Weekly Musings – Index performance for week ended January 20, 2024

22 Jan 2024 , 08:19 AM

SECTORAL DICHOTOMIES CONTINUE

It was a week when the markets were largely driven by the announcement of quarterly results for December 2023 quarter (Q3FY24). There were specific results that had a negative bearing on stock market performance. Stocks like Hindustan Unilever, Reliance Industries and HDFC Bank reported numbers that were below expectations. In the case of Reliance, the pressure was only in the O2C business with digital and retail doing very well. For Hindustan Unilever, it was more about delayed recovery in rural demand and input costs.

However, the real pressure was on HDFC Bank. The stock suffered badly during the week after there Q3 results were below par. Deposit growth continued to lag credit growth, but the big disappointment was the net interest margins (NIM). At 3.4%, it was not only way below the median NIM reported by HDFC Bank in the last few years; but, also, a full 100 bps below the NIM reported by ICICI Bank. At a sectoral level, it was the IT and oil & gas sector that put up a good show, but the pressure obviously came from the banking sector as the Nifty and the Sensex ended with weekly losses of around 1.5%.

FPIS INTENSIFY SELLING IN THE WEEK TO JANUARY 20, 2024

For the latest week, the FPIs were heavily on the selling side. Most of the selling happened in the two days as FPIs ended net sellers to the tune of $2,033 million in the week. For the month of January, so far, FPIs are net sellers to the tune of $1,569 million. In fact, after a gap of more than 12 weeks we are seeing the FPIs giving a net sell figure for the latest 4 rolling weeks. FPI selling in the week was triggered by results and rising US bond yields.

As stated earlier, the results of Hindustan Unilever, Reliance Industries and HDFC Bank disappointed the street. However, FPIs were specifically severe as they sold off in the HDFC Bank counter. In fact, the selling was seen in the domestic market and in the global ADS market for HDFC Bank share. Even as cautious profit booking was visible, the one factor that triggered FPI selling in the week was the US bond yields surging over 20 bps to 4.14% from 3.92% last week. Clearly Fed hawkishness is putting pressure. (For live updates market map)

BSE SENSEX 30 INDEX – CLOSES THE WEEK BELOW 71,500

The table captures the movement of the BSE SENSEX 30 for the week to January 20, 2024.

Date	High	Low	Close
20-Jan-24	72,026.26	71,312.71	71,423.65
19-Jan-24	71,895.64	71,542.74	71,683.23
18-Jan-24	71,451.29	70,665.50	71,186.86
17-Jan-24	72,484.80	71,429.30	71,500.76
16-Jan-24	73,427.59	72,960.29	73,128.77
15-Jan-24	73,402.16	72,909.00	73,327.94
12-Jan-24	72,720.96	71,982.29	72,568.45
	Weekly Returns	-1.58%

Data Source: NSE

Sensex closed the week -1.58% lower for the week. There were several headwinds for the Sensex in the week. Several big-ticket quarter results were below expectations. The spike in bond yields and rising US Fed hawkishness is making investors wary. Needless to say, the worsening crisis in the Red Sea continues to put pressure on crude oil prices. The outcome was that despite demand concerns in China (a negative factor for crude oil), the price of Brent stayed above $78/bbl. The Sensex ended 1,145 points lower during the week and closed below the 71,500 levels during the current week. The next week could be critical as key data points in the US (GDP and PCE inflation) are likely to be announced.

NIFTY 50 INDEX – IT, OIL BULLISH; BUT BANKING BEARISH

The table captures the movement of Nifty 50 index in the week to January 20, 2024.

Date	High	Low	Close
20-Jan-24	21,720.30	21,541.80	21,571.80
19-Jan-24	21,670.60	21,575.00	21,622.40
18-Jan-24	21,539.40	21,285.55	21,462.25
17-Jan-24	21,851.50	21,550.45	21,571.95
16-Jan-24	22,124.15	21,969.80	22,032.30
15-Jan-24	22,115.55	21,963.55	22,097.45
12-Jan-24	21,928.25	21,715.15	21,894.55
	Weekly Returns	-1.47%

Data Source: NSE

It was an extended 6-day trading week as the Monday trading was shifted to Saturday due to the market holiday on account of the Ayodhya Temple inauguration. The latest week saw FPI selling of $2,033 million. That almost looks like a sentiment turnaround in the last couple of weeks. The Nifty has now fallen nearly 500 points from the 22,000 levels. During the week, the Nifty closed 323 points lower. Like in the previous week, the VIX spiked to above 15, before settling at around 13. That betrays the first signs of volatility in the market. While Nifty was held up by IT and oil & gas stocks; heavyweight banking stocks bore the brunt.

NIFTY NEXT 50 INDEX – CLOSES FLAT FOR THE WEEK

The table captures the movement of Nifty Next 50 for the week to January 20, 2024.

Date	High	Low	Close
20-Jan-24	55,038.55	54,459.35	54,727.20
19-Jan-24	54,741.80	54,250.95	54,709.00
18-Jan-24	54,150.95	52,766.30	53,948.40
17-Jan-24	54,813.10	54,116.55	54,206.25
16-Jan-24	55,056.75	54,515.00	54,816.90
15-Jan-24	55,025.60	54,530.60	54,936.65
12-Jan-24	54,852.90	54,587.10	54,742.90
	Weekly Returns	-0.03%

Data Source: NSE

The Nifty Next 50 generally mirrors the Nifty but this week, it managed to outperform the Nifty by a margin.. The Nifty Next 50 is the list of 50 companies with potential to become Nifty companies in the near future. On the last day of trading, the Nifty Next 50 index scaled past the 55,000 levels but failed to sustain above that level due to pressure on the overall market. The gains were, once again, in defence and PSU stocks, but the gains were relatively subdued compared to the previous week. IT was another sector that did well in the week.

NIFTY MID-CAP 100 INDEX – POSITIVE CUES IN A TOUGH WEEK

The table captures the movement of Nifty Mid-Cap 100 in the week to January 20, 2024.

Date	High	Low	Close
20-Jan-24	48,287.20	47,899.15	48,062.80
19-Jan-24	47,855.90	47,377.15	47,815.95
18-Jan-24	47,176.15	45,860.25	47,099.85
17-Jan-24	47,599.90	46,899.55	47,151.55
16-Jan-24	48,053.45	47,249.65	47,667.40
15-Jan-24	47,951.35	47,485.90	47,837.95
12-Jan-24	47,595.40	47,363.65	47,512.60
	Weekly Returns	+1.16%

Data Source: NSE

The Nifty Mid-Cap index gained 550 points during the week as alpha hunting was back in vogue. With large caps under pressure due to the banking sell-off, action shifted to the mid-caps where investors could still find pockets of value. Unlike frontline indices like the Nifty and Sensex, the Mid-cap index gained 1.16% as traders and investors decided to use the churn in the market for alpha hunting. The mid-cap index is at a new 52-week high, having breached 48,000 for the first time. Year 2024 is likely to see big mid-cap allocations.

NIFTY SMALL-CAP 100 INDEX – ENDS ON A TEPID NOTE

The table captures movement of Nifty Small Cap 100 in the week to January 20, 2024.

Date	High	Low	Close
20-Jan-24	15,589.35	15,477.70	15,518.90
19-Jan-24	15,561.25	15,447.55	15,487.45
18-Jan-24	15,417.45	14,936.00	15,320.60
17-Jan-24	15,550.35	15,282.05	15,348.35
16-Jan-24	15,653.90	15,376.20	15,535.30
15-Jan-24	15,687.10	15,503.05	15,610.50
12-Jan-24	15,609.70	15,526.90	15,544.65
	Weekly Returns	-0.17%

Data Source: NSE

In the last 6 weeks, the Nifty Small Cap index had a cumulative gain of over 14%, so the -0.17% loss in the latest week may pale in significance. For the latest week, the small cap index closed just 26 points lower. While small cap remains a good story, it has just taken a back seat this week as fresh allocations are targeting mid-caps due to the relative liquidity factor. One view is that the focus of mutual fund NFOs may shift to large caps, and that could hit small cap flows. SIP flows remain a proxy for retail interest in small cap stocks.

BANK NIFTY INDEX – HDFC BANK LEADS THE SELL-OFF

The table below captures the movement of BANKNIFTY in the week to January 20, 2024.

Date	High	Low	Close
20-Jan-24	46,183.70	45,640.90	46,058.20
19-Jan-24	46,249.85	45,558.05	45,701.15
18-Jan-24	46,184.05	45,430.70	45,713.55
17-Jan-24	47,212.75	45,979.60	46,064.45
16-Jan-24	48,305.40	48,002.85	48,125.10
15-Jan-24	48,248.05	47,825.40	48,158.30
12-Jan-24	47,873.70	47,408.50	47,709.80
	Weekly Returns	-3.46%

Data Source: NSE

The heavyweight banking sector bore the brunt of the selling during the week. The Bank Nifty closed -3.46% down; a negative close for the third week in a row. Rising bond yields in the US and disappointing NIMs by HDFC Bank played spoilsport with Bank Nifty. Inflation continues to rise and that is not a pretty scenario for banks. Markets will be cautious about banking stocks, especially private sector banks. One likely trend is a bigger shift of FPI money from HDFC Bank to ICICI Bank.

NIFTY IT INDEX – SOBER GAINS, BUT STILL POSITIVE

The table captures the movement of Nifty IT index in the week to January 20, 2024.

Date	High	Low	Close
20-Jan-24	37,310.65	36,643.70	36,697.50
19-Jan-24	37,263.95	36,831.35	37,069.25
18-Jan-24	36,826.45	36,136.40	36,730.50
17-Jan-24	37,107.20	36,289.30	36,960.40
16-Jan-24	37,132.40	36,600.45	36,727.10
15-Jan-24	37,929.30	37,109.35	37,201.95
12-Jan-24	36,581.10	35,659.55	36,521.70
	Weekly Returns	+0.48%

Data Source: NSE

After an incredible 4.79% rally in the previous week, the IT index gained another 0.48% in the latest week. IT results of Infosys and TCS may have been below expectations, but markets were seemingly impressed by the improvement in operating margins and the reduced overhang of manpower costs. Bets on the IT index is also based on the likely strengthen in the US dollar, as inflation stays sticky in the US. This could delay rate cuts and strengthen the dollar. However, IT stocks have shown a very sharp rally in the last 3 months, so some caution may be warranted. In fact, in the calendar year 2023, IT sector returns had beaten Nifty returns by over 600 bps.

NIFTY OIL & GAS INDEX – OIL RALLY AMIDST FLAT RIL

The table captures the Nifty Oil & Gas index for the week to January 20, 2024.

Date	High	Low	Close
20-Jan-24	10,440.75	10,329.10	10,373.40
19-Jan-24	10,379.10	10,223.50	10,359.00
18-Jan-24	10,206.50	9,943.95	10,189.40
17-Jan-24	10,280.40	10,097.55	10,128.90
16-Jan-24	10,323.30	10,167.90	10,230.65
15-Jan-24	10,204.95	10,000.15	10,193.20
12-Jan-24	10,034.80	9,842.85	10,019.95
	Weekly Returns	+3.53%

Data Source: NSE

In the previous 10 weeks, the Oil & Gas index had already gained over 31%, so some correction was on the cards. However, oil & gas index bucked the trend and rallied another 3.53% in the week. Oil & Gas has been the big star of Q4-2023. Reliance may have been flat in the week, but big gains came from ONGC, BPCL and the gas stocks. Oil has generally gained on the back of elevated oil prices and robust gross refining margins (GRMs). The upstream and downstream companies are obviously having a field day in the market.

NIFTY AUTO INDEX – COMING UP AGAINST A SPEED-BREAKER

The table captures the movement of Nifty Auto index in the week to January 20, 2024.

Date	High	Low	Close
20-Jan-24	18,786.75	18,592.15	18,651.10
19-Jan-24	18,708.35	18,572.75	18,694.60
18-Jan-24	18,528.45	18,142.50	18,496.25
17-Jan-24	18,620.00	18,413.65	18,447.25
16-Jan-24	18,865.85	18,642.30	18,712.70
15-Jan-24	18,799.40	18,623.60	18,765.25
12-Jan-24	18,798.75	18,588.15	18,715.20
	Weekly Returns	-0.34%

Data Source: NSE

Auto index closed the week with losses of -0.34%, but that is not a major worry considering that the auto sector was the top performing sector of year 2023. Both four wheelers and two-wheelers have done very well and what we are seeing is some profit booking at higher levels. Also, with the deep imprint left by weak rural demand, there is intense pressure on the tractor companies while the two-wheeler companies have also come under some strain in the latest week.

NIFTY FMCG INDEX – TOPLINE AND BOTTOMLINE WORRIES

The table captures the movement of Nifty FMCG index in the week to January 20, 2024.

Date	High	Low	Close
20-Jan-24	56,650.35	55,933.65	55,976.65
19-Jan-24	56,813.95	56,085.30	56,640.50
18-Jan-24	56,228.20	55,206.70	55,953.60
17-Jan-24	56,839.60	56,191.70	56,259.50
16-Jan-24	56,872.50	56,425.05	56,755.85
15-Jan-24	56,818.60	56,317.45	56,657.30
12-Jan-24	56,559.90	56,008.00	56,485.75
	Weekly Returns	-0.90%

Data Source: NSE

After four weeks of gains, the FMCG index had fallen by -2.05% in the previous week. This week saw another -0.90% fall in the FMCG index. The relatively tepid results reported by Hindustan Unilever has put pressure on the FMCG index. Weak rural demand and margin concerns have been a challenge for FMCG stocks. However, defensive bets on the FMCG stocks are unlikely to go away in a hurry. While the likely gains of low crude prices may be waning, rightsizing of brands is helping. ITC, Colgate, Britannia, and Tata Consumer are taking the leadership role in FMCG story now.