Weekly Musings – Index performance for week ended July 07, 2023

8 Jul 2023 , 01:00 PM

The Nifty gained 0.74% during the week with the rally being led by the consumer oriented sectors once again. The Nifty closed the week in the positive but the short covering had taken the Nifty all the way up to the 19,500 mark. However, the selling on Friday sort of reversed that trend partially. The undertone still looks quite strong and the selling on Friday was more about weakening short covering, than any genuine selling. (For live impact, check market map)

NIFTY 50 INDEX – FRIDAY FALL CURTAILS THE RALLY

The table below captures the movement of the Nifty 50 index in the week to July 07, 2023.

Date	High	Low	Close
07-Jul-23	19,523.60	19,303.60	19,331.80
06-Jul-23	19,512.20	19,373.00	19,497.30
05-Jul-23	19,421.60	19,339.60	19,398.50
04-Jul-23	19,434.15	19,300.00	19,389.00
03-Jul-23	19,345.10	19,234.40	19,322.55
30-Jun-23	19,201.70	19,024.60	19,189.05
	Weekly Returns	+0.74%

Data Source: NSE

In the week to June 30, 2023, the Nifty had decisively breached above the 19,000 mark and the next visible resistance was only between the range of 19,400 and 19,500. That is where the market met its resistance during the latest week. The Nifty rallied from 19,189 to 19,497 in just 4 sessions. However, the Friday correction offset nearly half of the gains of the first four days. Monsoons remain a major overhang on the markets and although the deficiency is down, the concerns over food inflation are still rampant. One reason for the fall on Friday was also that the US markets had corrected sharply after the FOMC statement. Also, there has been some cooling off after the frenetic rally of the last few weeks.

NIFTY NEXT 50 INDEX – NOT AS FANCIFUL AS NIFTY 50

The table captures the movement of Nifty Next 50 index in the week to July 07, 2023.

Date	High	Low	Close
07-Jul-23	44,510.10	43,928.00	44,002.50
06-Jul-23	44,396.75	44,136.70	44,372.10
05-Jul-23	44,156.80	43,867.15	44,108.00
04-Jul-23	44,081.00	43,647.90	43,758.20
03-Jul-23	43,966.10	43,780.85	43,924.85
30-Jun-23	43,782.90	43,575.50	43,750.30
	Weekly Returns	+0.58%

Data Source: NSE

It was another positive week for the Nifty Next 50, although the returns were not as impressive as the Nifty 50, because the action was all in the large caps. However, on Friday, the Nifty Next 50 index also fell very sharply. Nifty Next 50 index has a 55% exposure to 3 sectors viz., consumer goods, financials, and healthcare. Consumer goods have been facing some pressure on account of delayed rains and its repercussions on rural demand. Financials, despite the heavy FPI buying, have moved in a tepid fashion. Overall, the companies poised to become future Nifty companies have delivered well in the week; although there is some tapering after the sharp rally of previous weeks.

NIFTY MID-CAP 100 INDEX – MID-CAPS SUBDUED IN THE WEEK

The table captures the movement of Nifty Mid-Cap 100 in the week to July 07, 2023.

Date	High	Low	Close
07-Jul-23	36,403.60	35,953.05	36,076.80
06-Jul-23	36,379.90	36,043.70	36,373.10
05-Jul-23	36,054.75	35,786.90	36,024.65
04-Jul-23	35,978.50	35,699.55	35,771.80
03-Jul-23	35,980.80	35,790.85	35,843.50
30-Jun-23	35,782.25	35,612.20	35,754.35
	Weekly Returns	+0.90%

Data Source: NSE

After several weeks of giving average weekly returns of over 2%, the mid-cap index had given 2.74% returns in the last week of June. In the first week of July, the positive sentiments sustained, although the gains were limited to 0.90%. Like other indices, the Mid-Cap index also fell sharply on Friday and that undid most of the advantage during the week. It must be remembered that mid-cap stocks mirror the benefits of lower rates, lower crude prices, lower inflation, and stable currency better than the large caps. The sharp spike in crude prices to over $78/bbl in the week did throw some cold water on the mid-caps. Retail, HNI, and institutional investors have, however, displayed a distinct bias for alpha hunting in mid-sized stocks. If one looks ahead, mid-caps are likely to benefit from the RBI going easy on rates, combined with stable rupee. Oil prices could actually hold the key.

NIFTY SMALL-CAP 100 INDEX – SMALL IS REALLY BEAUTIFUL

The table captures the movement of Nifty Small Cap 100 index in the week to July 07, 2023.

Date	High	Low	Close
07-Jul-23	11,216.00	11,077.85	11,118.60
06-Jul-23	11,175.15	11,083.60	11,167.40
05-Jul-23	11,087.60	10,995.70	11,078.25
04-Jul-23	11,054.20	10,936.75	10,997.20
03-Jul-23	10,986.50	10,909.25	10,970.25
30-Jun-23	10,851.25	10,817.55	10,837.10
	Weekly Returns	+2.60%

Data Source: NSE

The Small-Cap 100 index has been largely impervious to the overall market movements and that trend continued even in the latest week. Even as the Nifty was volatile, the small cap index continued to grow steadily. In the latest week to July 07, 2023, the small cap index actually stood. Not only did it gain 2.6% during the week, but the fall on Friday was also relatively muted. The week has also shown that most of the retail, HNI, and even institutional investors are still very positive about the small cap space.

BANK NIFTY INDEX – FACES PRESSURE AT 45,000 LEVELS

The table below captures the movement of BANKNIFTY in the week to July 07, 2023.

Date	High	Low	Close
07-Jul-23	45,227.25	44,844.80	44,925.00
06-Jul-23	45,417.50	45,042.60	45,339.90
05-Jul-23	45,418.90	45,073.40	45,151.80
04-Jul-23	45,655.50	45,000.25	45,301.45
03-Jul-23	45,353.20	44,882.10	45,158.10
30-Jun-23	44,787.10	44,447.20	44,747.35
	Weekly Returns	+0.40%

Data Source: NSE

Despite the 2.58% rally in the last week of June, the Bank Nifty has faced resistance at 45,000 levels. That continued in the latest week also as the Bank Nifty reported subdued returns of just about 0.40%. Barring the last week of June, the returns on the Bank Nifty have been very sober on most of the other weeks. However, once the NII / NIM game is played out, there are no immediate triggers for banks. In the last few months, the Bank Nifty rallied on the back of growing net interest income (NII) and expanding net interest margins (NIM). That story is likely to be more subdued and that is showing up in index performance.

NIFTY IT INDEX – ENDS WEEK ON FLAT NOTE

The table captures the movement of Nifty IT index in the week to July 07, 2023.

Date	High	Low	Close
07-Jul-23	29,937.75	29,508.85	29,560.45
06-Jul-23	29,848.05	29,690.25	29,805.20
05-Jul-23	29,910.35	29,702.65	29,841.85
04-Jul-23	29,743.35	29,444.80	29,729.85
03-Jul-23	29,718.95	29,334.40	29,424.80
30-Jun-23	29,594.20	28,957.15	29,563.00
	Weekly Returns	-0.01%

Data Source: NSE

After fabulous returns of 3.53% in the last week of June, it was a return to reality for the IT index as it closed absolutely flat in the week to July 07, 2023. FPIs have been slightly cautious about IT companies due to factors like lower tech spending and pricing pressures. That caution has continued after the euphoria of the last week of June. However, domestic buying in IT sector was robust in the previous week and there are enough domestic funds willing to bet on the IT story. Mutual funds are now floating IT funds and IT ETFs to strike while the IT stock prices are still quite low. This has created domestic institutional demand for IT stocks. But, there is also a paradigm shift to generative AI and Low Code, which surely makes the future of the existing IT model slightly ambivalent. It remains the X-factor.

NIFTY OIL & GAS INDEX – DOWNSTREAM IS THE BIG STAR

The table captures the movement of Nifty Oil & Gas index in the week to July 07, 2023.

Date	High	Low	Close
07-Jul-23	7,942.20	7,830.15	7,857.00
06-Jul-23	7,868.25	7,710.75	7,864.00
05-Jul-23	7,724.85	7,647.25	7,718.20
04-Jul-23	7,732.85	7,632.90	7,653.80
03-Jul-23	7,713.35	7,560.55	7,705.90
30-Jun-23	7,545.05	7,500.65	7,535.70
	Weekly Returns	+4.26%

Data Source: NSE

The surprising star of the week was oil & gas. Oil stocks rallied by 4.26% for two reasons. On the one hand, Brent Crude rallying to above $78/bbl, steadied the shop for upstream oil companies. But the bigger story this week was from the downstream oil companies like IOCL, BPCL and HPCL. While GRMs (gross refining margins) could be weakening this quarter, the good news is that the marketing margins could bounce back sharply due to lower average prices of crude oil. That gave a leg up to most of the downstream oil stocks.

NIFTY AUTO INDEX – HAPPY TIMES CONTINUE

The table captures the movement of Nifty Auto index in the week to July 07, 2023.

Date	High	Low	Close
07-Jul-23	15,565.75	15,374.50	15,498.85
06-Jul-23	15,471.00	15,239.10	15,453.70
05-Jul-23	15,304.20	15,048.20	15,281.90
04-Jul-23	15,185.85	15,010.10	15,035.05
03-Jul-23	15,291.55	15,089.80	15,106.85
30-Jun-23	15,182.45	14,884.35	15,147.65
	Weekly Returns	+2.32%

Data Source: NSE

Autos have been one of the big stories in the market and that continues to be almost relentless. The auto index rallied in 5 out of the previous 6 weeks and in the latest week it has given bumper returns of 2.32%. Auto numbers show a huge backlog of orders and demand far in excess of supply. Now, even the two wheelers are seeing good traction on the demand front. At a broader level, the concerns over delayed monsoons and weak rural demand are still there, but the macro story for auto looks fairly powerful for now.

NIFTY FMCG INDEX – EARLY NUMBER INDICATIONS LOOK GOOD

The table captures the movement of Nifty FMCG index in the week to July 07, 2023.

Date	High	Low	Close
07-Jul-23	53,820.80	52,847.85	52,942.45
06-Jul-23	53,971.25	53,557.65	53,765.65
05-Jul-23	53,846.90	52,720.10	53,776.20
04-Jul-23	52,882.40	52,390.55	52,814.80
03-Jul-23	52,857.90	52,061.10	52,741.50
30-Jun-23	52,239.05	51,759.45	52,194.75
	Weekly Returns	+1.43%

Data Source: NSE

Despite concerns over monsoons, the FMCG sector has gained another 1.43% in the latest week to July 07, 2023. Even the FPI flow data shows that the global institutions are still net buyers into the FMCG sector. FMCG stocks continue to benefit from lower input costs, better product positioning and smart product size management. 

Here are the major takeaways from the week ended July 07, 2023. 

• Even as the overall Nifty breaks higher, alpha picking continues to be the name of the game. Autos, IT, capital goods and banks have been the preferred sector for FPIs.

   

• The subdued tone of the FOMC minutes on the pace of future rate hikes and the robust labour data have added to the enthusiasm of FPIs in emerging markets like India.

The Nifty could face some resistance in the range of 19,400 to 19,500 but, for now, the low VIX continues to remain a major positive factor for the Indian markets. Lower levels are likely to see buying.