Weekly Musings – Index performance for week ended June 9, 2023

11 Jun 2023 , 09:22 AM

Despite the correction on Friday, the Nifty closed above the 18,500 mark and Sensex above the 62,600 level. The weekly performance could have been much better, but for the sell-off on Friday. While the RBI rate decision was almost along expected lines, markets are a bit jittery about the delayed monsoons, the likely impact on Kharif output and its implications for food inflation in the coming months. Also, the markets were slightly perturbed on Friday after the RBI continued to give warnings on inflation. (For live impact, check market map)

NIFTY 50 INDEX – HOLDS 18,500, BUT CLOSES FLAT

The table below captures the movement of the Nifty 50 index in the week to 09-Jun 2023. 

Date	High	Low	Close
09-Jun-23	18,676.65	18,555.40	18,563.40
08-Jun-23	18,777.90	18,615.60	18,634.55
07-Jun-23	18,738.95	18,636.00	18,726.40
06-Jun-23	18,622.75	18,531.60	18,599.00
05-Jun-23	18,640.15	18,582.80	18,593.85
02-Jun-23	18,573.70	18,478.40	18,534.10
	Weekly Returns	+0.16%

Data Source: NSE

The week saw the Nifty surging above the 18,700 level but its next resistance of 18,800 turned out tough to break. After touching a peak of 18,778 during the week, the Nifty corrected sharply in the last two days of the week to close at 18,563 levels. While the FPI flows were relatively lower than previous weeks, there were two reasons for the Nifty resistance. Firstly, most of the macro positives like GDP and fiscal deficit had already been factored into the calculations and hence did not make a big difference in the week. Secondly, there are growing concerns about food inflation due to the delayed monsoons. The concerns got underlined when the RBI also issued a specific warning on inflation.

NIFTY NEXT 50 INDEX –OUTSHINES THE NIFTY AGAIN

The table below captures the movement of Nifty Next 50 index in the week to 09-Jun 2023.

Date	High	Low	Close
09-Jun-23	42,862.70	42,630.40	42,672.65
08-Jun-23	43,119.50	42,652.40	42,713.45
07-Jun-23	43,027.65	42,710.40	42,998.50
06-Jun-23	42,642.85	42,352.60	42,597.10
05-Jun-23	42,546.55	42,360.45	42,401.35
02-Jun-23	42,372.90	42,216.05	42,331.40
	Weekly Returns	+0.81%

Data Source: NSE

While the Nifty Next 50 could not recreate the magic of the previous two weeks, it still managed to outperform the Nifty with 0.81% returns for the week. The Nifty Next 50 index has a 55% exposure to 3 sectors viz., consumer goods, financials, and healthcare. Many of the FMCG stocks were under pressure during the week and that could have resulted in a more sedate performance by the Nifty Next 50 during the week. However, the fact remains that investors are seriously betting more on future long term growth rather than instant gratification in the markets, which is a good thing. Nifty Next 50 represents the list of companies with the potential to become index companies in the future.

NIFTY MID-CAP 100 INDEX –ROBUST BUT LOSING MOMENTUM

The table captures the movement of Nifty Mid-Cap 100 index in the week to 09-Jun 2023.

Date	High	Low	Close
09-Jun-23	34,355.80	34,114.10	34,153.05
08-Jun-23	34,534.70	34,157.70	34,200.40
07-Jun-23	34,417.95	34,150.40	34,390.10
06-Jun-23	34,065.50	33,830.00	34,035.90
05-Jun-23	34,170.35	33,984.25	34,015.20
02-Jun-23	34,006.55	33,891.50	33,966.80
	Weekly Returns	+0.55%

Data Source: NSE

In The last two weeks, the Nifty Mid cap index had rallied by 2.69% and 1.62% respectively. After this sort of frenetic rally, some form of cooling was on the cards. However, the returns for the week are still positive at 0.55% and it looks like a clear case of investors showing preference for alpha hunting in mid-sized stocks. It needs no reiteration that domestic mutual funds and foreign investors have been aggressively lapping up smaller sized stocks in the last few weeks. At a fundamental level, the mid-caps are likely to benefit the most from the RBI hinting at a peak on interest rates, combined with steady rupee. Both are generally value accretive for the mid-sized focused stock market plays.

 

NIFTY SMALL-CAP 100 INDEX – SMALL STAYS BEAUTIFUL

The table captures the movement of Nifty Small Cap 100 index in the week to 09-Jun 2023.

Date	High	Low	Close
09-Jun-23	10,489.40	10,419.15	10,442.85
08-Jun-23	10,587.45	10,442.35	10,455.30
07-Jun-23	10,561.55	10,459.10	10,555.55
06-Jun-23	10,421.90	10,338.00	10,415.25
05-Jun-23	10,407.55	10,349.15	10,359.05
02-Jun-23	10,365.45	10,308.65	10,321.60
	Weekly Returns	+1.17%

Data Source: NSE

The good news is that the index appears to have decisively taken out the 10,000 levels in the last few weeks. After a 3.10% rally in the previous week, the small cap index added another impressive 1.17% in the latest week. Small caps are normally very stock specific plays and they also tend to be high risk alpha plays. The strong interest in small caps shows the willingness of investors take on stock specific risk and that is also evident in the trends seen in mutual fund flows in recent months.

BANK NIFTY INDEX – ANOTHER FLAT WEEK

The table below captures the movement of Nifty Bank index (BANKNIFTY) in the week to 09-Jun 2023.

Date	High	Low	Close
09-Jun-23	44,220.10	43,932.60	43,989.00
08-Jun-23	44,459.25	43,917.90	43,995.25
07-Jun-23	44,346.30	44,143.50	44,275.30
06-Jun-23	44,236.20	44,009.70	44,164.55
05-Jun-23	44,266.15	44,074.20	44,101.65
02-Jun-23	44,088.90	43,812.55	43,937.85
	Weekly Returns	+0.12%

Data Source: NSE

It was the second week in succession that banks behaved in a lacklustre manner. In the two recent weeks, the Bank Nifty gained 0.11% and lost -0.18%. In the latest week, the Bank Nifty has closed with tepid returns of 0.12%. In short, the Bank Nifty is almost where it was about 3 weeks back. The trigger for the banks 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, it is more a case of absence of triggers for the banking index.

NIFTY IT INDEX – IT WAS A HUGE SELL-OFF

The table captures the movement of Nifty IT index in the week ending on 09-Jun 2023.

Date	High	Low	Close
09-Jun-23	28,674.45	28,322.15	28,355.35
08-Jun-23	28,918.05	28,568.60	28,591.10
07-Jun-23	28,937.95	28,754.85	28,913.70
06-Jun-23	29,013.90	28,485.85	28,689.05
05-Jun-23	29,533.40	29,217.35	29,238.75
02-Jun-23	29,550.15	29,272.55	29,328.15
	Weekly Returns	-3.32%

Data Source: NSE

After two weeks of stellar performance, the IT index had closed the previous week with marginal losses of -0.09%. However, there was a decisive sell-off in IT stocks during the latest week as the index lost -3.32%. All the frontline IT stocks saw pressure at higher levels after a very sharp bounce. The IT sector bounce was always a dead-cat bounce since the outlook of the global investors continued to be ambivalent. The correction this week came after research reports indicated more pressure on tech spending in coming quarters.

NIFTY OIL & GAS INDEX – OVER TO DOWNSTREAM

The table captures the movement of Nifty Oil & Gas index in the week ending 09-Jun 2023.

Date	High	Low	Close
09-Jun-23	7,466.30	7,401.30	7,405.50
08-Jun-23	7,490.00	7,432.90	7,441.15
07-Jun-23	7,477.75	7,396.15	7,470.40
06-Jun-23	7,418.85	7,356.40	7,392.20
05-Jun-23	7,410.90	7,367.75	7,391.15
02-Jun-23	7,455.10	7,360.65	7,372.60
	Weekly Returns	+0.45%

Data Source: NSE

It was a relief rally for the oil & gas stocks in the week. The gain of 0.45% may look small, but surely comes as a relief after the -2.75% fall in the previous week. Brent Crude continues to hover around the $75-$77/bbl levels, so there is not much of excitement for upstream players. However, the week did see a lot of downstream oil stocks rallying. More importantly, Reliance Industry remained stable to strong and that give a major boost to the oil & gas index during the week.

NIFTY AUTO INDEX – IS IT THE NEXT BIG THING?

The table captures the movement of Nifty Auto index in the week ending on 09-Jun 2023.

Date	High	Low	Close
09-Jun-23	14,759.55	14,610.20	14,626.00
08-Jun-23	14,903.10	14,669.80	14,692.00
07-Jun-23	14,842.50	14,716.35	14,819.45
06-Jun-23	14,743.45	14,594.30	14,729.50
05-Jun-23	14,598.40	14,449.75	14,570.25
02-Jun-23	14,402.25	14,263.45	14,388.60
	Weekly Returns	+1.65%

Data Source: NSE

That is the million dollar question; will auto be the next big thing. After giving returns of 1.83% and 1.93% respectively in the last 2 weeks, the Nifty Auto index rallied by another 1.65% in the current week. Auto numbers have been broadly positive across passenger vehicles (PV), commercial vehicles (CV), tractors and two-wheelers. But more importantly, FPIs infused more than $1 billion into auto stocks in May 2023 and that had enthused the markets. With sharp fall in input costs and pick-up in rural demand, two-wheelers are also joining the auto party.

NIFTY FMCG INDEX – MONSOON CONCERNS SHOW UP

The table captures the movement of Nifty FMCG index in the week ending on 09-Jun 2023.

Date	High	Low	Close
09-Jun-23	51,381.90	50,605.75	50,674.85
08-Jun-23	51,718.00	51,091.50	51,143.50
07-Jun-23	51,673.45	51,066.90	51,609.40
06-Jun-23	51,212.65	50,783.15	51,038.40
05-Jun-23	51,502.20	51,026.90	51,058.40
02-Jun-23	51,399.55	51,026.95	51,288.65
	Weekly Returns	-1.20%

Data Source: NSE

After stellar gains of 1.79% in the previous week, FMCG index gave up -1.2% in the current week. That is not surprising considering the delay in monsoons. Late rains mean that sowing season would be impacted and farm incomes would take a hit. This seems to be happening just when FMCG companies were trying to get their rural act together. That could remain an overhang in the coming weeks too.

Here are the major takeaways for the week ended 09-Jun 2023. 

• Even as the overall markets have been tough, alpha picking continues to be the name of the game.

   

• For the IT index it was a return to reality, but auto probably promises to be the next big India story.

Markets next week will be largely driven by data flows like inflation, IIP and Fed policy outlook.