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Weekly Musings – Index performance for week ended April 19, 2024

22 Apr 2024 , 07:04 AM

WHAT DOES THE SPIKE IN VIX INDICATE?

During the week, the VIX (volatility index) spiked rom 11.53 to 13.46, even touching a high of 14.41 on Friday. VIX is also called the fear index and shows the amount of fear and risk of volatility built in options pricing. Here are the 3 key takeaways.

It is a clear indicator that the market is pricing in the higher risk, albeit after a long gap. Unlike the previous elections, the markets were almost sanguine this year. However, there appear to be rising concerns that the election outcome in India may not be as simple and straightforward as previously envisaged.
Secondly, the spike in VIX is also reflective of the worsening geopolitical situation in the Middle East and West Asia. The geopolitical situation not only has implications for FPI flows, but also for the price of crude oil and for the rupee value. The spike in VIX shows the likelihood of geopolitical risks staying elevated for longer.
Last, but not the least, the VIX is also a barometer of risk, which is defined as the gap between expectation and reality. The sharp spike in VIX shows that the corporate results in Q4FY24 could show much higher pressure than expected and that was evident in the results of Infosys and HDFC Bank in the previous week.

Overall, the VIX spike shows that the market may have been rather lenient in not factoring the risks and only focusing on the rewards.

EQUITY MARKET TRACKER AGENDA FOR NEXT WEEK

The coming week has some key data points to watch out for. Here are 5 data points that will be closely tracked by the markets in the coming week.

Quarterly results will still hold the key to the momentum of markets. There are big numbers like Reliance Industries and Hindustan Unilever, which will set the tone for market sentiments in the coming year. The focus will be more on top line growth.
In terms of stock market triggers, the US GDP data will be key as the Fed is unlikely to cut rates when GDP growth is still robust. If GDP growth for Q1FY24 is anywhere above 2.5%, then it puts further pressure on the Fed rate cut plans.
The other key data point will be the PCE inflation in the US, which is expected to spike in the month of March in line with the consumer inflation. Any inflation spike takes it farther from the avowed target of 2%, making chances of rate cuts even more remote.
The market is likely to focus on VIX or the volatility index in the coming week, especially after the sharp spike from 11.5 to 13.5 levels last week. If the VIX gets closer to 15 in the coming week, we could see most trades covering their open positions.
Crude prices tapered in the latest week to $87/bbl, but there may be more of hope than evaluation in that fall. If crude prices get back to $90/bbl or higher; then equity markets could have a lot of problems.

Apart from the above, the markets will also focus on FPI flows, US bond yields and the US dollar index as key inputs.

BSE SENSEX 30 INDEX – SLUMPS BELOW 72,000 IN THE WEEK

The table captures the movement of the BSE SENSEX 30 for the week to April 19, 2024.

Date	Open	High	Low	Close
19-Apr-24	71,999.65	73,210.17	71,816.46	73,088.33
18-Apr-24	73,183.10	73,473.05	72,365.67	72,488.99
17-Apr-24	72,892.14	73,135.43	72,685.03	72,943.68
16-Apr-24	72,892.14	73,135.43	72,685.03	72,943.68
15-Apr-24	73,315.16	73,905.80	73,315.16	73,399.78
12-Apr-24	74,889.64	74,951.88	74,189.31	74,244.90
		Weekly Returns		-1.56%

Data Source: BSE

After a flat close last week, the Sensex retreated a full 1,157 this week. Sensex touched a high of 74,952, but closed the week at 73,088 levels after the sharp sell-off in the week. On Friday, the Sensex fell below 72,000 but recovered sharply to close above 73,000 for the week. Through this truncated week, the Sensex stayed under 75,000. The rising tide of geopolitical risk and the persistent FPI flows led to the sell-off in markets, even as Q4 results were far from flattering.

NIFTY 50 INDEX – RETREATS FROM LIFETIME HIGHS

The table captures the movement of Nifty 50 index in the week to April 19, 2024.

Date	Low	High	Low	Close
19-Apr-24	21,861.50	22,179.55	21,777.65	22,147.00
18-Apr-24	22,212.35	22,326.50	21,961.70	21,995.85
17-Apr-24	22,125.30	22,213.75	22,079.45	22,147.90
16-Apr-24	22,125.30	22,213.75	22,079.45	22,147.90
15-Apr-24	22,339.05	22,427.45	22,259.55	22,272.50
12-Apr-24	22,677.40	22,726.45	22,503.75	22,519.40
		Weekly Returns		-1.65%

Data Source: NSE

In the last few weeks, the Nifty has fallen sharply from its all-time high. Nifty closed this week with losses of 372 points, as FPIs net sold $2,229 Million in equities during the week. FPI inflows in the current week more than offset the inflows of last week. In terms of sectoral show; the selling was across the board, although oil & gas managed to show some semblance of sanity. It was the spike in the VIX that was the big story for the Nifty, as risks started to get factored in more effectively.

NIFTY NEXT 50 INDEX – TAKES A DEEPER CUT THAN THE NIFTY

The table captures the movement of Nifty Next 50 for the week to April 19, 2024.

Date	Low	High	Low	Close
19-Apr-24	61,469.45	62,051.70	60,647.25	61,887.90
18-Apr-24	62,594.55	63,033.60	61,751.90	61,989.20
17-Apr-24	61,789.80	62,331.55	61,475.35	62,057.50
16-Apr-24	61,789.80	62,331.55	61,475.35	62,057.50
15-Apr-24	62,076.25	62,716.65	61,330.00	62,008.15
12-Apr-24	63,377.30	63,735.35	62,987.60	63,067.85
		Weekly Returns		-1.87%

Data Source: NSE

The Nifty Next 50 is the residual list after Nifty 50 stocks are removed from Nifty 100. In a market where Nifty is more about Beta and smaller stocks are about risky alpha, Nifty Next-50 offers the perfect middle path. This week, the index lost -1.87%. 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-50 touched a high of 63,717 levels but closed at 61,888; largely due to the persistent sell-off in the week. The Next 50 lost 1,180 points during the week.

NIFTY MID-CAP 100 INDEX – WORST PERFORMER AMONG GENERIC INDICES

The table captures the movement of Nifty Mid-Cap 100 in the week to April 19, 2024.

Date	Low	High	Low	Close
19-Apr-24	48,548.40	48,913.70	47,952.70	48,696.95
18-Apr-24	49,532.00	49,731.20	48,893.25	48,995.70
17-Apr-24	48,993.35	49,550.30	48,842.95	49,236.65
16-Apr-24	48,993.35	49,550.30	48,842.95	49,236.65
15-Apr-24	49,105.00	49,644.75	48,785.85	49,281.00
12-Apr-24	50,339.20	50,590.20	50,022.05	50,067.55
		Weekly Returns		-2.74%

Data Source: NSE

In the last few weeks, the Nifty Mid-Cap 100 did show a bounce from lower levels. However, this week, the Mid-Cap index cracked 274 bps or 1,371 points. This also caps a 4 week rally in the mid-cap index as it closed the week below 49,000, after opening well above the 50,000 mark. Mid-cap stocks tend to be vulnerable to high crude prices and volatility in the USDINR, and that has come back to haunt the mid-cap index in the latest week.

NIFTY SMALL-CAP 100 INDEX – STRESSFUL TIMES FOR SMALL CAPS

The table captures movement of Nifty Small Cap 100 in the week to April 19, 2024.

Date	Low	High	Low	Close
19-Apr-24	16,115.65	16,337.00	15,928.50	16,270.40
18-Apr-24	16,441.95	16,543.55	16,250.40	16,286.35
17-Apr-24	16,104.95	16,421.65	16,065.90	16,332.80
16-Apr-24	16,104.95	16,421.65	16,065.90	16,332.80
15-Apr-24	16,131.55	16,363.30	15,911.85	16,211.00
12-Apr-24	16,562.45	16,653.30	16,473.95	16,496.40
		Weekly Returns		-1.37%

Data Source: NSE

The small cap index faltered after rallying for 4 weeks in a row. The index had gained 11% in the last 4 weeks, so the -1.37% correction should not really pinch too much. Like the mid-caps, the small caps have also been vulnerable to the crude price volatility. While valuation concerns remain on small cap stocks, the retail interest continues to be in these stocks. Financialization of savings, will be a natural funnel for money flowing into small cap stocks.

BANK NIFTY INDEX – PRESSURE ON HEAVYWEIGHTS

The table below captures the movement of BANKNIFTY in the week to April 19, 2024.

Date	Low	High	Low	Close
19-Apr-24	46,744.95	47,668.70	46,579.05	47,574.15
18-Apr-24	47,592.70	47,829.75	46,982.15	47,069.45
17-Apr-24	47,436.70	47,609.00	47,316.55	47,484.80
16-Apr-24	47,436.70	47,609.00	47,316.55	47,484.80
15-Apr-24	48,057.50	48,255.50	47,725.80	47,773.25
12-Apr-24	48,671.20	48,882.65	48,477.55	48,564.55
		Weekly Returns		-2.04%

Data Source: NSE

After gains of 3.1% in the previous 2 weeks, the Bank Nifty fell sharply by 2.04% in the latest week to April 19, 2024. Like the Nifty and the Sensex, the Bank Nifty also saw a sharp fall in the week before recovering partially on Friday. The one concern for banks has been the rapid growth in the C/D ratio, which means they may have to offer higher rates on deposits. HDFC Bank results showed flat profits despite ₹7,350 Crore of exceptional gains.

NIFTY IT INDEX – INFOSYS LEADS THE INDEX LOWER THIS WEEK

The table captures the movement of Nifty IT index in the week to April 19, 2024.

Date	Low	High	Low	Close
19-Apr-24	33,047.35	33,538.55	32,915.50	33,368.30
18-Apr-24	33,746.40	34,102.15	33,445.35	33,498.65
17-Apr-24	34,108.60	34,175.60	33,504.35	33,574.95
16-Apr-24	34,108.60	34,175.60	33,504.35	33,574.95
15-Apr-24	34,845.80	35,188.15	34,335.15	34,463.60
12-Apr-24	35,222.55	35,363.60	34,980.85	35,018.10
		Weekly Returns		-4.71%

Data Source: NSE

The IT index fell sharply by -4.71% after the Infosys Q4 results disappointed. Firstly, the net profit growth came about purely from the tax refund, even as operating margins faltered. In addition, the company lowered its sales growth guidance to 1-3% for the year, putting further pressure on the stock. The concern is that escalation of tensions would mean tech spending also tapering. This sector has been facing tough times since Accenture downsized its revenue guidance, leading to a run on Indian IT stocks.

NIFTY OIL & GAS INDEX – CONTAINED LOSSES DURING THE WEEK

The table captures the Nifty Oil & Gas index for the week to April 19, 2024.

Date	Low	High	Low	Close
19-Apr-24	11,544.55	11,667.60	11,446.85	11,609.85
18-Apr-24	11,858.55	11,996.65	11,600.00	11,635.30
17-Apr-24	11,620.20	11,888.80	11,584.60	11,765.30
16-Apr-24	11,620.20	11,888.80	11,584.60	11,765.30
15-Apr-24	11,545.35	11,839.35	11,426.15	11,695.15
12-Apr-24	11,787.75	11,818.75	11,629.45	11,647.75
		Weekly Returns		-0.33%

Data Source: NSE

The week saw the oil & gas index closing 33 bps lower as the windfall tax only had a limited impact on the sector. Indian oil companies in the upstream segment gain from higher oil prices as it boosts realization per barrel, improves GRMs and leads to inventory translation at higher levels. There are concerns over oil price volatility in the Brent markets but what should favour oil stocks is that oil prices look all set to remain robust for some time now. The oil prices are not expected to pose a problem as the OPEC is likely to boost supplies of crude oil at higher levels.

NIFTY AUTO INDEX – RATE CUT HOPES IN 2024 REDUCING

The table captures the movement of Nifty Auto index in the week to April 19, 2024.

Date	Low	High	Low	Close
19-Apr-24	21,483.30	21,637.10	21,144.75	21,609.70
18-Apr-24	21,790.75	21,948.50	21,459.05	21,520.75
17-Apr-24	21,536.90	21,845.10	21,480.75	21,703.05
16-Apr-24	21,536.90	21,845.10	21,480.75	21,703.05
15-Apr-24	21,623.60	21,818.85	21,445.00	21,680.30
12-Apr-24	21,985.80	22,076.20	21,834.45	21,851.30
		Weekly Returns		-1.11%

Data Source: NSE

The Nifty Auto Index had gained 8.2% in last 4 weeks and this week it fell by 111 bps. Even as the US Fed has been ambivalent on rate cuts, the RBI MPC minutes also indicated that any rate cuts look unlikely in India, at least till July this year. However, robust auto demand and the EV shift are likely to be strong stories.

NIFTY FMCG INDEX – TOUGH TIMES CONTINUE

The table captures the movement of Nifty FMCG index in the week to April 19, 2024.

Date	Low	High	Low	Close
19-Apr-24	52,530.00	53,229.75	52,398.75	53,055.45
18-Apr-24	53,482.90	53,571.75	52,719.70	52,825.50
17-Apr-24	52,996.55	53,526.75	52,937.25	53,402.25
16-Apr-24	52,996.55	53,526.75	52,937.25	53,402.25
15-Apr-24	53,299.05	53,475.15	52,778.75	53,174.95
12-Apr-24	54,244.45	54,275.60	53,653.45	53,701.40
		Weekly Returns		-1.20%

Data Source: NSE

The FMCG sector has seen persistent pressure in recent week. In the latest week, the FMCG index lost another 120 bps. Even as the FMCG sector remains a good defensive play and consumption proxy; there are concerns too. Weak rural demand is not reviving in a hurry and higher crude prices are pushing up input costs. FMCG may not be in the best of times!

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