Weekly Musings – Index performance for the week ended November 03, 2023

6 Nov 2023 , 07:00 AM

FED POLICY HELPS NIFTY AND SENSEX TO RECOVER

It was a week that offered some respite and some solace to the markets. The gains were less than 1% in the frontline indices like the Nifty and the Sensex during the week. However, the impact on the small and mid-cap stocks was much bigger as there was a rush to buy many of these alpha bets at lower levels. However, the big news was the Fed policy holding rates at the existing level of 5.25% to 5.50%. That was along expected lines, but the Fed did give a stern warning that it would not hesitate to hike rates further, should the inflation continue to remain high. 

However, the CME Fedwatch interpreted it as the end of the rate hike cycle and even went to the extent of projecting aggressive rate cuts by the Fed in 2024. The market bounce globally was a reaction to this rather aggressive interpretation by the CME Fedwatch. Back home, the core sector growth remained above 8% for the fourth month in a row, despite flagging momentum. Fiscal deficit appears to be on track with just 39.3% of full year deficit done till the close of H1FY24, despite analysts flagging risks that election could lead to back-ending of expenditure. Overall, the week had a positive tone.

US BOND YIELDS AND DOLLAR INDEX FALL SHARPLY

The good news for the markets came from the US bond yields and the dollar index. Let us look at the US bond yields first. For the week, the US bond yields retreated sharply to the 4.52% mark after touching a high of 5%. That was an outcome of the Fed policy statement that kept status quo on rates for the third time in the last 4 meetings. CME Fedwatch is interpreting that as an indication that the Fed may be done with rate hikes in this round and the action may now shift to rate cuts, perhaps in a more aggressive fashion in 2024. 

The other big global impact was the sharp fall in the dollar index down to 105 levels. Just about a few weeks back, the dollar index had crossed 107 (only the third time in 40 years). A fall in the dollar index was reflected in a stronger rupee for the week. This is important for two reasons. Firstly, it does away with the risk of imported inflation. Secondly, FPIs don’t have to worry about protecting their dollar returns. (For live impact, check market map)

BSE SENSEX 30 INDEX – SOME RESPITE FOR THE PRINCE OF DALAL STREET

The table captures the movement of the BSE SENSEX 30 for the week to November 03, 2023.

Date	High	Low	Close
03-Nov-23	64,535.19	64,275.39	64,363.78
02-Nov-23	64,202.64	63,815.35	64,080.90
01-Nov-23	63,896.05	63,550.46	63,591.33
31-Oct-23	64,452.32	63,812.53	63,874.93
30-Oct-23	64,184.58	63,431.45	64,112.65
27-Oct-23	63,913.13	63,393.37	63,782.80
	Weekly Returns	+0.91%

Data Source: NSE

During the latest week, the Sensex was extremely volatile and despite gaining nearly 800 points in the last two days after the Fed policy statement. For the week overall, the Sensex closed 581 points, which is less than a 1% gain. The level of 64,000 held for the week, which is positive. The market has seen an overhang of short positions in the recent past, so some short covering is absolutely likely. That could set the trend for the Sensex in the short term.

NIFTY 50 INDEX – CLOSES THE WEEK ABOVE 19,200 LEVELS

The table captures the movement of Nifty 50 index in the week to November 03, 2023.

Date	High	Low	Close
03-Nov-23	19,276.25	19,210.90	19,230.60
02-Nov-23	19,175.25	19,064.15	19,133.25
01-Nov-23	19,096.05	18,973.70	18,989.15
31-Oct-23	19,233.70	19,056.45	19,079.60
30-Oct-23	19,158.50	18,940.00	19,140.90
27-Oct-23	19,076.15	18,926.65	19,047.25
	Weekly Returns	+0.96%

Data Source: NSE

The latest week saw FPI selling of $913 million, marking the third time in the last five weeks when the FPI selling has been more than $900 million. Even when the markets recovered from lower levels after the Fed policy statement, the buying came from the domestic players like LIC and mutual funds, with FPIs continuing to be net sellers. After briefly falling below the 19,000 mark in the current week, the Nifty bounced above the that mark and actually closed the week above the 19,200 levels. The low India VIX at 10.88 levels is offering support to the Nifty at lower levels and should offer support for now.

NIFTY NEXT 50 INDEX – BIG JUMP TAKES IT NEAR 45,000

The table captures the movement of Nifty Next 50 for the week to November 03, 2023.

Date	High	Low	Close
03-Nov-23	44,907.90	44,613.35	44,885.00
02-Nov-23	44,478.35	44,086.30	44,451.10
01-Nov-23	44,216.25	43,718.65	43,783.15
31-Oct-23	44,183.05	43,890.95	44,019.10
30-Oct-23	43,982.85	43,462.85	43,906.60
27-Oct-23	43,939.40	43,252.50	43,837.50
	Weekly Returns	+2.39%

Data Source: NSE

In last few weeks, the Nifty Next 50 has shown the tendency to mirror the Nifty, and that was evident in the latest week too. The only difference was that the bounce in the Nifty Next 50 was much sharper as it gained 239 bps for the week. In the previous week, the Nifty Next-50 index had briefly dipped below the 43,000 levels, but this week saw renewed buying taking the index close to 45,000. Many of the non-index stocks in financials, pharma and defence saw a lot of opportunistic buying in the week.

NIFTY MID-CAP 100 INDEX – MID-CAPS ARE BACK WITH A BANG

The table captures the movement of Nifty Mid-Cap 100 in the week to November 03, 2023.

Date	High	Low	Close
03-Nov-23	39,640.05	39,490.40	39,587.40
02-Nov-23	39,351.70	39,055.45	39,312.45
01-Nov-23	39,004.20	38,738.70	38,775.10
31-Oct-23	39,116.65	38,818.95	38,876.95
30-Oct-23	38,832.70	38,363.20	38,735.20
27-Oct-23	38,828.35	38,383.00	38,701.85
	Weekly Returns	+2.29%

Data Source: NSE

The last few weeks had been cautious for the mid-cap index with a sustained selling due to a mix of caution and margin calls. However, this week saw a sharp 2.29% gain in the mid-cap index as the Nifty Mid-cap index closed just short of the 40,000 mark. It was one of the best performing indices in the week, although there has been a lot of blood-letting in the last few weeks. After facing resistance at 41,000, the Mid-Cap 100 index fell below 38,000 in the previous week. The good news is that the quarterly results of many mid-sized companies continue to be robust. Also, the mutual fund buying in these stocks continues to be strong.

NIFTY SMALL-CAP 100 INDEX – IT IS BACK TO WINNING WAYS

The table captures movement of Nifty Small Cap 100 in the week to November 03, 2023.

Date	High	Low	Close
03-Nov-23	12,983.85	12,907.45	12,965.05
02-Nov-23	12,826.90	12,735.85	12,809.90
01-Nov-23	12,746.40	12,627.05	12,640.75
31-Oct-23	12,755.75	12,634.70	12,649.90
30-Oct-23	12,719.15	12,560.45	12,657.80
27-Oct-23	12,672.05	12,510.95	12,639.30
	Weekly Returns	+2.58%

Data Source: NSE

In the last few weeks, this was one index that was holding up amidst the chaos in markets. The previous week was a disappointment with the small cap index losing -2.23%. However, the current week has more than made up for that, gaining 2.58% during the week. The specific stories that drove up the small cap story like railways, healthcare, IT, AI, and defence were back in the reckoning in the current week. The index spent the whole week below 13,000 levels and despite the sharp rally, the Small Cap 100 closed just below the 13,000 mark. Further traction in the Nifty Small Cap 100 index would depend on its ability to sustain convincingly above the 13,000 mark. 

BANK NIFTY INDEX – DOVISH FED TONE BOOSTS INDIAN BANKS

The table below captures the movement of BANKNIFTY in the week to November 03, 2023.

Date	High	Low	Close
03-Nov-23	43,416.10	43,221.00	43,318.25
02-Nov-23	43,271.50	42,796.45	43,017.20
01-Nov-23	42,815.15	42,589.65	42,700.95
31-Oct-23	43,356.85	42,797.15	42,845.95
30-Oct-23	43,112.50	42,390.50	43,039.15
27-Oct-23	42,840.15	42,482.75	42,782.00
	Weekly Returns	+1.25%

Data Source: NSE

After several weeks of persistent pressure, the Bank Nifty bounced 1.25% in the week. There had been too many headwinds in previous weeks. HDFC Bank had been under pressure post the merger with HDFC Ltd. Other private banks came under pressure after analysts raised questions over the sustainability of NII growth and NIMs. Above all, the global hawkishness and sticky inflation did not help financials either. The latest Fed policy is being interpreted as a signal that the Fed may be done with rates. US bond yields fell sharply, and that is also likely to rub off on the Indian banks and financials. After touching 46,000 levels in recent week, the Bank Nifty had dipped below 43,000 last week. This week, the Bank Nifty closed above 43,000 levels, although it has a lot of ground to cover.

NIFTY IT INDEX – SUBDUED GAINS DESPITE NASDAQ RALLY 

The table captures the movement of Nifty IT index in the week to November 03, 2023.

Date	High	Low	Close
03-Nov-23	30,924.85	30,739.35	30,779.95
02-Nov-23	30,731.55	30,495.30	30,582.75
01-Nov-23	30,694.45	30,283.15	30,344.85
31-Oct-23	30,769.20	30,396.05	30,582.25
30-Oct-23	30,698.40	30,433.65	30,640.95
27-Oct-23	30,676.95	30,313.95	30,599.70
	Weekly Returns	+0.59%

Data Source: NSE

Among all the major sectoral indices, IT was one sector that showed subdued gains. In the last 3 weeks, the Nifty IT index had fallen more than 8% after the major IT companies reported pressure on margins and gave weak guidance. That appears to be an endemic problem for IT companies and that explains why the gains in the current week were still subdued. IT results disappointed the street in terms of its guidance and the sharp fall in headcount. Of course, the good news is that there are fewer people in the bench, but the concern is that it is a signal of the pressure that IT companies are facing on the pricing and margin front. Ironically, even the 5.71% rally in the NASDAQ index last week did not help matters for IT companies. The overhang of the current IT models is real issue here.

NIFTY OIL & GAS INDEX – RELIANCE HELPS OIL INDEX FLY

The table captures the Nifty Oil & Gas index for the week to November 03, 2023.

Date	High	Low	Close
03-Nov-23	7,793.50	7,743.80	7,773.50
02-Nov-23	7,724.75	7,670.15	7,713.85
01-Nov-23	7,680.20	7,606.15	7,626.30
31-Oct-23	7,693.55	7,574.30	7,609.45
30-Oct-23	7,688.40	7,579.65	7,649.95
27-Oct-23	7,565.00	7,480.60	7,549.00
	Weekly Returns	+2.97%

Data Source: NSE

With gains of 297 bps, the Nifty Oil & Gas index was the star gainer of the week. The index generally struggled after breaking below the 8,000 mark a couple of weeks back. While it still remains below that level, the rally in the week was led by oil refining stocks. A sharp fall in Brent Crude prices to $85/bbl after the FOMC statement, has raised hopes of better gross refining margins (GRMs) during the current quarter. Most of the refining stocks, including heavyweight Reliance Industries showed smart gains during the week. Also, record profits from IOCL this quarter helped bolster sentiments.

NIFTY AUTO INDEX – DRIVING SLOWLY INTO SELL MODE

The table captures the movement of Nifty Auto index in the week to November 03, 2023.

Date	High	Low	Close
03-Nov-23	16,130.10	16,015.10	16,045.40
02-Nov-23	15,977.90	15,836.00	15,948.65
01-Nov-23	16,007.50	15,807.95	15,835.65
31-Oct-23	16,139.25	15,899.25	15,916.20
30-Oct-23	16,242.35	15,831.80	16,023.45
27-Oct-23	16,279.80	16,002.15	16,169.15
	Weekly Returns	-0.77%

Data Source: NSE

After falling over 2% last week, the auto index lost another 77 bps this week. Auto demand concerns are rising, especially in the passenger car market, despite the festive season. Also, input cost considerations and weak rural demand are being flagged as major concerns.

NIFTY FMCG INDEX – DEFENSIVE BUYING HELPS FMCG STOCKS

The table captures the movement of Nifty FMCG index in the week to November 03, 2023.

Date	High	Low	Close
03-Nov-23	51,984.60	51,660.25	51,901.50
02-Nov-23	51,633.90	51,164.25	51,589.00
01-Nov-23	51,462.45	50,997.40	51,087.80
31-Oct-23	51,418.45	51,125.25	51,262.60
30-Oct-23	51,501.95	50,951.95	51,180.70
27-Oct-23	51,502.45	50,948.10	51,395.00
	Weekly Returns	+0.99%

Data Source: NSE

After losing 133 bps and 83 bps in the previous two weeks, the latest week saw the FMCG index gain 99 bps. Rural concerns remain, but the results of companies like Britannia show that in a tough and volatile market, the FMCG index still calls the shots. Once again, a rush to defensives was visible. Overall, it was a positive week for markets, but next week could be a lot more critical.