Market outlook for the week (11-Nov to 15-Nov)

10 Nov 2024 , 11:07 PM

SECTORAL STORY IN THE WEEK TO NOVEMBER 08, 2024

The week to November 01, 2024 saw Nifty and Sensex down by -0.64% and -0.30% respectively. During the week the FPIs withdrew $2.37 Billion from Indian equities taking the total FPI outflows to $13.6 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 (08-Nov)	Index (01-Nov)
Nifty IT	4.00%	42,050.15	40,433.65
Nifty India Digital	1.83%	9,188.70	9,023.25
Nifty Capital Markets	1.00%	3,775.40	3,738.15
Nifty PSU Banks	0.98%	6,845.20	6,778.55
Nifty Consumer Durables	0.89%	39,908.10	39,555.05
Nifty Healthcare	0.18%	14,476.50	14,450.70
Nifty Automobiles	0.00%	23,805.20	23,805.60
Nifty Banks	-0.22%	51,561.20	51,673.90
Nifty MNC	-0.24%	29,272.10	29,341.80
Nifty India Defence	-0.59%	6,384.33	6,422.25
Nifty Private Banks	-0.64%	25,186.75	25,347.80
Nifty Metals	-0.87%	9,308.90	9,390.30
Nifty Mobility	-1.15%	20,240.60	20,476.36
Nifty CPSE	-1.55%	6,563.25	6,666.50
Nifty Non-Banks	-1.72%	25,664.39	26,113.03
Nifty Infrastructure	-1.80%	8,709.40	8,869.15
Nifty FMCG	-1.81%	58,359.40	59,433.20
Nifty Oil & Gas	-1.87%	11,228.10	11,442.25
Nifty Energy	-3.11%	38,403.65	39,635.65
Nifty Realty	-4.11%	967.65	1,009.10

Data Source: NSE

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

• Out of the 20 sectoral indices, 6 sectors showed gains and 14 showed losses. Big gainers in the week were IT, Digital, Capital markets, and PSU Bank. The theme was largely about large and mid-cap technology stocks and in stories like capital market enablers which are largely proxies for technology enablement.
• Let us turn to the sectors that corrected during the week. Out of the 14 sectors that gave negative returns in the week, Realty, Energy, Oil & Gas, and FMCG were the worst hit. Out of the 6 gaining sectors for the week, 3 sectors gained more than 1%; while among the 16 losing sectors 8 sectors lost more than 1%.
• For the week, the arithmetic average of returns of these 20 sectors stood at -0.54%. However, if you look at the 6 gaining sectors, they averaged 1.48% returns, while the 14 losing sectors averaged around -1.40% returns. IT gained from the Trump euphoria, oil was weak due to GRM concerns, while FMCG and realty got hit by weak urban demand.

During the week, Nifty VIX tapered to 14.47X 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; which is still a long way off!

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

The week saw some big changes in the US, but for the Indian markets, the concerns continue to be on domestic internals and flows.

• The US election outcome belied the generally non-committal political pundits. Trump romped home with an easy victory over Kamala Harris. Clearly, Trump managed to make the right noises. However, the return of Trump also means that trade sanctions, higher tariffs, an aggressive China policy and an anti-Iran approach may be part of the package.
• Fed November policy statement cut rates by another 25 bps, taking total rate cuts since September 18, 2024 to 75 basis points. It is already known that Trump does not favour aggressive rate cuts that have the potential to trigger inflation. As a result, the CME Fedwatch has lowered its estimated rate cuts by end of 2025 to 150 bps to 175 bps only.
• FPI selling was aggressive in November with $2.37 Billion of FPI selling in the first week of November. This comes on top of $11.2 Billion of FPI selling in equities in October 2024. FPI selling has been a mix of several factors like valuation concerns, China swap by FPIs, unwillingness of the RBI to cut rates and slowdown in the economic growth.
• The Indian rupee continued to be under pressure amidst persistent FPI outflows. During the week, the rupee closed at an all-time low of ₹84.39/$ even dipping as low as ₹84.44/$ during the week. While the strength in the dollar index weakened the rupee, RBI intervention selling dollars has also led to a fall in forex reserves, straining the INR.
• China announced a mega $1.4 Trillion fiscal stimulus package over next five years. This is likely to accentuate the long-China / Short-India trade, which FPIs have already been actively indulging in. The actual package announced by China is much larger than originally indicated; so, the trend could only deepen in the coming weeks.
• Reliance Industries fell over 22% in over a month, losing nearly $50 billion in market cap. Apart from the pressures in the O2C (oil to chemicals) business, there are valuation concerns as incremental growth in retail and digital has not kept pace with the aggressive valuations. That dampened FPI sentiments in Indian markets overall.

The big data flow next week will be the India and US consumer inflation numbers.

STOCK MARKET TRIGGERS FOR COMING WEEK TO NOVEMBER 15, 2024

The coming week to November 15, 2024 will be critical in the light of key macro data flows and a series of Fed member reactions.

• Nifty fell -0.64% and Sensex -0.30% for the week to 08-Nov; as gains in IT mellowed the losses in oil and FMCG. Alpha hunting appeared to be elusive in the week as mid-cap index fell by -0.25% and the small cap index corrected -1.86%. The uncertain trend is likely to continue in the coming week also.
• Key large cap results next week include ONGC, Hindalco, Britannia, Shree Cements, Jubilant Food, NMDC, Hyundai, Bosch, Eicher, HAL, Grasim. Other Q2results to be announced include Blue Dart, BEML, Zydus Life, BSE, Nykaa, Finolex Cables, Alkem, Sun TV, Apollo Tyres, IPCA Laboratories.
• In key US updates next week, the Consumer Inflation will be announced on Wednesday; and while headline inflation is expected to be flat at 2.4%, core inflation may spike above 3.3%. Also, keep an eye on Fed speeches by Powell, Waller, Kashkari, and Harker. The speeches assume significance after 25 bps rate cut by the Fed and Trump’s return.
• MOSPI to announce India inflation data and IIP data on Tuesday at 4.00 pm. Higher food inflation is expected to spike India headline CPI inflation for October 2024 from 5.49% to 5.81%. On the positive side, the IIP for September is likely to turn around from -0.1% contraction to +2.5% IIP growth. H1FY25 IIP growth needs to be observed.
• In other India data points, the WPI inflation for October is also expected to trend higher. Trade deficit is expected to be wider than $20.4 Billion last month. The focus would once again be on whether USDINR breaches above ₹84.50/$ amidst rising merchandise trade deficits and persistent dollar index strength.
• The coming week is likely to be relatively subdued for IPO. The IPO of ₹2,200 crore Niva Bupa is slated to close on 11-Nov, while the IPO of the Rs1,115 crore Zinka Logistics will open on 13-Nov. Next week, the IPO dates for Avanse Finance and NTPC Green Energy are also likely to be announced.
• Finally, in key global data points, key variables to track in the US economy include inflation, API/EIA stocks, Fed Speak, Fed balance sheet, PPI, Inflation expectations, initial jobless claims, and retail sales. In ROW data, focus will be on ECB Meet, GDP, IIP (EU); GDP, IIP, Current Acct (Japan); New Loans, IIP (China); Jobs, GDP, IIP, MPC Speak (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 fell sharply from 16.69 levels to 14.67 level last week. Buy on dips may only happen if the VIX drops to 11.0-11.5 levels. That appears elusive for the time being.
• Nifty and Sensex are very close to breaking crucial supports. The coming week could see a decisive break below 24,000 on the Nifty and below 79,000 on the Sensex. 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 focus on India inflation, India IIP, US inflation, India trade data and key Fed speeches in the coming week.

For now, Nifty and Sensex will be driven by flows and inflation data. However, key internals like consumption and urban demand will hold the key to a sustained revival in the Nifty and Sensex.