Weekly Musings – Index performance for week ended July 14, 2023

17 Jul 2023 , 06:47 AM

The Nifty gained 1.20% during the week despite negative returns on the Bank Nifty. The Nifty closed the week in the positive but the rally has now gone well beyond short covering. The short covering was expected to taper in the range of 19,400 to 19,500 but now the Nifty has decisively closed above this range. It remains to be seen if the coming week can see the Indian markets stay above this psychological level as that can take this rally to the next stage. For now, the best thing to do is to raise a toast to this unprecedented rally. (For live impact, check market map)

NIFTY 50 INDEX – GETS A FRIDAY IMPETUS FROM IT SECTOR

The table below captures the movement of the Nifty 50 index in the week to July 14, 2023.

Date	High	Low	Close
14-Jul-23	19,595.35	19,433.50	19,564.50
13-Jul-23	19,567.00	19,385.80	19,413.75
12-Jul-23	19,507.70	19,361.75	19,384.30
11-Jul-23	19,515.10	19,406.45	19,439.40
10-Jul-23	19,435.85	19,327.10	19,355.90
07-Jul-23	19,523.60	19,303.60	19,331.80
	Weekly Returns	+1.20%

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 week to July 07, 2023. However, the latest week to July 14, 2023 saw the Nifty settling well above the 19,500 mark, driven by the IT sector rally. It is true that monsoons remain a major overhang on the markets and the impact is already visible in the sharp spike in June inflation to 4.81%. However, the markets were also pleased that the US inflation had fallen sharply to 3%, making the Fed rethink on its hawkish stance. The Nifty also rallied ahead of the demerger of Reliance, but the story was largely about IT.

NIFTY NEXT 50 INDEX – POSITIVE GAINS BUT STILL TEPID

The table captures the movement of Nifty Next 50 index in the week to July 14, 2023.

Date	High	Low	Close
14-Jul-23	44,286.65	43,890.40	44,243.05
13-Jul-23	44,473.20	43,781.05	43,917.10
12-Jul-23	44,231.05	43,949.20	44,202.85
11-Jul-23	44,210.10	43,812.55	44,090.80
10-Jul-23	44,132.95	43,659.70	43,759.95
07-Jul-23	44,510.10	43,928.00	44,002.50
	Weekly Returns	+0.55%

Data Source: NSE

It was another positive week for the Nifty Next 50, although the returns were not as impressive as the Nifty 50, as action gravitated towards the large caps. The Nifty Next 50 index remains highly exposed to financials, consumer goods and healthcare. While consumer goods have done well, the same cannot be said about financials and healthcare. 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. The Nifty Next 50 index struggled to breach the 44,000 levels during the week, but finally manged to close the week above that level.

NIFTY MID-CAP 100 INDEX – MID-CAPS ALSO GET AN IT BOOST

The table captures the movement of Nifty Mid-Cap 100 in the week to July 14, 2023.

Date	High	Low	Close
14-Jul-23	36,549.55	36,192.70	36,528.95
13-Jul-23	36,546.80	36,005.25	36,114.35
12-Jul-23	36,458.65	36,261.90	36,408.15
11-Jul-23	36,344.10	36,028.30	36,252.90
10-Jul-23	36,190.25	35,831.80	35,938.05
07-Jul-23	36,403.60	35,953.05	36,076.80
	Weekly Returns	+1.25%

Data Source: NSE

It was another week of strong gains for the Nifty Mid-Cap 100 gaining 1.25%. What is of note is that the Nifty Mid-Cap 100 is at a life-time high now. The rally in the week was largely triggered on the last day of the week, which was once again all about the tech rally. The Nifty Mid-cap 100 has some high quality mid-cap IT companies including Mphasis, LTTS, Coforge, Persistent and OFSS. These were among the major stocks to rally in the week with most of them also touching their life time highs. The IT index largely mirrored the frenetic rally in the NASDAQ as markets felt that most of the concerns of the mid-cap IT companies were already in the price. One thing to note is that this index is vulnerable to spike in oil prices and now Brent Crude is hovering close to $80/bbl. The index did attract the retail, HNI, and institutional investors with a distinct bias for alpha hunting in mid-sized stocks. 

NIFTY SMALL-CAP 100 INDEX – BREACHES KEY BARRIERS 

The table captures the movement of Nifty Small Cap 100 index in the week to July 14, 2023.

Date	High	Low	Close
14-Jul-23	11,333.45	11,213.35	11,323.90
13-Jul-23	11,355.30	11,135.20	11,165.85
12-Jul-23	11,321.05	11,243.95	11,278.70
11-Jul-23	11,204.85	11,087.90	11,193.95
10-Jul-23	11,172.25	11,042.50	11,054.15
07-Jul-23	11,216.00	11,077.85	11,118.60
	Weekly Returns	+1.85%

Data Source: NSE

The Small-Cap 100 index has been largely impervious to the overall market movements and that positive trend continued even in the latest week. After gaining 2.6% in the previous week, the small cap index rallied another 1.85% this week. Just a month back, the index was struggling to break above the 10,000 mark. Now it is comfortably poised at above 11,300 and shows no signs of relenting. Even as retail and HNI investors have been indulging in alpha hunting in small cap stocks, many of them are also being seriously looked at by mutual funds for their focused business models.

BANK NIFTY INDEX – 45,000 LEVELS REMAINS KEY RESISTANCE

The table below captures the movement of BANKNIFTY in the week to July 14, 2023.

Date	High	Low	Close
14-Jul-23	44,923.85	44,547.80	44,819.30
13-Jul-23	45,085.15	44,612.20	44,665.05
12-Jul-23	44,937.25	44,562.40	44,639.45
11-Jul-23	45,139.55	44,663.05	44,745.05
10-Jul-23	45,184.30	44,721.90	44,860.85
07-Jul-23	45,227.25	44,844.80	44,925.00
	Weekly Returns	-0.24%

Data Source: NSE

Even in a fabulous week, banking index has given negative returns. In fact, in the last 2 weeks when the Nifty rallied over 700 points, the Bank Nifty has been absolute flat. The level of 45,000 continues to be a resistance. During the current week, the Bank Nifty made several attempts to get above the 45,000 mark but to no avail. There is a reason for this tepid interest in banking stocks. The general consensus in the market is that the NII / NIM game has more or less played out, and there are no immediate triggers for banks. In the last few months, the Bank Nifty rallied to life time highs on the back of growing net interest income (NII) and expanding net interest margins (NIM). With cost of deposits also catching up with the yield on loans, the chinks in the armour are starting to show.

NIFTY IT INDEX – IT FLATTERS DESPITE WEAK RESULTS

The table captures the movement of Nifty IT index in the week to July 14, 2023.

Date	High	Low	Close
14-Jul-23	31,017.55	29,847.05	30,945.50
13-Jul-23	29,903.65	29,115.70	29,628.20
12-Jul-23	29,424.75	29,020.20	29,118.05
11-Jul-23	29,371.50	29,092.70	29,324.80
10-Jul-23	29,609.85	29,116.30	29,194.70
07-Jul-23	29,937.75	29,508.85	29,560.45
	Weekly Returns	+4.69%

Data Source: NSE

There are times when logic works, there are time logic does not work and there are times when logic works atrociously in the market. The IT sector had a week in which logic worked atrociously to their advantage. After the tepid results of TCS, HCL Tech and Wipro, one would have logically expected the stocks to correct sharply. That is what happened in the first 3 days of the week. However, in the last 2 days of the week, the Nifty IT index rallied by a stupendous 6.3%. We are talking about a sectoral index and not about any particular stock. There were two triggers. The IT index had lagged the NASDAQ rally and it was playing catch up. The second trigger was that most of the negatives were already factored into the price and hence downside risk was limited. Whether that is true or not, only time will tell. For now, IT had a week to remember. Mutual funds demand for IT stocks continued to be robust even as FPIs remained largely cautious on Indian IT story. 

NIFTY OIL & GAS INDEX – WEEK WAS ALL ABOUT RELIANCE DEMERGER

The table captures the movement of Nifty Oil & Gas index in the week to July 14, 2023.

Date	High	Low	Close
14-Jul-23	7,957.40	7,870.05	7,933.50
13-Jul-23	8,032.95	7,884.00	7,897.55
12-Jul-23	8,061.40	7,982.55	7,990.95
11-Jul-23	7,987.20	7,922.15	7,977.15
10-Jul-23	7,953.40	7,883.55	7,903.25
07-Jul-23	7,942.20	7,830.15	7,857.00
	Weekly Returns	+0.97%

Data Source: NSE

Oil was nothing like the previous week when refining stocks had a fabulous rally. This week, the oil index was up just 0.97%, but it was largely about the enthusiasm over Reliance Industries as it demerges its financial services business effective the coming week. Crude rallied to $79/bbl and that has increased interest in the upstream and refining stocks. While GRMs (gross refining margins) could be weakening this quarter, the good news is that the marketing margins could bounce back sharply. Oil stocks have been seeing interest, of late.

NIFTY AUTO INDEX – HAPPY DAYS ARE HERE AGAIN

The table captures the movement of Nifty Auto index in the week to July 14, 2023.

Date	High	Low	Close
14-Jul-23	15,605.90	15,513.30	15,576.10
13-Jul-23	15,761.20	15,460.80	15,519.70
12-Jul-23	15,655.20	15,549.80	15,614.90
11-Jul-23	15,630.45	15,456.45	15,617.45
10-Jul-23	15,630.20	15,387.20	15,403.20
07-Jul-23	15,565.75	15,374.50	15,498.85
	Weekly Returns	+0.50%

Data Source: NSE

Autos have been one of the big stories in the market and that continues, although the momentum of the rally appears to be tapering. The auto index rallied in 6 out of the previous 7 weeks and in the latest week it has given moderate returns of 0.50%. 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. However, the higher inflation has raised concerns that rural demand may be hit this year, although urban demand is likely to more than compensate for the same. Macro story is still powerful. 

NIFTY FMCG INDEX – BELLWETHERS AT 52-WEEK HIGHS

The table captures the movement of Nifty FMCG index in the week to July 14, 2023.

Date	High	Low	Close
14-Jul-23	53,558.95	53,094.45	53,453.70
13-Jul-23	53,567.65	52,946.40	53,029.95
12-Jul-23	53,513.40	52,944.50	53,279.50
11-Jul-23	53,372.00	52,544.40	53,184.40
10-Jul-23	53,148.60	52,484.50	52,536.15
07-Jul-23	53,820.80	52,847.85	52,942.45
	Weekly Returns	+0.97%

Data Source: NSE

The FMCG index is trading at a 52-week high with most of its major components like Colgate, Tata Consumer, Dabur, Nestle India, Marico, Hindustan Unilever, and Britannia trading close to their 52-week highs. A combination of revival in consumer demand, promise of rural purchases and product positioning have given a boost to the FMCG stocks. The rally has been sustained over the last few weeks.

Here are the major takeaways from the week ended July 14, 2023. 

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

   

• The sharp fall in US inflation to 3% should act as a force multiplier for the market sentiments and FPI flows could build up momentum from here on.

The Nifty is now in uncharted territory. The low VIX continues to remain a major positive factor for the Indian markets.