Weekly Musings – Index performance for week ended October 18, 2024

21 Oct 2024 , 01:20 PM

NIFTY PERFORMANCE MAY HAVE BEEN DECEPTIVE
For the latest week, the overall performance of the Nifty and the Sensex appeared flat with a negative bias. However, the macro view was deceptive and also misleading. It was a week in which the banking stocks had a strong rally. However, all the other heavyweight sectors closed the week with negative returns. The issue this week was less about global factors and more about market internals. The geopolitical risk was constant in West Asia and markets have discounted geopolitical worries. Oil, actually, fell sharply during the week. The real issue was about disappointing corporate results and pressure on key macros like inflation and global trade. Here are key trends we noted down in the week ending October 18, 2024.
1) For the week to October 18, 2024, the aggregate picture was flat with a downward bias. However, the real picture was a lot more intense. For instance, out of the top 20 sectors, only 5 sectors gained in the week while 15 sectors ended in the red. The fall in the front line indices like the Sensex and the Nifty was just about -0.20% to -0.45%. Scratch the surface; and there were fairly large dichotomies in the performance of various sectors.

2) FPIs net selling in equities was to the tune of $2.26 Billion this week. This follows 2 weeks of intensive selling and the net result is that FPIs have net sold $9.25 Billion of equities in the first 13 trading days of October. That is more than the FPI selling seen in any month in history, and that is quite a statement, considering that we still have 9 more trading session to go for the month. It is hard to say if selling will intensify in October; but FPI outflows in the latest week have been largely driven by domestic concerns.

3) The positive highlight of the week was the banking sector. Despite HDFC bank giving tepid credit growth guidance, the Bank Nifty closed the week with gains of 1.8%. There were gains across private banks and PSU banks. The reason was the expectation that despite the higher inflation, the growth concerns may impel the RBI to cut rates in the December 2024 meeting. It is this expectation that led to a rally in banks; in a week when most of the other key indices were deep in the red.

4) Leave out banking and the pressure on the other indices was fairly intense. Two companies set the downside trend in the market with their guidance. Reliance reported a fall in net profits on weak performance by its oil to chemicals (O2C) business as gross refining margins came under pressure. Oil index took a hit of -1.64% in the week. But the big hit was on consumption stocks after Bajaj Auto reported 31% fall in profits in Q2. Above all, Bajaj Auto guided for festival sales of just 3% to 5% this year, compared to 8% last year. Not surprisingly, auto stocks fell by -4.88% in the week and FMCG -1,67%. Even metals corrected -1.80%, after there was little stimulus action from China.

5) The big story of the week was that the investors have underplayed the consumption theme. That is significant considering that Indian is entering the festival season, which is normally a time when consumer demand tends to peak.
Overall, it looked like the markets were hinting at a more systemic demand problem in the Indian economy; and it is up to the investors how they interpret this signal.

BSE SENSEX 30 INDEX – CLOSES MARGINALLY LOWER FOR THE WEEK

The table captures the movement of the BSE SENSEX 30 for the week to October 18, 2024.

Date	Open	High	Low	Close
18-Oct-24	80,749.26	81,391.15	80,409.25	81,224.75
17-Oct-24	81,758.07	81,781.40	80,905.64	81,006.61
16-Oct-24	81,646.60	81,932.15	81,358.26	81,501.36
15-Oct-24	82,101.86	82,300.44	81,635.57	81,820.12
14-Oct-24	81,576.93	82,072.17	81,541.20	81,973.05
11-Oct-24	81,478.49	81,671.38	81,304.15	81,381.36
		Weekly Returns		-0.19%

Data Source: BSE

It was another week of the Sensex drifting with negative bias. Last week, the Sensex was down -0.38% and this week it is down another -0.19%. That is hardly alarming, but the latest week story is an underlying consumption story that appears to have weakened. The downward reaction of the Sensex was not surprising considering FPIs sold $2.26 Billion in equities in the week. Banking was the only star of the week; while oil and metals saw pressure. But the real hit came from consumption stories like autos and FMCG. During the week, the Sensex touched a high of 82,300 and a low of 80,409; losing 157 points this week.

NIFTY 50 INDEX – INCHES LOWER DURING THE WEEK

The table captures the movement of Nifty 50 index in the week to October 18, 2024.

Date	Open	High	Low	Close
18-Oct-24	24,664.95	24,886.20	24,567.65	24,854.05
17-Oct-24	25,027.40	25,029.50	24,728.90	24,749.85
16-Oct-24	25,008.55	25,093.40	24,908.45	24,971.30
15-Oct-24	25,186.30	25,212.05	25,008.15	25,057.35
14-Oct-24	25,023.45	25,159.75	25,017.50	25,127.95
11-Oct-24	24,985.30	25,028.65	24,920.05	24,964.25
		Weekly Returns		-0.44%

Data Source: NSE

The Nifty closed the week just around 24,850 support levels, and the range to 25,000 will now be a psychological barrier for Nifty. The volatility index (VIX) tapered in the week from 13.22 levels to 13.02 levels; although it is not low enough to be called a buy-on-dips market. For the Nifty, it was not just the FPI selling, but the loss of confidence in the consumption story that took the markets lower. For the week, Nifty closed -0.44% lower at 24,854, making lower tops and bottoms. The Nifty lost 90 points in the week. During the week, the Nifty touched a high of 25,212 and a low of 24,568, with lows being back-ended.

NIFTY NEXT 50 INDEX – EXPERIENCES A SHARP FALL IN THE WEEK

The table captures the movement of Nifty Next 50 for the week to October 18, 2024.

Date	Open	High	Low	Close
18-Oct-24	73,813.60	74,415.90	73,085.00	74,288.10
17-Oct-24	75,717.40	75,746.75	73,933.05	74,007.20
16-Oct-24	75,830.40	76,093.30	75,340.05	75,698.15
15-Oct-24	76,018.55	76,054.45	75,634.45	75,859.85
14-Oct-24	75,659.35	75,745.90	75,309.50	75,651.70
11-Oct-24	75,397.80	75,514.35	74,975.90	75,378.45
		Weekly Returns		-1.45%

Data Source: NSE

After a recovery in the previous week, the Nifty Next 50 index again saw deep cuts in the current week. Some of the typical sectors in the index like IT, healthcare, defence, and PSUs came under pressure this week. The index lost 1,090 points or -1.45% for the week. However, the good news was that the index bounced sharply on Friday and closed near the high point of the day. This week, the Nifty Next 50 touched a high of 76,093 level and a low of 73,085. It made higher highs and higher lows; an intrinsically positive signal.

NIFTY MID-CAP 100 INDEX – ALPHA HUNTING NOT ON THE AGENDA

The table captures the movement of Nifty Mid-Cap 100 in the week to October 18, 2024.

Date	Open	High	Low	Close
18-Oct-24	58,222.65	58,752.70	57,575.30	58,649.15
17-Oct-24	59,521.30	59,550.80	58,415.80	58,465.95
16-Oct-24	59,520.75	59,700.30	59,234.95	59,451.85
15-Oct-24	59,664.45	59,686.20	59,279.65	59,593.25
14-Oct-24	59,354.20	59,520.80	59,043.40	59,465.45
11-Oct-24	59,038.75	59,259.15	58,826.20	59,212.70
		Weekly Returns		-0.95%

Data Source: NSE

If the previous week showed some signs of alpha hunting coming back, that was surely not on the agenda. However, the good news is in the mutual fund buying report, which saw a lot of mid-caps seeing massive outlays by mutual funds in September 2024. Sectors like mid-cap IT, mid-cap PSUs and defence stocks were under pressure during the week although the A/D ratio showed signs of recovery. In the week to October 18, 2024, the mid-cap index fell -564 points. For the week, the Mid-Cap 100 index touched a high of 59,700 and a low of 57,575. Once again; higher highs and higher lows are a positive signal here.

NIFTY SMALL-CAP 100 INDEX – SMALL SHOPPING BASKETS ARE BACK

The table captures movement of Nifty Small Cap 100 in the week to October 18, 2024.

Date	Open	High	Low	Close
18-Oct-24	18,957.75	19,102.65	18,645.40	19,077.80
17-Oct-24	19,374.90	19,391.90	19,039.50	19,065.95
16-Oct-24	19,279.25	19,346.85	19,178.25	19,304.90
15-Oct-24	19,179.55	19,318.60	19,149.30	19,302.05
14-Oct-24	19,074.25	19,105.75	18,992.20	19,090.55
11-Oct-24	18,950.15	19,064.10	18,894.50	19,008.80
		Weekly Returns		+0.36%

Data Source: NSE

For the second week in a row, the small cap index closed in the positive. One thinking is that the small caps may be oversold, so some bounce is inevitable. Also, the mutual fund action in September did show active buying in small cap stocks. This week, the index of small caps closed with gains of 69 points. For the week, the Nifty Small Cap index touched a high of 19,392 levels and a low of 18,645. Currently, broader concerns in the markets are around geopolitical risk and market allocation internals. These do not impact small caps too much.

BANK NIFTY INDEX – BETTING ON DECEMBER RATE CUTS

The table below captures the movement of BANKNIFTY in the week to October 18, 2024.

Date	Open	High	Low	Close
18-Oct-24	51,261.00	52,199.45	51,000.90	52,094.20
17-Oct-24	51,849.30	51,930.20	51,150.25	51,288.80
16-Oct-24	51,711.20	52,031.60	51,711.20	51,801.05
15-Oct-24	51,975.95	52,022.05	51,698.75	51,906.00
14-Oct-24	51,263.25	51,893.00	51,220.85	51,816.90
11-Oct-24	51,491.90	51,560.00	51,005.85	51,172.30
		Weekly Returns		+1.80%

Data Source: NSE

Overall, it was a mixed week for the banks. On the downside, the geopolitical risk is still there. HDFC Bank results were mixed. It beat profit growth expectations, but NIMs are subdued at 3.46% and loan growth is tepid. We have to see what the other big banks announce this quarter. But the big story was that the RBI may be impelled to cut rates in December 2024, despite inflation concerns. Markets are betting that with contraction in core sector and IIP as well as pressure on consumption, the government will expect the RBI to make rates easier. That helped banks rally. During the week, the Bank Nifty touched a high of 52,199 and a low of 51,001; gaining 922 points in the week.

NIFTY IT INDEX – DOLLAR STRENGTH THE ONLY SAVING GRACE

The table captures the movement of Nifty IT index in the week to October 18, 2024.

Date	Open	High	Low	Close
18-Oct-24	45,583.00	42,216.90	42,579.75	41,838.00
17-Oct-24	45,582.00	42,455.60	42,900.45	42,369.80
16-Oct-24	45,581.00	42,605.35	42,691.15	42,168.70
15-Oct-24	45,580.00	42,917.65	43,329.50	42,572.80
14-Oct-24	45,579.00	42,383.25	42,985.10	42,357.75
11-Oct-24	45,576.00	41,770.50	42,567.20	41,734.20
		Weekly Returns		+0.25%

Data Source: NSE

The IT sector may not have displayed fireworks like the banking sector, but it still closed in the positive. It was one of the indices that saved the Nifty and Sensex from a sharp crash. In the latest week to October 18, 2024, the Nifty IT closed 0.25% higher. In the last 3 weeks of FPI selling, IT is one sector that has stayed buoyant. There were two reasons. Recent data on GDP growth and unemployment show that hard landing may not really be a concern and tech spending should remain buoyant. Secondly, the dollar is likely to remain strong as a safe haven in tumultuous times. That is again positive for IT, being a dollar defensive sector. That has led to the IT index holding up quite smartly. For the week, the IT index gained just 104 points. The Nifty IT index touched a high of 42,917 and a low of 42,580, staying in a very narrow range during the week.

NIFTY OIL & GAS INDEX – RELIANCE RESULTS SPOOKS OIL STOCKS

The table captures the Nifty Oil & Gas index for the week to October 18, 2024.

Date	Open	High	Low	Close
18-Oct-24	12,076.50	12,135.55	11,920.75	12,104.25
17-Oct-24	12,292.60	12,320.55	12,117.85	12,128.60
16-Oct-24	12,252.50	12,356.95	12,193.45	12,283.65
15-Oct-24	12,288.90	12,359.25	12,205.70	12,255.95
14-Oct-24	12,350.50	12,357.40	12,218.70	12,289.45
11-Oct-24	12,262.30	12,331.75	12,237.05	12,306.55
		Weekly Returns		-1.64%

Data Source: NSE

Oil index fell -1.64% after the O2C (oil to chemicals) business of Reliance Industries resulted in profit contraction in Q2FY25. More importantly, there was visible pressure on the gross refining margins (GRMs) in line with the fall in the benchmark Singapore GRM. In the last 3 weeks of FPI selling, the oil & gas index has fallen by a tad over 9%, taking the brunt of the market hit. Global Brent crude prices cracking to $73/bbl also hurt oil stocks. For the week to October 18, 2024, the index lost -202 points. For the week, the Oil & Gas index touched a high of 12,359 and a low of 11,921; making lower highs and lower lows for the week.

NIFTY AUTO INDEX – BAJAJ AUTO DRIVES AUTO STOCKS LOWER

The table captures the movement of Nifty Auto index in the week to October 18, 2024.

Date	Open	High	Low	Close
18-Oct-24	24,907.95	25,247.80	24,699.35	25,146.90
17-Oct-24	25,792.15	25,820.50	24,959.85	24,991.20
16-Oct-24	26,178.25	26,197.25	25,783.25	25,909.00
15-Oct-24	26,619.00	26,626.10	26,028.80	26,242.60
14-Oct-24	26,501.15	26,569.40	26,428.05	26,463.55
11-Oct-24	26,583.25	26,610.90	26,381.00	26,436.60
		Weekly Returns		-4.88%

Data Source: NSE

Auto was the other frontline index (apart from oil & gas) that lost 9% in the last 3 weeks and became synonymous with FPI selling. The problems for the auto sector this week began with Bajaj Auto reporting 31% fall in profits. What really disappointed the markets was the guidance by Bajaj Auto management that festival sales growth would taper to just 3-5% this year, compared to 8% last year. That not only spooked auto stocks, but all consumption stocks across the board. For the week, the auto index closed -1,290 points lower. Auto Index made a weekly high of 26,626 and a low of 24,699, with persistent pressure in the last 3 days of the week.

NIFTY FMCG INDEX – A PROXY FOR WEAK CONSUMPTION?

The table captures the movement of Nifty FMCG index in the week to October 18, 2024.

Date	Open	High	Low	Close
18-Oct-24	61,372.50	61,409.40	60,453.20	61,042.10
17-Oct-24	62,409.00	62,423.80	61,280.75	61,352.75
16-Oct-24	62,560.15	62,572.05	62,081.25	62,373.25
15-Oct-24	62,494.15	62,683.20	62,112.45	62,607.70
14-Oct-24	62,368.45	62,439.05	61,881.25	62,372.30
11-Oct-24	62,257.65	62,312.45	61,849.60	62,080.20
		Weekly Returns		-1.67%

Data Source: NSE

After gaining more than 22% in 10 weeks, the FMCG index has lost -7.6% in the last 3 weeks. FMCG stocks have borne the brunt of FPI selling in the last 3 weeks. Higher inflation, household budget pressures, weak rural revival, and tepid festival demand seem to be the concerns for the FMCG sector. Growth is tapering, consumption is tepid and the RBI is not even talking about rate cuts. For the week, FMCG index lost -1,038 points. During the week, FMCG index touched a high of 63,683 and a low of 60,453. The theme of the week was “Consumption is the big worry for markets now.”