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Weekly Musings – Index performance for week ended October 04, 2024

7 Oct 2024 , 04:25 AM

MARKETS CRACK AS GEOPOLITICAL RISK SPIRALS

The week to October 04, 2024 was disappointing in a number of ways. The FPIs were net sellers to the tune of $(3.12) Billion with the entire selling happening across just 3 sessions. That is a sign of the intensity of the selling. The key trigger for the markets was the rising geopolitical risk as Iran and Israel moved closer to war. For now, the good news is that neither side wants a full-fledged war and so it may be limited to just trading a few blows here and there. But knowing the situation in the Middle East and West Asia and its strategic relevance to global trade; it is only apparent that things can go out of hand very quickly. The markets are still optimistic that better sense would prevail, but the odds of a full-fledged war increased sharply this week. That is what the market was depicting. Here are some key trends we noted down in the week ending October 04, 2024.

  • For the week to October 04, 2024, no major sector was spared. Metals was the only sector that showed a marginally positive close for the week since it depends less on the West Asia route and more on the prices set by Chinese stimulus. That has been a big positive for metal stocks in recent weeks. Otherwise, 19 out of the 20 major sectors saw heavy selling during the week.
  • The Nifty and the Sensex corrected close to -4.5% in the week, thanks largely to the worsening geopolitical situation. The markets have a different set of concerns and they largely pertain to oil. There are two risks for oil. Firstly, it is likely that Israel may look to bomb the oil installations of NOIC to cripple the Iranian economy. Secondly, the bigger risk is that Iran may announce a blockade of the Straits of Hormuz, which is the virtual trade gateway to Asia. Both could spike oil prices.
  • The other big risk that markets saw in the week was the worsening trade situation in the Red Sea / Suez Canal Route. That is where nearly half of India’s trade passes through. There are already reports of Houthi Rebels announcing a blockade of the route from the Red Sea to Suez Canal. That can impose an additional cost in terms of higher freight costs, longer delivery times and also higher insurance costs.
  • If metals was the only sector that gave positive returns in the week, the other sector to limit losses was the IT sector. The reasons are not far to seek. With a more benign unemployment number at 4.1% in the US, the risks of hard landing are not so grave any longer. That means tech spending would not be impacted and the IT companies would continue to have a better control on pricing. More importantly, the geopolitical risk has led to a safe haven rush to dollar assets, strengthening the dollar index sharply. That is also helping the IT sector.
  • Industrials and rate sensitive stocks had a tough time during the week. In fact, rate sensitive sectors like realty, automobiles and private banks were the worst hit with weekly losses of -7.7%, -6.1%, and -5.1% respectively. With oil prices likely to become volatile, most of the stocks in the oil, energy, transport, and logistics sector also took a sharp hit and that was evident in the indices in the week. In fact, the sell-off was intense that it did not even spare the defensives. Even FMCG fell -3.7% and healthcare fell by -2.4% during the week.

The coming week has some key data points like the RBI policy statement, US FOMC minutes and US inflation. However, geopolitical risks will continue to dominate for now!

BSE SENSEX 30 INDEX – CLOSES THE WEEK DEEP IN THE RED

The table captures the movement of the BSE SENSEX 30 for the week to October 04, 2024.

Date Open High Low Close
04-Oct-24 82,244.25 83,368.32 81,532.68 81,688.45
03-Oct-24 83,002.09 83,752.81 82,434.02 82,497.10
02-Oct-24 84,257.17 84,648.40 84,098.94 84,266.29
01-Oct-24 84,257.17 84,648.40 84,098.94 84,266.29
30-Sep-24 85,208.76 85,359.65 84,257.14 84,299.78
27-Sep-24 85,893.84 85,978.25 85,474.58 85,571.85
  Weekly Returns -4.54%

Data Source: BSE

Just when we though that the Sensex had gathered momentum above 82,000 and was facing temporary resistance at 86,000, the undertone of the market has completely changed. Sensex closed the week at 81,688 levels; losing a full 3,883 points in a single week. The Sensex closed the week a full -4.54% lower and this has come amidst a virtual carnage across cyclical and even defensive sectors. Barring metals, which managed a positive close, it was the heavyweights that took it on the chin. The selling was relentless on Sensex stocks during the week as each bounce was used to sell further. During the week, the Sensex touched a high of 85,360 and a low of 81,533.

NIFTY 50 INDEX – JUST HOLDS ON TO 25,000 SUPPORT LEVELS

The table captures the movement of Nifty 50 index in the week to October 04, 2024.

Date Open High Low Close
04-Oct-24 25,181.90 25,485.05 24,966.80 25,014.60
03-Oct-24 25,452.85 25,639.45 25,230.30 25,250.10
02-Oct-24 25,788.45 25,907.60 25,739.20 25,796.90
01-Oct-24 25,788.45 25,907.60 25,739.20 25,796.90
30-Sep-24 26,061.30 26,134.70 25,794.10 25,810.85
27-Sep-24 26,248.25 26,277.35 26,151.40 26,178.95
  Weekly Returns -4.45%

Data Source: NSE

The Nifty closed the week just above its 25,000 support levels, but that may not be saying much in such a volatile market. The volatility index (VIX) surged in the week to 14.13 levels, although one can argue that it did not fully reflect the panic selling in the market. For the Nifty, most of the heavyweights sectors like banking, oil & gas, autos, and FMCG took it on the chin. In addition, the pressure of heavy selling in Nifty futures was also visible. For the week, Nifty closed -4.45% lower at 25,015, making lower tops and bottoms persistently. The Nifty lost 1,164 points in the week. During the week, the Nifty touched a high of 26,135 and a low of 24,967, eventually closing very near to the low point of the week.

NIFTY NEXT 50 INDEX – THERE WAS ALMOST NOWHERE TO HIDE

The table captures the movement of Nifty Next 50 for the week to October 04, 2024.

Date Open High Low Close
04-Oct-24 75,363.30 75,724.05 74,184.75 74,620.25
03-Oct-24 75,950.75 76,783.50 75,059.75 75,448.30
02-Oct-24 77,233.00 77,532.00 77,004.65 77,284.45
01-Oct-24 77,233.00 77,532.00 77,004.65 77,284.45
30-Sep-24 77,668.70 77,866.35 77,006.85 77,095.15
27-Sep-24 77,201.80 77,918.00 77,053.95 77,813.25
  Weekly Returns -4.10%

Data Source: NSE

The Nifty Next 50 closed the week, losing a full -4.10% or nearly 3,193 points. This virtually offsets the big gains made in the previous week. In a week when the Nifty and the Sensex faced massive risk-off selling, the Nifty Next 50 obviously could not do much better. The index lost value through the week, losing over 4% in the week. This week, the Nifty Next 50 touched a high of 77,866 level and a low of 74,185. It has made a sharply lower high and a sharply lower low for the week.

NIFTY MID-CAP 100 INDEX – SORRY, NO ALPHA HUNTING FOR NOW

The table captures the movement of Nifty Mid-Cap 100 in the week to October 04, 2024.

Date Open High Low Close
04-Oct-24 58,959.80 59,274.70 57,916.80 58,474.45
03-Oct-24 59,490.30 60,099.60 58,891.30 59,024.70
02-Oct-24 60,241.45 60,414.80 59,896.80 60,358.30
01-Oct-24 60,241.45 60,414.80 59,896.80 60,358.30
30-Sep-24 60,189.55 60,381.10 59,829.60 60,153.80
27-Sep-24 60,584.05 60,696.35 60,275.30 60,381.15
  Weekly Returns -3.16%

Data Source: NSE

With alpha hunting still elusive, the Nifty Mid Cap index closed with losses of -3.16% for the week. Obviously, with such higher levels of geopolitical risk, investor and traders would be less than willing to take on mid-cap and small cap risk. In the current week to October 04, 2024, the mid-cap index fell by a full 1,907 points. The A/D ratio was under tremendous pressure during the week. For the week, the Mid-Cap 100 index touched a high of 60,415 and a low of 57,917; seeing pressure in the last two days of the week. Alpha hunting may be off the table for now, especially with the high volatility in oil prices and the rupee also weakening beyond the ₹84/$ mark.

NIFTY SMALL-CAP 100 INDEX – CLOSES WITH SUBDUED LOSSES

The table captures movement of Nifty Small Cap 100 in the week to October 04, 2024.

Date Open High Low Close
04-Oct-24 18,934.75 19,042.00 18,566.60 18,758.65
03-Oct-24 19,031.15 19,229.15 18,878.85 18,952.60
02-Oct-24 19,230.45 19,349.50 19,222.55 19,331.30
01-Oct-24 19,230.45 19,349.50 19,222.55 19,331.30
30-Sep-24 19,249.90 19,290.35 19,079.10 19,179.65
27-Sep-24 19,314.25 19,401.85 19,210.90 19,242.00
  Weekly Returns -2.51%

Data Source: NSE

Ironically, the small cap index, which has been under pressure in the last 2 months, closed with losses of -2.51%; better than the front line indices. The small cap index has been under pressure for some and even for the month of September it had delivered negative returns. This week, the index of small caps closed  with losses of -483 points. For the week, the Nifty Small Cap index touched a high of 19,350 levels and a low of 18,567. Like in the case of mid-caps, even in the case of small caps, the selling was pronounced only on the last two days of the week; largely due to their vulnerability to higher oil prices and weaker rupee.

BANK NIFTY INDEX – REPRESENTING THE GLOBAL RISK FACTOR

The table below captures the movement of BANKNIFTY in the week to October 04, 2024.

Date Open High Low Close
04-Oct-24 51,643.75 52,358.35 51,347.25 51,462.05
03-Oct-24 52,314.45 52,582.95 51,683.40 51,845.20
02-Oct-24 52,844.00 53,235.25 52,817.80 52,922.60
01-Oct-24 52,844.00 53,235.25 52,817.80 52,922.60
30-Sep-24 53,556.95 53,726.40 52,926.55 52,978.10
27-Sep-24 54,338.70 54,338.70 53,763.20 53,834.30
  Weekly Returns -4.41%

Data Source: NSE

For the banking sector, the risks are much beyond just the geopolitical risks. At best, the geopolitical risk may be a trigger. The bigger risk is that the private banks are expected to witness sharply slower loan growth and deposit growth in Q2 results. This is true of most private banks. Also, the big risk is that if the RBI does not follow-up the Fed rate cuts with similar rate cuts in India, then banks may not really gain from the global dovishness. There are also concerns over pressure on NII growth and NIM spread in the quarter. During the week, the Bank Nifty touched a high of 53,726 and a low of 51,347; losing 2,372 points in the week and closing very near to the low point of the week.

NIFTY IT INDEX – DOLLAR STRENGTH LENDS SUPPORT TO IT SECTOR

The table captures the movement of Nifty IT index in the week to October 04, 2024.

Date Open High Low Close
04-Oct-24 41,682.95 42,566.15 41,682.95 41,912.50
03-Oct-24 41,978.45 42,325.85 41,631.50 41,762.60
02-Oct-24 41,916.30 42,470.50 41,916.30 42,434.80
01-Oct-24 41,916.30 42,470.50 41,916.30 42,434.80
30-Sep-24 42,045.55 42,275.40 41,853.25 41,946.05
27-Sep-24 42,738.55 43,377.95 42,270.55 42,312.60
  Weekly Returns -0.95%

Data Source: NSE

In the latest week to October 04, 2024, the Nifty IT also ended up losing 95 bps, but the losses were much more sober compared to other sectors. Ironically, despite negative returns, IT was the second best performing sector in the wee after metals. The positive trigger for IT sector came from two fronts. Firstly, the 4.1% unemployment rate is healthy and sort of rules out hard landing risks. That should keep IT spending intact. Secondly, as global investors rush for safe havens, dollar will be the obvious choice. That led to the dollar index hardening; benefiting the IT index and limiting its losses for the week. For the week, the IT index lost -400 points. The Nifty IT index touched a high of 42,566 and a low of 41,632. The IT sector actually gained on the last two days of the week.

NIFTY OIL & GAS INDEX – CRUDE OIL VOLATILITY SPOOKS THE INDEX

The table captures the Nifty Oil & Gas index for the week to October 04, 2024.

Date Open High Low Close
04-Oct-24 12,582.90 12,660.95 12,402.60 12,462.50
03-Oct-24 12,711.20 12,866.25 12,570.75 12,595.70
02-Oct-24 13,038.20 13,110.65 12,931.70 12,947.90
01-Oct-24 13,038.20 13,110.65 12,931.70 12,947.90
30-Sep-24 13,089.30 13,183.75 12,926.85 13,035.60
27-Sep-24 12,842.30 13,152.30 12,806.20 13,128.25
  Weekly Returns -5.02%

Data Source: NSE

In the previous week, the oil & gas index had bounced by 5%; and this week those gains were fully wiped out as the index closed -5.02% lower. In the current week to October 04, 2024, the index lost -666 points. With crude prices spiking from $71/bbl to $78/bbl due to the geopolitical uncertainty, the stocks took a hard hit. For the week, the Oil & Gas index touched a high of 12,866 and a low of 12,403 levels. There are concerns that the oil price volatility could continue due to risks to the access route via Straits of Hormuz.

NIFTY AUTO INDEX – SEES BIG FALL IN THE WEEK

The table captures the movement of Nifty Auto index in the week to October 04, 2024.

Date Open High Low Close
04-Oct-24 26,294.25 26,449.25 25,850.40 25,926.30
03-Oct-24 26,479.50 26,806.20 26,261.55 26,302.10
02-Oct-24 27,099.80 27,228.10 26,971.65 27,083.45
01-Oct-24 27,099.80 27,228.10 26,971.65 27,083.45
30-Sep-24 27,474.30 27,534.90 26,971.05 27,027.20
27-Sep-24 27,477.70 27,696.10 27,382.65 27,610.75
  Weekly Returns -6.10%

Data Source: NSE

Auto was one of the bottom performers in the week, falling -6.1% during the week. In the last few weeks, there have been growing concerns on the auto sales numbers amidst piling dealer inventory. While higher input costs are also rankling, there were two mor risks this week. One was the spike in crude oil prices and the other was the risk of higher imported inflation due to a weak rupee. Both these factors had a negative impact on the auto stocks. For the week, the auto index closed lower by 1,685 points. Auto Index made a weekly high of 27,535 and a low of 25,850.

NIFTY FMCG INDEX – TAKES A BREATHER AFTER A FRENETIC RALLY

The table captures the movement of Nifty FMCG index in the week to October 04, 2024.

Date Open High Low Close
04-Oct-24 64,371.15 64,683.50 63,266.95 63,380.05
03-Oct-24 64,687.80 65,076.40 64,392.60 64,502.05
02-Oct-24 65,546.85 65,685.00 65,029.55 65,470.95
01-Oct-24 65,546.85 65,685.00 65,029.55 65,470.95
30-Sep-24 65,744.45 66,122.15 65,413.70 65,540.35
27-Sep-24 65,967.00 66,427.70 65,530.65 65,845.45
  Weekly Returns -3.74%

Data Source: NSE

FMCG in recent weeks; has been countercyclical and also aggressive. After gaining more than 22% in the last 10 weeks, this week the FMCG index gave up -3.7%. With higher crude prices, there is the risk of inflation coming back and hitting urban and rural demand for consumer products. In the last few weeks, much of the buying in FMCG stocks was on account of a bet on rural demand revival. For the week, FMCG index lost -2,465 points. During the week, FMCG index touched a high of 66,122 and a low of 63,267.

Related Tags

  • BankNifty
  • F&O
  • ITIndex
  • Midcap
  • nifty
  • SEBI
  • sensex
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