Market outlook for the week (16-Dec to 20-Dec)

16 Dec 2024 , 10:10 AM

SECTORAL STORY IN THE WEEK TO DECEMBER 13, 2024

The week to December 13, 2024 saw Nifty and Sensex up by 0.37% and 0.76% respectively. During the week the FPIs were net sellers of $199 Million in Indian equities; a cautious shift after 2 weks. Here is how the 20 key sectors performed in the week to December 06, 2024.

Sectoral Index	Weekly Returns	Index (13-Dec)	Index (06-Dec)
Nifty IT	2.86%	45,995.80	44,716.05
Nifty Capital Markets	2.36%	4,197.80	4,100.90
Nifty Consumer Durables	1.70%	42,903.35	42,186.95
Nifty India Digital	1.46%	10,081.30	9,936.10
Nifty Non-Banks	1.21%	26,701.29	26,380.98
Nifty Realty	1.04%	1,085.05	1,073.90
Nifty Metals	0.45%	9,439.30	9,397.15
Nifty India Defence	0.41%	6,927.05	6,898.70
Nifty Infrastructure	0.21%	8,951.70	8,933.20
Nifty Banks	0.14%	53,583.80	53,509.50
Nifty MNC	0.06%	29,480.65	29,462.25
Nifty Private Banks	-0.01%	25,952.60	25,956.35
Nifty Healthcare	-0.49%	14,351.20	14,422.05
Nifty Automobiles	-0.78%	23,773.10	23,960.25
Nifty CPSE	-1.18%	6,523.05	6,600.95
Nifty Mobility	-1.25%	20,334.65	20,591.49
Nifty Oil & Gas	-1.43%	11,160.30	11,322.60
Nifty FMCG	-1.52%	56,869.40	57,744.30
Nifty Energy	-1.71%	37,194.20	37,842.80
Nifty PSU Banks	-1.88%	7,020.80	7,155.25

Data Source: NSE

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

• Out of the 20 sectoral indices, only 11 sector showed positive returns while 9 sectors showed negative returns in the week. This can be attributed to FPI buying and traders going light ahead of key data points. The big losers in the week were PSU Bank -1.88%, Energy -1.71%, and FMCG -1.52%. The pressure on FMCG continues on consumption concerns. A total of 6 sectoral / thematic indices fell more than 1% in the week.
• Let us look at the sectors that gave the best returns during the week. IT was the top performer at 2.86%, while Capital Markets again had a good week at 2.36%. The rally in BSE and CDSL continued to help the Capital Markets index. Among other gainers, consumer durables gained 1.7% while digital index also gained 1.46% in the week. A total of 2 indices gained more than 2% in the week while 4 indices gained over 1%.
• For the week, the arithmetic average of returns of these 20 sectors stood at a paltry 0.08%. However, the top-10 sectors delivered 1.18%, while the bottom 10 sectors delivered -1.02%%. The performance was largely split between gainers and the losers with tech related stocks gaining the most from a weak rupee.

During the week, Nifty VIX remained in a tight range between 13 and 14. VIX has tapered in recent weeks, but needs to touch 11.0-11.5 levels, for a buy-on-dips rally.

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

Here is a quick wrap of the week just gone by and how key events had a bearing on the stock market performance overall.

• CPI inflation data tapered to 5.48% for November 2024, largely along expected lines. It may be recollected that inflation had touched 6.21% in October. While food inflation moderated in November, the core inflation remained elevated at 3.7%. FPIs did not give too much credence to the inflation data as the fall in the inflation can be explained by the base effect and it remains to be seen how the inflation looks without the base effect. There are concerns over the situation in West Asia and stickiness of core inflation.
• With the policy announcement, the RBI also announced the change of guard at the helm for RBI. A career bureaucrat, Sanjay Malhotra, replaces Shaktikanta Das who had a successful 6 year stint. It remains to be seen if this change has anything to do with the RBI rate policies. Das was a man who was fiercely hawkish and wanted inflation controlled at all costs. It is expected that with Malhotra taking charge of the RBI, there could be a change in thinking, in a way that is more supportive of industry.
• The MOSPI also reported the index of industrial production (IIP) for October 2024, showing an improvement from 3.09% to 3.45%. The positive takeaways is that the contraction in IIP in August 2024 provided to be more an exception than the rule. The real good news was that IIP is being driven higher by manufacturing which has larger externalities for the GDP growth overall. For October, the IIP growth has been positive MOM and YOY.
• FPI outflows in the week were tepid at $199 Million, not something to worry about, although it comes after 2 consecutive weeks of FPI inflows. The selling was quite pronounced in consumer stocks and energy stocks as FPIs were found to be trimming positions. However, FPIs continue to add on to positions in banking and IT.
• The USDINR continued to be under pressure as it fell further to ₹84.782/$ during the week. The spike in crude oil prices and the FPI outflows were largely responsible for the rupee weakening and the futures indicate that more weakness could be in store for the Indian rupee, possibly even up to ₹86/$.
• US inflation inched up 10 bps to 2.7% yoy, and to 0.3% on MOM basis. While the impact of fuel deflation has reduced, food inflation presents a source of risk while core inflation has been sticky at higher levels. One concern is that the inflation is now getting farther away from the 2% target; but, for how, the December rate cuts appears to be on.

Let us now turn toe big data flows in the coming week; both in the domestic and the global market.

STOCK MARKET TRIGGERS FOR COMING WEEK TO DECEMBER 20, 2024

Here are some of the key triggers to keep a watch out for in the coming week to December 20, 2024.

• Nifty was up +0.37% and Sensex was up +0.76% in the week to December 13, 2024. The positive cues from inflation and IIP held up the markets. However, the alpha hunting in small cap stocks took a pause. For the week, the Mid-cap index rose +0.49% and the small cap index fell -0.44%.
• The week includes some key corporate action record dates. Some of the stocks having record dates in the coming week include; Styrenix, and Vedanta (RD for Dividend); Bharat Seats, Linc, PC Jewellers, Mazagon Docks, Sky Gold (RD for Bonus issues and stock Split). Mazagon Docks is again going or a stock split, after the recent bonus.
• Key macro data points are to be announced this week. India PMI manufacturing and PMI Services will be put out on Monday. Also on Monday, the WPI inflation is likely to taper from 2.36% to 2.20%. Trade deficit data on Monday is expected to widen from the previous month’s $27.14 Billion, and put further pressure on the CAD for Q3FY25.
• In key policy announcements this week, RBI will publish its MPC minutes on Friday; where greater clarity will be sought on the 4:2 vote on rate cuts. The Fed will also announce the last policy for 2024 with the quarterly economic projections. With Christmas Holidays coming up, the US Bureau of Economic Analysis (BEA) will also announce the Q3 final GDP and the November PCE inflation will set the tone for how the Fed handles rates in 2025.
• Not surprisingly, the USDINR weakened further in the week to levels of ₹84.782/$ and it would be crucial to check if the USDINR gets closer to ₹85/$ in the coming week. The FPI flows could get some boost with 2 IPOs opening in the week and institutional interest likely to be high. Transrail Lighting & Mamata Machinery IPOs will open for subscription this week, while Vishal Mega Mart, Sai Life, MobiKwik, IGI, and Inventurus will list.
• Finally, let us turn to key data points for the US and the rest of the world (ROW) markets next week. Key data points for the US include; Composite PMI, Fed Policy, retail sales, industrial output, EIA stocks, Atlanta Fed Q4 GDP, Housing Starts, PCE. The major data points for the ROW markets are ECB Speak, PMI, Trade (EU); BOJ policy, Trade (Japan); IIP, Jobs, PBOC Loan Rate (China); PMI, jobs, CPI (UK).

Let us finally turn to what all this means for the Nifty and the Sensex in the coming week to December 20, 2024.

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 was in a very tight range between 13.4 and 13.8; in a very tight range. Buy on dips works if the VIX drops to 11.0-11.5 levels. That is still a long way off.
• Nifty and Sensex are very close to key resistance levels. Nifty closed at 24,768 but needs to convincingly break above 24,800 for further upsides. Similarly, the Sensex, which closed the week at 82,133. Here again, the Nifty needs to break above the range of 82,000 to 82,500 for sustained upsides. We could see a more decisive week now.
• Some of the immediate triggers include WPI inflation and trade deficit at a data level, as well as MPC minutes and the Fed policy statement at a policy level. This may be last rate cut by the Fed for now and 2025, there will be a new thinking.

The undertone of the markets have changed for the better, but the risks are still fairly pronounced.