Weekly Musings – Index performance for week ended August 23, 2024

25 Aug 2024 , 08:41 AM

FIVE KEY TRENDS WE JOTTED DOWN IN THE WEEK

The week to August 23, 2024 marked a turnaround with FPIs emerging as net buyers, albeit to the tune of just $584 Million. However, it was also a week in which the indices closed in the positive. This was true across the large cap, mid-cap, and small cap indices; which can construed as a good sign of a broad-based recovery. Let us look at some sectoral trends that we gathered in the recent week to August 23, 2024.

• Metals was the star performer of the week gaining more than 3%. However, the sharp spike can be attributed to the perceived weakness in the dollar. With Powell hinting at the first rate cut in September the dollar has already started showing sign of weakness, giving a boost to the prices of commodities like oils and metals.
• There, however, appears to be a defensive tilt to the gainers in the week and that appears to have been the trend over the last few weeks. The top gaining sectors are generally the defensive sectors, which are proxies for consumption like FMCG and consumer durables. Healthcare has also been a defensive on the gaining side.
• The indication that the Fed would cut rates in September is broadly seen as neutral for the IT sector. While, the weaker dollar could put some strain on profits, that would be more than compensated for by the higher technology spending that is likely to be triggered by a revival in GDP growth in the US. The neutral shift is evident in returns.
• The broad trade (or rather the low hanging fruit) appears to be short on PSUs and long on private sector. While PSU banks were an exception, the overall PSE index, and the defence index (which is predominantly PSU driven) were the only two sectors that found themselves in the negative side in the week to August 23, 2024.
• Realty continues to be under pressure. Apparently, the sector is yet to recover from the Union Budget decision to do away with the capital gains indexation benefit on real estate and other non-equity assets. While the LTCG tax rate on realty has been cut to 12.5%, the absence of indexation benefits is likely to be a steep cost for home buyers.

In a week when the FOMC minutes hinted at a rate cut and Powell’s speech at Jackson almost confirmed it, the undertone was surely positive overall. But a lot will depend on how the Q1 GDP data pans out for India and how the other data coordinates like the fiscal deficit update, core sector growth, US GDP updated and the US PCE inflation flow in next week.

BSE SENSEX 30 INDEX – CLOSES THE WEEK ABOVE 81,000

The table captures the movement of the BSE SENSEX 30 for the week to August 23, 2024.

Date	Open	High	Low	Close
23-Aug-24	81,165.65	81,231.49	80,883.26	81,086.21
22-Aug-24	81,207.24	81,236.45	80,954.02	81,053.19
21-Aug-24	80,667.25	80,952.83	80,626.38	80,905.30
20-Aug-24	80,722.54	80,942.96	80,517.95	80,802.86
19-Aug-24	80,680.25	80,724.40	80,332.65	80,424.68
16-Aug-24	79,754.85	80,518.21	79,306.69	80,436.84
		Weekly Returns		0.81%

Data Source: BSE

The band of 81,000 to 82,000 has been a key resistance for the Sensex and the index got back into that band this week. The Sensex closed above the 81,000 mark. The positive vibes coming from the FOMC minutes and the speech delivered by Jerome Powell at Jackson Hole were the key triggers for the markets to close higher. FPIs turned net buyers, although the quantum of net FPI flows was just $584 Million in the week. For the week, the Sensex closed with gains of 0.81%. During the week, the Sensex touched a high of 81,336 and a low of 80,333. The Sensex closed the week 649 points higher, largely triggered by positive news flows on the US monetary policy trajectory.

NIFTY 50 INDEX – INCHES CLOSER TO MOUNT 25K

The table captures the movement of Nifty 50 index in the week to August 23, 2024.

Date	Open	High	Low	Close
23-Aug-24	24,845.40	24,858.40	24,771.65	24,823.15
22-Aug-24	24,863.40	24,867.35	24,784.45	24,811.50
21-Aug-24	24,680.55	24,787.95	24,654.50	24,770.20
20-Aug-24	24,648.90	24,734.30	24,607.20	24,698.85
19-Aug-24	24,636.35	24,638.80	24,522.95	24,572.65
16-Aug-24	24,334.85	24,563.90	24,204.50	24,541.15
		Weekly Returns		1.15%

Data Source: NSE

The VIX continued to be elevated at above 13 levels during the week, although FPIs had tuned net buyers in the week. The sharp rally in the Nifty can be attributed to macro feel-good factor driven by the monetary signals from the Fed. With dollar weakness likely, the IT sector faltered in the week, but defensives were up. For the week, Nifty closed with gains of 1.15%, as the level of 24,500 was taken out towards the close and the Nifty inched closer to the 25,000 mark. For the week, the Nifty gained 282 points. During the week, the Nifty touched a high of 24,867 and a low of 24,523, eventually closing the week very near to the high point of the week.

NIFTY NEXT 50 INDEX – ENDS SHARPLY HIGHER IN THE WEEK

The table captures the movement of Nifty Next 50 for the week to August 23, 2024.

Date	Open	High	Low	Close
23-Aug-24	74,904.35	74,958.60	74,325.25	74,403.60
22-Aug-24	74,546.15	74,713.65	74,382.00	74,660.35
21-Aug-24	74,088.95	74,256.05	73,922.05	74,178.50
20-Aug-24	73,628.80	74,002.75	73,314.95	73,971.30
19-Aug-24	73,446.45	73,664.35	73,249.85	73,370.75
16-Aug-24	72,208.55	73,001.85	71,885.20	72,943.20
		Weekly Returns		2.00%

Data Source: NSE

In a week when the Nifty and the Sensex closed with smart gains, the Nifty Next 50 showed a much smarter rally of 2.00%. The index closed the week gaining 1,460 points. This week, the Nifty Next 50 touched a high of 74,959 level and a low of 73,250 during the week, before closing the week nearer to the high point at  74,404. The Nifty Next 50 represents the large cap stocks part of the NSE 100, and gained from the strong presence of FMCG and healthcare players in the index.

NIFTY MID-CAP 100 INDEX – MID CAPS HOLD UP DURING THE WEEK

The table captures the movement of Nifty Mid-Cap 100 in the week to August 23, 2024.

Date	Open	High	Low	Close
23-Aug-24	58,961.55	59,008.45	58,518.20	58,555.30
22-Aug-24	58,743.05	58,946.90	58,623.75	58,844.85
21-Aug-24	58,303.20	58,508.45	58,143.70	58,444.05
20-Aug-24	58,037.30	58,282.65	57,828.30	58,247.85
19-Aug-24	57,992.65	58,111.45	57,623.20	57,760.90
16-Aug-24	56,991.75	57,699.75	56,861.20	57,656.00
		Weekly Returns		1.56%

Data Source: NSE

The Nifty Mid Cap index made smart gains in the previous week to the tune of 0.84%. In the current week to August 23, 2024, the mid-cap index built on the gains adding another 156 bps in the week. The index also gained from the improvement in the A/D ratio and gained 899 points during the week. For the week, the Mid-Cap 100 index touched a high of 59,008 and a low of 57,828; with mid-cap IT stocks seeing some pressure this week.

NIFTY SMALL-CAP 100 INDEX – ALPHA HUNTING BACK WITH A BANG

The table captures movement of Nifty Small Cap 100 in the week to August 23, 2024.

Date	Open	High	Low	Close
23-Aug-24	19,165.60	19,180.20	19,033.95	19,079.25
22-Aug-24	19,158.05	19,224.70	19,075.50	19,099.60
21-Aug-24	18,871.75	19,078.80	18,828.30	19,067.35
20-Aug-24	18,848.75	18,868.75	18,761.75	18,839.95
19-Aug-24	18,577.20	18,774.25	18,558.10	18,752.70
16-Aug-24	18,249.80	18,450.55	18,234.90	18,436.85
		Weekly Returns		3.48%

Data Source: NSE

After tepid gains of just 0.14% in the previous week, the small cap index gained a whopping 3.48% in the week to August 23, 2024. This week, the index of small caps closed  with rather attractive gains of 642points. For the week, the Nifty Small Cap index touched a high of 19,225 levels and a low of 18,558, despite the defence and PSU stocks putting pressure. The small cap index also gained from a positive shift in the A/D ratio.

BANK NIFTY INDEX – GAINS ALMOST MATCH THE SENSEX GAINS

The table below captures the movement of BANKNIFTY in the week to August 23, 2024.

Date	Open	High	Low	Close
23-Aug-24	51,040.05	51,117.85	50,856.70	50,933.45
22-Aug-24	50,894.80	51,080.00	50,794.45	50,985.70
21-Aug-24	50,666.65	50,772.45	50,333.35	50,685.55
20-Aug-24	50,417.25	51,025.60	50,398.60	50,803.15
19-Aug-24	50,683.55	50,728.25	50,283.55	50,368.35
16-Aug-24	50,133.00	50,603.40	49,806.05	50,516.90
		Weekly Returns		0.82%

Data Source: NSE

Bank Nifty closed 417 points higher in the week to August 23, 2024 as the dovish stance of the Fed and the speech delivered by Powell at Jackson Hole, raised hopes that the RBI would also eventually follow suit. Unlike in previous weeks, this week saw the PSU banks also performing well; in fact, doing much better than the private banks. However, the rate cut hopes raised by the Fed actually kept the banking stocks in the hunt and closed flat; but the RBI’s ambivalent policy stance as evident in the RBI MPC minutes has not been too helpful. During the week, the Bank Nifty touched a high of 51,118 and a low of 50,284.

NIFTY IT INDEX – SUBDUED WEEK ON DOLLAR CONCERNS

The table captures the movement of Nifty IT index in the week to August 23, 2024.

Date	Open	High	Low	Close
23-Aug-24	41,492.75	41,548.75	41,029.50	41,089.85
22-Aug-24	41,735.25	41,834.00	41,406.20	41,506.20
21-Aug-24	41,532.05	41,603.60	41,368.05	41,570.85
20-Aug-24	41,421.25	41,746.55	41,366.20	41,572.80
19-Aug-24	40,940.90	41,271.60	40,736.55	41,236.85
16-Aug-24	40,287.30	40,927.15	40,063.90	40,878.25
		Weekly Returns		0.52%

Data Source: NSE

In the previous week, the IT index bounced 4.7% to close above the 40K mark for the week. In the current week to August 23, 2024, the IT index gains were subdued at just about 0.52%. It is a two way road for the IT sector. On the one hand, the growth boost from rate cuts would improve tech spending and help the tech stocks. However, rate cuts will also weaken the dollar, leading to currency translation losses for the IT sector. For the week to August 23, 2024, IT index bounced by just 212 points. The Nifty IT index touched a high of 41,834 and a low of 40,737. IT sector may not be an outperformer from here, but it will continue to be a dollar defensive for now.

NIFTY OIL & GAS INDEX – HOPES OF HARDENING OIL PRICES

The table captures the Nifty Oil & Gas index for the week to August 23, 2024.

Date	Open	High	Low	Close
23-Aug-24	13,243.05	13,272.00	13,124.10	13,140.45
22-Aug-24	13,322.55	13,336.80	13,206.40	13,227.35
21-Aug-24	13,237.55	13,305.90	13,215.80	13,258.40
20-Aug-24	13,276.40	13,302.35	13,200.80	13,217.65
19-Aug-24	13,115.60	13,249.85	13,104.35	13,197.30
16-Aug-24	12,900.20	13,023.75	12,858.00	12,999.75
		Weekly Returns		1.08%

Data Source: NSE

In the previous week, the oil and gas index had marginally gained by 0.21%. In the current week to August 23, 2024, the oil & gas index rallied 1.08%. From a longer term perspective, oil & gas index has been the star performer of the last 4-6 months. In the last few weeks, the volatile crude prices hovering just below $80/bbl and that trend has continued. Markets are betting on the Brent Crude prices again crossing above $80/bbl and an improvement in the gross refining margins (GRMs). During the week to August 23, 2024, the Oil & Gas index touched a high of 13,337 and a low of 13,104 levels.

NIFTY AUTO INDEX – FADA DATA REMAINS A CONCERN FOR AUTOS

The table captures the movement of Nifty Auto index in the week to August 23, 2024.

Date	Open	High	Low	Close
23-Aug-24	25,630.80	25,929.05	25,621.25	25,850.70
22-Aug-24	25,658.45	25,681.50	25,518.05	25,563.65
21-Aug-24	25,520.55	25,597.65	25,448.05	25,586.75
20-Aug-24	25,480.75	25,538.45	25,377.60	25,500.00
19-Aug-24	25,732.10	25,732.10	25,355.70	25,368.75
16-Aug-24	25,344.80	25,635.45	25,261.75	25,597.35
		Weekly Returns		0.99%

Data Source: NSE

Auto sector was among the steady performers in the Indian markets in the last few weeks and the latest week has been no exception. However, there are concerns on the auto sales numbers. As per data put out by the Federation of Automotive Dealers Association (FADA), there is a backlog of dealer inventory to the tune of 7.3 Lakh vehicles. That has forced the big guns like Maruti to tweak production schedule to align with the backlog. The trade constraints are already putting pressure on two-wheeler exports and the weak dollar is not going to help. Higher inflation expectations and higher input costs remain an overhang for auto stocks overall; and now there are demand concerns too. The saving grace is a sharp recovery in rural demand and that appears to have played out in the week as the Auto Index once again rallied by 99 bps. For the week, the Auto Index made a high of 25,929 and a low of 25,356; closing 253 points higher for the week.

NIFTY FMCG INDEX – ANOTHER WEEK OF FAIRY TALE RALLY FOR FMCG

The table captures the movement of Nifty FMCG index in the week to August 23, 2024.

Date	Open	High	Low	Close
23-Aug-24	63,586.65	63,700.75	63,134.75	63,409.25
22-Aug-24	63,424.80	63,620.90	63,155.10	63,483.60
21-Aug-24	62,380.40	63,212.55	62,310.80	63,091.90
20-Aug-24	62,381.20	62,473.05	61,996.60	62,240.60
19-Aug-24	62,433.25	62,640.40	62,228.80	62,326.05
16-Aug-24	61,450.00	62,303.45	61,315.60	62,213.00
		Weekly Returns		+1.92%

Data Source: NSE

The last 6 weeks were action-packed for the FMCG index. They first rallied 10.2% over 4 weeks, then corrected -1.57% and bounced by +2.65%. In the latest week to August 23, 2024, the FMCG  index gained an imposing 192 bps. As traders gravitated to safety, FMCG stocks were back at the centre of action. For the week, the FMCG index gained just 1,196 points; with the FMCG index being in the midst of an unprecedented rally. During the week, the FMCG index touched a high of 63,701 and a low of 61,997.

The levels of 25,500 for Nifty and 82,500 for Sensex remain the key resistance levels. However, breaching these levels will need a major impetus from the market triggers. Probably, a Fed rate cut, followed by an RBI rate cut can provide that impetus.