Weekly Musings – Index performance for week ended November 10, 2023

13 Nov 2023 , 06:45 AM

JEROME POWELL PUTS LIMITS TO FED EUPHORIA

In the global financial markets, the distance from euphoria to caution and from caution to pessimism tends to be quite short. Just a handful of events or one major event is enough to shift the undertone of the markets. Just last week, the markets had bounced in the half after the Fed had held status quo on rates. In the week before last, the Fed had opted to hold rates at 5.25%-5.50% range for the third time in the last four policy statements. That had enthused the markets and even the Indian markets had rallied by 1%. The hope was that the current week would support a sustenance of the rally, that began last week.

While the rally did sustain, with the Nifty gaining another 1% in this week, the euphoria in the market was largely nipped by the rather hawkish language of Jerome Powell. Speaking at the IMF conference in Washington, Jerome Powell of the Fed openly underlined that he was unhappy with the progress made by the Fed in containing inflation. He also added that the Fed had, possibly, not done enough and favoured more rate hikes if the need arose to rapidly bring inflation down to the 2% mark. That limited the bullishness in the market.

US BOND YIELDS AND DOLLAR INDEX BOUNCE BACK THIS WEEK

Last week, we had seen the US bond yields and the US dollar index fall sharply after the Fed statement. However, despite expectations of a further fall in this week, the global markets did not really oblige. That is largely due to the relatively hawkish noises coming from Jerome Powell in his speech. The impact on the US bond yields was that the yields remained static. It had closed the previous week at 4.647% and during the current week, bond yields repeatedly fell below 4.5%, but eventually closed the week, absolutely flat at 4.646%.

Secondly, let us turn to the dollar index. The dollar index, last week, had fallen from 106.88 to 105.21, offering some respite to the Indian rupee. However, this week, the dollar index rallied in the last two days of the week to close at 105.86 levels. This bounce was an outcome of the relatively hawkish tone adopted by the Fed chair, Jerome Powell. A strong dollar index means that the rupee again came under stress. (For live updates market map)

BSE SENSEX 30 INDEX – RALLY YES; BUT POWELL LIMITS EUPHORIA

The table captures the movement of the BSE SENSEX 30 for the week to November 10, 2023.

Date	High	Low	Close
10-Nov-23	65,014.06	64,580.95	64,904.68
09-Nov-23	65,046.56	64,768.76	64,832.20
08-Nov-23	65,124.00	64,851.06	64,975.61
07-Nov-23	65,021.29	64,638.10	64,942.40
06-Nov-23	64,992.54	64,617.48	64,958.69
03-Nov-23	64,535.19	64,275.39	64,363.78
	Weekly Returns	+0.84%

Data Source: NSE

During the latest week, the Sensex was extremely volatile but the undertone was positive. While the Fed statement had been flattering, the subsequent speech by Jerome Powell at the IMF conference, put limits to the rally. For the week overall, the Sensex closed 541 points, which about 84 bps gain for the week. The Sensex closed almost on the threshold of 65,000 levels, which is positive. The market has seen an overhang of short positions in the recent past, so some short covering is absolutely on the cards. That could set the trend for the Sensex in the short term; although global cues wills till drive the market sentiments.

NIFTY 50 INDEX – CLOSES THE WEEK ABOVE 19,400 LEVELS

The table captures the movement of Nifty 50 index in the week to November 10, 2023.

Date	High	Low	Close
10-Nov-23	19,451.30	19,329.45	19,425.35
09-Nov-23	19,463.90	19,378.35	19,395.30
08-Nov-23	19,464.40	19,401.50	19,443.50
07-Nov-23	19,423.50	19,329.10	19,406.70
06-Nov-23	19,423.00	19,309.70	19,411.75
03-Nov-23	19,276.25	19,210.90	19,230.60
	Weekly Returns	+1.01%

Data Source: NSE

The latest week saw FPI selling of $687 million, almost looking like November will repeat the trend of September and October. In the previous week, the Nifty had recovered from lower levels after the Fed policy statement. However, this week, the rather cautiously hawkish statement of Jerome Powell at the IMF conference, led to the Nifty stagnating in the last 2 days of the week. However, the Nifty closed the week decisively above the 19,k400 mark, and that is a positive signal. The subdued India VIX at 11.38 levels is offering support to the Nifty at lower levels and the buy-on-dips approach is likely to continue. That explains the 101 bps rally in the Nifty in the week.

NIFTY NEXT 50 INDEX – BIG JUMP TAKES WELL BEYOND 45,000 LEVELS

The table captures the movement of Nifty Next 50 for the week to November 10, 2023.

Date	High	Low	Close
10-Nov-23	45,767.50	45,378.50	45,724.20
09-Nov-23	46,011.25	45,628.15	45,660.40
08-Nov-23	45,912.20	45,695.65	45,894.90
07-Nov-23	45,641.15	45,137.85	45,593.30
06-Nov-23	45,269.35	44,985.35	45,227.45
03-Nov-23	44,907.90	44,613.35	44,885.00
	Weekly Returns	+1.87%

Data Source: NSE

In last few weeks, the Nifty Next 50 had just about managed to mirror the Nifty. However, in the last two weeks, the Nifty Next 50 has convincingly outshone the Nifty. The rally in the Nifty Next 50 was much sharper as it gained 839 bps for the week to close with gains of 187 basis points. The index closed the week well above 45,700. The rally in the Nifty Next 50 is indicative of the trend that the real action appears to be in the next rung non-Nifty stocks. In the Next 50 index, financials, pharma, and defence are still seeing aggressive buying.

NIFTY MID-CAP 100 INDEX – MID-CAPS PUT THEIR GROWTH STAMP

The table captures the movement of Nifty Mid-Cap 100 in the week to November 10, 2023.

Date	High	Low	Close
10-Nov-23	40,778.10	40,297.25	40,733.05
09-Nov-23	40,680.90	40,454.60	40,537.65
08-Nov-23	40,482.30	40,250.75	40,446.85
07-Nov-23	40,139.25	39,892.60	40,049.80
06-Nov-23	39,967.70	39,743.40	39,937.10
03-Nov-23	39,640.05	39,490.40	39,587.40
	Weekly Returns	+2.89%

Data Source: NSE

After a sharp rally of 2.29% in the previous week, the current week saw the Nifty Mid-Cap Index gaining another 2.89%. gain The Mid-cap index closed decisively above the 40,700 mark for the week and it remained among the best performing generic thematic indices. However, in the previous fall, the Nifty Mid-cap index had faced stiff resistance at 41,000 levels, so that level has to be taken out convincingly. On the positive side, the quarterly results of many mid-sized companies continue to be robust. To add to the stimulus to smaller stocks, mutual fund buying in these stocks almost has continued unabated.

NIFTY SMALL-CAP 100 INDEX – THAT WAS THE STAR OF THE WEEK

The table captures movement of Nifty Small Cap 100 in the week to November 10, 2023.

Date	High	Low	Close
10-Nov-23	13,382.75	13,250.85	13,365.20
09-Nov-23	13,398.90	13,292.00	13,303.15
08-Nov-23	13,401.95	13,307.45	13,335.15
07-Nov-23	13,250.40	13,109.45	13,242.70
06-Nov-23	13,158.95	13,068.80	13,144.65
03-Nov-23	12,983.85	12,907.45	12,965.05
	Weekly Returns	+3.09%

Data Source: NSE

In the last few weeks, this was one index that was holding up amidst the chaos in markets, despite the fall about 2 weeks back. The previous week saw the Nifty small cap index gaining by 2.58% during the week and in the current week, that has got magnified by another 3.09% rally in the small cap index. The specific stories that drove up the small cap story like railways, healthcare, IT, AI, and defence are back in the game in the current week; largely a repeat of the previous week. However, the small cap index also stagnated in the last 2 days of the week. The Small Cap 100 closed the week above its key resistance area of 13,000, and that is a good sign. The coming week will test if it can hold above the 13,000 mark. 

BANK NIFTY INDEX – POSITIVE DESPITE SOME Q2 DISAPPOINTMENTS

The table below captures the movement of BANKNIFTY in the week to November 10, 2023.

Date	High	Low	Close
10-Nov-23	43,908.70	43,504.95	43,820.10
09-Nov-23	43,876.75	43,542.65	43,683.60
08-Nov-23	43,797.55	43,547.75	43,658.65
07-Nov-23	43,799.35	43,283.85	43,737.90
06-Nov-23	43,648.70	43,415.20	43,619.40
03-Nov-23	43,416.10	43,221.00	43,318.25
	Weekly Returns	+1.16%

Data Source: NSE

After several weeks of persistent pressure, the Bank Nifty had bounced by 1.25% in the previous week. In the current week, the index rallied by another 1.16%. This is notwithstanding the fact that the quarter had issued some warning signals for the banks. For instance, the frenetic growth in net interest income (NII) of the last few weeks started to falter. Also, the net interest margins (NIMs) tapered to more realistic levels in the current quarter. However, the markets bet on the fact that most of these risks were already factored since the Bank Nifty had already corrected sharply from peak levels. The undertone remains strong for now in Bank Nifty, with 44,000 and 45,000 being key levels to watch.

NIFTY IT INDEX – ONLY HEAVYWEIGHT INDEX TO CLOSE LOWER

The table captures the movement of Nifty IT index in the week to November 10, 2023.

Date	High	Low	Close
10-Nov-23	30,680.85	30,504.10	30,639.05
09-Nov-23	30,993.05	30,655.55	30,717.70
08-Nov-23	31,128.90	30,865.25	30,917.20
07-Nov-23	31,052.50	30,860.65	30,981.60
06-Nov-23	31,034.15	30,863.65	30,972.95
03-Nov-23	30,924.85	30,739.35	30,779.95
	Weekly Returns	-0.46%

Data Source: NSE

The only large index to close in the negative, looks like a dubious distinction. After very tepid gains in the previous week, the Nifty IT index closed 46 bps lower in the current week. This is despite the 2.1% rally in the NASDAQ index during the week. From the lows of late October, the NASDAQ has rallied 9.5%, but that had little impact on the Nifty IT index. Clearly, the markets are preoccupied with more immediate concerns of the IT sector like tepid constant currency growth in revenues, weak guidance, falling margins, shrinking workforce etc. IT results disappointed the street in terms of its guidance and the sharp fall in headcount. The overhang of the current IT model is the real challenge today.

NIFTY OIL & GAS INDEX – OIL STOCKS GAIN ON CRUDE PRICE FALL

The table captures the Nifty Oil & Gas index for the week to November 10, 2023.

Date	High	Low	Close
10-Nov-23	7,976.55	7,897.95	7,970.55
09-Nov-23	8,007.30	7,916.05	7,923.00
08-Nov-23	8,011.90	7,950.55	7,987.15
07-Nov-23	7,958.15	7,858.95	7,925.10
06-Nov-23	7,879.35	7,805.85	7,873.10
03-Nov-23	7,793.50	7,743.80	7,773.50
	Weekly Returns	+2.53%

Data Source: NSE

With gains of 253 bps, the Nifty Oil & Gas index was the star gainer of the week for the second time in a row. However, the oil & gas index is yet to break above the psychological 8,000 mark. The sharp fall in Brent Crude prices to $81/bbl amid demand concerns, raised hopes that the gross refining margins (GRMs) and the marketing margins would improve in this quarter. Reliance Industries led the pack with robust gains. Also, the quarterly numbers from most of the oil companies in Q2 were much better than expected.

NIFTY AUTO INDEX – BACK TO ITS BULLISH WAYS

The table captures the movement of Nifty Auto index in the week to November 10, 2023.

Date	High	Low	Close
10-Nov-23	16,341.10	16,185.50	16,286.70
09-Nov-23	16,401.50	16,229.65	16,355.30
08-Nov-23	16,235.95	16,166.00	16,220.80
07-Nov-23	16,220.35	16,116.60	16,143.75
06-Nov-23	16,185.65	16,102.85	16,172.75
03-Nov-23	16,130.10	16,015.10	16,045.40
	Weekly Returns	+1.50%

Data Source: NSE

After falling over 280 bps in the last 2 weeks, the auto index showed a bounce this week by 150 bps. Auto demand concerns are still there, but the recent monthly numbers have showed green-shoots of recovery in rural demand. Rising input cost considerations and weak Kharif output are still a concern at a demand level, so a lot will depend on how Rabi shapes up this year.

NIFTY FMCG INDEX – DEFENSIVE BUYING STILL THE STORY

The table captures the movement of Nifty FMCG index in the week to November 10, 2023.

Date	High	Low	Close
10-Nov-23	52,129.15	51,689.05	52,076.05
09-Nov-23	52,562.50	51,946.15	51,983.00
08-Nov-23	52,498.65	52,153.80	52,455.20
07-Nov-23	52,216.45	51,934.25	52,130.00
06-Nov-23	52,166.35	51,966.65	52,075.70
03-Nov-23	51,984.60	51,660.25	51,901.50
	Weekly Returns	+0.34%

Data Source: NSE

After gaining 99 bps last week, the FMCG index gained a more subdued 34 bps in the recent week. Rural concerns remain, but results show that even in a tough and volatile market, the FMCG index attracts defensive buying and a bet that FMCG leaders are best positioned to beat the margin squeeze. That is the safe haven in Indian equities.