekly Returns	+0.23%

Data Source: NSE

The oil & gas index had traversed above the 8,000 mark after a lot of effort. Last week, the index fell below 8,000, and this week it stayed flat and under that level. Oil cues are quite confusing at this point. The crude prices have rallied, but going ahead the higher windfall tax is likely to pinch the upstream companies. That has led to a correction in some of the oil stocks. Also, if the price of Brent Crude breaches above $100/bbl, as Goldman has predicted, then that would trigger subsidy sharing and that becomes a bigger challenge for the oil companies; both upstream and downstream. Oil is a sensitive subject in an election year.

NIFTY AUTO INDEX – WEAK RURAL DEMAND HOLDS THE KEY

The table captures the movement of Nifty Auto index in the week to September 29, 2023.

Date	High	Low	Close
29-Sep-23	16,261.90	16,045.10	16,184.40
28-Sep-23	16,327.00	16,041.50	16,092.20
27-Sep-23	16,315.80	16,195.85	16,283.40
26-Sep-23	16,325.25	16,231.25	16,278.25
25-Sep-23	16,320.05	16,170.50	16,221.55
22-Sep-23	16,301.30	16,129.05	16,234.35
	Weekly Returns	-0.31%

Data Source: NSE

In the last couple of weeks, the Auto index scaled its life-time highs and that trend was dented in the last two weeks. However, the corrections are still quite small. Auto stocks were tad jittery in the last week of September, ahead of the auto numbers for the month. More than the PV numbers, the concerns are over the tractor numbers and the two-wheeler numbers; since both are a proxy for rural demand. In the last few months, rising rural inflation has dented demand quite badly.

NIFTY FMCG INDEX – KEEPS UP A BRAVE FACE

The table captures the movement of Nifty FMCG index in the week to September 29, 2023.

Date	High	Low	Close
29-Sep-23	51,742.70	51,273.75	51,602.65
28-Sep-23	52,393.15	51,246.45	51,329.10
27-Sep-23	52,377.85	51,653.80	52,329.50
26-Sep-23	51,982.45	51,644.05	51,912.85
25-Sep-23	51,762.45	51,346.05	51,642.45
22-Sep-23	51,716.70	51,344.65	51,608.50
	Weekly Returns	-0.01%

Data Source: NSE

In a week, when the markets were jittery overall, investors saw merit in the safety of FMCG stocks. The FMCG index closed absolutely flat, despite the volatility in the overall market. There have been hints of a revival in rural demand, although the sector would be hoping that the crude prices top out sooner rather than later. However, the dynamic FMCG industry is discovering new ways like making smaller products, cutting costs, and expanding their basket. It is a sector that will remain a key player directing market sentiments.

THE WEEK WAS ABOUT LOW PROFILE SECTORS

How did markets hold up flat despite the weakness in IT sector. To an extent, there were positive triggers from low profile sectors like NBFCs, insurers, healthcare socks and metals. Collectively, they account for about 10-12% of the overall Nifty and they played a silent and critical role in holding the Nifty up. At least, they ensured a flat close for the Nifty amidst major global headwinds.