Weekly Musings – Index performance for week ended April 05, 2024

8 Apr 2024 , 06:38 AM

MID AND SMALL CAPS SHOW SMART RECOVERY

It was a week in which the FPIs continued to be net sellers, albeit to the tune of just $39 Million. For the last 3 weeks, the FPIs have sold $713 Million of Indian equities, but that pales in front of the $5.56 Billion infused into equities before that. The story of the week was the smart revival in the small and mid-cap stocks after a long hiatus.

2. For the week, the Nifty and the Sensex rallied by over 80 bps each. However, the mix of market movements was a lot more interesting. The sectoral story was fairly steady during the week. Banking index rallied by 2.9% in the week, one of the best shows put up in recent weeks. IT was also 1.0% higher, while FMCG was the only sector that was marginally in the negative.
3. Sectors like oil & gas and automobiles, which have been the drivers of the market in the last one year, had a more sober week this time around. Upstream oil stocks were under pressure after the spike in the crude oil prices eventually led to a spike in the windfall tax. OMCs are already under pressure due to price cuts. For autos, the concerns are more about delays in cutting rates, something the sector has been betting on.
4. But the big story of the week was the phenomenal bonce in smaller stocks. For the latest week, the mid-cap index spiked by 4.05% while the small cap index spiked by an amazing 7.10%. The bounce was largely led by defence stocks on the back of order hopes.

The next big thing to watch if the FPIs sustain their enthusiasm on India with respective to equity allocations.

WHAT SHOULD MARKETS TRACK NEXT WEEK?

The coming week will see several key data points to watch out for. Here are 5 data points that will be closely watched by the markets.

• The crude oil level will continue to be the major data point to watch. This is more so in the light of the worsening geopolitical situation and Iran and Israel moving closer to a full-scale conflict in the region. That has kept the price of oil elevated at $91/bbl.
• The US inflation data will be out in the week. The markets are expecting the CPI inflation in the US to spike by 20 bps to 3.4%, which should almost rule out any rate cuts till July 2024. That is likely to be viewed negatively by the Indian equity markets.
• A key factor in the market direction will be the CPI India inflation to be announced this week. The CPI inflation is expected to taper from 5.09% to 4.90% as per Bloomberg consensus estimates, but we need to see the oil price impact on CPI inflation.
• Another big data point this week will be the Index of Industrial Production (IIP), which is expected to bounce from 3.8% to 6.0% for the latest month; largely on the back of a low base and improved manufacturing IIP.
• Lastly, the all-important Fed minutes of its last March meeting will also be announced during the week. While the Fed has been clear about not cutting rates before July, the individual member discussion are likely to give a better granular picture.

Apart from the above, the next week will also track FPI flows as the allocations will be visible in the coming week.

BSE SENSEX 30 INDEX – GETS CLOSER TO THE 75,000 MARK

The table captures the movement of the BSE SENSEX 30 for the week to April 05, 2024.

Date	Open	High	Low	Close
05-Apr-24	74,287.02	74,361.11	73,946.92	74,248.22
04-Apr-24	74,413.82	74,501.73	73,485.12	74,227.63
03-Apr-24	73,757.23	74,151.21	73,540.27	73,876.82
02-Apr-24	74,022.30	74,099.78	73,743.77	73,903.91
01-Apr-24	73,968.62	74,254.62	73,909.39	74,014.55
29-Mar-24	73,149.34	74,190.31	73,120.33	73,651.35
		Weekly Returns		+0.81%

Data Source: BSE

Sensex closed the week +0.81% higher, despite the tepid FPI flows in the week. Sensex touched a high of 74,502, but closed at 73,248 levels. The Sensex did show a bounce on 3 out of the 5 trading sessions, even as traders were just about getting adjusted to the new fiscal. Overall, Sensex gained 597 points this week, which lower than the previous week. The real action on the BSE was on the smaller stocks, not on the Sensex stocks.

NIFTY 50 INDEX – BANKS GIVE A BOOST TO NIFTY

The table captures the movement of Nifty 50 index in the week to April 05, 2024.

Date	Low	High	Low	Close
05-Apr-24	22,486.40	22,537.60	22,427.60	22,513.70
04-Apr-24	22,592.10	22,619.00	22,303.80	22,514.65
03-Apr-24	22,385.70	22,521.10	22,346.50	22,434.65
02-Apr-24	22,458.80	22,497.60	22,388.15	22,453.30
01-Apr-24	22,455.00	22,529.95	22,427.75	22,462.00
29-Mar-24	22,163.60	22,516.00	22,163.60	22,326.90
		Weekly Returns		+0.84%

Data Source: NSE

Nifty closed the week with gains of 187 points, with FPIs net selling $39 Million in the week. Now FPIs have taken out $713 Million in the last 3 weeks. In terms of sectoral show; banking & IT showed smart gains, oil and auto were subdued while FMCG was marginally under pressure. However, with VIX in the range of 11-12, the risks are not too high and it remains a typical buy on dips market.

NIFTY NEXT 50 INDEX – DOES BETTER THAN NIFTY

The table captures the movement of Nifty Next 50 for the week to April 05, 2024.

Date	Low	High	Low	Close
05-Apr-24	62,209.65	62,734.75	62,019.30	62,696.10
04-Apr-24	62,882.15	62,951.00	62,005.55	62,158.95
03-Apr-24	62,180.85	62,480.90	61,983.55	62,423.75
02-Apr-24	61,882.65	62,296.85	61,722.80	62,254.10
01-Apr-24	61,107.05	61,755.35	61,068.35	61,634.60
29-Mar-24	60,079.70	60,842.35	60,026.00	60,624.30
		Weekly Returns		+3.42%

Data Source: NSE

The Nifty Next 50 is positioned somewhere between Nifty and the smaller stocks. In a market where Nifty is more of Beta and smaller stocks are too risky, Nifty Next-50 checks the right boxes. This week, the index gained +3.42%. The Nifty Next 50 is the list of 50 companies with potential to become Nifty companies in the near future. During the week, Nifty Next-50touched a high of 62,951 levels but closed at 62,696; fairly close to its weekly high. The Next 50 gained 2,072 points during the week.

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

The table captures the movement of Nifty Mid-Cap 100 in the week to April 05, 2024.

Date	Low	High	Low	Close
05-Apr-24	49,791.75	50,058.55	49,678.75	50,022.85
04-Apr-24	50,101.10	50,152.35	49,605.80	49,743.80
03-Apr-24	49,398.95	49,801.40	49,252.70	49,736.70
02-Apr-24	49,117.30	49,521.30	48,918.45	49,479.30
01-Apr-24	48,463.15	48,958.50	48,388.85	48,912.05
29-Mar-24	48,131.40	48,250.25	47,785.20	48,075.75
		Weekly Returns		+4.05%

Data Source: NSE

Last week, the mid-cap index showed smart gains and this week it has built on that gaining another 1,947 points. With 3 weeks of gains, mid-caps are finally back to their winning ways with most of the tax-farming pressure in mid-cap stocks out of the day. This is a common practice among the traders and the mid-cap stocks are most vulnerable to tax farming. The good news is that, retail interest in these stocks continues to be robust.

NIFTY SMALL-CAP 100 INDEX – TURNS STAR OF THE WEEK

The table captures movement of Nifty Small Cap 100 in the week to April 05, 2024.

Date	Low	High	Low	Close
05-Apr-24	16,229.25	16,375.55	16,171.05	16,355.35
04-Apr-24	16,287.75	16,335.75	16,137.80	16,219.35
03-Apr-24	15,965.75	16,158.90	15,932.15	16,146.40
02-Apr-24	15,834.85	15,974.75	15,761.30	15,960.95
01-Apr-24	15,418.25	15,785.10	15,414.55	15,768.40
29-Mar-24	15,365.60	15,397.15	15,251.20	15,270.45
		Weekly Returns		+7.10%

Data Source: NSE

The small cap index rallied for the third week in a row after 6 consecutive weeks of negative returns. After gaining around 1.4% each in the previous two weeks, this week saw the Nifty Small Cap generated phenomenal 7.1% gains. With this rally, the small cap index has recouped most of its losses in the last two months of FY2024. While valuation concerns remain on small cap stocks, most of the discouraging measures worked in a limited way.

BANK NIFTY INDEX – BEST SECTORAL GAINS IN THE WEEK

The table below captures the movement of BANKNIFTY in the week to April 05, 2024.

Date	Low	High	Low	Close
05-Apr-24	48,104.65	48,557.40	47,894.50	48,493.05
04-Apr-24	48,086.20	48,254.65	47,712.70	48,060.80
03-Apr-24	47,350.25	47,676.95	47,279.80	47,624.25
02-Apr-24	47,490.75	47,707.35	47,408.55	47,545.45
01-Apr-24	47,391.05	47,646.80	47,373.10	47,578.25
29-Mar-24	46,827.85	47,440.45	46,827.85	47,124.60
		Weekly Returns		+2.90%

Data Source: NSE

Unlike the previous two weeks of subdued growth, the current week saw a stellar 2.9% returns on the Bank Nifty. With NBFCs coming under scrutiny, there are bigger bets turning towards banks. The signals from the Fed policy statement on March 20, 2024 hinted at 3 rate cuts in 2024, and that led to a sharp bounce in banking stocks. However, subsequent pronouncements have been ambiguous. The one concern for banks has been the rapid growth in the C/D ratio, which means they have to offer higher rates on deposits.

NIFTY IT INDEX – RECOVERS AFTER THE ACCENTURE SHOCK

The table captures the movement of Nifty IT index in the week to April 05, 2024.

Date	Low	High	Low	Close
05-Apr-24	35,331.80	35,371.10	35,146.50	35,247.90
04-Apr-24	35,314.70	35,649.60	34,915.15	35,426.70
03-Apr-24	34,682.60	35,289.70	34,626.20	35,047.40
02-Apr-24	34,900.15	34,984.35	34,769.90	34,793.95
01-Apr-24	35,224.00	35,265.30	34,963.80	35,042.80
29-Mar-24	34,862.60	35,203.25	34,786.65	34,898.15
		Weekly Returns		+1.00%

Data Source: NSE

In the latest week to April 05, 2024, the Nifty IT bounced by 1.0%, after falling by over 7% in the last 2 weeks after the tepid guidance by Accenture. However, now the real picture of IT companies would be out with the Q4 results starting from the first half of April 2024. While Accenture may have sharply cut it revenue guidance, the impact on Indian companies may be relatively lesser, considering that the Indian IT has a natural pricing advantage over its global peers. However, there are still concerns that IT spending and consulting revenues could take a hit in 2024.

NIFTY OIL & GAS INDEX – WINDFALL TAX UNDERCUTS THE RALLY

The table captures the Nifty Oil & Gas index for the week to April 05, 2024.

Date	Low	High	Low	Close
05-Apr-24	11,466.20	11,538.00	11,371.35	11,503.65
04-Apr-24	11,724.95	11,728.40	11,429.75	11,494.80
03-Apr-24	11,649.90	11,747.60	11,620.25	11,654.50
02-Apr-24	11,524.40	11,664.95	11,513.70	11,649.70
01-Apr-24	11,492.80	11,564.30	11,479.65	11,500.30
29-Mar-24	11,408.75	11,541.40	11,384.80	11,440.90
		Weekly Returns		+0.55%

Data Source: NSE

Oil & gas index gained just 55 bps this week, after a sharp 3.5% spike in last 2 weeks. There are concerns over oil price volatility in the Brent markets and the worsening conflict between Iran and Israel. OMCs are under pressure after the price cut, but the real concerns this week were over the windfall gains tax increase after the price of crude showed a relatively relentless upward trend.

NIFTY AUTO INDEX – RATE CUTS STORY MAY HAVE TO WAIT

The table captures the movement of Nifty Auto index in the week to April 05, 2024.

Date	Low	High	Low	Close
05-Apr-24	21,597.85	21,651.35	21,539.25	21,600.90
04-Apr-24	21,672.70	21,719.00	21,404.85	21,651.85
03-Apr-24	21,555.65	21,629.55	21,446.75	21,555.35
02-Apr-24	21,494.20	21,641.20	21,373.20	21,614.25
01-Apr-24	21,546.95	21,630.55	21,338.65	21,385.25
29-Mar-24	21,222.50	21,607.80	21,085.85	21,419.10
		Weekly Returns		+0.85%

Data Source: NSE

The Nifty Auto Index had gained over 6% in just 2 weeks and this week it added another 85 bps of gains. However, this tepid gains can be attributed to the fact that there are rising doubts about rate cuts in the US and in India too. Auto stocks were betting largely on rate cuts, but the US Fed remains ambiguous and the latest RBI policy indicates that the RBI may not even consider rate cuts till the full budget is presented in July 2024.

NIFTY FMCG INDEX – CLOSES MARGINALLY LOWER THIS WEEK

The table captures the movement of Nifty FMCG index in the week to April 05, 2024.

Date	Low	High	Low	Close
05-Apr-24	53,718.20	54,094.50	53,569.65	53,925.95
04-Apr-24	54,072.95	54,116.00	53,502.90	53,634.45
03-Apr-24	54,056.20	54,101.60	53,522.90	53,866.70
02-Apr-24	54,141.65	54,141.65	53,823.55	54,096.95
01-Apr-24	54,078.20	54,369.10	53,828.10	53,889.15
29-Mar-24	53,683.20	54,251.00	53,534.45	53,949.20
		Weekly Returns		-0.04%

Data Source: NSE

The FMCG sector has been oscillating between positive and negative zone in the last few weeks. After gaining 70 bps in the previous week, the current week saw the FMCG index close marginally lower. FMCG may still be a good defensive and consumption play; but weak rural demand and higher crude prices are playing spoilsport in the FMCG rally. It looks like the FMCG index may continue to struggle in the coming weeks.