Market outlook for the next week (18-Nov to 22-Nov)

18 Nov 2024 , 09:21 AM

SECTORAL STORY IN THE WEEK TO NOVEMBER 15, 2024

The week to November 15, 2024 saw Nifty and Sensex down by -2.40% and -2.55% respectively. During the week the FPIs withdrew $288 Million from Indian equities taking the total FPI outflows to $14 Billion since the start of October 2024. Here is how the 20 key sectors performed in the week to November 08, 2024.

Sectoral Index	Weekly Returns	Index (15-Nov)	Index (08-Nov)
Nifty IT	0.81%	42,390.85	42,050.15
Nifty India Digital	-0.29%	9,162.05	9,188.70
Nifty Realty	-2.14%	946.95	967.65
Nifty Private Banks	-2.29%	24,610.60	25,186.75
Nifty Banks	-2.68%	50,179.55	51,561.20
Nifty Non-Banks	-2.79%	24,948.54	25,664.39
Nifty Consumer Durables	-3.01%	38,705.90	39,908.10
Nifty Mobility	-3.02%	19,628.62	20,240.60
Nifty Infrastructure	-3.18%	8,432.85	8,709.40
Nifty Energy	-3.53%	37,047.55	38,403.65
Nifty Oil & Gas	-3.72%	10,810.30	11,228.10
Nifty Automobiles	-3.74%	22,914.50	23,805.20
Nifty Healthcare	-4.22%	13,865.60	14,476.50
Nifty FMCG	-4.42%	55,782.70	58,359.40
Nifty Capital Markets	-4.43%	3,608.30	3,775.40
Nifty CPSE	-4.56%	6,263.70	6,563.25
Nifty MNC	-5.09%	27,783.30	29,272.10
Nifty PSU Banks	-5.15%	6,492.65	6,845.20
Nifty Metals	-5.16%	8,828.70	9,308.90
Nifty India Defence	-5.35%	6,042.75	6,384.33

Data Source: NSE

Here are key takeaways from the tabulation of weekly sectoral returns above.

• Out of the 20 sectoral indices, only 1 sector showed gains and 19 sectors showed losses. The sols gainer in the week was IT. The IT stocks continue to gain on dollar strength and the hope that Trump 2.0 will give a boost to corporate profitability and help boost IT spending. Digital India was the only other theme to close flat with negative bias.
• Let us turn to the sectors that corrected during the week. Out of the 19 sectors that gave negative returns in the week, defence, metals, PSU banks, and MNC themes lost more than 5%, while healthcare, FMCG, capital markets, and CPSEs fell over 4%. A total of 18 out these 19 sectors corrected more than 2% during the week.
• For the week, the arithmetic average of returns of these 20 sectors stood at -3.40%. However, if you look at the bottom 10 sectors, the average returns were -4.58%. If you look at the bottom-10 sectors, there are several defensive sectors like MNCs, capital markets, healthcare, and FMCG; which shows that the selling is largely broad-based.

During the week, Nifty VIX tapered to 14.78 levels; but still remains elevated in absolute terms. For the market to turn buy-on-dips, the VIX has to dip to around the 11.0-11.5 levels!

WEEK THAT WAS; THE GOOD, THE BAD AND THE UGLY

For the week to November 15, 2024; despite subdued FPI at $288 million, the markets fell sharply due to weak sentiments in the market.

• India inflation was distinctly higher at 6.21% consumer inflation and 2.36% wholesale inflation. In both the cases, the trigger for higher inflation in October was the spike in food prices; with food inflation in double digits in CPI and WPI inflation measures. In addition, core inflation has also shown signs of pressure in the week.
• With the spike in inflation, the markets reconciled to the reality that even rate cuts in December 2024 were out of question. The first rate cut that the market can now expected is in February 2025 and even that would depend on the Kharif output coming into the Mandis on time and taming food inflation. Rabi is likely to be robust this year.
• FPI selling continued in the week, although it was relatively sober at $288 million. However, that could be more being a truncated week. Also, there has been a lot of (long China / short India) trades in the last few months, so some respite was called for. However, there are now chances of China weakening the Yuan, which can impact India.
• The week also saw US consumer inflation come in higher by 20 bps at 2.6% for October 2024. The Fed still uses PCE inflation for its rate action, but the consumer inflation does set the trend for the month. However, in the US, the core inflation was flat and food inflation was lower. However, the pressure came from hardening of crude oil prices.
• During the week, India announced the IIP growth for September and also the trade deficit for October 2024. After contracting in August, IIP was back in positive at 3.09% in September. That was essential to allay concerns that government going slow on capex was hitting core sector and IIP. Merchandise trade deficit for October 2024 widened to $27.14 Billion. Even the overall trade deficit (after adjusting for services surplus) was well above $10 billion in October. This raises the chances of current account deficit (CAD) inching closer to the 2.2% of GDP mark.
• The USDINR will be in focus with the RBI intervening spasmodically in the spot dollar market. However, the bigger cue for the rupee would be whether China drops the Yuan to offset the Trump tariffs. If that were to happen, then the Indian rupee would weaken beyond 85/$ just to stay competitive. The USDINR is likely to cause a lot of tumult in the financial markets in coming weeks.

The coming week will generally be light on data; before the big data flows including Q2 GDP are announced towards the end of November 2024.

STOCK MARKET TRIGGERS FOR COMING WEEK TO NOVEMBER 22, 2024

Here are some of the key triggers for the stock market action in India in the coming week to November 22, 2024. This will again be a truncated week with markets shut on November 20, 2024 on account of Maharashtra assembly elections. Here are the key triggers.

• For the week the Nifty was down -2.40% and Sensex down -2.55%; while the Mid-cap index fell by -4.10% and the small cap index closed -4.58% lower. While IT was the sole sector to hold up in the large caps, most traders and investors almost deserted the small and mid-caps. That trend is likely to continue next week too.
• Interesting updates on company Q2FY25 performance. Among big gun indices; Nifty 50 Revenues up (+6.69%), Net Profit up (+5.27%); while Large Cap Revenues up (+7.47%), Net Profit up (+2.32%). Among smaller indices; Mid-Cap Revenues up (+10.37%), PAT up (+9.96%); Small Cap Revenues up (+8.48%), PAT down (-0.57%). Key dividend record dates include Emami, Asian Paints, MRF, ONGC, GE Shipping, Akzo, PFC, Sun TV, Nalco.
• In data flows, markets will focus on PMI manufacturing and services to be announced on Friday. Both are expected to be steady around 57.5 and 58.5 levels. In addition, markets will focus on the RBI for its currency chest update and for any cues on the likely trajectory of rate cuts by the RBI.
• With USDINR at 84.48, and DXY at 106.7; RBI support may be limited, so rupee could weaken in next week. Yuan could hold the key to the rupee. However, a fall in crude prices below $70/bbl (as looks likely now) could be positive for Indian trade deficit in the full fiscal year FY25.
• IPO action likely to be limited in the coming week, but if you look at FPI flows, it is IPOs that are saving the day amidst heavy secondary market selling by FPIs. Next week, the IPO of Zinka Logistics IPO will close for subscription. At the same time, the NTPC Green Energy ₹10,000 crore IPO will open next week; with 40% anchor portion.
• Finally, a look at key global data points for the week. Major US macro data points include Building permits, Housing starts, Crude stocks, Atlanta Fed GDP, jobless claims, PMI, Fed Balance Sheet. For ROW, key data points are CPI, Trade balance, PMI (EU); Trade, Inflation (Japan); PBOC Prime Rates (China); CPI, PPI, PMI, retail sales (UK).

Let us turn to what all this means for the Nifty and the Sensex in the coming week.

PARTING THOUGHTS ON NIFTY AND SENSEX FOR NEXT WEEK

For the coming week, there are 3 things to keep an eye on.

• During the week, VIX spiked to 15.62 levels, but fell to close almost flat for the week at 14.78 levels. However, buy on dips may only work if the VIX drops to 11.0-11.5 levels. That appears elusive for the time being.
• Nifty and Sensex have broken crucial supports. Nifty has decisively broken below 24,000 and Sensex below 78,000; and that now becomes the resistance. Upsides are now possible, only if these levels are taken out with volumes on the upside.

For now, Nifty and Sensex will be driven by news flows from the US and China. The next big data trigger for India will be the GDP for Q2FY25, which gets announced in the last week of November. Till then, one can expect a volatile Nifty and Sensex with downward bias!