Which sectors moved equity markets in April 2023?

29 Apr 2023 , 08:43 PM

While the FPI inflows in March were attributed to the $1.9 billion investment made by GQG Investments into the Adani group, the $1.41 billion of FPI flows in April 2023 were purely on merit. It was the overall rally across large cap, mid-cap and small cap indices that stood out in April 2023. Here is how the key indices fared for the month of April 2023.

Sector / Index	April 2023 Returns (%)
Nifty 50 Index	+4.06%
BSE Sensex	+3.60%
Mid Cap Index	+5.86%
Small Cap Index	+7.54%

There was some uncertainty in the markets over technology results, but the market decided to just shrug it off and focus on the fact that the RBI had decided to go slow on rate hikes. The pause in the April 2023 MPC meet was a signal to the markets that the RBI was willing to adopt a growth-friendly path, even if it was at divergence with global monetary policy.

Global macros had limited impact on Indian markets in April 2023

Global macros continued to challenge the Indian economy, but the markets were less worried about it. The confidence, apparently, stems from the belief that the Indian economy would be able to ring-fence itself from the global headwinds. Let us look three  global headwinds that were visible in April 2023.

• Central bank hawkishness continued to be a major challenge with the RBI not relenting on rate hikes despite the global banking crisis. Rates in the US are now a full 475 bps higher and that is putting pressure on rates globally. For now, the Fed has hinted at another 25 bps to 50 bps of rate hikes from current levels.

   

• The banking crisis is far from over and the impact was evident as global consumers became wary of spending. US GDP growth for March 2023 quarter came in sharply lower at 1.1%; sharply lower than the Q42022 growth of 2.6%. That is having a visible impact on Indian exports, technology spending and the pricing power of companies.

   

• The third big risk stems from oil prices, with the OPEC-Plus having cut supplies further. For now, the supply cuts have not had an impact as markets are pricing a slowdown and a consequent impact on oil demand. However, if oil demand remains buoyant through the next few weeks, then pressure on oil prices could be visible.

Domestic concerns still existed in April 2023

Even as the global factors hogged the limelight, a few domestic factors continued to plague the performance of the Indian economy.

1. If one reads the language of the RBI MPC minutes released in the third week of April, it is clear that the RBI was not done with its rate hikes. The RBI has underlined the possibility of another one or two rate hikes. With cost of funds already pinching Indian corporates, more rate hikes could be a challenge for the Indian economy.

    

2. The Q4 results are half-way through for Indian companies and some pressure points are visible. Sectors like cement and IT are still seeing pressure from higher operating costs. Consumer facing sectors like FMCG are facing a serious dent on rural demand, although urban demand is making up for it. Perhaps, it is the solid growth in banking profits that is glossing over a lot of the underlying problems that Indian companies are facing.

    

3. At the level of household budgets, inflation is still hitting hard. According to recent reports, this has impacted the spending of households. That was visible in the tepid sales of gold during the recent festive season. That is a factor that can keep GDP revival under check.

Clearly, it is the domestic concerns that could bother the markets in the short to medium term. That is where, there still are a number of challenges.

Sectoral leaders and laggards on April 2023 returns

If you look at April 2023 as a month, it was decisively bullish. Out of the 25 sectors that we have looked at, only IT sector has given negative returns, with all the other sectors giving positive returns. That is evident from the table below.

Sectoral /  Thematic Index	Current Index  Value	1-Year  Returns (%)	1-month  Returns (%)
NIFTY REALTY	445.10	-0.89	16.78
NIFTY PSU BANK	4,167.65	48.56	13.18
NIFTY AUTO	13,189.25	17.84	8.81
NIFTY BANK	43,233.90	18.70	8.33
NIFTY PRIVATE BANK	21,885.75	18.43	8.19
NIFTY FINANCIAL SERVICES	19,162.55	14.66	7.69
NIFTY INFRASTRUCTURE	5,356.20	2.85	6.83
NIFTY OIL & GAS	7,491.80	-10.66	6.62
NIFTY METAL	5,799.40	-8.85	6.21
NIFTY ENERGY	23,734.55	-18.29	6.09
NIFTY INDIA MANUFACTURING	8,340.65	2.71	6.08
NIFTY CPSE	3,053.80	12.36	6.02
NIFTY PSE	4,683.15	8.02	5.75
NIFTY PHARMA	12,613.95	-6.42	5.62
NIFTY INDIA CONSUMPTION	7,502.05	4.76	5.59
NIFTY COMMODITIES	5,781.65	-7.90	5.44
NIFTY HEALTHCARE INDEX	8,013.55	-5.01	5.42
NIFTY FMCG	47,814.10	24.32	5.27
NIFTY SERVICES SECTOR	23,733.75	1.24	4.68
NIFTY MNC	19,811.55	6.58	4.60
NIFTY INDIA DIGITAL	5,247.95	-12.62	4.17
NIFTY CONSUMER DURABLES	24,276.35	-12.50	1.65
NIFTY MEDIA	1,714.85	-22.52	1.30
NIFTY IT	27,708.20	-13.18	-1.08

Data Source: NSE (shaded column is ranked variable)

Clearly, the monthly gainers have dominated in April 2023 and here is the story.

• Among the major gainers were the rate sensitives. If you look at the top 6 gaining sectors, they are all rate sensitive sectors. That is not hard to fathom. With the RBI declaring status quo on rates in April 2023, the markets are keen to believe that India may be close to the top. Additionally, infrastructure, oil and metals were major gainers.

   

• The only sectoral laggard for the month was the IT sector, which lost -1.08%, even in a substantially bullish month. The reason was the weak guidance given by the leading IT companies like Infosys and HCL Tech. The message was that in FY24, the top line growth in constant currency terms and the operating margins would be under pressure.

If you leave the IT outlier, April 2023 was a decisively positive month for the stock markets.

Sectoral leaders and laggards on 1-year returns

Here we capture the 1-year returns of key sectors to get a longer perspective.

Sectoral /  Thematic Index	Current Index  Value	1-Year  Returns (%)	1-month  Returns (%)
NIFTY PSU BANK	4,167.65	48.56	13.18
NIFTY FMCG	47,814.10	24.32	5.27
NIFTY BANK	43,233.90	18.70	8.33
NIFTY PRIVATE BANK	21,885.75	18.43	8.19
NIFTY AUTO	13,189.25	17.84	8.81
NIFTY FINANCIAL SERVICES	19,162.55	14.66	7.69
NIFTY CPSE	3,053.80	12.36	6.02
NIFTY PSE	4,683.15	8.02	5.75
NIFTY MNC	19,811.55	6.58	4.60
NIFTY INDIA CONSUMPTION	7,502.05	4.76	5.59
NIFTY INFRASTRUCTURE	5,356.20	2.85	6.83
NIFTY INDIA MANUFACTURING	8,340.65	2.71	6.08
NIFTY SERVICES SECTOR	23,733.75	1.24	4.68
NIFTY REALTY	445.10	-0.89	16.78
NIFTY HEALTHCARE INDEX	8,013.55	-5.01	5.42
NIFTY PHARMA	12,613.95	-6.42	5.62
NIFTY COMMODITIES	5,781.65	-7.90	5.44
NIFTY METAL	5,799.40	-8.85	6.21
NIFTY OIL & GAS	7,491.80	-10.66	6.62
NIFTY CONSUMER DURABLES	24,276.35	-12.50	1.65
NIFTY INDIA DIGITAL	5,247.95	-12.62	4.17
NIFTY IT	27,708.20	-13.18	-1.08
NIFTY ENERGY	23,734.55	-18.29	6.09
NIFTY MEDIA	1,714.85	-22.52	1.30

Data Source: NSE (shaded column is the ranked variable)

The monthly story is too myopic, so we also look at sectors from a yearly perspective, which is more reflective of the broader trend. Here, the gaining sectors and losing sectors are almost evenly distributed. The key gaining sectors on an annual returns basis are PSU banks, autos, FMCG and NBFCs. Here again the theme is of rate sensitives, but FMCG was a defensive play on consumer demand.

What were the big losers. Oil, IT, and metals were among the big losers. Clearly, the last one year has been tough for commodities and the IT sector.