Weekly Musings – Index performance for week ended December 15, 2023

17 Dec 2023 , 01:09 PM

INDIAN MARKETS GET A FED POLICY BOOST

The week started on a positive note for the markets in terms of data flows. The consumer inflation came in lower than expected and the IIP growth was robust at 12.07%. However, what really flattered the market was the dovish sound of the US Federal Reserve as it announced the last monetary policy of 2023. For the first time, the Fed gave out a view that was distinctly dovish. The Fed did not say, in so many words, that rate hikes were done and dusted, but the hints were clear enough. Above all, the markets celebrated the fact that the Fed turning dovish was an indication that inflation had been controlled without a hard landing for the US economy. That is what really impressed the markets.

Of course, the US consumer inflation announced during the week also came in at 3.1%, which is 10 bps lower than the previous month. However, that did not have a major impact. The real boost to markets came when the Fed almost committed that it would cut rates by 75 bps in 2024 and another 100 bps in 2025. That is a clear indication of dovishness. More importantly, the long term estimates of the Fed, which are updated each quarter, were also updated in December. Compared to September 2023, the December projects were clearly veering towards higher GDP growth in the next two years and sharply lower inflation. The dot plot chart also pencilled in 175 bps rate cut by end of 2025, although the CME Fedwatch is betting it should happen much sooner. 

THE WEEK WAS ALSO ABOUT FOMO PLUS STRUCTURAL BETS

Only last week, we had spoken about how Temasek of Singapore plans to substantially expand its bets on India. That may just be the tip of the iceberg and more long-only funds may be thinking on the same lines. This week, it was a mix of FOMO and structural bets on play. Fear of missing out (FOMO) has suddenly become the narrative after most large investors underestimated the intensity of the recent rally. Now nobody wants to miss out the bandwagon. More importantly, FPIs and others are starting to believe there is a genuine structural rally in the offing in the indices. That is likely to be driven by the GDP rally, India emerging as a manufacturing base and high GDP growth. (For live updates market map)

BSE SENSEX 30 INDEX – CONQUERS 71K IN THE WEEK

The table captures the movement of the BSE SENSEX 30 for the week to December 15, 2023.

Date	High	Low	Close
15-Dec-23	71,605.76	70,655.97	71,483.75
14-Dec-23	70,602.89	70,110.75	70,514.20
13-Dec-23	69,657.93	69,100.56	69,584.60
12-Dec-23	70,033.64	69,443.85	69,551.03
11-Dec-23	70,057.83	69,782.48	69,928.53
08-Dec-23	69,893.80	69,506.12	69,825.60
	Weekly Returns	+2.37%

Data Source: NSE

Sensex closed the week with gains of 2.37%. The big boost to Sensex came from a surge of FPI flows and fundamental factors like subdued inflation, sharp spike in IIP and positive and dovish cues from the US Federal Reserve. The net result was that the Sensex closed a full 1,658 points higher. In the previous three weeks, Sensex has gained 5,424 points. Sensex not only crossed the 70,000 mark, but closed the week comfortably above 71,000; gaining a full 2,000 points in the last 2 days of the week, after the Fed policy statement. The market has seen an overhang of short positions, so short covering is also helping the markets. Sentiments also benefited from strong action in mid-cap stocks and small caps.

NIFTY 50 INDEX – GETS CLOSE TO 21,500 THIS WEEK

The table captures the movement of Nifty 50 index in the week to December 15, 2023.

Date	High	Low	Close
15-Dec-23	21,492.30	21,235.30	21,456.65
14-Dec-23	21,210.90	21,074.45	21,182.70
13-Dec-23	20,950.00	20,769.50	20,926.35
12-Dec-23	21,037.90	20,867.15	20,906.40
11-Dec-23	21,026.10	20,923.70	20,997.10
08-Dec-23	21,006.10	20,862.70	20,969.40
	Weekly Returns	+2.32%

Data Source: NSE

The latest week saw FPI buying of $1.95 billion. This comes on top of $2.01 billion and $2.20 billion in the previous two weeks. In the last 3 weeks, the intensity of FPI flows has brought in $6 billion into Indian equities and the outcome is visible in the Nifty. The Nifty actually got pretty close to the 21,500 mark during the week and closed the week just below that mark. For the Nifty which was struggling to break the 19,500 mark just about a month back, this rally comes as a whiff of fresh air. Short covering on the Nifty futures also helped the Nifty this week and that may now gradually peter out. For the latest week, the Nifty gained a full 488 points; after gaining 701 points and 473 points in the previous two weeks respectively. In short, the Nifty has traversed close to 1,662 points in just three weeks. Amidst this entire frenetic rally, the Nifty VIX closed slightly higher at 13.13 levels; still relatively low. 

NIFTY NEXT 50 INDEX –OUTPACES NIFTY; BUT ONLY MARGINALLY 

The table captures the movement of Nifty Next 50 for the week to December 15, 2023.

Date	High	Low	Close
15-Dec-23	52,210.55	51,836.25	51,957.35
14-Dec-23	52,004.70	51,540.75	51,925.45
13-Dec-23	51,321.60	50,687.45	51,273.50
12-Dec-23	51,352.45	50,583.90	50,813.20
11-Dec-23	51,172.95	50,696.85	51,139.65
08-Dec-23	51,289.55	50,079.00	50,608.75
	Weekly Returns	+2.66%

Data Source: NSE

The Nifty Next 50 has generally tended to mirror the Nifty. In contrast to the last 3 weeks when this index smartly outperformed the Nifty,  the outperformance this week is just about marginal. The Nifty Next 50 is the list of 50 companies with the potential to become Nifty companies in the near future. For the week, the Nifty Next 50 closed very near to the 52,000 mark, even briefly crossing that level. The rally was prominent in the last 3 days.

NIFTY MID-CAP 100 INDEX – GRADUALLY GAINING MOMENTUM

The table captures the movement of Nifty Mid-Cap 100 in the week to December 15, 2023.

Date	High	Low	Close
15-Dec-23	45,814.45	45,514.10	45,586.55
14-Dec-23	45,587.00	45,221.45	45,534.30
13-Dec-23	44,997.55	44,465.95	44,947.30
12-Dec-23	44,920.65	44,303.65	44,555.75
11-Dec-23	44,762.95	44,458.30	44,729.15
08-Dec-23	44,758.35	44,033.15	44,400.20
	Weekly Returns	+2.67%

Data Source: NSE

It not too common to see the Nifty Mid-cap index underperforming the Nifty, but that was the story in the previous week. After gaining 15%, in the last 6 weeks, the mid-cap index gained another 2.67% in the latest week to December 15, 2023. For the week, the mid-cap index gained 1,187 points, on top of 1,018 points and 1,332 points respectively in the previous 2 weeks. The mid-cap index is now at a 52-week high. The index had briefly fallen out of favour after the rally had focused on the large caps, but is back in the reckoning.

NIFTY SMALL-CAP 100 INDEX – A GOOD WEEK, INCHES CLOSE TO 15,000

The table captures movement of Nifty Small Cap 100 in the week to December 15, 2023.

Date	High	Low	Close
15-Dec-23	14,913.40	14,814.70	14,885.80
14-Dec-23	14,856.55	14,771.20	14,780.90
13-Dec-23	14,668.55	14,528.75	14,656.55
12-Dec-23	14,633.05	14,493.35	14,529.45
11-Dec-23	14,544.20	14,465.75	14,525.65
08-Dec-23	14,619.50	14,321.55	14,403.95
	Weekly Returns	+3.35%

Data Source: NSE

In two weeks, the small cap index gained 1.16% and 2.98%. In the latest week to December 15, 2023; Nifty Small Cap Index has rallied another 3.35% to scale new highs. Momentum is surely back after slowing in the previous week and the smaller stocks are now likely to play catch up with the larger indices. After, the index had struggled around the 14,000 mark for several weeks, it is now decisively above 14,800. Once the institutional euphoria settles down, we should see a lot of alpha buying coming back into these small cap stocks. 

BANK NIFTY INDEX – TAKES A BREAK AFTER FRENETIC RALLY

The table below captures the movement of BANKNIFTY in the week to December 15, 2023.

Date	High	Low	Close
15-Dec-23	48,219.95	47,632.85	48,143.55
14-Dec-23	47,943.60	47,510.85	47,732.30
13-Dec-23	47,201.95	46,886.90	47,092.25
12-Dec-23	47,454.00	47,004.05	47,097.55
11-Dec-23	47,588.00	47,186.60	47,314.25
08-Dec-23	47,303.65	46,793.90	47,262.00
	Weekly Returns	+1.87%

Data Source: NSE

Bank Nifty was more subdued after it had virtually led the Nifty last week with 5.46% gains. In previous weeks, the big trigger was positive US data flows and India GDP growth at 7.6%. Also, the RBI monetary policy last week set the tone for the end of rate hikes by the RBI. In the latest week, the trigger was the IIP growth numbers at 12.07% and the US Fed policy, which came in sharply dovish. Fed will cut rates by 175 bps in next 2 years.

NIFTY IT INDEX – IT WAS THE REAL KING OF THE WEEK

The table captures the movement of Nifty IT index in the week to December 15, 2023.

Date	High	Low	Close
15-Dec-23	35,947.60	34,427.55	35,782.45
14-Dec-23	34,308.55	33,419.10	34,223.35
13-Dec-23	33,497.45	32,715.65	33,066.65
12-Dec-23	33,799.80	33,358.00	33,493.90
11-Dec-23	33,615.70	33,332.50	33,514.25
08-Dec-23	33,452.40	33,012.70	33,392.90
	Weekly Returns	+7.16%

Data Source: NSE

In the last 3 weeks, IT index gained 7%. As if that was just the trailer, the IT index gained another 7.16% in the current week. The first triggers came from higher than expected Q3 GDP in the US, which raised the prospects of technology spending by US corporates. But the real trigger this week came from the dovish undertone of the Fed policy. It was clear that the Fed has not only given an indication about the end of rate hikes, but also an indication that the inflation had been reined without risking a hard landing. That is what boosted the fortunes of IT stocks to a large extent in the current week.

NIFTY OIL & GAS INDEX – NOTHING LIKE LAST WEEK

The table captures the Nifty Oil & Gas index for the week to December 15, 2023.

Date	High	Low	Close
15-Dec-23	9,190.35	9,070.25	9,150.90
14-Dec-23	9,054.30	8,950.20	9,039.30
13-Dec-23	8,947.75	8,858.50	8,915.10
12-Dec-23	9,062.75	8,912.70	8,926.85
11-Dec-23	9,134.10	9,021.50	9,044.25
08-Dec-23	9,197.00	8,948.65	9,044.50
	Weekly Returns	+1.18%

Data Source: NSE

In the previous 5 weeks, the Oil & Gas index had already gained over 17.5% and in the latest week, the oil & gas rally was subdued at 1.18%. This incredible story has been led by PSU players like BPCL, HPCL, IOCL, GAIL etc. Reliance lent its heft, but only to some extent. With Brent Crude prices at $75-77/bbl, it looks like the marketing margins are going to benefit a lot more than the gross refining margins (GRMs). This week, Brent crude continued to hover around the $76/bbl mark.

NIFTY AUTO INDEX – ANOTHER POSITIVE WEEK FOR AUTO STOCKS

The table captures the movement of Nifty Auto index in the week to December 15, 2023.

Date	High	Low	Close
15-Dec-23	18,182.10	17,843.25	18,038.25
14-Dec-23	18,077.00	17,926.60	18,045.05
13-Dec-23	17,937.15	17,699.65	17,917.90
12-Dec-23	17,935.00	17,630.65	17,726.50
11-Dec-23	17,885.85	17,711.65	17,852.30
08-Dec-23	17,948.25	17,663.30	17,769.10
	Weekly Returns	+1.51%

Data Source: NSE

Positive gains for auto are almost passe now; although the real action is now happening in other sectors like banking, oil, and IT. After recording 2.63% and 1.60% gains in the last two weeks, the latest week saw auto index gain another 1.51%. Of course, rural demand has remained a concern, but the revival is more a question of when rather than whether. It is the two-wheeler stocks that have been in the limelight in the last few weeks and that has reflected in price. New model launches and EVs are likely to drive the auto story. The bounce in WPI inflation raises hopes that pricing power may be back with auto companies.

NIFTY FMCG INDEX – BACK IN POSITIVE TERRITORY

The table captures the movement of Nifty FMCG index in the week to December 15, 2023.

Date	High	Low	Close
15-Dec-23	54,585.75	53,963.25	54,186.20
14-Dec-23	54,564.00	53,990.10	54,361.45
13-Dec-23	54,275.65	53,776.60	54,215.35
12-Dec-23	54,372.80	53,738.80	53,837.00
11-Dec-23	54,021.25	53,558.80	53,976.90
08-Dec-23	54,491.30	53,568.60	53,636.35
	Weekly Returns	+1.03%

Data Source: NSE

The FMCG index had fallen -0.40% in the previous week, but this week it is up more than 1%. Most FMCG stocks, barring Hindustan Unilever, are close to their 52-week highs, but the sentiments over rural demand are still quote subdued. However, defensive bets on the FMCG stocks are expected to continue in this week.