Weekly Musings – Index performance for week ended July 28, 2023

31 Jul 2023 , 09:43 AM

The week to July 28, 2023 saw the Nifty struggling in the range of 19,600 to 19,800. It closed the previous week pretty close to the 20,000 mark, but this week saw the momentum in the Nifty waning as it closed 50 bps lower for the week. The good news is that the NSE VIX is still very low at 10.14, which largely limits the downside in the markets. However, it was more of global factors that had an impact on the Indian stock markets.

To an extent, it was a week when the markets literally took a breather after a frenetic up move of more than 1,600 points in the last few weeks. The level of 20,000 has been a major resistance and the Fed rate hike also contributed to the FPIs getting slightly defensive about emerging markets. FPIs were net sellers in two out of the five trading days in the week and had it not been for IPO flows, the secondary market flows were negative for the week. (For live impact, check market map)

NIFTY 50 INDEX – IT WAS ALL ABOUT THE LEVEL 20,000

The table below captures the movement of the Nifty 50 index in the week to July 28, 2023.

Date	High	Low	Close
28-Jul-23	19,695.90	19,563.10	19,646.05
27-Jul-23	19,867.55	19,603.55	19,659.90
26-Jul-23	19,825.60	19,716.70	19,778.30
25-Jul-23	19,729.35	19,615.95	19,680.60
24-Jul-23	19,782.75	19,658.30	19,672.35
21-Jul-23	19,887.40	19,700.00	19,745.00
	Weekly Returns	-0.50%

Data Source: NSE

In the last few weeks, the Nifty had successfully breached through some very strong resistance levels. This included key levels like 18,400, 18,800, 19,500 and 19,800. In the previous week, the Nifty had gotten tantalizingly close to the 20,000 mark, but has retreated ever since. In the latest week to July 28, 2023, all the heavyweight sectors like banking, IT and FMCG came under pressure, which had its collateral impact on the Nifty too. 

The only major sector that closed flat in the week was oil and that was on the back of a rally by Reliance Industries and ONGC. The 25 bps rate hike by the Fed resulted in the dollar strengthening and that also put pressure on the Indian markets. Overall, there was a good deal of profit taking in the markets as traders opted to unwind their positions close to the psychological resistance of 20,000 on the Nifty.

NIFTY NEXT 50 INDEX – OFFERS SURPRISE BOUNCE IN THE WEEK

The table captures the movement of Nifty Next 50 index in the week to July 28, 2023.

Date	High	Low	Close
28-Jul-23	45,187.95	44,732.50	45,166.40
27-Jul-23	44,824.00	44,543.30	44,696.45
26-Jul-23	44,622.00	44,446.40	44,568.25
25-Jul-23	44,432.25	44,118.00	44,407.55
24-Jul-23	44,345.20	44,113.15	44,176.80
21-Jul-23	44,401.15	44,139.80	44,184.75
	Weekly Returns	2.22%

Data Source: NSE

In the last few weeks, Nifty Next 50 has consistently underperformed the Nifty 50. The tables changed in the current week with the Nifty Next 50 offering 2.22% returns for the week. The returns were led by many emerging value stocks like HDFC AMC, Tata Power, Zomato, Canara Bank, GAIL, Marico etc. These stocks had specific stories with HDFC AMC rallying on the back of a much bigger market being prised open by the entry of Jio Blackrock. The enthusiasm in the FMCG stocks and the digital stocks continued in the current week. Overall, as the Nifty showed signs of tiring, the bets shifted to the next level.

NIFTY MID-CAP 100 INDEX – MID-CAPS ATTRACT INTEREST ON ALPHA BUYING

The table captures the movement of Nifty Mid-Cap 100 in the week to July 28, 2023.

Date	High	Low	Close
28-Jul-23	37,378.05	37,135.95	37,357.15
27-Jul-23	37,297.00	37,025.40	37,151.60
26-Jul-23	37,117.90	36,940.95	37,050.10
25-Jul-23	36,944.85	36,655.25	36,887.65
24-Jul-23	36,940.85	36,705.70	36,742.60
21-Jul-23	36,886.20	36,752.05	36,799.50
	Weekly Returns	+1.52%

Data Source: NSE

It was another week of strong gains for the Nifty Mid-Cap 100 as alpha hunting returned as the theme of the week with the overall Nifty index tiring at higher levels. The rally in the mid-cap was more about alpha hunting and was led by stocks like Prestige, Torrent Power, Tata Chemicals, Indian Bank, LIC Housing Finance, IPCA Labs and others. With the large caps tiring, as is evident from the heavyweight indices, the action is shifting to the mid-caps as investors look at options for alpha hunting. With rates topping out, rupee stabilizing and oil prices in a range, mid-caps stand to benefit the most.

NIFTY SMALL-CAP 100 INDEX – POSITIVE BUT SUBDUED

The table captures the movement of Nifty Small Cap 100 index in the week to July 28, 2023.

Date	High	Low	Close
28-Jul-23	11,636.50	11,560.00	11,600.30
27-Jul-23	11,663.30	11,558.15	11,578.75
26-Jul-23	11,607.55	11,558.15	11,578.95
25-Jul-23	11,648.05	11,544.55	11,558.90
24-Jul-23	11,625.25	11,548.20	11,571.90
21-Jul-23	11,542.65	11,415.60	11,529.70
	Weekly Returns	+0.61%

Data Source: NSE

The Small-Cap 100 index was in the positive but relatively subdued. However, this index has rallied more than 20% in the last 2 months so some amount of tapering is warranted at these levels. Also, many small cap dedicated funds have put limits on lumpsum inflows and that is likely to keep the interest in these stocks limited. The small caps also saw some heavy profit booking in the last few days as traders, who had made solid returns in the last 10 weeks, were booking out.

BANK NIFTY INDEX – ENCOUNTERS PRESSURE AT HIGHER LEVELS

The table below captures the movement of BANKNIFTY in the week to July 28, 2023.

Date	High	Low	Close
28-Jul-23	45,727.75	45,238.80	45,468.10
27-Jul-23	46,310.10	45,570.65	45,679.30
26-Jul-23	46,096.60	45,804.70	46,062.35
25-Jul-23	46,156.10	45,622.85	45,845.00
24-Jul-23	46,191.50	45,858.75	45,923.05
21-Jul-23	46,369.50	45,925.90	46,075.20
	Weekly Returns	-1.32%

Data Source: NSE

The Bank Nifty was the star of the previous week, but fell -1.32% in the week to July 28, 2023. That was more due to profit booking in banks at higher levels. While the results of PSU and private banks continue to be positive, with sharp growth in NIIs and NIMs, the fundamental bet is that the banks may have seen peak NIMs already. Hence traders are cautious at higher levels. However, FPIs continue to positive on banking and financials, although the enthusiasm has waned in the latest week. In the last 2 weeks, it was HDFC Bank that led the rally on the back of the merger news. That appears to have played out. The Bank Nifty is near its all-time high, as are most banking stocks. That has infused profit booking caution into the sector. That pressure looks likely to continue for now.

NIFTY IT INDEX – FACES LAG EFFECT OF WEAK GUIDANCE

The table captures the movement of Nifty IT index in the week to July 28, 2023.

Date	High	Low	Close
28-Jul-23	29,829.75	29,339.35	29,490.25
27-Jul-23	29,895.00	29,670.50	29,745.00
26-Jul-23	29,988.90	29,770.20	29,800.40
25-Jul-23	29,921.40	29,685.40	29,761.15
24-Jul-23	30,112.90	29,807.15	29,843.45
21-Jul-23	30,338.10	29,701.20	29,871.05
	Weekly Returns	-1.27%

Data Source: NSE

The IT index performance was not as bad as the previous week when the stocks fell vertically on Friday after the Infosys results. However, in the current week, the frontline IT stocks continue to remain under pressure. The latest quarterly numbers have not done too much to help the IT index as in most cases there has been pressure on the top line and also on the margins. In addition, in the case of all companies that provide guidance, it has been toned down compared to the previous guidance in terms of constant currency growth. It remains to be seen how this changes if the US eventually manages a soft landing, as is indicating by the recent GDP and PCE inflation numbers. However, mid-cap IT companies did a good job in the week, with some of them even touching 52-week highs.

NIFTY OIL & GAS INDEX – UPSTREAM GAINS, DOWNSTREAM STRAINS

The table captures the movement of Nifty Oil & Gas index in the week to July 28, 2023.

Date	High	Low	Close
28-Jul-23	8,094.50	8,005.35	8,058.20
27-Jul-23	8,147.80	8,010.55	8,032.50
26-Jul-23	8,160.15	8,071.70	8,111.10
25-Jul-23	8,069.75	8,007.25	8,060.25
24-Jul-23	8,058.05	7,995.20	8,005.05
21-Jul-23	8,096.10	8,037.50	8,062.15
	Weekly Returns	-0.05%

Data Source: NSE

It was a mixed bag for oil companies with the upstream gaining on the back of higher crude prices while the downstream companies came under pressure. The heaviest stock in the oil & gas index, Reliance Industries, had a quiet week after most of the action pertaining to the demerger had manifested in the previous week. Major price contributors on the positive side were ONGC, OIL and the CGD companies. On the downside, the pressure came from BPCL, IOCL and HPCL. The net effect on the oil & gas index was almost neutral.

NIFTY AUTO INDEX – SEES RARE NEGATIVE RETURNS IN THE WEEK

The table captures the movement of Nifty Auto index in the week to July 28, 2023.

Date	High	Low	Close
28-Jul-23	15,631.35	15,466.90	15,537.90
27-Jul-23	15,713.90	15,492.55	15,572.00
26-Jul-23	15,912.15	15,734.85	15,763.25
25-Jul-23	15,786.70	15,664.35	15,765.60
24-Jul-23	15,715.65	15,581.60	15,617.55
21-Jul-23	15,645.30	15,509.55	15,590.35
	Weekly Returns	-0.34%

Data Source: NSE

Autos have been one of the big stories in the market and that faced a hurdle after a very long time. However, it is too early for the Cassandras to come calling as the fall was just about 34 bps in the week. The rural story appears to be intact so that led to gains in stocks like Mahindra & Mahindra, Bajaj Auto and Hero Moto, although M&M did take a hit on news of it taking a significant stake in RBL Bank. The real traction is in the two wheelers, which have benefited from the green shoots of revival in rural demand. However, the concerns for the market arise from higher food inflation due to delayed and erratic monsoons, which could impact rural demand. 

NIFTY FMCG INDEX – MID-CAP FMCG HOLDS UP IN THE WEEK

The table captures the movement of Nifty FMCG index in the week to July 28, 2023.

Date	High	Low	Close
28-Jul-23	53,035.00	52,500.80	52,964.05
27-Jul-23	53,067.55	52,270.95	52,499.90
26-Jul-23	52,972.65	52,381.60	52,865.30
25-Jul-23	52,761.50	52,002.75	52,315.95
24-Jul-23	53,882.25	52,615.40	52,771.70
21-Jul-23	54,349.85	53,511.00	53,697.45
	Weekly Returns	-1.37%

Data Source: NSE

The FMCG index is trading at close to its 52-week high and we have seen some distinct action shift towards mid-cap FMCG plays. It is the likes of Colgate Palmolive, Marico, Radico and McDowell holding with ITC being the only large cap holding up in the week. Other heavyweights like Britannia, Hindustan Unilever and Godrej Consumer came under pressure during the week. 

What we deciphered from the weekly market data

Here are the major takeaways from the week ended July 28, 2023. 

• Even as Nifty struggles at the 20,000 resistance level, alpha picking continues unabated. This time around, there was no visible sector rotation in the large caps, but there was a good deal of action that shifted to the mid-cap stocks.

   

• If the Fed calls a top on rates; which looks likely with GDP at 2.4% and PCE inflation at 3%, it would be good news for the Indian stocks as FPI flows could resume. However, at these levels, the stock market is likely to be very stock-specific and bottom-up.

While 20,000 level looks like a resistance, the low VIX of 10.14 should result in buy-on-dips and eventually take the market beyond 20,000. The next few weeks could be interesting.