Weekly Musings – Index performance for week ended August 09, 2024

12 Aug 2024 , 11:17 AM

UNCERTAINTY ROCKS STOCK MARKETS IN THE WEEK

The week to August 09, 2024 saw the markets rocked by uncertainty. There was uncertainty over the geopolitical situation, yen carry trade and the prospects of a slowing US economy.  Here is how some of the key sectors performed during the week.

• The heavyweight banking sector came under pressure during the week leading the overall index lower. With no signals of a rate cut in the RBI policy and the RBI asking banks to reduce their reliance on CDs and focus on retail deposits, the risk of ALM mismatch is back at the centre of attention. That kept banks under pressure.
• IT index had multiple reasons to be under pressure, although the cuts were not too steep. The biggest concerns for the IT sector pertain to the likely slowdown in the US economy. The worry is that if the US Economy slows, then the IT spends would come down and that would hit the IT business volumes and their pricing power.
• Auto and oil stocks also remained under pressure during the week. Oil was more due to the range bound moves in global oil prices and weak GRMs. For auto sector, while rural demand is a big boost, the concerns over high input costs and margin pressures remain.
• FMCG and Healthcare were, perhaps, the only two sectors in the entire list of key sectors in India that witnessed positive returns for the week. The gains were subdued, but it gave an indication that investors were flocking to the defensive plays like FMCG and Pharma despite their relatively higher valuations.

The big story in the week was the spike in the volatility index (VIX). On Monday, the VIX spiked by more than 52% to above the 20 levels, leading to a sharp sell-off in the market as caution crept in. In the coming week, the big data points will be US inflation, India inflation, India IIP, India trade data etc. The results season is almost over and the coming week will be the last big week for Q1FY25 results. The overall picture is of a quarter that has seen relatively higher cost pressures and relatively subdued operating margins.

BSE SENSEX 30 INDEX – HIGH VIX ROILS THE SENSEX

The table captures the movement of the BSE SENSEX 30 for the week to August 09, 2024.

Date	Open	High	Low	Close
09-Aug-24	79,984.24	79,984.24	79,549.09	79,705.91
08-Aug-24	79,420.49	79,626.92	78,798.94	78,886.22
07-Aug-24	79,565.40	79,639.20	79,106.20	79,468.01
06-Aug-24	78,981.97	79,852.08	78,496.57	78,593.07
05-Aug-24	78,588.19	79,780.61	78,295.86	78,759.40
02-Aug-24	81,158.99	81,345.60	80,868.91	80,981.95
		Weekly Returns		-1.58%

Data Source: BSE

The Sensex closed below the 80,000 mark. Had it not been for the 820 points recovery in the Sensex on Friday, the losses would have been much deeper. The selling was led by banking and IT stocks as FMCG tried to offer an iota of support. At a macro level, the geopolitical risks, yen carry trade unwinding and the risks of a US slowdown continued to weigh on the indices. For the week, the Sensex closed with losses of -1.58%. During the week, the Sensex touched a high of 79,984 and a low of 78,296. The Sensex closed the week 1,276 points lower, despite the sharp recovery on Friday. For now, 80,000-81,000 range remains the immediate resistance for the BSE Sensex.

NIFTY 50 INDEX – PERSISTENT FPI SELLING TAKES ITS TOLL

The table captures the movement of Nifty 50 index in the week to August 09, 2024.

Date	Open	High	Low	Close
09-Aug-24	24,386.85	24,419.75	24,311.20	24,367.50
08-Aug-24	24,248.55	24,340.50	24,079.70	24,117.00
07-Aug-24	24,289.40	24,337.70	24,184.90	24,297.50
06-Aug-24	24,189.85	24,382.60	23,960.40	23,992.55
05-Aug-24	24,302.85	24,350.05	23,893.70	24,055.60
02-Aug-24	24,789.00	24,851.90	24,686.85	24,717.70
		Weekly Returns		-1.42%

Data Source: NSE

FPIs were net sellers for the second week in a row, after 7 weeks of buying. The high VIX at above 20 and the FPI selling of $1.48 Billion had its impact on the Nifty levels, although the Friday buying came as a blessing in disguise. The selling in the week was largely led by the US slowdown fears, geopolitical uncertainty and the yen carry trade worries. The fall was across heavyweight sectors like banking, IT, autos, and oil & gas. For the week, Nifty closed with losses of -1.42%, as the level of 25,000 continues to be a strong resistance. For the week, the Nifty lost 350 points. During the week, the Nifty touched a high of 24,420 and a low of 23,894, eventually closing the week very close to the high point of the week.

NIFTY NEXT 50 INDEX – ENDS LOWER FOR THE WEEK

The table captures the movement of Nifty Next 50 for the week to August 09, 2024.

Date	Open	High	Low	Close
09-Aug-24	72,658.90	72,900.00	72,241.20	72,718.85
08-Aug-24	72,465.10	72,495.55	71,716.40	71,825.90
07-Aug-24	71,577.65	72,491.05	71,077.35	72,401.25
06-Aug-24	71,496.40	72,456.65	70,081.00	70,282.45
05-Aug-24	71,459.55	72,084.95	70,269.45	70,936.90
02-Aug-24	73,621.40	74,241.25	73,173.45	73,328.15
		Weekly Returns		-0.83%

Data Source: NSE

In a week when the Nifty and the Sensex closed with losses, the losses on the Nifty Next 50 were relatively less intense at about -0.83%. The index closed the week losing 609 points. This week, the Nifty Next 50 touched a high of 72,900 level and a low of 70,081 during the week, before closing the week near to the high point at  72,719. The Nifty Next 50 represents the large cap stocks part of the NSE 100, but not part of the Nifty 50.

NIFTY MID-CAP 100 INDEX – MID CAPS REMAIN UNDER PRESSURE

The table captures the movement of Nifty Mid-Cap 100 in the week to August 09, 2024.

Date	Open	High	Low	Close
09-Aug-24	57,227.00	57,427.20	57,019.45	57,174.40
08-Aug-24	57,031.50	57,233.40	56,603.95	56,681.20
07-Aug-24	56,570.50	56,936.35	56,054.15	56,873.80
06-Aug-24	56,295.90	57,002.05	55,362.20	55,515.55
05-Aug-24	56,319.15	56,748.95	55,463.95	55,857.25
02-Aug-24	57,900.60	58,247.30	57,563.40	57,913.65
		Weekly Returns		-1.28%

Data Source: NSE

Last week, mid-cap index had been a marginal gainer, but this week it could not repeat that magic. In the week to August 09, 2024, the Nifty Mid-Cap 100 index closed -1.28% or 793 points lower for the week. However, the mid-cap index is already trading close to its lifetime highs. During the week, the advance / decline ratio turned decisively negative and that worked against these mid-cap stocks. For the week, the Mid-Cap 100 index touched a high of 57,427 and a low of 55,362.

NIFTY SMALL-CAP 100 INDEX – ALPHA HUNTING TAKES A BACK SEAT

The table captures movement of Nifty Small Cap 100 in the week to August 09, 2024.

Date	Open	High	Low	Close
09-Aug-24	18,518.25	18,544.95	18,377.55	18,410.20
08-Aug-24	18,430.15	18,505.00	18,285.45	18,307.30
07-Aug-24	18,189.90	18,413.40	17,972.40	18,383.30
06-Aug-24	18,150.65	18,366.95	17,837.15	17,871.35
05-Aug-24	18,276.25	18,375.75	17,844.15	17,942.00
02-Aug-24	18,742.90	18,942.20	18,630.50	18,800.60
		Weekly Returns		-2.08%

Data Source: NSE

The week showed alpha hunting not just taking a pause; but taking a backseat for now as the global and domestic uncertainties pile up. The small cap index lost -2.08% in the current week, but it comes after a sharp bounce in the last few weeks, with the small cap index also trading very close to its all-time highs. This week, the index of small caps closed  with losses of 390 points. For the week, the Nifty Small Cap index touched a high of 18,545 levels and a low of 18,285, with the losses being relatively higher than other generic indices. Defence stocks are under pressure and that is taking a toll on the small cap index.

BANK NIFTY INDEX – CLOSES WITH LOSSES AFTER RBI MONETARY POLICY

The table below captures the movement of BANKNIFTY in the week to August 09, 2024.

Date	Open	High	Low	Close
09-Aug-24	50,612.10	50,707.75	50,386.45	50,484.50
08-Aug-24	50,051.90	50,440.75	49,829.60	50,156.70
07-Aug-24	50,286.20	50,292.45	49,782.20	50,119.00
06-Aug-24	50,436.90	50,688.80	49,659.05	49,748.30
05-Aug-24	50,586.25	50,747.55	49,719.10	50,092.10
02-Aug-24	51,172.25	51,608.70	51,087.85	51,350.15
		Weekly Returns		-1.69%

Data Source: NSE

Bank Nifty closed -866 basis points lower in the week to August 09, 2024 as the monetary policy not only raised concerns about the falling NIMs, but also implied that banks should rely less on CDs on the liability side and more on household deposits. That is likely to add to the funding costs of the banks, amidst falling CASA ratio Banks also faced pressure amidst tapering NII growth and concerns that if there is an economic slowdown, the ghost of NPAs could surface again. The rate cut hopes raised by the Fed actually kept the banking stocks in the hunt last week; but the RBI’s ambivalent policy stance this week did not help much. During the week, the Bank Nifty touched a high of 50,748 and a low of 49,659.

NIFTY IT INDEX – CONCERNS OVER A LIKELY US SLOWDOWN

The table captures the movement of Nifty IT index in the week to August 09, 2024.

Date	Open	High	Low	Close
09-Aug-24	39,007.70	39,252.40	38,931.85	39,043.30
08-Aug-24	39,030.50	39,098.75	38,371.15	38,448.30
07-Aug-24	39,269.05	39,427.10	38,882.95	39,194.80
06-Aug-24	38,565.85	39,395.40	38,551.70	38,624.20
05-Aug-24	38,822.55	39,044.70	37,829.10	38,435.95
02-Aug-24	40,346.55	40,632.25	39,662.65	39,730.30
		Weekly Returns		-1.73%

Data Source: NSE

For now, the focus is not the Q1 results of the IT companies or what the guidance for FY25 is. The concern is that the US labour data and the inverted yield curve hints at a likely slowdown in the US economy. The much feared hard landing is finally back to haunt the global financial system. For the week to August 09, 2024, IT index fell -1.73%. There were two triggers for the fall. The first trigger was that a slowdown in the US could hit IT spend volumes and the pricing power of IT companies. Secondly, rate cuts could weaken the dollar, something not too positive for Indian IT companies. The Nifty IT index closed with weekly losses of 687 points. For the week, Nifty IT index touched a high of 39,427 and a low of 37,829. After 6 weeks of sterling performance, the IT index has lost more than 5.5% in the last two weeks as the global IT spending scenario has got clouded.

NIFTY OIL & GAS INDEX – NO RESPITE FOR OIL & GAS THIS WEEK

The table captures the Nifty Oil & Gas index for the week to August 09, 2024.

Date	Open	High	Low	Close
09-Aug-24	12,981.15	13,041.25	12,904.65	12,972.75
08-Aug-24	12,958.35	12,964.05	12,777.10	12,802.40
07-Aug-24	12,789.55	13,003.05	12,735.10	12,973.85
06-Aug-24	12,740.10	12,950.00	12,558.25	12,588.40
05-Aug-24	12,863.20	12,915.40	12,517.80	12,649.55
02-Aug-24	13,188.75	13,256.75	13,050.00	13,137.45
		Weekly Returns		-1.25%

Data Source: NSE

Last week, the oil & gas stocks were the only large cap sector to deliver meaningful gains of 0.68%. However, this week, the index is down -1.25%. Of course, after gains of over 10.5% in the previous 6 weeks, this may look like small change. The reasons are not hard to fathom. Lower crude prices ($76-79/bbl in the Brent market) and falling gross refining margins (GRMs) of the leading oil refiners have put pressure, while the marketing margins are also weak. During the week to August 09,2024, the Oil & Gas index touched a high of 13,041 and a low of 12,518 levels in the week.

NIFTY AUTO INDEX – DEMAND CONCERNS START TO CROP UP

The table captures the movement of Nifty Auto index in the week to August 09, 2024.

Date	Open	High	Low	Close
09-Aug-24	25,272.90	25,445.00	25,202.75	25,346.65
08-Aug-24	24,947.80	25,111.15	24,785.05	24,917.35
07-Aug-24	25,001.50	25,028.20	24,789.85	24,937.60
06-Aug-24	24,909.05	25,309.20	24,464.50	24,520.05
05-Aug-24	25,056.05	25,150.50	24,509.25	24,706.50
02-Aug-24	26,192.80	26,192.80	25,678.35	25,714.45
		Weekly Returns		-1.43%

Data Source: NSE

Auto sector had been among the star performers in the Indian markets in the last few weeks. However, in the previous week, the auto index had lost -2.04% and in the latest week to August 09, 2024, the auto index lost another -1.43%. The auto numbers for July put out by the SIAM showed wholesale dispatches under pressure and now there are fears that any economic slowdown could hit the export numbers quite hard. Higher inflation expectations and higher input costs remain an overhang for the auto stocks. However, a sharp recovery in rural demand could be the saving grace, although we have to wait and watch. For the week, the Auto Index made a high of 25,445 and a low of 24,465; closing -368 points lower for the week, although the index closed near to the high point of the week.

NIFTY FMCG INDEX – A SAVING GRACE IN A VOLATILE MARKET

The table captures the movement of Nifty FMCG index in the week to August 09, 2024.

Date	Open	High	Low	Close
09-Aug-24	62,479.55	62,488.40	62,029.85	62,157.35
08-Aug-24	62,480.80	62,503.25	61,880.80	62,042.55
07-Aug-24	62,112.20	62,545.60	61,997.45	62,322.65
06-Aug-24	61,654.80	62,291.35	61,516.50	61,604.15
05-Aug-24	60,877.25	62,156.55	60,818.80	61,550.45
02-Aug-24	61,659.05	62,639.55	61,632.85	61,745.15
		Weekly Returns		+0.67%

Data Source: NSE

After rallying an incredible 10.2% over 4 weeks, the FMCG index had seen a -1.57% correction in the previous week. However, in the latest week to August 09, 2024, the FMCG index bounced by +0.67% to close with minor gains. As traders gravitated to safety, FMCG was the big outperformer in the week. For the week, the FMCG index gained 412 points, despite some selling on the last day as sectoral churn was clearly visible in the week. During the week, the FMCG index touched a high of 62,546 and a low of 60,819.

The levels of 25,000 for Nifty and 81,000 for Sensex, now continue to be the critical resistance points to breach, before the next rally.