Weekly Musings – Index performance for week ended October 11, 2024

14 Oct 2024 , 06:59 AM

MARKETS HOLD UP AMIDST FPI SELLING DELUGE

The week to October 11, 2024 was actually a mixed week. It was disappointing because the data flows like the IIP numbers and RBI policy were less than encouraging. It was also disappointing because FPIs were net sellers to the tune of $(3.76) Billion and now sold $7 Billion of equities in India in the first 8 trading sessions of October 2024. However, the week was also positive for two reasons. Firstly, the markets did not fall as sharply as the previous week and was flat to marginally negative; as far as the generic frontline indices were concerned. At the same time, the smaller indices actually outperformed the market and select stories like Defence returned as the star performers. However, the geopolitical risk in West Asia continued to be a challenge and the new investment trend seems to be “Sell India, Buy China.” Here are key trends we noted down in the week ending October 11, 2024.

• For the week to October 11, 2024, the sectoral picture was a little more mixed. There were 12 gaining sectors and 8 losing sectors. The fall in the front line indices like the Nifty and the Sensex was just about -0.2% to -0.3%. it can be attributed to some quietness after the frenetic selling in the previous week. However, the smaller indices like the mid-cap and the small cap indices gained over 1%, indicating that selective alpha hunting had already begun in the week.
• If you look at the Nifty and the Sensex for the week, the correction was relatively tepid at -0.20% and -0.38% respectively. This is despite higher FPI selling at $3.76 Billion in the latest week. That was more because the sectoral performance of the front line stocks was relatively mixed. For instance, heavyweight sectors like banking, FMCG, and oil & gas gave negative returns in the week; which was offset by positive returns from other heavyweight sectors like IT and Automobiles.
• The big story in the week was the defence sector, which returned to be the top performer for the week. Most investors almost had started to believe that the defence honeymoon was truly over. However, the defence stocks showed a harp revival after the government continue to depend on Indian manufacturers for its defence needs. The recent submarine deal is another classic example of how the make in India story is changing the contours of the defence sector in India.
• The pressure on the markets is visible in 3 broad stories viz. financials, commodities, and consumer driven sectors. There are concerns that higher rates and tighter household budgets could delay the revival in rural demand. That had dented the attractiveness of FMCG stocks, which had rallied sharply in recent weeks. With the geopolitical situation still fluid in the Middle East and West Asia, the commodities like oil and metals have come under pressure. Metal stocks are also concerned that China had promised a big fiscal stimulus, but it is yet to see real evidence of the same.
• What is the story on the rate sensitives? That remains a question mark. The BFSI segment would have been pleased if the RBI had cut rates by, at least, 25 bps in the latest monetary policy. However, there are also larger fundamental concerns over the NII growth and the NIMs of banks as well as the asset quality of NBFCs.

Overall, the markets held up in the week, despite aggressive FPI selling. The India inflation could hold the key to market direction next week.

BSE SENSEX 30 INDEX – CLOSES LOWER FOR THE WEEK

The table captures the movement of the BSE SENSEX 30 for the week to October 11, 2024.

Date	Open	High	Low	Close
11-Oct-24	81,478.49	81,671.38	81,304.15	81,381.36
10-Oct-24	81,832.66	82,002.84	81,538.94	81,611.41
09-Oct-24	81,954.58	82,319.21	81,342.89	81,467.10
08-Oct-24	80,826.56	81,763.28	80,813.07	81,634.81
07-Oct-24	81,926.99	82,137.77	80,726.06	81,050.00
04-Oct-24	82,244.25	83,368.32	81,532.68	81,688.45
		Weekly Returns		-0.38%

Data Source: BSE

Last week, the Sensex saw deep cuts correcting all the way from 86,000 levels to below the 82,000 levels. The correction continued in this week also, but was a lot more subdued. Sensex closed the week at 81,381 levels; losing -307 points in the week. The Sensex closed the week -0.38% lower and this is actually commendable considering that the week saw FPIs selling $3.76 Billion in equities. The sectoral mix was also more sober with banking, oil & gas and FMCG under pressure, while IT sector and automobiles closed in the positive. There is still a sense of caution when it comes to large caps; although not as intense as last week. During the week, the Sensex touched a high of 82,319 and a low of 80,726.

NIFTY 50 INDEX – CLOSES JUST BELOW 25,000 FOR THE WEEK

The table captures the movement of Nifty 50 index in the week to October 11, 2024.

Date	Open	High	Low	Close
11-Oct-24	24,985.30	25,028.65	24,920.05	24,964.25
10-Oct-24	25,067.05	25,134.05	24,979.40	24,998.45
09-Oct-24	25,065.80	25,234.05	24,947.70	24,981.95
08-Oct-24	24,832.20	25,044.00	24,756.80	25,013.15
07-Oct-24	25,084.10	25,143.00	24,694.35	24,795.75
04-Oct-24	25,181.90	25,485.05	24,966.80	25,014.60
		Weekly Returns		-0.20%

Data Source: NSE

The Nifty closed the week just below its 25,000 support levels, and that could be a psychological resistance now for the Nifty. The volatility index (VIX) fell sharply in the week to 13.22 levels, although one can argue that it is still elevated after the panic selling. For the Nifty, it was not just the FPI selling, but also the shorts built up in futures that had an impact. Also, the Buy China, Sell India trade appears to be taking its toll. For the week, Nifty closed -0.20% lower at 24,964, making lower tops and bottoms persistently. The Nifty lost 50 points in the week. During the week, the Nifty touched a high of 25,234 and a low of 24,694, eventually closing very near to the lowest point of Friday.

NIFTY NEXT 50 INDEX – MADE SURPRISE GAINS IN THE WEEK

The table captures the movement of Nifty Next 50 for the week to October 11, 2024.

Date	Open	High	Low	Close
11-Oct-24	75,397.80	75,514.35	74,975.90	75,378.45
10-Oct-24	75,668.50	76,085.90	75,163.80	75,278.10
09-Oct-24	75,013.75	76,009.90	74,926.50	75,407.80
08-Oct-24	72,771.40	74,740.80	72,459.85	74,597.30
07-Oct-24	74,989.25	75,156.00	72,531.30	72,884.30
04-Oct-24	75,363.30	75,724.05	74,184.75	74,620.25
		Weekly Returns		+1.02%

Data Source: NSE

After the carnage in the previous week, the Nifty Next 50 index saw a smart recovery in the latest week. Of course, it only offsets one-fourth of the losses of the previous week, but it is a good start. In a week when the Nifty and the Sensex faced sustained risk-off selling, the Nifty Next 50 managed to hold up in the positive. The index gained 758 points or 1.02% for the week as a whole. This week, the Nifty Next 50 touched a high of 76,086 level and a low of 72,459. The index staged a smart recovery after a sharp fall on Monday.

NIFTY MID-CAP 100 INDEX – ALPHA HUNTING SHOWS SOME TRACTION

The table captures the movement of Nifty Mid-Cap 100 in the week to October 11, 2024.

Date	Open	High	Low	Close
11-Oct-24	59,038.75	59,259.15	58,826.20	59,212.70
10-Oct-24	59,437.05	59,539.00	58,832.30	58,935.85
09-Oct-24	58,917.90	59,476.55	58,873.50	59,102.65
08-Oct-24	57,096.15	58,649.25	56,919.00	58,535.90
07-Oct-24	58,731.25	58,855.85	56,823.20	57,300.20
04-Oct-24	58,959.80	59,274.70	57,916.80	58,474.45
		Weekly Returns		+1.26%

Data Source: NSE

It finally looked like alpha hunting was coming back into the markets with the Nifty Mid Cap index closing with gains of 1.26% for the week. Obviously, with such higher levels of geopolitical risk, investor and traders would logically be less than willing to take on mid-cap and small cap risk. However, sectors like mid-cap IT, mid-cap PSUs and defence stocks held up this index for the week. In the current week to October 11, 2024, the mid-cap index bounced by 738 points. The A/D ratio has also turned favourable this week. For the week, the Mid-Cap 100 index touched a high of 59,539 and a low of 56,823; seeing pressure in the first two days of the week, before bouncing sharply in the latter half of the week.

NIFTY SMALL-CAP 100 INDEX – SMALL IS BEAUTIFUL ONCE AGAIN

The table captures movement of Nifty Small Cap 100 in the week to October 11, 2024.

Date	Open	High	Low	Close
11-Oct-24	18,950.15	19,064.10	18,894.50	19,008.80
10-Oct-24	18,976.60	19,018.30	18,884.15	18,900.00
09-Oct-24	18,718.45	18,940.70	18,716.80	18,864.60
08-Oct-24	18,208.55	18,658.80	18,097.45	18,617.65
07-Oct-24	18,840.60	18,907.45	18,102.05	18,242.85
04-Oct-24	18,934.75	19,042.00	18,566.60	18,758.65
		Weekly Returns		+1.33%

Data Source: NSE

Of course, a few swallows do not a summer make; but the good news is that there is positive traction in small cap stocks too. The index had been under pressure for the last two weeks, so this bounce comes as a respite. This week, the index of small caps closed  with gains of 250 points. For the week, the Nifty Small Cap index touched a high of 19,064 levels and a low of 18,102. Like in the case of mid-caps, even in the case of small caps, the selling was pronounced only on the first two days of the week, before the index made a smart bounce from lower levels to close the week in the positive.

BANK NIFTY INDEX – POLICY UNCERTAINTY HITS THE BANKS

The table below captures the movement of BANKNIFTY in the week to October 11, 2024.

Date	Open	High	Low	Close
11-Oct-24	51,491.90	51,560.00	51,005.85	51,172.30
10-Oct-24	51,195.70	51,659.45	51,047.00	51,530.90
09-Oct-24	51,161.75	51,707.15	50,903.75	51,007.00
08-Oct-24	50,736.10	51,176.05	50,466.00	51,021.00
07-Oct-24	51,543.20	51,784.80	50,194.30	50,478.90
04-Oct-24	51,643.75	52,358.35	51,347.25	51,462.05
		Weekly Returns		-0.56%

Data Source: NSE

For the banking sector, the geopolitical risks may be a trigger, at best. The bigger risk is that the private banks are expected to witness slower loan growth and deposit growth in Q2FY25. This is true of most private banks, while PSU banks are facing the pangs of rich valuations. The other concern 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. It did not happen in October, but it must happen, at least, in December or February. During the week, the Bank Nifty touched a high of 51,785 and a low of 50,194; losing 290 points in the week, although it bounced sharply from the lows of Monday.

NIFTY IT INDEX – DOLLAR STRENGTH LENDS SUPPORT TO IT SECTOR

The table captures the movement of Nifty IT index in the week to October 11, 2024.

Date	Open	High	Low	Close
11-Oct-24	41,770.50	42,567.20	41,734.20	42,335.70
10-Oct-24	42,801.05	42,880.40	42,012.35	42,088.80
09-Oct-24	42,524.70	42,920.55	42,498.55	42,622.75
08-Oct-24	42,275.25	42,445.25	41,639.45	42,387.55
07-Oct-24	42,134.65	42,491.85	41,760.10	42,190.60
04-Oct-24	41,682.95	42,566.15	41,682.95	41,912.50
		Weekly Returns		+1.01%

Data Source: NSE

IT appears to be the stand-out sector among the large cap intensive plays. In the latest week to October 11, 2024, the Nifty IT closed 1.01% higher. Even amidst the carnage of the previous week, the Nifty IT index only fell by a sober 95 bps. The positive trigger for IT sector came from 3 fronts. Firstly, the 4.1% US unemployment rate is healthy and 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. Thirdly, the Fed may tone down its dovishness, which is again positive for the dollar. For the week, the IT index gained 423 points. The Nifty IT index touched a high of 42,921 and a low of 41,639.

NIFTY OIL & GAS INDEX – GEOPOLITICS AND WAR WORRIES HIT OIL INDEX

The table captures the Nifty Oil & Gas index for the week to October 11, 2024.

Date	Open	High	Low	Close
11-Oct-24	12,262.30	12,331.75	12,237.05	12,306.55
10-Oct-24	12,307.55	12,409.10	12,225.35	12,247.10
09-Oct-24	12,391.00	12,449.80	12,240.85	12,252.55
08-Oct-24	12,138.75	12,368.40	12,064.30	12,334.85
07-Oct-24	12,521.90	12,533.35	12,111.85	12,180.10
04-Oct-24	12,582.90	12,660.95	12,402.60	12,462.50
		Weekly Returns		-1.25%

Data Source: NSE

In the previous week, the oil & gas index had fallen sharply by -5.02%, in tandem with the massive market sell-off. This week also the oil & gas index fell by -1.25% in sympathy with the volatile geopolitical situation in West Asia. In the current week to October 11, 2024, the index lost -156 points. With crude prices spiking from $71/bbl to $79/bbl due to the geopolitical uncertainty, the stocks are likely to remain under pressure. For the week, the Oil & Gas index touched a high of 12,533 and a low of 12,064 levels.

NIFTY AUTO INDEX – GRATIFYING BOUNCE AFTER THE BIG FALL

The table captures the movement of Nifty Auto index in the week to October 11, 2024.

Date	Open	High	Low	Close
11-Oct-24	26,583.25	26,610.90	26,381.00	26,436.60
10-Oct-24	26,492.00	26,764.15	26,392.15	26,528.50
09-Oct-24	26,314.10	26,673.40	26,271.00	26,450.25
08-Oct-24	25,731.85	26,293.60	25,612.45	26,236.10
07-Oct-24	26,042.60	26,079.95	25,544.80	25,807.15
04-Oct-24	26,294.25	26,449.25	25,850.40	25,926.30
		Weekly Returns		+1.97%

Data Source: NSE

Auto was one of the bottom performers in the previous week falling -6.1%. that was partially recouped in this week with the auto index gaining 1.97%. In the last few weeks, there have been growing concerns on the auto sales numbers, piling dealer inventory, rising crude prices, and stiff interest rates on auto loans on India. All these factors remain, but the bounce is a bet on the consumer story of auto companies. For the week, the auto index closed higher by 510 points. Auto Index made a weekly high of 26,764 and a low of 25,545.

NIFTY FMCG INDEX – DEMAND CONCERNS CONTINUE IN INDIA

The table captures the movement of Nifty FMCG index in the week to October 11, 2024.

Date	Open	High	Low	Close
11-Oct-24	62,257.65	62,312.45	61,849.60	62,080.20
10-Oct-24	62,640.20	62,672.35	61,841.85	62,056.30
09-Oct-24	63,515.10	63,517.55	62,190.75	62,334.35
08-Oct-24	63,014.15	63,562.75	62,895.35	63,326.55
07-Oct-24	63,522.65	63,688.15	62,894.25	63,028.35
04-Oct-24	64,371.15	64,683.50	63,266.95	63,380.05
		Weekly Returns		-2.05%

Data Source: NSE

After gaining more than 22% in 10 weeks, last week the FMCG index fell -3.7%. the fall was accentuated in this week falling another -2.05%. With higher crude prices, there is the risk of inflation coming back and hitting urban and rural demand for consumer products. Growth is tapering, and that is not good news. In last few weeks, much of the buying in FMCG stocks was on account of rural demand bets; but now there seems to be a rethink. For the week, FMCG index lost -1,300 points. During the week, FMCG index touched a high of 63,688 and a low of 61,850.