Weekly Musings – Index performance for week ended November 17, 2023

20 Nov 2023 , 06:44 AM

US INFLATION PROVIDED FUEL TO INDIAN MARKETS

In the global financial markets, the situation can change at very short notice. Just a couple of weeks back, the markets had expected the end of rate hikes after the Fed meeting. Last week, the markets converged towards the Fed point of view after Powell spoke hawkish in his speech at the IMF conference. This week, it was back to the markets diverging from the Fed stance. Now markets are betting that the US rate hikes are done and dusted. The reason for this view was a sharp fall in the consumer inflation in the US.

For the month of October 2023, the US inflation came in sharply lower at 3.2%. That is a fall of 50 bps from the levels of 3.70% in August and September. The sharp fall in the consumer inflation in the US was triggered by a marginal fall in core inflation but a sharp fall in food inflation and energy inflation. This led to the markets betting on the end of rate hikes in the US with the US bond yields and the US dollar index also falling in response. These slew of changes proved to be positive for Indian equity market sentiments as Nifty and Sensex closed with sharp gains in the week.

INDIA MACRO DATA WAS A MIXED BAG THIS WEEK

Normally, the Indian markets should have celebrated the sharp fall in the US inflation and India inflation. Consumer inflation in India fell by a full 15 bps from 5.02% to 4.87%. Although, this was higher than the Reuters consensus estimate of 4.80%, that was still seen as positive for the market sentiments. After all, India had seen a very sharp fall in the core inflation in October, something the RBI had been trying to decipher for a long time.

However, all was not hunky dory for the Indian markets as there was a negative surprise coming for the markets from the trade data for October 2023. Trade deficit on the merchandise account came in at a record level of $31.46 billion for October 2023. This is the highest level of monthly trade deficit ever. As a result, the overall deficit (merchandise deficit adjusted for services surplus) was at around $17.5 billion. This is a figure that has a direct bearing on the current account deficit (CAD) and hence had its negative ramifications on the Indian rupee, keeping it under pressure in the week. (For live updates market map)

BSE SENSEX 30 INDEX – REACTS POSITIVE TO FAVORABLE GLOBAL CUES

The table captures the movement of the BSE SENSEX 30 for the week to November 17, 2023.

Date	High	Low	Close
17-Nov-23	66,037.69	65,639.74	65,794.73
16-Nov-23	66,358.37	65,507.02	65,982.48
15-Nov-23	65,747.65	65,373.50	65,675.93
13-Nov-23	65,176.96	64,853.36	64,933.87
12-Nov-23	65,418.98	65,218.60	65,259.45
10-Nov-23	65,014.06	64,580.95	64,904.68
	Weekly Returns	+1.37%

Data Source: NSE

During the latest week, the Sensex was relatively volatile but the undertone was positive as it closed with gains of 1.37% for the week. For the week, the big boost to the Sensex came from the sharply lower US inflation and falling inflation in India. For the week, the Sensex closed 890 points higher and it closed the week well above the psychological level of 65,000 on the BSE Sensex. The market has seen an overhang of short positions in the recent past, so some short covering is absolutely on the cards. However, a lot of positive action has been happening in the smaller stocks.

NIFTY 50 INDEX – GETTING CLOSER TO 20,000 LEVELS

The table captures the movement of Nifty 50 index in the week to November 17, 2023.

Date	High	Low	Close
17-Nov-23	19,806.00	19,667.45	19,731.80
16-Nov-23	19,875.25	19,627.00	19,765.20
15-Nov-23	19,693.20	19,579.65	19,675.45
13-Nov-23	19,494.40	19,414.75	19,443.55
12-Nov-23	19,547.25	19,510.25	19,525.55
10-Nov-23	19,451.30	19,329.45	19,425.35
	Weekly Returns	+1.58%

Data Source: NSE

The latest week saw FPI buying of $869 million; the first week of net FPI buying in the last 12 weeks. Now it looks like November could rebut the trend of September and October. This week the positive sentiments came from lower US inflation and lower India inflation. However, there were also concerns that the sharply higher trade deficit in October due to a spike in gold imports, could have negative ramifications for the current account deficit (CAD) and also for the Indian rupee. The Nifty would be closely watching the minutes of the Fed next week. However, with the India VIX at 11.82 levels, downside risks even in the event of any fall in the market would be limited and see buying at lower levels. Nifty looks all set to try to touch 20,000 levels this week.

NIFTY NEXT 50 INDEX – GETS VERY CLOSE TO MOUNT 47,000

The table captures the movement of Nifty Next 50 for the week to November 17, 2023.

Date	High	Low	Close
17-Nov-23	46,870.75	46,422.90	46,838.25
16-Nov-23	46,691.25	46,330.25	46,591.55
15-Nov-23	46,478.55	46,155.05	46,425.55
13-Nov-23	46,009.85	45,739.65	45,986.70
12-Nov-23	46,090.10	45,897.10	45,942.95
10-Nov-23	45,767.50	45,378.50	45,724.20
	Weekly Returns	+2.44%

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 outperformed the Nifty by a margin. The rally in the Nifty Next 50 was much sharper as it gained 1,114 bps for the week to close with gains of 244 basis points. The index closed the week well above 46,800 and looks poised to get past the 47,000 mark in the coming week. 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. The specific sectors of interest include financials, pharma, and defence.

NIFTY MID-CAP 100 INDEX – MID-CAPS ARE DRIVING THE BIG RETURNS

The table captures the movement of Nifty Mid-Cap 100 in the week to November 17, 2023.

Date	High	Low	Close
17-Nov-23	41,863.20	41,584.15	41,811.25
16-Nov-23	41,818.95	41,414.90	41,726.30
15-Nov-23	41,432.55	41,237.05	41,404.85
13-Nov-23	41,063.70	40,784.25	41,009.70
12-Nov-23	41,091.40	40,951.80	40,982.85
10-Nov-23	40,778.10	40,297.25	40,733.05
	Weekly Returns	+2.65%

Data Source: NSE

After gaining 2.29% and 2.89% in the previous two weeks, the Nifty Mid-Cap Index gained another 2.65% in the current week. The Mid-cap index closed decisively above the 41,800 mark for the week and it remained among the best performing generic thematic indices. In the previous fall, the Nifty Mid-cap index had faced stiff resistance at 41,000 levels, so taking out that level in this week is fairly significant for its uptrend. Mutual fund buying in mid-cap stocks has continued unabated.

NIFTY SMALL-CAP 100 INDEX – THE REAL STARS OF THE WEEK

The table captures movement of Nifty Small Cap 100 in the week to November 17, 2023.

Date	High	Low	Close
17-Nov-23	13,957.00	13,821.40	13,881.85
16-Nov-23	13,912.25	13,772.00	13,869.05
15-Nov-23	13,808.45	13,725.25	13,789.25
13-Nov-23	13,629.10	13,444.85	13,610.00
12-Nov-23	13,560.05	13,504.35	13,517.70
10-Nov-23	13,382.75	13,250.85	13,365.20
	Weekly Returns	+3.87%

Data Source: NSE

In the last few weeks, this was one index that was holding up amidst the chaos in markets, it was the Nifty small cap index. After gaining 2.58% and 3.09% in the last two weeks, the Nifty Small Cap Index rallied by 3.87% in the current week. The small cap index once again stagnated in the last 2 days of the week. The Small Cap 100 has stayed through this week above its key resistance area of 13,000, and that is a good sign. While there have been concerns about small cap funds freezing flows, that has had little practical impact.

BANK NIFTY INDEX – BANKS FACE BRUNT OF THE PRESSURE 

The table below captures the movement of BANKNIFTY in the week to November 17, 2023.

Date	High	Low	Close
17-Nov-23	43,872.85	43,513.85	43,583.95
16-Nov-23	44,420.95	44,064.15	44,161.55
15-Nov-23	44,408.55	44,164.55	44,201.70
13-Nov-23	43,970.75	43,681.40	43,891.25
12-Nov-23	44,056.00	43,916.60	43,996.65
10-Nov-23	43,908.70	43,504.95	43,820.10
	Weekly Returns	-0.54%

Data Source: NSE

After bouncing by 1.25% and another 1.16% in the previous two weeks, the Bank Nifty has again gotten into negative territory losing -0.54% this week. There have been several warning signals for the banks in the latest quarter. NII growth has slowed and the best of NIM expansion may be done. Most banks are expecting a slight uptick in the gross NPAs in the coming quarter. But the real pressure came from the RBI hardening its stance on consumer lending by the banks through an enhancement of its risk weights. That is likely to raise the cost of lending for banks and hit sentiments.

NIFTY IT INDEX – WITNESSES A 5.07% RALLY IN THE WEEK

The table captures the movement of Nifty IT index in the week to November 17, 2023.

Date	High	Low	Close
17-Nov-23	32,405.85	32,134.65	32,191.30
16-Nov-23	32,453.65	31,431.50	32,273.35
15-Nov-23	31,472.50	30,987.75	31,429.35
13-Nov-23	30,810.35	30,572.95	30,635.85
12-Nov-23	30,911.65	30,820.95	30,861.00
10-Nov-23	30,680.85	30,504.10	30,639.05
	Weekly Returns	+5.07%

Data Source: NSE

The IT index largely tends to reflect the NASDAQ movement. In November month alone, the NASDAQ has rallied by over 12%, while the IT index has been under pressure due to weak guidance by the frontline IT companies. All that change in this week as the IT index played catch-up by gaining a good 5.07% in the week. IT was the start of the week and the only sectoral index to see such phenomenal gains for the week. The sustenance of these returns is still a question mark. However, markets remain concerned over immediate concerns of the IT sector like tepid constant currency growth in revenues, weak guidance, falling margins, shrinking workforce etc. It remains an overahang.

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

The table captures the Nifty Oil & Gas index for the week to November 17, 2023.

Date	High	Low	Close
17-Nov-23	8,214.05	8,074.15	8,082.30
16-Nov-23	8,207.70	8,122.00	8,173.10
15-Nov-23	8,129.35	8,050.80	8,115.55
13-Nov-23	8,003.95	7,966.95	7,999.10
12-Nov-23	8,034.20	8,004.10	8,013.75
10-Nov-23	7,976.55	7,897.95	7,970.55
	Weekly Returns	+1.40%

Data Source: NSE

After gaining 253 bps in the previous week, the latest week again saw gains of 140 bps in the Nifty Oil & Gas index. During the current week, the oil & gas index decisively broke above the psychological 8,000 mark. The sharp fall in Brent Crude prices to $78-80/bbl amid demand concerns, raised hopes that the gross refining margins (GRMs) and the marketing margins would improve in this quarter. Reliance Industries has continued to see buying, but lot of positive action is visible across oil stocks, with most of the oil & gas PSUs at their yearly highs as they de-risk their bets with petchem forays.

NIFTY AUTO INDEX – BACK TO BULLISH WAYS

The table captures the movement of Nifty Auto index in the week to November 17, 2023.

Date	High	Low	Close
17-Nov-23	16,951.60	16,798.90	16,905.50
16-Nov-23	16,863.85	16,632.30	16,788.90
15-Nov-23	16,666.80	16,421.75	16,648.50
13-Nov-23	16,387.20	16,307.80	16,365.30
12-Nov-23	16,440.85	16,364.55	16,377.05
10-Nov-23	16,341.10	16,185.50	16,286.70
	Weekly Returns	+3.80%

Data Source: NSE

It was a week of consolidation for the Nifty Auto index as it gained a whopping 380 bps this week on top of 150 bps of gains in the previous week. Auto demand concerns are still there, but the recent monthly numbers have showed green-shoots of recovery are quite visible 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. Early indications are that Rabi output should be above average.

NIFTY FMCG INDEX – SEES STRONG BUYING ON DEMAND HOPES

The table captures the movement of Nifty FMCG index in the week to November 17, 2023.

Date	High	Low	Close
17-Nov-23	52,809.75	52,237.95	52,756.10
16-Nov-23	52,680.40	52,225.55	52,305.75
15-Nov-23	52,434.90	52,039.40	52,383.45
13-Nov-23	52,182.55	51,917.65	52,025.60
12-Nov-23	52,397.55	52,200.25	52,258.50
10-Nov-23	52,129.15	51,689.05	52,076.05
	Weekly Returns	+1.31%

Data Source: NSE

After gaining 135 bps in the last 2 weeks, the FMCG index added another 131 bps in the recent week. FMCG stocks are attracting defensive buying and a bet that FMCG leaders are well positioned to beat margin squeeze. Rural demand is also gradually improving; at least the green shoots are starting to show now.