Weekly Musings – Index performance for week ended June 16, 2023

19 Jun 2023 , 07:33 AM

The week started off on a strong note after the RBI had held rates in its meeting on 08-June. However, the macro data points were all positive in this week. CPI inflation came down to 4.25% and IIP bounced to 4.2% for the latest month. In the US, the consumer inflation fell sharply to 4% even as the Fed held rates in June after 15 months and 10 successive rate hikes to the tune of 500 basis points. The hope that global rates may be peaking gave a lot of optimism to the markets. (For live impact, check market map)

NIFTY 50 INDEX – CLOSES ABOVE THE 18,800 RESISTANCE

The table below captures the movement of the Nifty 50 index in the week to 16-Jun 2023. 

Date	High	Low	Close
16-Jun-23	18,864.70	18,710.50	18,826.00
15-Jun-23	18,794.10	18,669.05	18,688.10
14-Jun-23	18,769.70	18,690.00	18,755.90
13-Jun-23	18,728.90	18,631.80	18,716.15
12-Jun-23	18,633.60	18,559.75	18,601.50
09-Jun-23	18,676.65	18,555.40	18,563.40
	Weekly Returns	+1.41%

Data Source: NSE

The week saw the Nifty finally breaking above its crucial resistance level of 18,800 and close higher. This was the next hurdle for the Nifty to cross after it had decisively broken above 18,400. That opens the doors for the Nifty to go past the 19,000 mark, with the VIX still at low levels assuring of a buy-on-dips market. Among the business houses, the Tata group plays a big role in pulling up the Nifty during the week. FPI flows in the week were more than double the previous week. However, the spectre of higher food inflation still remains in the market with the monsoons delayed inordinately this year. Even if the quantum of rainfall is good, the delayed sowing season could impact overall Kharif output.

NIFTY NEXT 50 INDEX – OUTSHINES THE NIFTY ONCE AGAIN

The table below captures the movement of Nifty Next 50 index in the week to 16-Jun 2023.

Date	High	Low	Close
16-Jun-23	43,932.35	43,530.00	43,836.75
15-Jun-23	43,641.20	43,339.10	43,393.85
14-Jun-23	43,424.85	43,250.80	43,379.25
13-Jun-23	43,304.50	42,997.20	43,278.65
12-Jun-23	42,946.35	42,646.50	42,870.55
09-Jun-23	42,862.70	42,630.40	42,672.65
	Weekly Returns	+2.73%

Data Source: NSE

The previous week was a brief lull for the Nifty Next 50 with weekly returns of just about 0.81%. However, that jinx was broken in the current week with strong returns of 2.73%. The Nifty Next 50 index has a 55% exposure to 3 sectors viz., consumer goods, financials, and healthcare. While financials continue to be ambivalent, it is the consumer goods and the healthcare sector that are seeing a lot of buying interest. Even Mutual Fund flow for May suggests a lot of buying interest in the healthcare stocks like Mankind Pharma, Medanta and Gland Pharma. FMCG remained the star of the week and that also rubbed off on the performance of the Nifty Next 50 index.

NIFTY MID-CAP 100 INDEX – BACK WITH A BANG THIS WEEK

The table captures the movement of Nifty Mid-Cap 100 index in the week to 16-Jun 2023.

Date	High	Low	Close
16-Jun-23	35,198.05	34,995.80	35,144.30
15-Jun-23	35,029.80	34,790.45	34,907.00
14-Jun-23	34,870.20	34,737.25	34,833.30
13-Jun-23	34,781.20	34,428.30	34,761.00
12-Jun-23	34,372.30	34,090.95	34,342.30
09-Jun-23	34,355.80	34,114.10	34,153.05
	Weekly Returns	+2.90%

Data Source: NSE

The Nifty Mid Cap index has been one of the weekly outperformers in the last one month. However, after appreciating by 2.69% and 1.62% respectively; the last week saw the Nifty Mid-Cap 100 index rising by just 0.55%. Things changed for the better with a better outlook for the economy and the promise of flat to lower interest rates. Mid-cap stocks tend to mirror the gains of lower rates, lower crude prices, lower inflation, and stable currency much better than the large caps.  Investors displayed a distinct bias for alpha hunting in mid-sized stocks; and domestic funds and FPIs were also no exception to this rule. Going head, the mid-caps are likely to benefit from the RBI going easy on interest rates, combined with steady rupee and tepid oil prices. It looks like the mid-caps were back in business with 2.90% returns in the latest week.

NIFTY SMALL-CAP 100 INDEX – SMALL IS STILL BEAUTIFUL

The table captures the movement of Nifty Small Cap 100 index in the week to 16-Jun 2023.

Date	High	Low	Close
16-Jun-23	10,783.95	10,688.30	10,740.50
15-Jun-23	10,693.25	10,620.00	10,636.60
14-Jun-23	10,654.80	10,612.75	10,620.35
13-Jun-23	10,621.30	10,568.15	10,607.20
12-Jun-23	10,541.70	10,452.65	10,533.70
09-Jun-23	10,489.40	10,419.15	10,442.85
	Weekly Returns	+2.85%

Data Source: NSE

The Small-Cap 100 index has not only decisively taken out the 10,000 levels in the last few weeks, but is now a good 7-8% above that level. Last week, the returns on the small-cap index were relatively modest at 1.17%. However, in the week to 16-Jun 2023, the small cap index has given an impressive 2.85% return. Normally, this index tends to be heterogenous in nature but buying interest in the small caps is still reflective of investors willing to take on the high risk alpha plays. That willingness to invest in small caps was evident in the trends seen in mutual fund flows for the month of May 2023 too.

BANK NIFTY INDEX – SEEMS TO BE GOING NOWHERE

The table below captures the movement of Nifty Bank index (BANKNIFTY) in the week to 16-Jun 2023.

Date	High	Low	Close
16-Jun-23	44,083.25	43,536.95	43,938.15
15-Jun-23	44,077.45	43,397.50	43,443.60
14-Jun-23	44,212.35	43,956.15	43,988.00
13-Jun-23	44,138.15	43,889.70	44,079.85
12-Jun-23	44,124.95	43,874.05	43,944.20
09-Jun-23	44,220.10	43,932.60	43,989.00
	Weekly Returns	-0.12%

Data Source: NSE

If there is one index that has drifted aimlessly in the last few weeks, it is the Bank Nifty. In the last 3 weeks, prior to the current week, the Bank Nifty gave returns of -0.18%, 0.11% and 0.12% respectively. In the week to 16-Jun 2023, the Bank Nifty is down -0.12%. In short, the Bank Nifty has gone nowhere in the last 4 weeks. Remember that financials have a 37% weight in the Nifty so a rally in financials, still forms the basis for a sustained Nifty rally.

What explains this tepidness in banking stocks? The trigger for the banks in the last few months were the improving spreads and the shift to a neutral stance by the RBI. Both are already factored in and with the Bank Nifty at life-time highs. With private and PSU banks reporting record growth in net interest income (NII) and record levels of net interest margins (NIMs), the best is behind in the absence of fresh triggers.

NIFTY IT INDEX – IT WAS A HUGE SELL-OFF

The table captures the movement of Nifty IT index in the week ending on 16-Jun 2023.

Date	High	Low	Close
16-Jun-23	28,759.40	28,441.05	28,588.80
15-Jun-23	28,833.25	28,645.80	28,699.00
14-Jun-23	28,928.65	28,666.90	28,855.05
13-Jun-23	28,974.15	28,866.20	28,899.30
12-Jun-23	28,844.30	28,402.55	28,784.00
09-Jun-23	28,674.45	28,322.15	28,355.35
	Weekly Returns	+0.82%

Data Source: NSE

After two weeks of negative returns, the Nifty IT index gave positive returns of 0.82% in the latest week. In the last two weeks it had lost -3.32% and -0.09%. Select stocks like Infosys attracted some buying, but there was some nibbling by domestic funds into IT stocks at lower levels, even as FPIs continued to be net sellers. However, it is tough to say whether it is a dead cat bounce or a genuine heads up and we have to await confirmation in the coming weeks to see if the IT rally sustains. 

NIFTY OIL & GAS INDEX – OVER TO THE REFINING STORY

The table captures the movement of Nifty Oil & Gas index in the week ending 16-Jun 2023.

Date	High	Low	Close
16-Jun-23	7,630.60	7,592.30	7,612.45
15-Jun-23	7,617.25	7,575.35	7,601.60
14-Jun-23	7,605.25	7,524.60	7,590.80
13-Jun-23	7,527.55	7,486.25	7,522.05
12-Jun-23	7,479.45	7,394.45	7,468.60
09-Jun-23	7,466.30	7,401.30	7,405.50
	Weekly Returns	+2.79%

Data Source: NSE

After two ambivalent weeks, the oil & gas index rallied 2.79% in the latest week. The rally in oil was largely led by Reliance Industries and BPCL on hopes that lower crude prices would give a boost to their gross refining margins (GRMs). Brent has been around $73/bbl despite Saudi Arabia cutting supply. The demand concerns are quite strong at this point. With crude prices weak, the upstream oil companies are likely to remain under pressure.

NIFTY AUTO INDEX – DELAYED MONSOONS SAPS ENTHUSIASM

The table captures the movement of Nifty Auto index in the week ending on 16-Jun 2023.

Date	High	Low	Close
16-Jun-23	14,788.15	14,701.55	14,768.45
15-Jun-23	14,815.80	14,660.55	14,707.85
14-Jun-23	14,718.15	14,635.90	14,682.70
13-Jun-23	14,744.00	14,643.55	14,658.30
12-Jun-23	14,729.20	14,601.00	14,673.85
09-Jun-23	14,759.55	14,610.20	14,626.00
	Weekly Returns	+0.97%

Data Source: NSE

In the previous week, we had asked if Autos could be the next big thing in Indian markets. After returns of 1.65%, 1.83% and 1.93% in the last 3 weeks, the latest week saw tepid gains of 0.97% on the auto index. Delayed rains are apparently causing some concerns over demand for two-wheelers and tractors, especially in the rural areas. Rural demand is likely to remain an overhang for the auto sector.

NIFTY FMCG INDEX – IN CONSUMPTION WE TRUST

The table captures the movement of Nifty FMCG index in the week ending on 16-Jun 2023.

Date	High	Low	Close
16-Jun-23	52,540.50	52,112.60	52,440.20
15-Jun-23	52,236.65	51,840.80	52,046.45
14-Jun-23	51,834.50	51,441.90	51,767.90
13-Jun-23	51,607.35	50,794.10	51,462.70
12-Jun-23	50,875.15	50,553.25	50,762.55
09-Jun-23	51,381.90	50,605.75	50,674.85
	Weekly Returns	+3.48%

Data Source: NSE

Last week, FMCG index had given up -1.2% on worries over delayed monsoons. That is history, and in the current week the FMCG index was up 3.48%. Investors are betting on lower input costs, better product positioning and product size management to address the slowing rural demand. Even as monsoons remain an overhang, the FMCG stocks continue to attract interest from institutional investors.

Here are the major takeaways for the week ended 16-Jun 2023. 

• Even as the overall Nifty breaks higher, alpha picking continues to be the name of the game.

   

• Surprisingly, despite the delayed monsoons, investors are betting big time on the India consumption story.

With data flows positive; and out of the way, the coming week will be about a more range-bound market.