Weekly Musings – Index performance for week ended July 05, 2024

7 Jul 2024 , 09:15 AM

HOW TO HANDLE SENSEX AT 80,000

One of the big highlights of the week was the Sensex crossing the 80,000 mark. In fact, the 14% accretion from 70,000 levels to 80,000 levels happened in just one month since the election results day low. That is a phenomenal bounce in a market that is already at a lifetime high. The FPIs have infused $5.91 Billion into India equities since the new central government was formed and that shows a lot of confidence. However, that does not detract from the fact that for retail investors, the level of 80,000 on the Sensex does pose a major challenge. Is it the time to entry, stay invested or to exit the markets? Here are 4 ideas.

• This would be the time to restructure your portfolio. Try to bias your portfolio more in favour of large caps as compared to mid-caps and small caps. It is not that the small stock rally is over. It may continue for some more time. However, the risk-reward is clearly more favourable for the large cap stocks.
• This is the time for an asset allocation approach. In equity investing, if something is too good to be true, then it is probably not true. Investors wonder if the rally in defence stocks is over or it still has legs. It is tough to say, but an asset allocation approach helps. Keep shifting some of these profits to other liquid assets. That way, you are not over-exposed in the event of a fall; and also have liquidity to capitalize on corrections.
• The third mantra is to adopt a phased approach. You can call it a SIP approach or whatever, it does not matter. If you are buying, let it not be completed in one order. Similarly, if you are looking to sell, you do not have to complete that in one order. The idea is that by phasing your buy and sell orders, you can make the best of market volatility. Nobody knows the crest and the trough of the market, but it always pays to reduce your cost of purchase and to improve and your realizations.
• Remember, the long term India story is still strong. Probably, 3 years from now, the Sensex would be at much higher levels that what we are seeing today. As India transitions from $3.5 Trillion to $5 Trillion in GDP, it is going to prise open big opportunities in consumption, capex, demand rationalization, premiumization of brands etc. In a methodical way, you can still make the best of all these upcoming trends.

The moral of the story is that today the big bet is on Indian corporate earnings growing at a frenetic pace in the next few years. At 22X P/E ratio, the Indian markets are not awfully expensive, but they are not cheap either. What we need to watch for is handling the irrationality of the markets. Aftar all, as John Meynard Keynes famously said, “The problem with stock markets is that it can stay irrational much longer than investors can stay solvent.”

BSE SENSEX 30 INDEX – SPEEDS PAST THE 80,000 MARK

The table captures the movement of the BSE SENSEX 30 for the week to July 05, 2024.

Date	Open	High	Low	Close
05-Jul-24	79,778.98	80,149.87	79,478.96	79,996.60
04-Jul-24	80,321.79	80,392.64	79,986.41	80,049.67
03-Jul-24	80,013.77	80,074.30	79,754.95	79,986.80
02-Jul-24	79,840.37	79,855.87	79,231.11	79,441.45
01-Jul-24	79,043.35	79,561.00	78,971.79	79,476.19
28-Jun-24	79,457.58	79,671.58	78,905.89	79,032.73
		Weekly Returns		+1.22%

Data Source: BSE

If you believed the Sensex may experience acrophobia at dizzy heights, think again. While the current week was not as dominant as the previous week, the Sensex still closed the week with gains of 1.22%. During the week, the Sensex touched a high of 80,393 and a low of 78,906. The Sensex closed the week 964 points higher. For now, 81,000 looks to be the next major target and beyond that it is more like a no-man’s zone. It is hard to say how much the Sensex can traverse in uncharted territory.

NIFTY 50 INDEX – FPIS PROP UP THE NIFTY ONCE AGAIN

The table captures the movement of Nifty 50 index in the week to July 05, 2024.

Date	Open	High	Low	Close
05-Jul-24	24,213.35	24,363.00	24,168.85	24,323.85
04-Jul-24	24,369.95	24,401.00	24,281.00	24,302.15
03-Jul-24	24,291.75	24,309.15	24,207.10	24,286.50
02-Jul-24	24,228.75	24,236.35	24,056.40	24,123.85
01-Jul-24	23,992.95	24,164.00	23,992.70	24,141.95
28-Jun-24	24,085.90	24,174.00	23,985.80	24,010.60
		Weekly Returns		+1.30%

Data Source: NSE

In the last 4 weeks, the FPI flows have been very supportive of the Nifty with total flows of $5.91 Billion coming into equities. For the week, the Nifty closed with gains of 1.30% as the gains of IT sector, oil & gas and FMCG gave a boost to the large cap stocks. VIX also tapered to around 12.70 levels, making it a buy-on-dips market. For the week, the Nifty gained a total of 313 points. During the week, the Nifty touched a high of 24,401 and a low of 23,993, eventually closing the week above the 24,300 mark. Nifty is already in unchartered territory, so higher resistances would be psychological in nature.

NIFTY NEXT 50 INDEX – PUTS UP A GOOD SHOW IN THE WEEK

The table captures the movement of Nifty Next 50 for the week to July 05, 2024.

Date	Open	High	Low	Close
05-Jul-24	72,984.85	73,483.80	72,785.65	73,426.55
04-Jul-24	72,877.20	73,131.80	72,534.95	72,928.25
03-Jul-24	72,220.40	72,635.85	72,112.70	72,584.95
02-Jul-24	72,428.00	72,431.70	71,335.20	71,807.50
01-Jul-24	71,727.50	72,247.65	71,536.05	72,197.25
28-Jun-24	71,536.05	71,829.00	71,365.15	71,523.45
		Weekly Returns		+2.66%

Data Source: NSE

In a week when the Nifty and the Sensex dominated the story of the markets, Nifty Next 50 showed a smart rebound. The index closed the week with gains of 2.66%, relatively better compared to the Nifty and the Sensex. This week, the Nifty Next 50 touched a high of 73,484 level and a low of 71,335, before closing the week at  73,427. For the week as a whole, the Nifty Next 50 index gained 1,903 points, largely because its mainstay sectors of defence, IT, and PSU stocks outperformed in the week.

NIFTY MID-CAP 100 INDEX – SHOWING A SMART PULLBACK

The table captures the movement of Nifty Mid-Cap 100 in the week to July 05, 2024.

Date	Open	High	Low	Close
05-Jul-24	56,690.30	57,139.25	56,558.35	57,089.45
04-Jul-24	56,510.25	56,711.25	56,316.35	56,618.60
03-Jul-24	56,149.90	56,361.50	55,981.35	56,293.30
02-Jul-24	56,462.70	56,504.50	55,518.60	55,854.70
01-Jul-24	55,901.45	56,335.70	55,762.60	56,292.50
28-Jun-24	55,577.50	55,927.60	55,552.05	55,736.90
		Weekly Returns		+2.43%

Data Source: NSE

In the previous two weeks, the mid-cap index had closed with gains of just 90 bps, but bounced by 243 bps in the latest week to July 05, 2024. During the week, the advance / decline ratio turned decisively positive and that also helped these mid-sized stocks. During the week, the Mid-Cap 100 index touched a high of 57,139 and a low of 56,336. The index is already at its lifetime highs as it gained another 1,353 points in the week.

NIFTY SMALL-CAP 100 INDEX – BIG GAINS FOR SMALL CAPS

The table captures movement of Nifty Small Cap 100 in the week to July 05, 2024.

Date	Open	High	Low	Close
05-Jul-24	18,822.40	18,993.60	18,795.00	18,941.20
04-Jul-24	18,798.80	18,827.35	18,684.35	18,792.95
03-Jul-24	18,618.75	18,713.35	18,569.35	18,700.55
02-Jul-24	18,653.70	18,679.95	18,393.25	18,509.05
01-Jul-24	18,400.05	18,600.95	18,373.40	18,593.65
28-Jun-24	18,263.15	18,379.40	18,259.60	18,317.70
		Weekly Returns		+3.40%

Data Source: NSE

The week showed the alpha narrative back in the markets after a break. The small cap index had gained just about 0.45% in the previous week, but made up for that by gaining a full 3.40% in the latest week. For the week, the Nifty Small Cap index gained a full 624 points. During the week, the index touched a high of 18,994 levels and a low of 18,373, but ended the week just below the 19,000 mark. It is a sign that retail investors are back in a big way.

BANK NIFTY INDEX – HDFC BANK SPOILS THE BANKING PARTY

The table below captures the movement of BANKNIFTY in the week to July 05, 2024.

Date	Open	High	Low	Close
05-Jul-24	52,560.10	52,817.85	52,290.05	52,660.35
04-Jul-24	53,357.70	53,357.70	52,815.90	53,103.70
03-Jul-24	52,872.30	53,256.70	52,482.65	53,089.25
02-Jul-24	52,793.75	52,828.45	51,996.65	52,168.10
01-Jul-24	52,351.15	52,656.15	52,166.05	52,574.75
28-Jun-24	52,874.95	53,030.30	52,242.30	52,342.25
		Weekly Returns		+0.61%

Data Source: NSE

Bank Nifty added a subdued 318 points in the week to July 05, 2024. However, the gains of 0.61% is much lower than 1.32% and 3.32% in the two weeks prior to that. The banking party was spoilt on Friday with weak growth numbers reported by HDFC Bank for the June quarter. However, Bank Nifty still closed higher on hopes that the Fed would cut rates more aggressively in year 2025. During the week, the Bank Nifty touched a high of 53,358 and a low of 52,656.

NIFTY IT INDEX – WEAK RUPEE CONTRIBUTES BIG TIME

The table captures the movement of Nifty IT index in the week to July 05, 2024.

Date	Open	High	Low	Close
05-Jul-24	37,754.15	37,884.65	37,491.40	37,720.75
04-Jul-24	37,455.65	37,935.10	37,399.10	37,725.90
03-Jul-24	37,439.45	37,444.00	37,064.00	37,314.35
02-Jul-24	37,006.35	37,525.45	36,944.90	37,299.15
01-Jul-24	36,103.00	37,093.35	36,085.45	36,869.20
28-Jun-24	36,154.20	36,334.65	36,041.20	36,157.50
		Weekly Returns		+4.32%

Data Source: NSE

After gaining 4.50% in the previous two weeks, the latest week saw the IT index surge another 4.32% on the back of a weak rupee. The gains in IT stocks were supported by a strong dollar and a weak rupee. IT sector is a natural hedge against rupee weakness. The Nifty IT index closed with weekly gains 1,563 points. For the week, Nifty IT index touched a high of 37,935 and a low of 36,085. IT has been the start of the last three weeks.

NIFTY OIL & GAS INDEX – RELIANCE AGAIN LEADS THE OIL PACK

The table captures the Nifty Oil & Gas index for the week to July 05, 2024.

Date	Open	High	Low	Close
05-Jul-24	12,322.80	12,576.20	12,296.15	12,547.00
04-Jul-24	12,334.90	12,366.10	12,278.80	12,314.00
03-Jul-24	12,343.60	12,359.90	12,249.65	12,305.40
02-Jul-24	12,318.50	12,426.20	12,231.30	12,301.95
01-Jul-24	12,247.20	12,288.95	12,215.25	12,270.35
28-Jun-24	12,055.70	12,298.30	12,055.70	12,223.35
		Weekly Returns		+2.65%

Data Source: NSE

After gaining 3.06% in the previous week, the oil index gained another 2.65% in the latest week. The surge was largely led by re-rating in Reliance, which closed the week at a life-time high and gained nearly 2% in the week. The surge in crude prices helped the upstream and refining stocks with a promise of better gross refining margins (GRMs). Oil & Gas index was up 324 points as aggressive buying was back in oil & gas stocks. The Oil & Gas index touched a high of 12,576 and a low of 12,215 levels in the week.

NIFTY AUTO INDEX – MODEST GAINS FOR THE WEEK

The table captures the movement of Nifty Auto index in the week to July 05, 2024.

Date	Open	High	Low	Close
05-Jul-24	25,377.75	25,428.75	25,226.45	25,398.30
04-Jul-24	25,270.75	25,415.25	25,242.55	25,366.45
03-Jul-24	25,252.00	25,273.30	25,123.20	25,182.80
02-Jul-24	25,397.30	25,397.30	25,039.15	25,130.85
01-Jul-24	25,173.65	25,417.90	25,172.40	25,323.85
28-Jun-24	25,160.55	25,339.15	25,119.65	25,200.60
		Weekly Returns		+0.78%

Data Source: NSE

After gaining a mere 0.43% in the previous week, the auto index gained another 0.78% in the latest week. While rural demand is likely to be a booster this time, input costs and the challenge to pass on prices remains the key issue. For the week, the Auto Index made a high of 25,429 and a low of 25,039; closing 198 points higher for the week.

NIFTY FMCG INDEX – BUOYED BY RURAL DEMAND REVIVAL HOPES

The table captures the movement of Nifty FMCG index in the week to July 05, 2024.

Date	Open	High	Low	Close
05-Jul-24	57,102.35	57,737.75	57,048.75	57,673.00
04-Jul-24	57,325.70	57,446.05	57,030.35	57,058.40
03-Jul-24	56,850.50	57,276.65	56,805.15	57,177.55
02-Jul-24	57,360.65	57,374.00	56,473.95	56,669.20
01-Jul-24	56,745.50	57,234.40	56,672.80	57,154.70
28-Jun-24	56,709.10	57,007.45	56,560.35	56,756.85
		Weekly Returns		+1.61%

Data Source: NSE

The FMCG index saw a surprising rally of 1.61% after CRISIL hinted at a sharp revival in rural demand this quarter. The revival could average in double digits. This rally comes after the FMCG index lost -3.5% in the last 2 weeks. During the week, the FMCG index touched a high of 57,738 and a low of 56,474 and gained 916 points during the week.

To sum up, if the last week was about the large cap narrative, the latest week saw alpha hunting back in the markets. That is good for the market healthy overall.