Weekly Musings – Index performance for week ended July 26, 2024

29 Jul 2024 , 09:26 AM

WHY MARKETS SHOULD BE PLEASED WITH THE FULL BUDGET

The week to July 26, 2024 saw divergent moves. The FPIs ended up selling aggressively post the Union Budget announcement. However, the indices gained sharply post the budget, especially on Friday. The reality is that markets are reasons to celebrate in the budget.

• Firstly, there was much ado about the allocations made to Andhra Pradesh and Bihar. The reality was that, despite these allocations, the fiscal deficit was being reduced to just 4.9% of GDP. That should actually be seen as a positive.
• Secondly, the higher long term capital gains are likely to be largely neutralized by a higher base exemption limit. The overall impact on an investors, due to the higher rate of long term capital gains tax would be minimal; and nothing much to worry about.
• Thirdly, there were concerns about the higher rate of short term capital gains tax at 20% instead of 15%. The reality is that the gap between long term and short term has gone up from 5% to 7.5%, which should actually make allocations and trading more rational.
• Fourthly, the STT was a contentious issue as it was likely to impact the volumes in the F&O market. Past experience has been that changes in the STT rate hardly made any difference. If anything, it would curb the unhealthy speculation in F&O by retail investors, who often look at F&O as a proxy for trading in cash markets.
• Lastly, a lot of market impact is decided by the retail investors, and the budget has actually been small-investor friendly. The tweak in the tax slabs in the NTR and the higher standard deduction will put more money in the hands of the people. In an inflationary market, this is likely to ensure that investments are not impacted.

The week saw a mix of cautious large cap buying and aggressive alpha hunting in mid-caps and small caps. Clearly, the retail investors were not as sceptical about the budget as the foreign portfolio investors (FPIs) were.

BSE SENSEX 30 INDEX – CLOSES ABOVE PSYCHOLOGICAL 81,000 MARK

The table captures the movement of the BSE SENSEX 30 for the week to July 26, 2024.

Date	Open	High	Low	Close
26-Jul-24	80,158.50	81,427.18	80,013.60	81,332.72
25-Jul-24	79,542.11	80,143.10	79,477.83	80,039.80
24-Jul-24	80,343.38	80,519.58	79,750.51	80,148.88
23-Jul-24	80,724.30	80,766.41	79,224.32	80,429.04
22-Jul-24	80,408.90	80,800.92	80,100.65	80,502.08
19-Jul-24	81,585.06	81,587.76	80,499.10	80,604.65
		Weekly Returns		+0.90%

Data Source: BSE

In a week where the two halves were separated by the Union Budget, the Sensex showed a lot of character; holding closing the 81,000 mark. The trigger for the Sensex this week came from big non-banking plays like IT, oil & gas, automobiles and FMCG. For the week, the Sensex closed with gains of 0.90%. During the week, the Sensex touched a high of 81,427 and a low of 79,224. The Sensex closed the week 728 points higher. For now, 81,000 levels has been finally breached on a closing basis, and sustenance above this level will be the key.

NIFTY 50 INDEX – GAINS 124 BPS IN AN AMBIVALENT MARKET

The table captures the movement of Nifty 50 index in the week to July 26, 2024.

Date	Open	High	Low	Close
26-Jul-24	24,423.35	24,861.15	24,410.90	24,834.85
25-Jul-24	24,230.95	24,426.15	24,210.80	24,406.10
24-Jul-24	24,444.95	24,504.25	24,307.25	24,413.50
23-Jul-24	24,568.90	24,582.55	24,074.20	24,479.05
22-Jul-24	24,445.75	24,595.20	24,362.30	24,509.25
19-Jul-24	24,853.80	24,854.80	24,508.15	24,530.90
		Weekly Returns		+1.24%

Data Source: NSE

For the seventh week in a row, the FPI flows at $348 Million were very supportive of the Nifty. FPI flows have totalled $9.04 Billion into equities in 7 weeks. For the latest week, the Nifty closed with gains of 1.24% as the gains of autos, IT sector, oil & gas, and FMCG were neutralized by weakness in the banking and financials. The VIX, fell sharply to 12.25 levels as the budget volatility in the market got subdued. For the week, the Nifty gained a total of 304 points. During the week, the Nifty touched a high of 24,861 and a low of 24,074, eventually closing the week very close to the high point; and just short of the 25,000 mark.

NIFTY NEXT 50 INDEX – JOINS THE POST-BUDGET PARTY

The table captures the movement of Nifty Next 50 for the week to July 26, 2024.

Date	Open	High	Low	Close
26-Jul-24	72,611.20	73,457.85	72,559.60	73,400.65
25-Jul-24	71,340.20	72,355.40	71,055.30	72,210.25
24-Jul-24	71,704.30	72,163.75	71,449.90	71,844.65
23-Jul-24	72,627.00	72,635.20	68,938.50	71,632.20
22-Jul-24	71,092.10	72,352.00	70,696.30	72,265.95
19-Jul-24	73,047.85	73,059.60	71,246.90	71,353.00
		Weekly Returns		+2.87%

Data Source: NSE

In a week when the Nifty and the Sensex closed with smart gains, the Nifty Next 50 also joined the party and did even better. That can be attributed to selected stocks in the IT and FMCG space, which did very well in the week. The index closed the week with gains of 2.87%, doing better than the Nifty and the Sensex. This week, the Nifty Next 50 touched a high of 73,458 level and a low of 68,939 (on budget day), before closing the week at  73,401. For the week as a whole, the Nifty Next 50 index gained 2,048 points, despite limited support from the defence and other PSU stocks.

NIFTY MID-CAP 100 INDEX – DELIVERS A STERLING PERFORMANCE

The table captures the movement of Nifty Mid-Cap 100 in the week to July 26, 2024.

Date	Open	High	Low	Close
26-Jul-24	56,991.55	57,813.55	56,980.45	57,768.10
25-Jul-24	56,439.80	56,916.75	56,320.70	56,741.75
24-Jul-24	56,323.45	56,964.35	56,227.00	56,872.75
23-Jul-24	56,968.20	56,991.45	54,423.05	56,285.25
22-Jul-24	55,724.60	56,746.70	55,336.60	56,624.65
19-Jul-24	57,069.75	57,069.75	55,788.10	55,908.30
		Weekly Returns		+3.33%

Data Source: NSE

In the previous week, the mid-cap index had closed with losses of -221 bps. However, in the latest week to July 26, 2024, this was more than compensated with 333 bps gains. During the week, the advance / decline ratio turned decisively positive and that favoured these mid-cap stocks. During the week, the Mid-Cap 100 index touched a high of 57,814 and a low of 54,423. Unlike the previous week, when the index closed the week near its low point, this week, the index closed very close to its weekly highs.

NIFTY SMALL-CAP 100 INDEX – IS ALPHA HUNTING BACK?

The table captures movement of Nifty Small Cap 100 in the week to July 26, 2024.

Date	Open	High	Low	Close
26-Jul-24	18,726.35	18,879.00	18,692.20	18,854.00
25-Jul-24	18,574.95	18,711.20	18,512.90	18,673.05
24-Jul-24	18,420.15	18,748.70	18,392.45	18,723.50
23-Jul-24	18,644.40	18,651.70	17,559.65	18,400.50
22-Jul-24	18,265.55	18,597.85	18,111.65	18,563.05
19-Jul-24	18,831.15	18,835.95	18,367.50	18,397.75
		Weekly Returns		+2.48%

Data Source: NSE

The week showed alpha hunting back in the markets; albeit in a cautious manner. The small cap index had lost about -291 bps in the previous week, so some bounce was on the cards. For the week to July 26, 2024, the small cap index made up most of the losses of the previous week. This week, the index of small caps closed  with gains of 2.48%. For the week, the Nifty Small Cap index gained 456 points. During the week, the index touched a high of 18,879 levels and a low of 17,560, with the index recovering sharply from the lows on budget day. It is a sign that retail investors still see the best potential for multi-bagger returns in the small cap space, due to their focused business models.

BANK NIFTY INDEX – KEEPS THE MARKETS UNDER PRESSURE

The table below captures the movement of BANKNIFTY in the week to July 26, 2024.

Date	Open	High	Low	Close
26-Jul-24	50,456.10	51,398.60	50,438.30	51,295.95
25-Jul-24	50,762.30	51,006.10	50,559.90	50,888.75
24-Jul-24	51,657.65	51,944.65	50,784.25	51,317.00
23-Jul-24	52,511.00	52,547.55	51,342.65	51,778.30
22-Jul-24	52,145.60	52,427.00	51,874.55	52,280.40
19-Jul-24	52,531.55	52,586.75	52,146.30	52,265.60
		Weekly Returns		-1.86%

Data Source: NSE

Bank Nifty closed -186 basis points lower for the week to July 26, 2024. In recent weeks, the banking party was spoilt by the negative news flows in heavyweights like HDFC Bank and Kotak Bank. Higher inflation expectations also impacted banking stocks negatively at a macro level and the banking results have shown pressure on the NII growth and the NIM spreads. The higher CPI inflation reading in June 2024 may hold back the RBI from cutting rates. During the week, the Bank Nifty touched a high of 52,548 and a low of 50,438.

NIFTY IT INDEX – WEAK RUPEE AND ROBUST Q1 BOOSTS IT

The table captures the movement of Nifty IT index in the week to July 26, 2024.

Date	Open	High	Low	Close
26-Jul-24	40,164.45	41,073.65	40,081.90	40,977.35
25-Jul-24	39,809.80	40,198.65	39,693.60	40,055.45
24-Jul-24	40,003.00	40,282.10	39,918.75	40,115.05
23-Jul-24	39,773.75	40,193.85	39,081.30	40,044.70
22-Jul-24	39,664.85	39,945.50	39,418.45	39,773.15
19-Jul-24	40,682.70	40,682.70	39,833.10	39,923.30
		Weekly Returns		+2.64%

Data Source: NSE

The gist of the Nifty quarterly results this season has been that margins are steady, constant currency growth is happening and the global BFSI sector is seeing a sharp revival. After gaining 14.9% in the previous 5 weeks, the latest week saw the IT index surge another 2.64% on the back of robust results and a weak rupee. Most of the IT companies are also seeing a slew of deal wins and improved TCV (total contract value)of new orders in this quarter. The Nifty IT index closed with weekly gains of 1,054 points. For the week, Nifty IT index touched a high of 41,074 and a low of 39,081. IT has been the consistent star among large caps for 6 weeks in a row.

NIFTY OIL & GAS INDEX – GRM BOOST FROM LOWER CRUDE PRICES

The table captures the Nifty Oil & Gas index for the week to July 26, 2024.

Date	Open	High	Low	Close
26-Jul-24	13,050.45	13,078.80	12,985.95	13,049.25
25-Jul-24	12,605.95	13,019.25	12,572.05	12,992.35
24-Jul-24	12,485.95	12,748.30	12,470.45	12,710.45
23-Jul-24	12,699.45	12,714.30	12,096.00	12,499.55
22-Jul-24	12,655.15	12,761.55	12,514.30	12,651.25
19-Jul-24	13,110.05	13,112.00	12,712.90	12,729.90
		Weekly Returns		+2.51%

Data Source: NSE

After gaining 7.1% in the previous 4 weeks, the oil & gas index saw another 2.51% spike in the current week. The reasons are not hard to fathom. Lower crude prices (now at under $80/bbl in the Brent market) have resulted in an improvement in the gross refining margins (GRMs) of the leading oil refiners. While upstream may have run its course for now, the action appears to be in the refining plays. The Oil & Gas index was up 319 points as some value buying was visible in oil & gas stocks. The Oil & Gas index touched a high of 13,079 and a low of 12,096 levels in the week.

NIFTY AUTO INDEX – BACK IN ACCELERATION MODE

The table captures the movement of Nifty Auto index in the week to July 26, 2024.

Date	Open	High	Low	Close
26-Jul-24	25,759.25	26,289.35	25,601.70	26,250.70
25-Jul-24	25,210.70	25,640.40	25,147.35	25,627.35
24-Jul-24	25,305.80	25,370.10	25,193.05	25,309.05
23-Jul-24	25,361.75	25,458.20	24,473.80	25,321.70
22-Jul-24	24,889.30	25,292.90	24,689.80	25,250.75
19-Jul-24	25,573.90	25,573.90	24,931.25	24,963.35
		Weekly Returns		+5.16%

Data Source: NSE

Auto stocks were under pressure for the last two weeks, losing nearly 180 bps in the process. However, the auto index made a handsome recovery in the latest week gaining 5.16% on signals of positive demand and a more friendly EV policy by the government in the full Union Budget. Of course, higher inflation expectations and higher input costs remain an overhang on the auto stocks. However, a sharp recovery in rural demand appears to be the immediate impetus for the auto stocks. For the week, the Auto Index made a high of 26,289 and a low of 24,474; closing 1,287 points higher for the week.

NIFTY FMCG INDEX – LOOKS LIKE THERE IS NO STOPPING

The table captures the movement of Nifty FMCG index in the week to July 26, 2024.

Date	Open	High	Low	Close
26-Jul-24	62,483.50	62,928.60	61,829.75	62,728.80
25-Jul-24	61,912.50	62,342.20	61,599.15	62,139.50
24-Jul-24	62,627.70	62,731.80	61,908.60	62,182.35
23-Jul-24	61,028.00	62,755.00	60,850.60	62,511.25
22-Jul-24	60,968.25	61,454.20	60,743.70	60,881.75
19-Jul-24	61,286.45	61,491.40	60,840.45	61,087.90
		Weekly Returns		+2.69%

Data Source: NSE

In the last 3 weeks, the Nifty FMCG Index rallied 7.6%, but that was not all. This week, the index rallied another 2.69%; adding up to a 10.1% rally in just 4 weeks, something you do not normally get to see in the FMCG index. The trigger was a hint from a CRISIL report that there could be a sharp revival in rural demand, with the demand rally expected in double digits. For the week, the FMCG index gained a jaw-dropping 1,641 points this week. During the week, the FMCG index touched a high of 62,929 and a low of 60,744. The FMCG index continues to trade at lifetime high levels.

If the previous week was about the large cap narrative outshining the smaller stocks; this week was about a more balanced rally across sectors, with the exception of banks. Alpha hunting is back and that is good news for retail investor sentiments.