Weekly Musings – Index performance for week ended March 08, 2024

10 Mar 2024 , 07:29 AM

MARKETS ENTHUSED BY POWELL’S FED TESTIMONY?

When Jerome Powell testified before the US House of Representatives on March 06, 2024 under oath, there were expectations that there would be a clear cut time table on rate cuts. On the face of it, Powell remained cautious and limited himself to stating that the Fed would cut the Fed rates only after there was credible evidence of the inflation moving decisively moving towards the 2% mark. However, in the same breath, Powell also hinted that he did expect a few rate hikes to happen in 2024, although the quantum was not specified.

This dichotomy has three positive implications, which his why the markets ended the truncated with a sense of optimism. Remember, the last week had only 4 trading days, with trading shut on Friday. However, coming back to the Jerome Powell story, the first positive indication was that if Powell was nearly committing to rate cuts, the Fed was surely expecting some very sharp reduction in inflation in the coming months. Secondly, it is also n indication that Fed expects the GDP growth in the US to be robust through 2024 and 2025 too. Lastly, the Fed testimony also assumes significance in the light of the fact that the Fed has always taken its communication very seriously and was unlikely to digress from its pronouncements. That makes rate cuts in 2024 very likely, and possibly, even imminent.

WHAT SHOULD THE MARKETS BE READING INTO NEXT WEEK?

The coming week will several key data points coming out at the macro level. In fact, there are 4 data points that will be closely watched.

1. The US will announce its CPI inflation for February on Tuesday, giving the first indication of whether the lower PCE inflation was also being supported by a falling trend in CPI inflation. Markets are expecting it to be flat, so anything lower would be positive.
2. India also announces the retail and wholesale inflation during the coming week. Bloomberg estimates expect the consumer inflation to trend lower towards 5%, while the wholesale inflation is also likely to trend lower, making a case for RBI to cut rates.
3. The third major data point for the week will be the IIP growth for the month of January. With strong GDP growth presuming strong industrial growth, the IIP is expected to bounce above 4% for the month of January 2024.
4. Lastly, the trade data will be closely watched next week, for the level of merchandise trade deficit and the extent to which the services surplus offsets this deficit. The net figure is expected to be in single digits for February 2024.

Apart from these factors, the markets will also keep an eye on the updates on growth from the UK and Japan as well as the oil price situation in the light of the aggravating Red Sea crisis in the Middle East and West Asia.

BSE SENSEX 30 INDEX – SCALES 74,200 DURING THE WEEK

The table captures the movement of the BSE SENSEX 30 for the week to March 08, 2024.

Date	High	Low	Close
07-03-2024	74,245.17	73,921.48	74,119.39
06-03-2024	74,151.27	73,321.48	74,085.99
05-03-2024	73,915.54	73,412.25	73,677.13
04-03-2024	73,990.13	73,747.01	73,872.29
02-03-2024	73,994.70	73,778.14	73,806.15
01-03-2024	73,819.21	72,591.14	73,745.35
	Weekly Returns		+0.51%

Data Source: BSE (includes special trading on Saturday)

Sensex closed the week +0.51% higher, following positive macro cues in the previous week. For the week, the Sensex touched a high of 74,245, and decisively closed at 74,119 levels. Overall, Sensex gained 374 points this week, which is a continuation of the rally of the last 3 weeks. The geopolitical situation remains fluid, but Sensex took solace from the macro growth numbers and the fiscal deficit reined in. In the last 5 days of trading, the Sensex closed in the positive in 4 days, showing that the momentum as firmly positive.

NIFTY 50 INDEX – HELPED BY REVIVAL IN FPI FLOWS

The table captures the movement of Nifty 50 index in the week to March 08, 2024.

Date	High	Low	Close
07-Mar-24	22,525.65	22,430.00	22,493.55
06-Mar-24	22,497.20	22,224.35	22,474.05
05-Mar-24	22,416.90	22,269.15	22,356.30
04-Mar-24	22,440.90	22,358.30	22,405.60
02-Mar-24	22,419.55	22,367.05	22,378.40
01-Mar-24	22,353.30	22,047.75	22,338.75
	Weekly Returns		+0.69%

Data Source: NSE (includes special trading on Saturday)

Nifty closed with gains of 155 points, representing the highest lifetime close for the index. FPIs infused $919 Million in the week, after being net sellers in 5 out of previous 8 weeks. In terms of sectoral performance, banking and autos stole the show, while IT saw selling. Oil and FMCG stocks were largely neutral in the week. Even as the FPIs are back in action, the good news is that the VIX has also tapered to under 13.6 levels. However, the big news driving the Nifty during the previous was the lag effect of the stupendous GDP numbers.

NIFTY NEXT 50 INDEX – SURGES DURING THE WEEK

The table captures the movement of Nifty Next 50 for the week to March 08, 2024.

Date	High	Low	Close
07-Mar-24	60,573.10	59,929.10	60,323.90
06-Mar-24	60,048.85	58,900.15	59,806.10
05-Mar-24	60,225.55	59,858.30	59,981.35
04-Mar-24	60,045.60	59,648.85	59,944.20
02-Mar-24	59,867.45	59,669.35	59,783.70
01-Mar-24	59,578.20	59,213.70	59,506.75
	Weekly Returns		+1.37%

Data Source: NSE (includes special trading on Saturday)

The Nifty Next 50 generally mirrors the Nifty but this week, it did a lot better than the Nifty with 1.37% gains. The Nifty Next 50 is the list of 50 companies with potential to become Nifty companies in the near future. During the week, the index bounced to above 60,500 levels closed the week at its lifetime high of 60,324. The Next 50 index gained 817 points, after gaining 353 points, 568 points, 1,153 points, and 1,493 points in the previous 4 weeks. Most of the rally this week came from economically significant sectors, after the GDP rally; especially in the mid-sized banks, defence, and the PSU stories.

NIFTY MID-CAP 100 INDEX – SHOWS A MARGINAL BOUNCE

The table captures the movement of Nifty Mid-Cap 100 in the week to March 08, 2024.

Date	High	Low	Close
07-Mar-24	49,182.05	48,868.60	48,966.15
06-Mar-24	49,228.10	48,092.65	48,857.30
05-Mar-24	49,381.65	48,999.85	49,114.90
04-Mar-24	49,334.75	48,971.15	49,248.90
02-Mar-24	49,236.95	48,947.30	49,153.05
01-Mar-24	48,830.50	48,517.45	48,790.60
	Weekly Returns		+0.36%

Data Source: NSE (includes special trading on Saturday)

The Nifty Mid-Cap index gained 176 points or +0.36% in the week as selective alpha hunting could be seen, even as the bias stayed in favour of the large caps. After being flat for 4 days, the mid-cap index did pick up some steam on the last day of the week. In addition, the SEBI diktat to mutual fund AMCs to go slow on mid-cap fund flows also had its impact on the index, in terms of fresh flows into these mid-cap funds.

NIFTY SMALL-CAP 100 INDEX – SEES A SHARP SELL-OFF

The table captures movement of Nifty Small Cap 100 in the week to March 08, 2024.

Date	High	Low	Close
07-Mar-24	15,746.20	15,607.30	15,709.00
06-Mar-24	15,824.35	15,357.20	15,576.55
05-Mar-24	16,037.70	15,871.15	15,888.10
04-Mar-24	16,228.05	16,045.95	16,087.25
02-Mar-24	16,178.80	16,111.55	16,170.15
01-Mar-24	16,133.70	16,025.70	16,058.95
	Weekly Returns		-2.18%

Data Source: NSE (includes special trading on Saturday)

This was the fifth consecutive negative week for the Small Cap 100 index and this week saw intense selling. It closed the week with -2.18% losses after losing -0.72%, -0.12%, -0.46% and -0.31% in four weeks prior to the current week. While retail investors continued to be interested in small caps, there is some caution at higher levels; especially with the large caps looking better valued. Needless to say, the SEBI cautionary note to mutual fund AMCs to go slow on small cap funds has also dampened the enthusiasm for small cap stocks.

BANK NIFTY INDEX – RATE CUT HOPES BUOYS BANKS ONCE AGAIN

The table below captures the movement of BANKNIFTY in the week to March 08, 2024.

Date	High	Low	Close
07-Mar-24	48,071.70	47,747.20	47,835.80
06-Mar-24	48,161.25	47,442.25	47,965.40
05-Mar-24	47,737.85	47,196.75	47,581.00
04-Mar-24	47,529.60	47,191.65	47,456.10
02-Mar-24	47,433.85	47,237.00	47,297.50
01-Mar-24	47,342.25	46,218.00	47,286.90
	Weekly Returns		+1.16%

Data Source: NSE (includes special trading on Saturday)

Just about 2 weeks ago, the Bank Nifty had seen a sharp sell-off after Goldman Sachs cut the price targets for most private sector banks. It is true that NII growth and NIMs may have peaked. However, investors still see value in banks as the best proxy for the Indian GDP growth and also the ever expanding consumer base in India. With the RBI and the Fed hinting at possible rate cuts, the banks have gains more than 1% each in the latest two weeks and that has kept the Nifty and Sensex buoyant, considering their substantial weight in these indices. Also, the week saw a preference for banks over NBFCs amidst a slew of RBI restrictions imposed on some NBFCs on their lending portfolios.

NIFTY IT INDEX – FALLS FOR THIRD WEEK IN A ROW

The table captures the movement of Nifty IT index in the week to March 08, 2024.

Date	High	Low	Close
07-Mar-24	37,318.95	36,838.35	37,099.90
06-Mar-24	37,050.15	36,134.00	37,001.80
05-Mar-24	37,202.30	36,613.10	36,720.75
04-Mar-24	37,733.25	37,279.45	37,314.80
02-Mar-24	37,744.90	37,574.35	37,605.80
01-Mar-24	37,888.85	37,462.85	37,516.05
	Weekly Returns		-1.11%

Data Source: NSE (includes special trading on Saturday)

In the latest week to March 08, 2024, the Nifty IT index fell by -1.11%. In the previous two weeks, the IT index had lost -1.12% and 1.39% respectively. Indian IT companies got a leg up after the last quarter results, but that enthusiasm appears to be gradually tapering as margin pressures and weak constant currency (CC) revenue growth are back to haunt the IT companies. Rising share of digital business and dividend yields are strong narratives for the IT sector, but for now, the concern is on global uncertainty and margins are high.

NIFTY OIL & GAS INDEX – BACK TO WINNING WAYS

The table captures the Nifty Oil & Gas index for the week to March 08, 2024.

Date	High	Low	Close
07-Mar-24	11,941.65	11,742.95	11,768.25
06-Mar-24	12,058.00	11,706.20	11,911.20
05-Mar-24	12,054.80	11,915.95	12,034.65
04-Mar-24	12,005.65	11,750.25	11,972.00
02-Mar-24	11,789.95	11,723.00	11,751.90
01-Mar-24	11,746.15	11,538.20	11,715.40
	Weekly Returns		+0.45%

Data Source: NSE (includes special trading on Saturday)

Oil & gas gained 45 bps this week after losing 35 bps in the previous week. However, with 70% gains in the last quarter, this could just be the much needed cooling for the IT sector. Most of the oil stocks, including Reliance, BPCL, ONGC and IOCL were largely neutral during the week on the back of the aggravating Red Sea crisis. In the last few weeks, refiners were hit by volatile delivery schedules.

NIFTY AUTO INDEX – DOES AN ENCORE OF PREVIOUS WEEK

The table captures the movement of Nifty Auto index in the week to March 08, 2024.

Date	High	Low	Close
07-Mar-24	21,247.55	21,004.50	21,126.80
06-Mar-24	21,229.35	20,888.80	21,181.30
05-Mar-24	21,348.95	20,930.40	21,121.20
04-Mar-24	21,040.35	20,824.95	20,840.20
02-Mar-24	21,006.75	20,902.90	20,941.95
01-Mar-24	20,918.25	20,473.30	20,871.95
	Weekly Returns		+1.22%

Data Source: NSE (includes special trading on Saturday)

After gaining 20% in the last 7 weeks, the Auto index added another 1.22% in the latest week. Markets were enthused with Tata Motors announcing a split of its EV and PV business into separate listed entities. That is likely to be value accretive for auto stocks. However, lower inflation and robust growth could offer the auto sector a delectable combination of high demand and reduced cost of funding.

NIFTY FMCG INDEX – DELIVERS POSITIVE GAINS

The table captures the movement of Nifty FMCG index in the week to March 08, 2024.

Date	High	Low	Close
07-Mar-24	54,461.05	53,637.10	54,406.30
06-Mar-24	53,946.90	53,171.75	53,879.60
05-Mar-24	54,364.95	53,580.10	53,653.10
04-Mar-24	54,588.55	54,102.55	54,221.75
02-Mar-24	54,570.75	54,344.60	54,466.10
01-Mar-24	54,559.65	54,062.60	54,225.15
	Weekly Returns		+0.33%

Data Source: NSE (includes special trading on Saturday)

After negative returns of -0.21% in the previous week, the FMCG index bounced back to give +0.33% in the current week. The pressure of weak rural demand is still evident in the Q3FY24 results and urban demand is struggling to make up. There seems to be no specific theme for FMCG, other than defensive buying. However, from a macro standpoint, FMCG remains the best proxy for consumption demand. Attractive dividend yields are an added advantage.