Weekly Musings – Index performance for week ended October 06, 2023

9 Oct 2023 , 06:59 AM

FLAT CLOSE FOR NIFTY AMIDST VOLATILE WEEK

The first week of October 2023 was a truncated week, but the sentiments in the remaining days were broadly mixed. While hawkishness and inflation put pressure on the Nifty and Sensex in the first two days, the last two days of the week saw a bounce in the markets on the back of weak crude prices. In fact, the last 9 trading session saw crude tapering from $96/bbl to $84/bbl in the Brent market. For an economy that still depends on imports for 85% of her crude oil needs, the sharp fall in crude prices had a salutary impact on the markets. 

In addition, the markets were also pleased that the RBI monetary policy did not hike the inflation expectations for FY24 and maintained it at 5.4%. Also, the RBI language of inflation tapering in the next few months has gone down well with the markets. Of course, FPI selling remained a major challenge at $962 million in the firs week of October. However, that has been largely offset by strong inflows from domestic mutual funds and LIC. Not to forge, the surge in participation by retail investors is also helping the cause.

HOW THE MARKET SENTIMENTS WERE DEFINED?

While FPI selling was a feature of the latest week, it also saw two other factors that had an influence on the markets. The RBI policy was broadly mixed. The markets appreciated the decision to hold rates at 6.5% and the inflation expectations for FY24 at 5.4%. However, the markets were also concerned about the hawkish stance of the RBI. While the RBI MPC did not talk about further rate hikes, it gave adequate indications that the rates would be at an elevate pause. Also, the RBI has almost ruled out rate cuts in the near future. 

The impact on the markets was mixed. However, the second issue was the geopolitical risk building up in the Middle East and West Asia after a series of rockets were fired by Hamas into Israel. The retaliation was immediate and that raises major concerns for trade routes and oil supply from the OPEC nations. The coming week is likely to focus a lot more on data flows like India inflation, US inflation, Fed minutes and India IIP. (For live impact, check market map)

NIFTY 50 INDEX – ENDS THE WEEK ON A FLAT NOTE

The table captures the movement of Nifty 50 index in the week to October 06, 2023.

Date	High	Low	Close
06-Oct-23	19,675.75	19,589.40	19,653.50
05-Oct-23	19,576.95	19,487.30	19,545.75
04-Oct-23	19,457.80	19,333.60	19,436.10
03-Oct-23	19,623.20	19,479.65	19,528.75
02-Oct-23	19,726.25	19,551.05	19,638.30
29-Sep-23	19,726.25	19,551.05	19,638.30
	Weekly Returns	+0.08%

Data Source: NSE

It was a lacklustre week with just 4 days of trading. The Nifty fell in the first two days of the week but recover all of it in the last 2 days to close almost flat. The Nifty fall on Tuesday and Wednesday was largely impacted by the rising US bond yields and the strength in the dollar index (DXY). There were concerns on the margin front ahead of the Q2FY24 results being declared. The bounce in Nifty on the last days was on account of the sharp fall in oil prices. Also, the RBI MPC maintaining status quo on rate helped. However, the FPI selling continued to be an overhang with close to $1 billion of equities being sold in the first week of October 2023. The Nifty was pulled up by IT stocks, but oil, banks and autos pulled it down.

NIFTY NEXT 50 INDEX – CLOSES THE WEEK BELOW 45,000

The table captures the movement of Nifty Next 50 for the week to October 06, 2023.

Date	High	Low	Close
06-Oct-23	44,987.05	44,780.20	44,950.40
05-Oct-23	44,862.95	44,521.75	44,669.65
04-Oct-23	45,084.70	44,337.75	44,560.85
03-Oct-23	45,213.50	44,901.85	45,186.75
02-Oct-23	45,163.70	44,672.65	45,036.65
29-Sep-23	45,163.70	44,672.65	45,036.65
	Weekly Returns	-0.19%

Data Source: NSE

In last few weeks, the Nifty Next 50 has shown the tendency to mirror the Nifty, and that has continued in the current week also. While the Nifty Next 50 was marginally in the negative, the undertone was flat; largely like the Nifty. There is visible profit booking in non-Nifty stocks. The Nifty Next-50 has faced resistance at the 46,000 mark and that continued in the current week also; with the index eventually closing below the 45,000 mark. 

NIFTY MID-CAP 100 INDEX – MID-CAPS COME UNDER FIRE THIS WEEK

The table captures the movement of Nifty Mid-Cap 100 in the week to October 06, 2023.

Date	High	Low	Close
06-Oct-23	40,319.35	40,123.85	40,284.70
05-Oct-23	40,402.40	40,014.05	40,046.00
04-Oct-23	40,525.85	39,746.85	40,047.50
03-Oct-23	40,666.00	40,382.30	40,608.85
02-Oct-23	40,663.25	40,165.50	40,537.05
29-Sep-23	40,663.25	40,165.50	40,537.05
	Weekly Returns	-0.62%

Data Source: NSE

Mid-Cap index could not break above the 41,000 levels during the week, and eventually drifted to its strong support level of 40,000 during the week. Mid-cap index gained more than 35% since the start of the year, so these corrections are more of noise. Mid-caps came under pressure amidst rising crude prices and a volatile rupee. Mid-caps tend to be vulnerable to both these factors. However, with both the variables stabilizing in the current week this segment may look to improve its show in the coming weeks. After all, Alpha is still the big story and driving force in Indian markets.

NIFTY SMALL-CAP 100 INDEX – RETAINS CROWN FOR ANOTHER WEEK

The table captures movement of Nifty Small Cap 100 in the week to October 06, 2023.

Date	High	Low	Close
06-Oct-23	12,849.65	12,731.50	12,837.10
05-Oct-23	12,792.40	12,681.95	12,735.25
04-Oct-23	12,795.50	12,577.80	12,656.00
03-Oct-23	12,837.20	12,718.95	12,816.20
02-Oct-23	12,790.10	12,655.30	12,748.50
29-Sep-23	12,790.10	12,655.30	12,748.50
	Weekly Returns	+0.69%

Data Source: NSE

In the midst of chaos in markets, the small cap index remained an island of calm. Like the Nifty, the small cap index also picked up momentum in the last 2 days of the week. There has been a lot of buying interest in specific mid-cap sectors like railways, healthcare, IT, and defence that are in the news for the right reasons. For now, 13,000 looks the immediate resistance for the small cap index. This index has a direct bearing on the participation of retail investors. Record retail investor additions this year should only help small cap stocks. 

BANK NIFTY INDEX – HDFC BANKS HOLDS THE INDEX DOWN

The table below captures the movement of BANKNIFTY in the week to October 06, 2023.

Date	High	Low	Close
06-Oct-23	44,500.70	44,242.95	44,360.60
05-Oct-23	44,391.85	44,108.30	44,213.35
04-Oct-23	44,161.35	43,857.50	43,964.05
03-Oct-23	44,566.30	44,243.10	44,399.05
02-Oct-23	44,755.05	44,344.90	44,584.55
29-Sep-23	44,755.05	44,344.90	44,584.55
	Weekly Returns	-0.50%

Data Source: NSE

Bank Nifty has continued to be under pressure, after the brief burst a few weeks back on the strength of the withdrawal of the I-CRR. In recent weeks, the hawkish under tone of the Fed and the bank downgrade by Moody’s has kept the Bank Nifty under pressure. After touching 46,000 levels, the index dipped below 44,000, during the week, albeit briefly. The challenge for the Bank Nifty is that its heaviest stock, HDFC Bank, has been under pressure due to margin concerns post the merger with HDFC Ltd. That is surely making a lot of investors jittery, as HDFC Bank is the most owned (rather over-owned) stock in India.

NIFTY IT INDEX – POSITIVE NASDAQ TREND RUBS OFF

The table captures the movement of Nifty IT index in the week to October 06, 2023.

Date	High	Low	Close
06-Oct-23	32,438.40	32,098.80	32,341.70
05-Oct-23	32,368.45	31,956.90	32,125.40
04-Oct-23	31,874.70	31,412.50	31,811.50
03-Oct-23	31,852.65	31,499.35	31,717.25
02-Oct-23	32,020.35	31,514.90	31,784.40
29-Sep-23	32,020.35	31,514.90	31,784.40
	Weekly Returns	+1.75%

Data Source: NSE

After falling for 2 weeks in a row, the Nifty IT index bounced back by 1.75% in the latest week. It remains the only heavyweight stock to show sharp gains, despite concerns over the top line growth (CC) and profit margins of large cap IT stocks. The sentiments were largely boosted by the buyback indications coming from TCS and that would mean more IT companies will follow suite. In the latest week, the NASDAQ also gained 1.61% and that has also been instrumental in boosting IT stocks. Active and passive IT funds are also helping.

NIFTY OIL & GAS INDEX – OIL & GAS STRAINED BY WINDFALL TAX

The table captures the Nifty Oil & Gas index for the week to October 06, 2023.

Date	High	Low	Close
06-Oct-23	7,801.90	7,761.85	7,790.75
05-Oct-23	7,809.55	7,761.55	7,769.75
04-Oct-23	7,807.25	7,716.35	7,757.65
03-Oct-23	7,883.05	7,806.80	7,810.65
02-Oct-23	7,942.45	7,848.35	7,902.80
29-Sep-23	7,942.45	7,848.35	7,902.80
	Weekly Returns	-1.42%

Data Source: NSE

After breaking below the 8,000 mark last week, the oil & gas index drifted lower this week. There was pressure across the board. Stocks like ONGC came under pressure due to higher windfall tax on crude. The refining stocks like Reliance Industries and IOCL also came under pressure on account of the anticipating narrowing of gross refining margins (GRMs). The oil marketing companies like HPCL and BPCL also came under selling due to the likely impact of higher crude prices on the marketing margins of OMCs. Brent crude prices have corrected sharply to $84/bbl, after OPEC did not intensify the supply cuts. But the global oil market is still undersupplied by 2 million barrels of crude per day and that is likely to keep the pressure on oil stocks. It remains to be seen if crude makes another rusk for $100/bbl.

NIFTY AUTO INDEX – AUTO SALES LESS THAN FLATTERING

The table captures the movement of Nifty Auto index in the week to October 06, 2023.

Date	High	Low	Close
06-Oct-23	16,039.80	15,966.40	15,990.65
05-Oct-23	15,960.70	15,785.90	15,916.10
04-Oct-23	15,952.60	15,715.90	15,782.60
03-Oct-23	16,316.00	15,955.90	15,990.60
02-Oct-23	16,261.90	16,045.10	16,184.40
29-Sep-23	16,261.90	16,045.10	16,184.40
	Weekly Returns	-1.20%

Data Source: NSE

Auto index came under pressure and lost -1.20% in the week after the lower than expected sales numbers for September. Tractors and two wheelers came under pressure and both these are good proxies for rural demand. However, auto stocks have fallen after a very intense and long rally. In last few months, rising rural inflation dented demand quite badly.

NIFTY FMCG INDEX – STAYS NEUTRAL IN TOUGH MARKETS

The table captures the movement of Nifty FMCG index in the week to October 06, 2023.

Date	High	Low	Close
06-Oct-23	51,725.40	51,359.15	51,577.90
05-Oct-23	51,654.55	51,270.00	51,384.55
04-Oct-23	51,528.25	51,128.50	51,435.75
03-Oct-23	51,708.00	51,255.70	51,320.85
02-Oct-23	51,742.70	51,273.75	51,602.65
29-Sep-23	51,742.70	51,273.75	51,602.65
	Weekly Returns	-0.05%

Data Source: NSE

In a week, when the markets were jittery overall, investors saw merit in the safety of FMCG stocks. The FMCG index closed flat for the second week in a row, despite the volatility in the overall market. There have been hints of a revival in rural demand, although the sector would be hoping that the crude prices top out sooner rather than later. However, monthly auto numbers show that rural demand may be taking longer to revive. FMCG companies are discovering new ways to delight the customer by launching smaller products, cutting costs, and expanding their basket. It could drive the market direction in coming weeks.

THE WEEK WAS ABOUT FESTIVE DEMAND DRIVERS

While banks and oil saw most of the pressure on the Nifty, the gainer was the theme of festival demand. Top gainers included names like Bajaj Finance, Bajaj Finserv and Titan. All three are classic proxies for a surge in festival demand among the consumers. The next 2 months are festival shopping time and that is the theme markets appear to be betting on.