Weekly Musings – Index performance for week ended June 23, 2023

26 Jun 2023 , 10:11 AM

The Nifty corrected -0.85% during the week with the extent of the fall being reduced by the banks and, especially, the IT companies. Like in the last few weeks, the Nifty once again faced resistance at the 18,800 levels and corrected sharply. The decision by the Bank of England to hike rates by 50 bps also upset market calculations. After several weeks of bullish sentiments, it was more of a return to reality for the markets. (For live impact, check market map)

NIFTY 50 INDEX – BOE HAWKISHNESS UPSETS MACRO VIEW

The table below captures the movement of the Nifty 50 index in the week to 23-Jun 2023. 

Date	High	Low	Close
23-Jun-23	18,756.40	18,647.10	18,665.50
22-Jun-23	18,886.60	18,759.50	18,771.25
21-Jun-23	18,875.90	18,794.85	18,856.85
20-Jun-23	18,839.70	18,660.65	18,816.70
19-Jun-23	18,881.45	18,719.15	18,755.45
16-Jun-23	18,864.70	18,710.50	18,826.00
	Weekly Returns	-0.85%

Data Source: NSE

The last few weeks saw the Nifty struggling between the 18,400 levels and the 18,800 levels. In the week to June 23, 2023, the Nifty again faced resistance at 18,800 and only after that level is taken out can the Nifty look at the next level of 19,000. Monsoons remain a major overhang on the markets and its likely impact on food inflation remains and rural demand remains an uncertain factor. But the big dampener was the Bank of England decision to hike rates by 50 bps. Even as the Fed held rates and the RBI MPC minutes hinted at dichotomy in views, the Bank of England showed no signs of relenting on its hawkish stance. That has upset the calculations in the market If the global central banks still remain hawkish, then the RBI may not be able to sustain divergence for too long. That is the challenge.

NIFTY NEXT 50 INDEX – COMES UNDER PRESSURE IN THE WEEK

The table below captures the movement of Nifty Next 50 index in the week to 23-Jun 2023.

Date	High	Low	Close
23-Jun-23	43,414.80	42,781.55	42,833.15
22-Jun-23	43,985.10	43,341.15	43,387.15
21-Jun-23	44,175.55	43,749.50	43,905.65
20-Jun-23	43,978.25	43,674.10	43,926.30
19-Jun-23	44,054.10	43,709.10	43,764.70
16-Jun-23	43,932.35	43,530.00	43,836.75
	Weekly Returns	-2.29%

Data Source: NSE

After several consecutive weeks of positive performance, the Next 50 index came under pressure in the week. That is not surprising considering that the Nifty Next 50 index has a 55% exposure to 3 sectors viz., consumer goods, financials, and healthcare. Consumer goods, especially came under a lot of pressure during the week on account of delayed rains and its possible repercussions on rural demand. Within the financials space, it is only the insurance and NBFC players that are holding up, while the banks are quite tepid. Even healthcare stocks sold of in the week and that impacted the Next 50 index.

NIFTY MID-CAP 100 INDEX – A BREATHER FROM BULLISHNESS

The table captures the movement of Nifty Mid-Cap 100 index in the week to 23-Jun 2023.

Date	High	Low	Close
23-Jun-23	35,223.60	34,767.30	34,799.90
22-Jun-23	35,693.40	35,130.75	35,235.25
21-Jun-23	35,744.65	35,517.90	35,614.40
20-Jun-23	35,355.55	35,062.95	35,329.20
19-Jun-23	35,396.85	35,122.90	35,158.05
16-Jun-23	35,198.05	34,995.80	35,144.30
	Weekly Returns	-0.98%

Data Source: NSE

After several weeks of bullish sentiments, there was a correction in the mid-cap index. However, the traction has been weakening. In the 3 weeks prior to the lates week, the Nifty Mid-Cap 100 gave returns of 2.69%, 1.62%, 0.55% and 2.90%. In the latest week, the returns are in the negative at -0.98%. Mid-cap stocks tend to mirror the benefits of lower rates, lower crude prices, lower inflation, and stable currency better than the large caps. It is clear that; in the current market, the investors have displayed a distinct bias for alpha hunting in mid-sized stocks. 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. 

NIFTY SMALL-CAP 100 INDEX – SMALL CAPS SEE LATE SELL-OFF

The table captures the movement of Nifty Small Cap 100 index in the week to 23-Jun 2023.

Date	High	Low	Close
23-Jun-23	10,759.55	10,582.65	10,624.10
22-Jun-23	10,896.15	10,718.05	10,750.10
21-Jun-23	10,908.95	10,816.05	10,832.05
20-Jun-23	10,834.50	10,738.60	10,824.80
19-Jun-23	10,824.70	10,749.60	10,769.15
16-Jun-23	10,783.95	10,688.30	10,740.50
	Weekly Returns	-1.08%

Data Source: NSE

The Small-Cap 100 index rallied in the first two days of the week but gave up the gains and more in the last 3 days of the week. In the previous two weeks, the returns on the small-cap 100 index have been impressive at 1.17% and 2.85% respectively. In contrast, the latest week saw negative returns on small-cap index after a long time, indicating that the boredom at higher levels was spreading to smaller stocks as well. However, there is still a lot of institutional interest in these smaller sized stocks.

BANK NIFTY INDEX – WITNESSES SELLING PRESSURE IN THE WEEK

The table below captures the movement of BANKNIFTY in the week to 23-Jun 2023.

Date	High	Low	Close
23-Jun-23	43,824.10	43,519.55	43,622.90
22-Jun-23	44,042.15	43,663.35	43,724.85
21-Jun-23	43,946.70	43,698.95	43,859.20
20-Jun-23	43,823.95	43,345.95	43,766.50
19-Jun-23	44,040.35	43,501.40	43,633.75
16-Jun-23	44,083.25	43,536.95	43,938.15
	Weekly Returns	-0.72%

Data Source: NSE

Till the week prior to the current week, the Bank Nifty had drifted aimlessly with returns of -0.18%, 0.11%, 0.12%, and -0.12% respectively. However, in the latest week, the Bank Nifty fell by -0.72%, still not very sharp, but fairly impactful considering the 37% weight that the banks and financials have in the overall market. Banks have seen a tremendous rally in the last 3-4 months as most banks got re-rated amidst a spurt in net interest income (NII) and an expansion in net interest margins (NIMs). That story appears to have adequately played out, leaving most of the banks in an uncertain zone. In the last few weeks, the focus has shifted from the banks to the insurance players and NBFCs. HDFC Twins have largely held up.

NIFTY IT INDEX – SELLS OFF, BUT STILL BETTER THAN OTHERS

The table captures the movement of Nifty IT index in the week ending on 23-Jun 2023.

Date	High	Low	Close
23-Jun-23	28,752.50	28,482.15	28,554.25
22-Jun-23	28,977.90	28,750.40	28,811.15
21-Jun-23	29,084.45	28,869.80	29,025.70
20-Jun-23	28,966.95	28,640.30	28,930.80
19-Jun-23	28,750.70	28,568.55	28,708.30
16-Jun-23	28,759.40	28,441.05	28,588.80
	Weekly Returns	-0.12%

Data Source: NSE

After several weeks of selling off, the Nifty IT index had given positive returns of 0.82% in the previous week. Even in the current week, the fall in the Nifty IT index was just about -0.12% as it held up much better than other sectors at a time when many of the IT companies continued to see value buying at lower levels. Many of the domestic funds have been consistently buying into IT stocks at lower levels, even as the foreign portfolio investors continue to be net sellers. However, with global spending likely to slow, pricing under pressure and the big shift to generative AI and Low Code, the prospects of the IT sector in India still looks quite ambivalent.

NIFTY OIL & GAS INDEX – OIL REFINING RALLY TAPERS

The table captures the movement of Nifty Oil & Gas index in the week ending 23-Jun 2023.

Date	High	Low	Close
23-Jun-23	7,541.15	7,427.65	7,434.25
22-Jun-23	7,631.45	7,539.45	7,548.15
21-Jun-23	7,614.65	7,556.35	7,607.90
20-Jun-23	7,585.65	7,526.95	7,576.05
19-Jun-23	7,637.40	7,559.40	7,571.70
16-Jun-23	7,630.60	7,592.30	7,612.45
	Weekly Returns	-2.34%

Data Source: NSE

After a massive rally of 2.79% in the previous week, the latest week saw the Oil & Gas index correcting by -2.34%. Reliance, IOCL and BPCL gave up on gains as the refining margins story had played out adequately in the latest week. Brent has stayed around the $73/bbl despite Saudi Arabia cutting supply. Upstream oil companies were always under pressure due to weak crude prices, but now even refiners are facing pressure at higher levels.

NIFTY AUTO INDEX – DELAYED MONSOONS HITS AUTOS

The table captures the movement of Nifty Auto index in the week ending on 23-Jun 2023.

Date	High	Low	Close
23-Jun-23	14,715.85	14,536.35	14,550.20
22-Jun-23	14,871.80	14,683.00	14,702.10
21-Jun-23	14,885.20	14,738.30	14,777.70
20-Jun-23	14,810.75	14,573.90	14,785.65
19-Jun-23	14,842.30	14,658.05	14,676.70
16-Jun-23	14,788.15	14,701.55	14,768.45
	Weekly Returns	-1.48%

Data Source: NSE

Autos have been one of the big stories in the market. In the last 4 weeks, prior to the latest week, the Nifty Auto Index gave returns of 1.65%, 1.83%, 1.93%, and 0.97% respectively. However, the latest week saw the Auto Index correcting by -1.48%. Clearly, the delayed monsoons have raised question marks over the growth in demand for two-wheelers and tractors, especially in the rural areas. Rural demand is likely to remain an overhang for the auto sector; which still derives bulk of its revenues from rural India.

NIFTY FMCG INDEX – RURAL CONSUMPTION HOPES DAMPEN

The table captures the movement of Nifty FMCG index in the week ending on 23-Jun 2023.

Date	High	Low	Close
23-Jun-23	51,556.95	51,124.50	51,283.75
22-Jun-23	51,965.75	51,516.00	51,557.80
21-Jun-23	52,421.95	51,763.55	51,934.25
20-Jun-23	52,239.40	51,809.15	52,164.70
19-Jun-23	52,526.05	52,063.70	52,123.85
16-Jun-23	52,540.50	52,112.60	52,440.20
	Weekly Returns	-2.21%

Data Source: NSE

After a 3.48% jump in the FMCG index in the previous week, the current week saw the FMCG index correcting by -2.21%. Fundamentally, investors like FMCG due to lower input costs, better product positioning and product size management to address the slowing rural demand. However, the delayed monsoons this year has turned out to be an overhang. The pressure on the FMCG stocks was visible across the large-cap and mid-cap segments.

Here are the major takeaways from the week ended 23-Jun 2023. 

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

   

• With most of the data flows being positive in the month of June so far, the focus is now shifting to concerns over the monsoons.

Nifty 18,800 will remain a major resistance for the Nifty. BOE hawkishness has not helped sentiments. For now, all eyes are on the outcome of Prime Minister’s visit to the US. That is something to be optimistic about.