Weekly Musings – Index performance for week ended December 01, 2023

3 Dec 2023 , 09:32 AM

YES, INDIA IS GROWING AT A FRENETIC PACE

No story of the previous week would be complete without talking about the India growth story. After India reported a better than expected 7.8% GDP growth in the first quarter, the logical expectation was that the second quarter GDP growth would taper to around 6.5%. In fact, based on the positive high frequency indicators, the consensus emerging among the economists was that Q2 GDP growth should be closer to 6.8%. In the final analysis, they ended up erring heavily on the side of caution. GDP growth for Q2FY24 came in sharply higher than expected at 7.6%. What is more; the nominal growth in Q2 was higher than in Q1, with the robust Q2 growth being achieved despite sharply higher inflation.

It was not just the GDP growth number, but even the composition of GDP growth that actually flattered the markets. Mining, electricity, manufacturing, and utilities saw double digit growth in Q2 and all of them represented a sharp boost over the Q1 growth levels. Agricultural growth was lower in Q2FY24, but the problem was not so much in nominal agricultural growth but in real growth, which was a result of higher farm inflation. Other service baskets like hotels, trade and financial services also fell below the Q1 levels, but that was more because the impact of revival in contact intensive sectors was normalizing. The private consumption component of GDP fell in the quarter, but that was offset by a bigger share of capital spending. Government focus on capex is surely helping.

INDIA BECOMES A $4 TRILLION MARKET CAP ECONOMY

During the week, the Indian market capitalization touched $4 trillion for the first time ever. At $4 trillion of market cap, India gets into the exclusive club of just 4 countries who are in that list viz. the US, China, and Japan; all substantial bigger economies than India in terms of GDP and per capita income. However, the latest estimates of GDP indicate that India could end the year with a best case scenario of $3.50 trillion. That makes Indian markets slightly unfavourable in terms of the Buffett Ratio (market cap / GDP). However, that is not going to be too relevant for the global investors, if India can maintain its growth clip at close to 7% and remain the fastest growing large economy in the world . (For live updates market map)

BSE SENSEX 30 INDEX – SCALES $4 TRILLION PEAK IN THE MONTH

The table captures the movement of the BSE SENSEX 30 for the week to December 01, 2023.

Date	High	Low	Close
01-Dec-23	67,564.33	67,149.07	67,481.19
30-Nov-23	67,069.89	66,610.35	66,988.44
29-Nov-23	66,946.28	66,374.52	66,901.91
28-Nov-23	66,256.20	65,906.65	66,174.20
27-Nov-23	66,101.64	65,894.05	65,970.04
24-Nov-23	66,101.64	65,894.05	65,970.04
	Weekly Returns	+2.29%

Data Source: NSE

Sensex closed the week with gains of 2.29%. The big boost to Sensex came from FPI inflows, GDP data, and positive cues from the US markets. Above all, the IPO response was robust and that also improved the sentiments for the Sensex. The net result was that the Sensex closed 1,511 points higher for the week; well above the psychological level of 67,000. The market has seen an overhang of short positions, so some short covering is absolutely on the cards. Sensex is also going to benefit from the strong action visible in the mid-cap stocks and small cap stocks; as they drive the Sensex indirectly via sentiments.

NIFTY 50 INDEX – LOOKS LIKE 20,000 IS FINALLY BROKEN FOR GOOD

The table captures the movement of Nifty 50 index in the week to December 01, 2023.

Date	High	Low	Close
01-Dec-23	20,291.55	20,183.70	20,267.90
30-Nov-23	20,158.70	20,015.85	20,133.15
29-Nov-23	20,104.65	19,956.30	20,096.60
28-Nov-23	19,916.85	19,800.00	19,889.70
27-Nov-23	19,832.85	19,768.85	19,794.70
24-Nov-23	19,832.85	19,768.85	19,794.70
	Weekly Returns	+2.39%

Data Source: NSE

The latest week saw FPI buying of $2.20 billion; the best weekly flow number in many months. Just two weeks back, FPIs had turned net buyers for the week, after nearly 12 weeks of persistent selling in equities. The week was a truncated week on account of trading holiday on Monday, but that did not deter the market from a bullish high or the return of FPIs. With India GDP data and the US news flows out of the way, the big focus area would be the monetary policy to be announced by RBI in the coming week. For the current week to December 01, 2023; the Nifty gained 473 points, even as Nifty VIX remained at 12.38 levels. This is indicative of buy-on-dips strength in the market and that largely limits downside risks. With the Nifty EPS at Rs936, the P/E ratio looks reasonable at 21 times earnings. But what is actually attractive is the Nifty Dividend yield at around 1.3%.

NIFTY NEXT 50 INDEX – OUTPACES THE NIFTY STORY

The table captures the movement of Nifty Next 50 for the week to December 01, 2023.

Date	High	Low	Close
01-Dec-23	48,565.55	48,197.45	48,486.40
30-Nov-23	48,082.95	47,382.70	48,020.40
29-Nov-23	47,556.40	47,414.20	47,487.50
28-Nov-23	47,216.25	46,718.60	47,161.95
27-Nov-23	46,819.00	46,578.10	46,607.75
24-Nov-23	46,819.00	46,578.10	46,607.75
	Weekly Returns	+4.03%

Data Source: NSE

The Nifty Next 50 has generally tended to mirror the Nifty. However, in the previous two weeks, the Nifty Next 50 had convincingly outperformed the Nifty by a margin; and the latest week is no exception. In the latest week, the Nifty Next 50 has grown at 4.03% against gains of 2.39% for the Nifty. Nifty Next 50 is the list of next 50 stocks that have the potential to become large caps. In line with the outperformance of mid-cap and small caps; the Next 50 stocks have also shown a sharp revival.

NIFTY MID-CAP 100 INDEX – STELLAR GAINS ON MID-SIZED STOCKS

The table captures the movement of Nifty Mid-Cap 100 in the week to December 01, 2023.

Date	High	Low	Close
01-Dec-23	43,469.30	43,118.25	43,382.40
30-Nov-23	42,979.65	42,483.70	42,908.90
29-Nov-23	42,664.70	42,501.30	42,618.70
28-Nov-23	42,299.75	42,077.60	42,278.00
27-Nov-23	42,193.20	41,992.90	42,050.45
24-Nov-23	42,193.20	41,992.90	42,050.45
	Weekly Returns	+3.17%

Data Source: NSE

After gaining 8.65%, in the last 4 weeks, the mid-cap index gained another 3.17% in the latest week to December 01, 2023. For the week, the index gained over 1,332 points to close at 43,382 and also marking a new high for the mid-cap index. In the recent fall, the Nifty Mid-cap index had faced stiff resistance at 41,000 levels, and that is now out of the way. More importantly, the Nifty Mid cap index is now at a 52-week high and most of the stocks have shown substantial bounce from the 52-week low levels.

NIFTY SMALL-CAP 100 INDEX – AFTER THE FALL COMES THE BOUNCE

The table captures movement of Nifty Small Cap 100 in the week to December 01, 2023.

Date	High	Low	Close
01-Dec-23	14,305.10	14,223.20	14,239.30
30-Nov-23	14,202.20	13,977.80	14,171.35
29-Nov-23	14,036.30	13,901.95	14,012.00
28-Nov-23	13,946.00	13,838.80	13,868.90
27-Nov-23	13,905.35	13,811.65	13,827.50
24-Nov-23	13,905.35	13,811.65	13,827.50
	Weekly Returns	+2.98%

Data Source: NSE

In the previous week, Nifty Small Cap index fell by -0.57% after gaining nearly 10% in the 3 weeks prior to that. However, in the latest week, the small cap index gained 2.98% to scale new highs. This is not just a 52-week high, but a lifetime high for the index. Last week, index struggled around the 14,000 mark, but this week it closed decisively above 14,200. With the robust GDP numbers, retail buying in small caps should pick up. There have been concerns about small cap funds freezing flows, that has had little practical impact on stocks.

BANK NIFTY INDEX – BANKS CELEBRATE POSITIVE US DATA

The table below captures the movement of BANKNIFTY in the week to December 01, 2023.

Date	High	Low	Close
01-Dec-23	44,951.10	44,531.75	44,814.20
30-Nov-23	44,764.80	44,254.60	44,481.75
29-Nov-23	44,630.35	44,003.45	44,566.45
28-Nov-23	43,960.30	43,739.80	43,880.95
27-Nov-23	43,806.50	43,566.15	43,769.10
24-Nov-23	43,806.50	43,566.15	43,769.10
	Weekly Returns	+2.39%

Data Source: NSE

In the previous two weeks, Bank Nifty had gained and lost around 50 bps ending almost neutral. In the latest week, the Bank Nifty rallied 2.39%, and closed on the threshold of the psychological level of 45,000. The big trigger this week was positive US data flows. GDP growth came in higher than expected at 5.2% for the Q3, while the US PCE inflation for October came in 40 bps lower at 3.0%. Fed has still maintained its hawkish stance, but CME Fedwatch is optimistic about rates falling sharply in 2024. Those sentiments rubbed off on banking stocks in India, rallying the Bank Nifty. Heavyweight HDFC Bank also saw a bounce. 

NIFTY IT INDEX – PRESENT UNCERTAIN BUT FUTURE PERFECT

The table captures the movement of Nifty IT index in the week to December 01, 2023.

Date	High	Low	Close
01-Dec-23	32,729.80	32,478.75	32,598.70
30-Nov-23	32,701.65	32,455.30	32,582.20
29-Nov-23	32,633.00	32,248.35	32,608.40
28-Nov-23	32,187.95	31,807.85	32,118.45
27-Nov-23	32,420.45	32,010.00	32,055.15
24-Nov-23	32,420.45	32,010.00	32,055.15
	Weekly Returns	+1.70%

Data Source: NSE

The previous two weeks had been strange for the IT sector. After gaining 5.07% two weeks back, it lost 42 bps in the previous week. In the latest week to December 01, 2023, the Nifty IT index has gained 1.7%. In the last week, the NASDAQ gained about 46 bps, but the big story favouring IT sector could be the US GDP data, which could be a sign that the tech spending in the US may finally recover. One emerging view among investors is that the worst may be over for Indian IT, especially with the IT sector set to grow 75% in the next 7 years at around 9% CAGR. 

NIFTY OIL & GAS INDEX – MOST PSU OIL STOCKS HIT NEW HIGHS

The table captures the Nifty Oil & Gas index for the week to December 01, 2023.

Date	High	Low	Close
01-Dec-23	8,559.15	8,494.85	8,518.80
30-Nov-23	8,486.65	8,370.80	8,476.40
29-Nov-23	8,449.10	8,390.15	8,414.60
28-Nov-23	8,353.35	8,190.20	8,347.25
27-Nov-23	8,195.00	8,152.80	8,161.20
24-Nov-23	8,195.00	8,152.80	8,161.20
	Weekly Returns	+4.38%

Data Source: NSE

In the previous 3 weeks, the Oil & Gas index had already gained over 5.5% and in the latest week, the index added another 4.38%. that is a good 11% rally in just about 4 weeks. Clearly, the stable crude prices are benefiting the refining companies and the downstream companies, most of which are now trading at their 52-week highs. The sharp fall in Brent Crude prices to $78-80/bbl amid demand concerns, raised hopes that the gross refining margins (GRMs) and the marketing margins will improve further in the coming quarters, notwithstanding the supply cuts of 2 million bps announced at the OPEC meet.

NIFTY AUTO INDEX – MOST AUTO STOCKS CLOSE TO 52-WEEK HIGHS

The table captures the movement of Nifty Auto index in the week to December 01, 2023.

Date	High	Low	Close
01-Dec-23	17,644.75	17,462.05	17,489.05
30-Nov-23	17,588.55	17,436.70	17,551.85
29-Nov-23	17,503.75	17,244.25	17,482.45
28-Nov-23	17,230.55	17,047.10	17,202.75
27-Nov-23	17,080.85	17,014.10	17,040.35
24-Nov-23	17,080.85	17,014.10	17,040.35
	Weekly Returns	+2.63%

Data Source: NSE

India’s largest manufacturing sector, automobiles, recorded 2.63% growth in the index in the latest week. Even as rural demand has remained a concern, auto stocks saw all-round gains on the back of rising domestic demand. It is the two-wheeler stocks that have been in the limelight in the last few weeks and that has reflected in price. Auto stocks are also expected to gain from the launch of a slew of new models in the coming months.

NIFTY FMCG INDEX – SAFETY AND AGGRESSION PACKED TOGETHER

The table captures the movement of Nifty FMCG index in the week to December 01, 2023.

Date	High	Low	Close
01-Dec-23	53,917.50	53,131.65	53,851.45
30-Nov-23	53,193.35	52,661.30	53,013.80
29-Nov-23	52,775.70	52,533.00	52,725.45
28-Nov-23	52,691.90	52,402.40	52,489.50
27-Nov-23	52,958.10	52,548.60	52,576.90
24-Nov-23	52,958.10	52,548.60	52,576.90
	Weekly Returns	+2.42%

Data Source: NSE

It is not often, you get to see a 2.42% gain in FMCG index in a week, but most FMCG stocks in India are close to their 52-week highs, especially the MNC FMCG plays. On the positive side, rural demand is gradually improving; with green shoots becoming visible. However, fuel costs could still hold the key to sustained auto demand.