Market outlook for the week (04-Nov to 08-Nov)

5 Nov 2024 , 09:25 AM

SECTORAL STORY IN THE WEEK TO NOVEMBER 01, 2024

The week to November 01, 2024 saw Nifty and Sensex up by 0.51% and 0.41% respectively. During the week the FPIs withdrew $979 Million from Indian equities taking the total FPI outflows to $11.2 Billion for the month of October 2024. However, domestic institutional buying by LIC and mutual funds defended the markets. Here is how the 20 key sectors performed in the week to October 25, 2024.

Sectoral Index	Weekly Returns	Index (01-Nov)	Index (25-Oct)
Nifty PSU Banks	7.87%	6,778.55	6,283.90
Nifty India Defence	5.33%	6,422.25	6,097.51
Nifty Metals	3.77%	9,390.30	9,048.95
Nifty Realty	3.57%	1,009.10	974.35
Nifty CPSE	2.86%	6,666.50	6,481.20
Nifty Non-Banks	2.20%	26,113.03	25,552.10
Nifty Infrastructure	1.80%	8,869.15	8,712.45
Nifty Banks	1.75%	51,673.90	50,787.45
Nifty Energy	1.46%	39,635.65	39,063.75
Nifty Healthcare	1.04%	14,450.70	14,302.35
Nifty FMCG	0.89%	59,433.20	58,908.50
Nifty Oil & Gas	0.79%	11,442.25	11,352.10
Nifty Private Banks	0.72%	25,347.80	25,166.80
Nifty MNC	0.68%	29,341.80	29,144.90
Nifty Automobiles	0.03%	23,805.60	23,799.30
Nifty Logistics	-0.06%	22,997.42	23,011.45
Nifty Mobility	-0.23%	20,476.36	20,523.87
Nifty Consumer Durables	-0.30%	39,555.05	39,672.45
Nifty India Digital	-1.07%	9,023.25	9,120.60
Nifty IT	-3.82%	40,433.65	42,038.85

Data Source: NSE

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

• Out of the 20 sectoral indices, 15 sectors showed gains and 5 showed losses. Big gainers in the week were PSU banks, Defence, metals, and realty. In all these segments, it was the PSU stocks and the mid-sized stocks that saw a lot of buying interest. Also, the sharp correction in these counters had put them in an attractive valuation inflection point.
• Let us turn to the sectors that corrected during the week. Out of the 5 sectors that gave negative returns in the week, IT index, Digital India Index, Consumer Durables and Mobility were the worst hit. Out of the 15 gaining sectors in the week, 10 sectors gained more than 1% while among the 5 losing sectors 2 sectors lost more than 1%.
• For the week, the arithmetic average of returns of these 20 sectors stood at +1.46%. However, if you look at the 15 gaining sectors, they averaged 2.32% returns, while the 5 losing sectors averaged around -1.09% returns. IT and related themes were hit the hardest while PSU themes were the big gainers of the week.

During the week, Nifty VIX spiked sharply to 16.0X levels; which has accentuated the sell-on-rises undertone of markets. For the market to turn buy-on-dips, the VIX has to dip to around the 11.0-11.5 levels; which is still a long way off!

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

It was a flat to positive week with most of the weekly gains happening on the Muhurat trading day on Friday. Here are some key triggers for the week gone by.

• The core sector growth for September 2024 turned around to 2.04%, after contracting by -1.58% in August 2024. Five out of the eight core sectors saw expansion of output in September 2024. However, the jury is still out on whether the contraction in August was a flash in the pan or an outcome of lower government capex in FY25.
• FPI selling continued to be rampant this week at $978 Million with the FPIs now turning net sellers of $11.2 Billion in October overall. The FPIs were actually net sellers of $13.5 Billion in equity secondary markets but the situation was partly salvaged by the $2.3 Billion FPI inflow into IPOs.
• In their latest annual report, Berkshire Hathaway reported it was holding a cash stash of $325 Billion after the recent sale of substantial shares in Apple and Bank of America. Buffett has been crying hoarse of the lack of investment opportunities for a long time and why he prefers to put the investor’s money into risk-less treasuries.
• Brent Crude prices rallied up to $75/bbl in the week but tapered back to close around the $73/bbl levels. There have been concerns about oil prices spiking due to growing unrest in West Asia. However, oil has been facing pressure at higher levels due to weak oil demand from China and chances of OPEC supplies resuming in full earnest.
• It look like India is in full control of its fiscal deficit as of the close of H1FY25. Fiscal deficit touched 29.4% of the full year fiscal deficit target, so it is very likely that India may close FY25 with fiscal deficit at less than 4.9% of GDP. Revenue flows have been strong and the government has been going slow on revenue and capex spending this year.
• During the week, the US Bureau of Economic Analysis (BEA) announced the Q3 GDP first advance estimate and the September PCE inflation. The US GDP growth for Q3-2024 came in at 2.8%, compared to 3.0% in Q2. But, there are 2 more estimates to come in. The PCE inflation tapered further to 2.1%; with substantial dependence on energy basket to rein in inflation. Core inflation remains sticky.

The big data flow next week will be the US monetary policy announcement and the US presidential elections.

STOCK MARKET TRIGGERS FOR COMING WEEK TO NOVEMBER 08, 2024

The coming week to November 08, 2024 will be critical in the light of the second quarter financial results. Here are some key trends to watch out for in the coming week.

• In the coming week, the large caps are likely to continue to be in a range, although the undertone will stay positive. Alpha hunting in small and mid-cap stocks in sectors like defence, IT and PSUs could be the theme of the week.
• The coming week will see dividend record date for Colgate, CIL, Ajanta, Cyient, HUL, CAMS, and REC. The week will also see key large cap Q2FY25 results of Tata Motors, Reddy Labs, SBI, Titan, PGCIL, LIC, Tata Steel, M&M, Trent, Apollo Hospitals, Asian Paints, Divi’s Labs etc. Mid-cap results next week include GAIL, Lupin, Oil India, Escorts, Amara Raja, Bata, Exide, Aurobindo Pharma, Gland Pharma, Berger, IHCL, and NHPC.
• The coming week in the US will be dominated by the US presidential elections and the US Federal Reserve meet. The presidential race promises to be a close contest between Trump and Kamala Harris. Meanwhile, the Federal Open markets Committee (FOMC) is expected to cut rates by another 25 bps in November policy meet, even as it had already cut rates by 50 bps in September.
• FPI flows will be on the radar after $13.5 billion of net selling in secondary market equities in October 2024. FPI IPO flows were positive at $2.3 billion in October and the IPO deluge will continue in the coming week too. Four mainboard IPOs will raise ₹18,500 Crore in the coming week; including Swiggy ₹11,327 Crore, ACME Solar ₹2,900 Crore, Niva Bupa ₹2,200 Crore and Sagility ͅ₹2,107 Crore.
• Finally, for the key data points next week. For the US markets, the key data points next week will be Factory orders, Vehicle Sales, PMI, Trade Balance, EIA stocks, Fed rate decision, jobless claims, consumer credit. For ROW markets, key triggers will be HCOB, PMI, PPI, Retail Sales (EU); BOJ Policy, Spending, PMI (Japan); PMI, CPI, PPI (China); and BOE Rates, PMI (UK).

Let us finally turn to what this means for the Nifty and Sensex?

PARTING THOUGHTS ON NIFTY AND SENSEX FOR NEXT WEEK

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

• VIX bounced to 16.69 levels from 14.51 level last week. Buy on dips may only happen if the VIX drops to 11.0-11.5 levels. That appears to be elusive for now.
• Nifty and Sensex are in the inaction range. Nifty has to break the range of 24,000-25,000 while Sensex has to break the range of 78,000 to 80,000. Only then, can one expect clear directional signals. It remains to be seen how soon and how effectively the Nifty and Sensex can break out.
• Among key economic cues, the markets will look for Q2FY25 results, Kharif data, US presidential elections, and US Fed policy. They are likely to set the tone.

For now, Nifty and Sensex will focus on external factors like Fed action and geopolitical risk. However, key internals like Q2 results and consumption will also hold the key.