Weekly Musings – Index performance for week ended December 22, 2023

24 Dec 2023 , 10:22 AM

BULL RALLY TAKES A BREATHER

It was less about any major correction and more about the frenetic bull rally taking a breather. After the markets rallied over 14% from the lows of late October,  some amount of tapering of gains was almost inevitable. The week saw selling across the board with large caps and mid-caps selling off. However, in terms of sectoral performance, the oil & gas sector and the FMCG sector were the two sectors that stood out as the star performers of the week, even in the midst of an overall sell-off in the markets. Most of the market correction happened in just one day, Wednesday, but the markets have managed to recover from lower levels in the last two days. The latest week to December 22, 2023 continued to see strong FPI flows at $1.75 billion. Now, FPIs have infused $7.91 billion into Indian equities in the last 4 weeks, showing a marked turnaround in FPI sentiments about investing in India. 

IT WAS THE RETURN OF THE COVID VARIANT – JN.1

COVID variants are nothing new in the Indian context. We saw COVID in all its severity in 2020 and the disruption it caused for normal economic activity. After the stress and negative growth that it caused in 2020, COVID returned with a much more sinister variant in 2021. In both these rounds, the casualties were fairly large. The latest variant began with an advisory issued by the Singapore government about travel to and from Singapore. Soon, other nations joined the fray and India also admitted that there have been cases of this new JN.1 variant of the COVID strain. This admission led to a sharp sell-off in the markets on Wednesday. After, the memories of 2020 and 2021 are still fresh in the minds of people and nobody really wants to take any chances. While we do not know much about the virulence of the JN.1 strain variant, the markets literally plummeted on Wednesday, before bouncing back partially in the last two days of the week. (For live updates market map)

BSE SENSEX 30 INDEX – HOLDS 71K DESPITE THE SHOCK

The table captures the movement of the BSE SENSEX 30 for the week to December 22, 2023.

Date	High	Low	Close
22-Dec-23	71,259.55	70,713.56	71,106.96
21-Dec-23	70,958.71	69,920.39	70,865.10
20-Dec-23	71,913.07	70,302.60	70,506.31
19-Dec-23	71,623.71	71,071.98	71,437.19
18-Dec-23	71,552.24	71,142.29	71,315.09
15-Dec-23	71,605.76	70,655.97	71,483.75
	Weekly Returns	-0.53%

Data Source: NSE

Sensex closed the week with losses of -0.53%. During the week, the data flows remained strong. The RBI minutes were relatively subdued, US growth was robust and PCE inflation was sharply lower. But, the real factor that impacted the Sensex in the week was the JN.1 variant of COVID, which led to the Sensex plummeting by 931 points on Wednesday. However, this is small reversal after the market had already gained over 14% since the end of October 2023. The net result was that the Sensex closed the week -377 points lower. In the previous 4 weeks, Sensex had gained over 7,000 points, so this was hardly a dent. The market has seen an overhang of short positions, so short covering also helped the markets. However, the net impact of the JN.1 scare has hardly been significant. 

NIFTY 50 INDEX – RECOVERS FROM THE SHARP WEDNESDAY FALL

The table captures the movement of Nifty 50 index in the week to December 22, 2023.

Date	High	Low	Close
22-Dec-23	21,390.50	21,232.45	21,349.40
21-Dec-23	21,288.35	20,976.80	21,255.05
20-Dec-23	21,593.00	21,087.35	21,150.15
19-Dec-23	21,505.05	21,337.75	21,453.10
18-Dec-23	21,482.80	21,365.35	21,418.65
15-Dec-23	21,492.30	21,235.30	21,456.65
	Weekly Returns	-0.50%

Data Source: NSE

The latest week saw FPI buying of $1.75 billion. This comes on top of $1.95 billion, $2.01 billion, and $2.20 billion in the previous 3 weeks. In the last 4 weeks, the intensity of FPI flows has brought in $7.91 billion into Indian equities and the outcome is visible in the Nifty. The Nifty actually got pretty close to the 21,600 mark on Wednesday, before succumbing to the JN.1 scale. However, the Nifty did bounce sharply in the last two days. For the latest week, the Nifty lost a full -108 points; This comes after the Nifty had effectively gained a total of 1,662 points in the last 4 weeks. Amidst this entire frenetic rally, the Nifty VIX closed slightly higher at 13.71 levels; still relatively low. That means; any dip in the market would still be met with aggressive buying in the markets.

NIFTY NEXT 50 INDEX – CLOSES ALMOST FLAT FOR THE WEEK 

The table captures the movement of Nifty Next 50 for the week to December 22, 2023.

Date	High	Low	Close
22-Dec-23	51,999.50	51,514.95	51,944.00
21-Dec-23	51,594.25	50,102.95	51,520.65
20-Dec-23	52,823.40	50,688.00	50,844.60
19-Dec-23	52,515.80	51,917.70	52,387.20
18-Dec-23	52,369.00	51,796.75	52,301.00
15-Dec-23	52,210.55	51,836.25	51,957.35
	Weekly Returns	-0.03%

Data Source: NSE

The Nifty Next 50 generally mirrors the Nifty. Like the trend in the last few weeks, the Nifty Next 50 outperformed the Nifty 50 index. Of course, both the indices were in the negative, but the Nifty Next 50 corrected less compared to the Nifty. The Nifty Next 50 is the list of 50 companies with 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 closing higher, before the correction set in on Wednesday. The rally was prominent in the last 2 days as the Nifty Next 50 gained over 1,000 points largely led by defence, railway, and PSU stocks in that space.

NIFTY MID-CAP 100 INDEX – SEES SHARP FALL IN THE WEEK

The table captures the movement of Nifty Mid-Cap 100 in the week to December 22, 2023.

Date	High	Low	Close
22-Dec-23	45,234.15	44,758.55	45,094.80
21-Dec-23	44,825.15	43,281.30	44,767.70
20-Dec-23	45,955.95	43,845.35	44,024.95
19-Dec-23	45,837.60	45,276.75	45,512.45
18-Dec-23	45,833.95	45,355.15	45,685.15
15-Dec-23	45,814.45	45,514.10	45,586.55
	Weekly Returns	-1.08%

Data Source: NSE

It not common to see the Nifty Mid-cap index underperforming the Nifty, but that was the story of the last two weeks. The Nifty actually fell by -0.52% while the mid-cap index fell by over 1%. The JN.1 scare hit the mid-cap stocks the most as they tend to be most vulnerable to any production disruption. The mid-cap index is close to its 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. The latest week may be more of an exception than the rule.

NIFTY SMALL-CAP 100 INDEX – HOLDS VALUE IN A TOUGH WEEK

The table captures movement of Nifty Small Cap 100 in the week to December 22, 2023.

Date	High	Low	Close
22-Dec-23	14,905.05	14,713.45	14,846.05
21-Dec-23	14,711.75	14,091.45	14,687.95
20-Dec-23	15,090.25	14,349.60	14,407.85
19-Dec-23	15,046.25	14,891.85	14,951.20
18-Dec-23	15,016.05	14,813.90	14,968.75
15-Dec-23	14,913.40	14,814.70	14,885.80
	Weekly Returns	-0.27%

Data Source: NSE

In the last 3 weeks, the Nifty Small Cap index has gained 1.16%, 2.98% and 3.35%. That is cumulative gain of over 8% in just 3 weeks, so some correction was in the offing. For the latest week, the small cap index closed 27 bps lower. Momentum is surely back in the small cap index in the last few weeks as alpha hunting is back in vogue; and nothing represents that better than the small cap index. The small cap index had struggled around the 14,000 mark for several weeks, but it is now decisively above 14,800, although it did face some resistance around the 15,000 levels during the current week. Once the institutional euphoria settles down, we should see a lot of alpha buying coming back into small caps.

BANK NIFTY INDEX – LEADS THE MARKET LOWER

The table below captures the movement of BANKNIFTY in the week to December 22, 2023.

Date	High	Low	Close
22-Dec-23	48,071.40	47,415.85	47,491.85
21-Dec-23	47,932.40	46,919.70	47,840.15
20-Dec-23	48,166.15	47,202.65	47,445.30
19-Dec-23	48,017.00	47,646.05	47,870.90
18-Dec-23	48,076.60	47,806.70	47,867.70
15-Dec-23	48,219.95	47,632.85	48,143.55
	Weekly Returns	-1.35%

Data Source: NSE

Bank Nifty actually led the markets lower during the week. It still has the biggest weightage in the Nifty and so a sell-off in the banking index was only obvious. In previous weeks, the big trigger was positive US data flows and India GDP growth at 7.6%. Also, the RBI monetary policy had set the tone for the end of rate hikes by the RBI and a move towards rate cuts some time in 2024. However, NIM concerns will keep banking stocks under pressure.

NIFTY IT INDEX – TAKES IT EASY AFTER 15% GAIN IN 4 WEEKS

The table captures the movement of Nifty IT index in the week to December 22, 2023.

Date	High	Low	Close
22-Dec-23	35,770.45	34,740.15	35,637.80
21-Dec-23	35,020.00	34,394.55	34,846.05
20-Dec-23	35,928.50	34,621.00	34,741.00
19-Dec-23	35,762.10	35,091.95	35,345.00
18-Dec-23	36,132.00	35,487.95	35,685.55
15-Dec-23	35,947.60	34,427.55	35,782.45
	Weekly Returns	-0.40%

Data Source: NSE

In the previous week, the Nifty IT index gained a whopping 7.16%. This is on top of the 7% gain in the IT index in the 3 weeks prior to that. In short, the IT index has already rallied 15% in the 4 weeks prior to the latest week. Hence the correction of -0.40% in the latest week was only par for the course. Nothing much has changed fundamentally. The index is just taking a respite after the frenetic rally. The real trigger for the IT sector came from the dovish undertone of the Fed policy. After the Fed announced a slew of rate cuts, it was bull season for the IT stocks as they stood to gain from a spike in IT spending. 

NIFTY OIL & GAS INDEX – SHINES IN A DULL MARKET

The table captures the Nifty Oil & Gas index for the week to December 22, 2023.

Date	High	Low	Close
22-Dec-23	9,297.40	9,213.25	9,287.05
21-Dec-23	9,223.35	8,971.80	9,210.45
20-Dec-23	9,447.70	9,035.20	9,053.80
19-Dec-23	9,258.10	9,142.05	9,228.65
18-Dec-23	9,206.10	9,113.05	9,155.65
15-Dec-23	9,190.35	9,070.25	9,150.90
	Weekly Returns	+1.49%

Data Source: NSE

In the previous 6 weeks, the Oil & Gas index had already gained over 20%, so some correction was expected in the latest week. However, oil & gas managed to buck the trend and close the week with gains of 1.49%. After the fall on Wednesday, the rally was very sharp in the last two days. It was not just the upstream oil stocks, but even the downstream oil stocks have joined the fray. The week saw Brent Crude crossing above the $79/bbl market, but it hardly mattered. The bet is that oil prices should taper with Angola leaving the OPEC and more supply likely to hit the oil markets soon.

NIFTY AUTO INDEX – FACES A SHARP CORRECTION IN THE WEEK

The table captures the movement of Nifty Auto index in the week to December 22, 2023.

Date	High	Low	Close
22-Dec-23	17,840.60	17,566.85	17,778.90
21-Dec-23	17,603.55	17,294.35	17,537.85
20-Dec-23	18,038.50	17,479.90	17,523.55
19-Dec-23	18,116.55	17,905.10	17,932.70
18-Dec-23	18,156.10	17,969.75	18,068.25
15-Dec-23	18,182.10	17,843.25	18,038.25
	Weekly Returns	-1.44%

Data Source: NSE

Auto has been one of the major gainers of the last few weeks; even before the current rally began. However, the current week saw some offloading of auto stocks after the sharp rally of the last few weeks. There have been some concerns that the valuation of most auto stocks is much above the historical averages and earnings are just not catching up. 

NIFTY FMCG INDEX – STAR PERFORMER OF THE WEEK

The table captures the movement of Nifty FMCG index in the week to December 22, 2023.

Date	High	Low	Close
22-Dec-23	55,143.05	54,643.75	55,101.05
21-Dec-23	54,940.35	53,970.60	54,803.30
20-Dec-23	55,581.40	54,459.20	54,597.90
19-Dec-23	54,855.80	54,145.05	54,776.55
18-Dec-23	54,122.25	53,911.35	54,017.05
15-Dec-23	54,585.75	53,963.25	54,186.20
	Weekly Returns	+1.69%

Data Source: NSE

It is not often that you see FMCG as the star performer of the week. This is the second week in a row that FMCG index has gained over 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 continued in this week. Above all FMCG stocks are also expected to gain on bets of lower crude oil prices. That could be interesting!