Weekly Musings – Index performance for week ended March 22, 2024

24 Mar 2024 , 08:52 AM

FED STATEMENT GIVES HOPE TO MARKETS

The week ended March 22, 2024 closed with gains of around 33 bps on the Nifty and 26 bps for Sensex. This was despite FPIs being net sellers this week to the tune of $314 Million. The big news in the week was the positive signals coming from the Fed statement. Here are 3 things that emerged from the Fed statement.

1. Fed chair, Jerome Powell, underlined that there would still be 3 rate cuts in 2024, hinting at rates being reduced by 75 bps in the current year. That was a positive takeaway after the Fed had consistently refused to commit to any time table on rate cuts. However, the number of rate cuts in 2025 may be reduced from 4 to 3, which may not matter much.
2. The other big signals from the Fed statement was that the US economy had well and truly avoided “hard landing”. Growth had picked up despite all odds and despite the Fed following a staunchly hawkish policy through 2022 and the first half of 2023. That had been instrumental in reining inflation and boosting real GDP growth.
3. The final takeaway was that rate cuts may be slower than expected on a long term basis and the equilibrium Fed rates would still be above pre-COVID levels. Inflation is likely to take much longer to reach its target of 2.0%, since the last mile is proving extremely difficult for the Fed to handle.

The paranoia of the previous week appears to be done and dusted and most of the pressure this week came largely from the IT sector stocks.

WHAT SHOULD MARKETS TRACK FOR NEXT WEEK?

The coming week will see several key data points to watch out for. Here are 4 data points that will be closely watched by the markets.

• The rupee level will be a key input in the coming week after the rupee fell to an all-time low of ₹83.55/$ during the week. The weakness in the rupee was largely led by the strength in the dollar index (DXY) triggered by weakness in Pound and Euro.
• Being the last week of the financial year FY24, and also a truncated week with 2 trading holidays, expect some intense volatility in the coming week. The F&O expiry slated for Thursday will only add to the intensity.
• The all-important current account deficit (CAD) update for the third quarter ended December 2023 will be put out this week. It is expected to be lower than expected due to the impact of sharply higher services surplus in the quarter.
• In global triggers, the markets will be closely watching for the dollar index and the US bond yields during the week as key indicators. The US also announces its last GDP update for 2023 and the February PCE inflation update this week.

There are other data points likely this week like February core sector data and the February update on India fiscal deficit, which will signal if 5.8% fiscal deficit was actually feasible.

BSE SENSEX 30 INDEX – GAINS MARGINALLY IN THE WEEK

The table captures the movement of the BSE SENSEX 30 for the week to March 22, 2024.

Date	High	Low	Close
22-Mar-24	73,115.62	72,172.09	72,831.94
21-Mar-24	72,882.46	72,416.03	72,641.19
20-Mar-24	72,402.67	71,674.42	72,101.69
19-Mar-24	72,490.09	71,933.35	72,012.05
18-Mar-24	72,985.89	72,314.16	72,748.42
15-Mar-24	72,998.07	72,484.82	72,643.43
	Weekly Returns		+0.26%

Data Source: BSE

Sensex closed the week +0.26% higher, as the year end kept the markets slightly cautious. For the week, the Sensex touched a high of 73,116, but closed decisively lower at 72,832 levels. The Sensex did show a bounce on 4 out of the 5 trading sessions, but could not sustain the momentum. Overall, Sensex gained just about 189 points this week, which is a sharp shift from the sharp fall last week. There was some euphoria coming back into the markets this week after the Fed statement hinted at 3 rates happening in 2024.

NIFTY 50 INDEX – CLOSES HIGHER, BUT IT PLAYS SPOILSPORT

The table captures the movement of Nifty 50 index in the week to March 22, 2024.

Date	High	Low	Close
22-Mar-24	22,180.70	21,883.30	22,096.75
21-Mar-24	22,080.95	21,941.30	22,011.95
20-Mar-24	21,930.90	21,710.20	21,839.10
19-Mar-24	21,978.30	21,793.10	21,817.45
18-Mar-24	22,123.70	21,916.55	22,055.70
15-Mar-24	22,120.90	21,931.70	22,023.35
	Weekly Returns		+0.33%

Data Source: NSE

Nifty closed the week with gains of just 74 points, with FPIs net selling $314 Million in the week, after infusing $5.56 Billion in the 4 weeks prior to that. In terms of sectoral show; auto, oil & gas and banking rallied while IT fell sharply after the tepid revenue guidance provided by Accenture for 2024. The week also saw a sharp fall in the Nifty VIX to the 12.22 levels, which still raises hopes that the Nifty rally may continue. However, with the coming week being a truncated week with just 3 trading sessions, we may have to wait for April for more explicit signals on the stock market.

NIFTY NEXT 50 INDEX – BACK TO ITS WINNING WAYS

The table captures the movement of Nifty Next 50 for the week to March 22, 2024.

Date	High	Low	Close
22-Mar-24	59,326.25	58,644.30	59,188.90
21-Mar-24	58,986.50	58,075.50	58,918.30
20-Mar-24	57,798.00	56,678.90	57,581.45
19-Mar-24	58,403.95	57,319.25	57,402.70
18-Mar-24	58,563.15	57,808.70	58,422.00
15-Mar-24	58,661.10	57,184.20	58,058.80
	Weekly Returns		+1.95%

Data Source: NSE

The Nifty Next 50 generally mirrors the Nifty but this week, it did a lot better than the Nifty with +1.95% 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 touched a high of 59,326 levels but closed lower at 59,189. The Next 50 gained 1,130 points this week after losing 2,265points in the previous week. Some of the sectors that predominate the index like defence and PSU stocks did a lot better during the current week.

NIFTY MID-CAP 100 INDEX – HAPPY DAYS ARE HERE AGAIN

The table captures the movement of Nifty Mid-Cap 100 in the week to March 22, 2024.

Date	High	Low	Close
22-Mar-24	47,371.00	46,843.50	47,312.85
21-Mar-24	47,071.15	46,424.85	47,033.55
20-Mar-24	46,234.70	45,395.30	45,919.90
19-Mar-24	46,536.55	45,751.05	45,926.30
18-Mar-24	46,847.95	46,149.55	46,501.65
15-Mar-24	47,145.30	46,062.05	46,685.60
	Weekly Returns		+1.34%

Data Source: NSE

The Nifty Mid-Cap index gained 627 points or +1.34% in the week, marking a sharp rally after the fall in the previous week. Much of the tax-farming pressure in mid-cap stocks is now out of the day. This is a common practice among the traders and the mid-cap stocks are most vulnerable. While SEBI warnings on mid-caps are still an overhang, the retail interest in these stocks is likely to remain robust as the investor base expands.

NIFTY SMALL-CAP 100 INDEX – GETS A LONG-AWAITED RELIEF

The table captures movement of Nifty Small Cap 100 in the week to March 22, 2024.

Date	High	Low	Close
22-Mar-24	15,092.95	14,918.35	15,056.75
21-Mar-24	14,980.55	14,759.60	14,960.30
20-Mar-24	14,698.75	14,396.80	14,593.55
19-Mar-24	14,801.40	14,565.20	14,586.85
18-Mar-24	14,927.70	14,680.60	14,762.15
15-Mar-24	14,927.40	14,566.85	14,846.70
	Weekly Returns		+1.41%

Data Source: NSE

The small cap index rallied this week, after 6 consecutive weeks of negative returns on the Small Cap 100 index. The 1.41% gain this week was a sharp relief after the -5.49% losses in the previous week. Also, with the small cap index falling more than 10% from the peak, some buying interest appears to be creeping b ack. However, valuation concerns are only normal at higher levels and that is likely to persist, at least till the elections are over. In addition, other factors like the reduced flows into small cap funds, the additional special margins and 100% upfront margins on several small stocks are likely to remain an overhang.

BANK NIFTY INDEX – POSITIVE SENTIMENTS CONTINUE IN BANKS

The table below captures the movement of BANKNIFTY in the week to March 22, 2024.

Date	High	Low	Close
22-Mar-24	46,974.15	46,566.80	46,863.75
21-Mar-24	46,990.25	46,570.15	46,684.90
20-Mar-24	46,655.55	45,828.80	46,310.90
19-Mar-24	46,602.35	46,258.75	46,384.80
18-Mar-24	46,739.25	46,022.15	46,575.90
15-Mar-24	46,802.55	46,310.50	46,594.10
	Weekly Returns		+0.58%

Data Source: NSE

The week may not have seen bumper gains but, the Bank Nifty consolidated and built on the gains of the previous week. The rally is appreciable, as it comes despite the sharp downgrade of banking stocks by Goldman Sachs, just about 4 weeks back. In its report, Goldman Sachs had raised concerns about NII growth and NIMs having peaked. However, RBI clampdown on large NBFCs, has been viewed as positive for the banks. Also, the signals from the Fed policy statement on March 20, 2024 hinted at a strong likelihood of 3 rate cuts in 2024, and that led to a sharp bounce in banking stocks on the last 2 days of the week.

NIFTY IT INDEX – PRESSURE WAS ABOUT ACCENTURE GUIDANCE

The table captures the movement of Nifty IT index in the week to March 22, 2024.

Date	High	Low	Close
22-Mar-24	35,419.25	34,701.75	35,188.40
21-Mar-24	36,296.35	35,816.80	36,026.80
20-Mar-24	36,115.20	35,697.85	35,748.90
19-Mar-24	36,573.05	35,783.40	35,814.65
18-Mar-24	37,522.85	36,746.60	36,886.05
15-Mar-24	37,592.05	37,264.90	37,500.70
	Weekly Returns		-6.17%

Data Source: NSE

In the latest week to March 22, 2024, the Nifty IT index cracked by -6.17% after Accenture lowered its guidance for revenue growth from a range of 2-5% to 1-3%. That spooked most of the frontline IT stocks like TCS, Infosys and HCL Technologies. The selling in IT stocks was almost relentless on Monday and later on Friday after the Accenture guidance. There are also concerns that IT spending and consulting revenues could take deep cuts in 2024.

NIFTY OIL & GAS INDEX – FRONTLINE OIL STOCKS LEAD THE RALLYI

The table captures the Nifty Oil & Gas index for the week to March 22, 2024.

Date	High	Low	Close
22-Mar-24	11,293.00	11,141.15	11,223.00
21-Mar-24	11,232.70	11,125.85	11,201.75
20-Mar-24	11,067.20	10,882.20	11,055.85
19-Mar-24	11,076.05	10,867.45	10,915.15
18-Mar-24	11,152.60	11,004.80	11,103.15
15-Mar-24	11,269.50	10,770.15	11,058.80
	Weekly Returns		+1.48%

Data Source: NSE

Oil & gas index gained 164 bps this week, after a very sharp cut in the previous week. However, the concerns over oil price volatility in the Brent markets continue. In the previous week, most of the OMCs came under pressure after the prices of petrol and diesel were cut by ₹2/litre, due to its likely impact on marketing margins. In the current week, some of the key oil stocks like Reliance, ONGC and even BPCL showed positive traction. However, the overhang of the Red Sea crisis remains on the oil market.

NIFTY AUTO INDEX – EMERGES TOP GAINER FOR THE WEEK

The table captures the movement of Nifty Auto index in the week to March 22, 2024.

Date	High	Low	Close
22-Mar-24	21,177.40	20,622.80	21,046.40
21-Mar-24	20,750.40	20,472.60	20,700.25
20-Mar-24	20,618.10	20,263.90	20,406.45
19-Mar-24	20,449.80	20,258.10	20,354.10
18-Mar-24	20,462.70	20,102.90	20,446.60
15-Mar-24	20,523.35	20,066.80	20,192.30
	Weekly Returns		+4.23%

Data Source: NSE

It almost looked like the revenge of the auto stocks. After falling -4.42% in the previous week, the auto index bounced back to near its all-time high levels and closed with gains of 4.23% for the latest week. The auto sector had been making big bets on lower inflation and lower rates of interest on automobiles for some time. With the latest Fed statement hinting that 3 rate cuts would happen in 2024, even if back-ended, auto sector had some serious reasons to rejoice. Auto demand continues to be robust.

NIFTY FMCG INDEX – WITNESSES DEFENSIVE BUYING

The table captures the movement of Nifty FMCG index in the week to March 22, 2024.

Date	High	Low	Close
22-Mar-24	53,849.60	53,305.05	53,775.70
21-Mar-24	53,423.60	52,967.55	53,338.35
20-Mar-24	53,033.70	52,562.60	52,993.50
19-Mar-24	53,915.10	52,626.95	52,740.90
18-Mar-24	54,189.10	53,805.85	53,907.85
15-Mar-24	54,464.95	53,886.70	54,155.45
	Weekly Returns		+0.70%

Data Source: NSE

The FMCG sector has been oscillating between positive and negative zone in the last few weeks. After the relatively defensive loss of just 46 bps last week, the FMCG sector ended this week with gains of 70 bps. While rural demand may be an overhang for the FMCG sector, investors still see FMCG as the best play on India consumption growth. Despite the risk of the impact of higher crude prices, the FMCG sector remains the best defensive bet for most long term investors.