Weekly Musings – Index performance for week ended May 03, 2024

6 May 2024 , 11:09 AM

A CASE OF DIVERGENT MARKETS

The week to May 03, 2024 was a truncated week with just about 4 trading sessions as Wednesday was a trading and bank holiday. The week also saw the markets reacting to several triggers. The Fed stayed on the defensive and refused to commit to any rate cut time table. However, while painting a rosy picture of the US economy, the Fed did not paint a very rosy picture of the trajectory of inflation. The core sector growth for March also came in lower at 5.2%, although the full year core sector at 7.2% was still impressive. However, there were two other factors that had an impact on the stock markets in the week.

The first was the sharp spike in volatility as measured by the VIX index. The VIX started the week around the 10 levels but spiked to above the 14 levels. Such volatility in the index is considered normal in election periods, but what is surprising is the behaviour of the VIX. In 2019, the VIX had stayed at elevated levels through the election period and only come down after that. However, this year, the colour of the VIX has been changing on a weekly basis. The second trigger was the action in the banks. Kotak Bank came under some heavy selling pressure after RBI had imposed a ban on fresh customer onboarding via its 811 platform. At the same time, ICICI Bank faced relentless news reports that the CEO was planning to move on. However, the banks overall had a good week as action shifted to other banks.

For the week, banks and autos were the stand out sectors. While Kotak Bank remained under pressure, there was a lot of flows gravitating towards other banks like ICICI Bank, Axis Bank and SBI. ICICI Bank did not see too much of correction on the CEO exit reports, as the bank was quick to intervene and clarify. Auto was the other sector betting on falling cost of funds. However, IT sector continued to be under pressure, even as FMCG also closed with marginal losses. Midst the pulls and pressures of the various sectors, it was hardly surprising that the Nifty and the Sensex closed almost flat for the recent week to May 03, 2024.

WHAT SHOULD EQUITY MARKETS TRACK NEXT WEEK?

The coming week has 3 data points to be tracked closely by markets.

• The index of industrial production (IIP) growth for the month of March 2024 and for the full year FY24 will put out towards the end of the week. More than the IIP per se, the focus would be on the manufacturing IIP, which is the key driver.
• There are some important FOMC members speaking next week including John Williams, Neil Kashkari, and Michelle Bowman. The Indian markets will be looking for signals on the trajectory of the rates in the coming week.
• With the election outcomes just about a month away, the trajectory of the VIX will be of interest to markets. In the last 3 weeks, the VIX has oscillated between highs and lows and that will have a deep bearing on the FPI flows and on market direction.

Additionally, the markets will also focus on US bond yields, crude oil prices and the US dollar index. The coming week will also see most of the major results for Q4 concluding.

BSE SENSEX 30 INDEX – NOW 75,000 PROVES TO BE BARRIER

The table captures the movement of the BSE SENSEX 30 for the week to May 03, 2024.

Date	Open	High	Low	Close
03-May-24	75,017.82	75,095.18	73,467.73	73,878.15
02-May-24	74,391.73	74,812.43	74,360.69	74,611.11
01-May-24	74,800.89	75,111.39	74,346.40	74,482.78
30-Apr-24	74,800.89	75,111.39	74,346.40	74,482.78
29-Apr-24	73,982.75	74,721.15	73,922.34	74,671.28
26-Apr-24	74,509.31	74,515.91	73,616.65	73,730.16
		Weekly Returns		+0.20%

Data Source: BSE

After a strong bounce in the previous week, the Sensex closed absolutely flat, gaining just 20 bps or 148 points for the week. Sensex touched a high of 75,095 on Friday, but closed the week at 73,878 levels after the sharp sell-off on Friday. The Sensex started the week above 74,500, and made several attempts during the week to breach past 75,000 mark. While it did succeed technically, on each of these days, the Sensex saw heavy selling the moment it crossed the 75,000 mark, leading to a sharply lower close.

NIFTY 50 INDEX – HAS A FLAT CLOSE FOR THE WEEK

The table captures the movement of Nifty 50 index in the week to May 03, 2024.

Date	Low	High	Low	Close
03-May-24	22,766.35	22,794.70	22,348.05	22,475.85
02-May-24	22,567.85	22,710.50	22,567.85	22,648.20
01-May-24	22,679.65	22,783.35	22,568.40	22,604.85
30-Apr-24	22,679.65	22,783.35	22,568.40	22,604.85
29-Apr-24	22,475.55	22,655.80	22,441.90	22,643.40
26-Apr-24	22,620.40	22,620.40	22,385.55	22,419.95
		Weekly Returns		+0.25%

Data Source: NSE

During the week, the Nifty faced persistent pressure in the range of 22,750 to 22,800 and struggled to breach above that level on 3 out of the 4 trading session. During the week, the Nifty gained just about 56 points as FPIs were net sellers of $146 Million in the week. The buying support from the domestic mutual funds, LIC could not help much as the sharp spike int eh VIX to above the 14 levels also spooked the Nifty on the last trading day of the week. In terms of sectors, the big boost to the Nifty came from auto stocks and banking stocks but the IT index and FMCG index continued to stay under pressure. Nifty closed the week flat.

NIFTY NEXT 50 INDEX – CONTINUES TO OUTPERFORM NIFTY BY A MARGIN

The table captures the movement of Nifty Next 50 for the week to May 03, 2024.

Date	Low	High	Low	Close
03-May-24	66,450.35	66,456.25	65,190.75	65,770.50
02-May-24	65,149.45	66,058.05	65,090.80	66,008.85
01-May-24	64,887.25	65,421.40	64,802.60	64,900.50
30-Apr-24	64,887.25	65,421.40	64,802.60	64,900.50
29-Apr-24	64,508.35	64,652.35	64,094.15	64,488.05
26-Apr-24	63,911.45	64,375.25	63,905.35	64,134.55
		Weekly Returns		+2.55%

Data Source: NSE

The Nifty Next 50 was like a whiff of a fresh air in a tough market. The Nifty Next 50 is the residual list after Nifty 50 stocks are removed from Nifty 100. In a market where Nifty is more about Beta and smaller stocks are about risky alpha; the Nifty Next-50 offers the middle path. This week, the index gained 2.55% after gaining an impressive 3.63% in the previous week. The Nifty Next 50 list apparently has the potential to become Nifty companies in the near future. During the week, Nifty Next-50 touched a high of 66,456 levels but closed at 65,771, as the sharp spike in the VIX limited the gains on the last day. The Next 50 gained 1,636 points during the week.

NIFTY MID-CAP 100 INDEX – MID-CAPS HAVE A SEDATE WEEK

The table captures the movement of Nifty Mid-Cap 100 in the week to May 03, 2024.

Date	Low	High	Low	Close
03-May-24	51,284.00	51,342.65	50,655.15	50,935.15
02-May-24	51,079.70	51,176.55	50,853.70	51,115.10
01-May-24	51,028.05	51,232.35	50,807.90	50,868.20
30-Apr-24	51,028.05	51,232.35	50,807.90	50,868.20
29-Apr-24	50,738.40	50,875.70	50,522.45	50,834.45
26-Apr-24	50,365.35	50,684.50	50,333.50	50,624.10
		Weekly Returns		+0.61%

Data Source: NSE

In a week when the spotlight belonged to the Next-50, the Mid-cap index was moderate with 0.61% returns. This week, the Nifty Mid-cap index gained 311 points or 0.61%. More importantly, even the mid-cap lows during the week consistently maintained above the psychological 50,000 mark. That is a level it had struggled to breach. Despite the VIX spike, the Mid-Cap index is trading at life-time highs.

NIFTY SMALL-CAP 100 INDEX – CLOSES IN THE NEGATIVE

The table captures movement of Nifty Small Cap 100 in the week to May 03, 2024.

Date	Low	High	Low	Close
03-May-24	17,128.80	17,135.15	16,817.40	16,936.50
02-May-24	17,089.30	17,108.25	16,996.55	17,019.40
01-May-24	17,119.80	17,132.60	16,992.45	17,011.80
30-Apr-24	17,119.80	17,132.60	16,992.45	17,011.80
29-Apr-24	17,098.60	17,121.00	16,971.20	17,017.85
26-Apr-24	16,956.80	17,051.55	16,910.75	16,981.30
		Weekly Returns		-0.26%

Data Source: NSE

After a sharp bounce in recent weeks, the small cap index gave negative returns in this week as the rising VIX and the volatility in exchange rates hit these stocks hard. Clearly, with the risks in the market too high, the traders also appear to be avoiding the small cap stocks. However, retail interest in these smaller stocks could hold the key.

BANK NIFTY INDEX – GAINS SMARTLY AMIDST THE CHAOS

The table below captures the movement of BANKNIFTY in the week to May 03, 2024.

Date	Low	High	Low	Close
03-May-24	49,375.05	49,607.75	48,659.70	48,923.55
02-May-24	49,262.00	49,529.35	49,123.60	49,231.05
01-May-24	49,477.10	49,974.75	49,249.90	49,396.75
30-Apr-24	49,477.10	49,974.75	49,249.90	49,396.75
29-Apr-24	48,359.90	49,473.60	48,342.70	49,424.05
26-Apr-24	48,660.00	48,679.65	48,088.25	48,201.05
		Weekly Returns		+1.50%

Data Source: NSE

After the Bank Nifty bounced by 1.32% last week, it gained another 1.50% this week. With the problems at Kotak Bank continuing, the investors are gravitating towards other banks like SBI, Axis Bank and ICICI Bank. The temporary disruption in ICICI Bank on the CEO exit did not have much of an impact. Bank Nifty still closed with gains of 723 points for the week.

NIFTY IT INDEX – SEES SUSTAINED FPI SELL-OFF IN THE WEEK

The table captures the movement of Nifty IT index in the week to May 03, 2024.

Date	Low	High	Low	Close
03-May-24	33,248.50	33,305.00	32,690.50	32,908.40
02-May-24	33,059.30	33,332.20	33,059.30	33,203.35
01-May-24	33,547.70	33,688.95	33,145.90	33,200.95
30-Apr-24	33,547.70	33,688.95	33,145.90	33,200.95
29-Apr-24	33,640.75	33,792.85	33,527.05	33,579.40
26-Apr-24	33,743.10	34,307.45	33,574.60	33,666.20
		Weekly Returns		-2.25%

Data Source: NSE

The IT index had fallen sharply by -4.71% two weeks back and had bounced 0.89% in the previous week. However, this week it again fell -2.25% as FPIs continued to lighten up on IT stocks. The Q4 results disappointment continues to be an overhang on the IT sector. Operating margins and CC revenue guidance are still tepid, this could be too early for investors to any shopping in IT stocks.

NIFTY OIL & GAS INDEX – REFLECTS THE NIFTY FLATNESS

The table captures the Nifty Oil & Gas index for the week to May 03, 2024.

Date	Low	High	Low	Close
03-May-24	11,993.85	12,035.00	11,698.30	11,807.65
02-May-24	11,892.15	11,966.50	11,811.60	11,925.00
01-May-24	11,959.25	12,020.90	11,811.55	11,826.50
30-Apr-24	11,959.25	12,020.90	11,811.55	11,826.50
29-Apr-24	11,830.70	11,932.50	11,814.40	11,899.05
26-Apr-24	11,774.00	11,862.75	11,740.35	11,785.15
		Weekly Returns		+0.19%

Data Source: NSE

The week saw the oil & gas index closing 19 bps higher as the windfall tax got reduced amidst falling crude prices. However, while the lower crude prices appeared to help the downstream marketing companies, the upstream extraction and the refiners continued to face selling pressure amidst falling crude oil prices.

NIFTY AUTO INDEX – REMAINS THE STAR OF THE WEEK

The table captures the movement of Nifty Auto index in the week to May 03, 2024.

Date	Low	High	Low	Close
03-May-24	22,870.55	22,870.55	22,342.60	22,541.35
02-May-24	22,613.95	22,776.90	22,478.15	22,733.50
01-May-24	22,184.80	22,634.05	22,181.10	22,479.90
30-Apr-24	22,184.80	22,634.05	22,181.10	22,479.90
29-Apr-24	22,192.40	22,259.65	21,990.90	22,078.75
26-Apr-24	22,219.30	22,286.55	22,081.10	22,111.55
		Weekly Returns		+1.94%

Data Source: NSE

The Nifty Auto Index had gained 9.7% in last 6 weeks and this week it added another 1.94%. With the US Fed and the RBI looking ambivalent on rate cuts, that may be off the table for now. However, the big bet is on robust demand for traditional cars and the shift to EVs. Now, auto stocks are betting that the RBI may move on rate cuts on its own, even if the Fed does not give advance signals. We have to wait and watch.

NIFTY FMCG INDEX – BACK TO WEAKNESS IN FMCG

The table captures the movement of Nifty FMCG index in the week to May 03, 2024.

Date	Low	High	Low	Close
03-May-24	54,688.85	54,702.55	53,913.30	54,273.90
02-May-24	54,155.15	54,757.35	54,154.90	54,490.55
01-May-24	54,519.50	54,670.30	54,181.95	54,240.60
30-Apr-24	54,519.50	54,670.30	54,181.95	54,240.60
29-Apr-24	54,527.15	54,557.25	54,125.50	54,332.15
26-Apr-24	54,441.50	54,601.60	54,119.75	54,300.75
		Weekly Returns		-0.05%

Data Source: NSE

The FMCG sector was flat to negative this week after a surprising 2.35% bounce last week. Even as the defensive bets on FMCG continued, and the lower crude prices helped; the quarter has not been great for FMCG companies. Pressure on top line growth, weak rural sales and rising raw material input costs are some of the headwinds that FMCG stocks are facing. Defensive may not be a very compelling argument at this juncture!