Weekly Musings – Index performance for week ended October 20, 2023

23 Oct 2023 , 06:50 AM

NIFTY, SENSEX STRUGGLE IN VOLATILE WEEK

Two of the major indices representing the Indian markets, viz., Sensex and Nifty; came under pressure in the last 3 days of the week, closing with losses of more than 1%. It was the story of geopolitical risk once again at a macro level with the situation in West Asia worsening, and negative repercussions for oil prices. Also, the rising wave pf uncertainty can be discerned by the 8% rally in gold prices in the last two weeks. That has led to a renewed bout of risk-off buying, which is normally negative for EMs like India. Sectors across the board saw heavy selling, with banks, IT and FMCG leading the sell-off.

Q2FY24 RESULTS PUT PRESSURE ON THE MARKETS

There were a number of stories in Q2FY24 that were below expectations. IT constant currency growth was below expectations for most of the frontlines stocks that provide guidance. Wipro even saw negative revenue growth this quarter. The banking sector, led by HDFC Bank and ICICI Bank, showed lower than expected growth in  NII and pressure on the NIMs. That also accelerated the fall in the markets this week. Above all, towards the end of the week, it was the FMCG numbers of the two leaders (ITC and HUL) that were below expectations. Overall, the markets were disappointed by the growth story and the margin story being impacted during this week . (For live impact, check market map)

BSE SENSEX 30 INDEX – LOSES 1,000 POINTS IN 3 DAYS

The table captures the movement of the BSE SENSEX 30 for the week to October 20, 2023.

Date	High	Low	Close
20-Oct-23	65,555.14	65,308.61	65,397.62
19-Oct-23	65,869.65	65,343.50	65,629.24
18-Oct-23	66,475.27	65,842.10	65,877.02
17-Oct-23	66,559.82	66,309.18	66,428.09
16-Oct-23	66,342.75	66,039.38	66,166.93
13-Oct-23	66,478.90	65,895.41	66,282.74
	Weekly Returns	-1.34%

Data Source: NSE

Today, the Sensex 30 may not be as active as the Nifty-50 in terms of derivative trading volumes. However, it is still the oldest index in India. With a pedigree of over 44 years, the Sensex remains the best barometer of India Inc and the Indian economy over a much longer term perspective. During the latest week, the Sensex lost more than 1,000 points in the last 3 days of trading as the sell-off in frontline stocks intensified. Sensex closed the week below the critical 66,000 mark.

NIFTY 50 INDEX – GEOPOLITICAL RISK BECOMES NIFTY HEADWIND

The table captures the movement of Nifty 50 index in the week to October 20, 2023.

Date	High	Low	Close
20-Oct-23	19,593.80	19,518.70	19,542.65
19-Oct-23	19,681.80	19,512.35	19,624.70
18-Oct-23	19,840.95	19,659.95	19,671.10
17-Oct-23	19,849.75	19,775.65	19,811.50
16-Oct-23	19,781.30	19,691.85	19,731.75
13-Oct-23	19,805.40	19,635.30	19,751.05
	Weekly Returns	-1.06%

Data Source: NSE

It was a volatile week once gain for the Nifty with 2 days of neutrality and 3 days of losses. While FPI selling has been getting more manageable, it is the global risk like the rising bond yields and the higher levels of the US dollar index that are putting pressure on the index. Also, the quarterly results threw up some disappointments and that also impacted the Nifty as did the relatively hawkish tone of the RBI MPC minutes. As we shall see in the sectoral analysis later, most of the heavy weight sectors like banks, IT, oil and FMCG saw more than 1% losses in the week, which was reflected in the Nifty performance.

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

The table captures the movement of Nifty Next 50 for the week to October 20, 2023.

Date	High	Low	Close
20-Oct-23	44,911.10	44,464.85	44,547.65
19-Oct-23	45,065.80	44,682.25	44,974.50
18-Oct-23	45,636.45	45,011.10	45,120.25
17-Oct-23	45,652.65	45,518.70	45,586.75
16-Oct-23	45,502.95	45,202.40	45,421.45
13-Oct-23	45,403.00	45,114.95	45,290.30
	Weekly Returns	-1.64%

Data Source: NSE

In last few weeks, the Nifty Next 50 has shown the tendency to mirror the Nifty, and that was evident in the latest week too. The Nifty Next 50 did far worse than the Nifty in this week as it lost -1.64% and even closed below the psychological support level of 45,000 for the week. There were bouts of profit booking in non-Nifty stocks, with retail and HNIs selling off in the non-index stocks too. The Nifty Next-50 faced resistance at the 46,000 mark and now it is very close to its support level of 44,500. Next week could be crucial for the index. 

NIFTY MID-CAP 100 INDEX – MID-CAPS COME UNDER SELLING PRESSURE

The table captures the movement of Nifty Mid-Cap 100 in the week to October 20, 2023.

Date	High	Low	Close
20-Oct-23	40,322.40	39,754.45	39,878.75
19-Oct-23	40,375.60	40,001.00	40,332.60
18-Oct-23	40,844.40	40,318.85	40,367.15
17-Oct-23	40,849.45	40,666.30	40,733.35
16-Oct-23	40,687.60	40,443.55	40,590.65
13-Oct-23	40,641.85	40,348.80	40,506.15
	Weekly Returns	-1.55%

Data Source: NSE

Mid-Cap index could not break above the 41,000 levels in the previous week also, and in the current week, the pressure of selling was quite intense. On Friday the Nifty Mid-cap 100 index closed below the 40,000 mark. However, one must not lose sight of the fact that the Mid-cap index has gained more than 35% since the start of the year, so interim corrections are more of noise and should not be taken too seriously. Mid-caps have come under pressure amidst rising crude prices and pressure on the rupee from a rising dollar index. A lot will depend on how the mid-cap quarterly results pan out. While some of the large caps gave out disappointing growth stories, the mid-cap story has continued to be robust. That would be the key driver of the sentiments in the weeks ahead.

NIFTY SMALL-CAP 100 INDEX – STAYS POSITIVE BUT LOSING MOMENTUM

The table captures movement of Nifty Small Cap 100 in the week to October 20, 2023.

Date	High	Low	Close
20-Oct-23	13,086.00	12,883.70	12,927.40
19-Oct-23	13,055.00	12,922.15	13,030.60
18-Oct-23	13,148.30	12,999.40	13,010.45
17-Oct-23	13,078.00	13,020.20	13,054.95
16-Oct-23	12,984.85	12,894.05	12,941.65
13-Oct-23	12,991.75	12,884.30	12,894.05
	Weekly Returns	+0.26%

Data Source: NSE

In the midst of chaos in markets, the small cap index gave positive returns; although it clearly appears to be losing momentum. The very specific stories that drove up the small cap story like railways, healthcare, IT, AI, and defence are facing the law of large returns. That is likely to gradually peak out. For now, 13,000 looks the immediate resistance for the small cap index. Despite the best efforts in this week ,the small cap index could not cross and go past the 13,000 mark. This index has a direct bearing on the participation of retail investors and the record investor account accretions clearly indicate that the interest in this segment is likely to continue for now.

BANK NIFTY INDEX – RISING US BOND YIELDS HITS INDIAN BANKS

The table below captures the movement of BANKNIFTY in the week to October 20, 2023.

Date	High	Low	Close
20-Oct-23	43,877.50	43,567.45	43,723.05
19-Oct-23	44,058.80	43,558.10	43,754.50
18-Oct-23	44,412.50	43,861.45	43,888.70
17-Oct-23	44,589.85	44,336.95	44,409.50
16-Oct-23	44,356.95	44,044.40	44,225.90
13-Oct-23	44,563.05	44,203.70	44,287.95
	Weekly Returns	-1.28%

Data Source: NSE

Bank Nifty continued to be under pressure in the current week losing close to 1.3%. The brief rally triggered by the withdrawal of the I-CRR is history. The hawkish tone of the Fed and sticky inflation in the US; as evidenced by the Fed minutes and the latest speeches by the Fed chair, Jerome Powell, are keeping Indian banks on tenterhooks. However, there have also been problems in the quarterly results of the big daddies of private banking. HDFC Bank and ICICI Bank saw pressure on NII growth and also on NIM margins. That was expected, but that has soured sentiments for the Bank Nifty. After touching 46,000 levels in recent week, the Bank Nifty has now dipped below 44,000. A lot of the pressure on the Bank Nifty is coming from HDFC Bank, where brokerages remain sceptical about the ability of the bank to sustain growth and margins post the mega merger with HDFC Ltd.

NIFTY IT INDEX – WEAK FY24 GUIDANCE CONTINUES THIS WEEK

The table captures the movement of Nifty IT index in the week to October 20, 2023.

Date	High	Low	Close
20-Oct-23	31,605.75	31,360.50	31,469.35
19-Oct-23	31,667.00	31,345.55	31,540.05
18-Oct-23	31,882.45	31,568.20	31,606.65
17-Oct-23	31,938.20	31,770.75	31,794.90
16-Oct-23	31,949.75	31,710.65	31,750.35
13-Oct-23	32,024.35	31,434.10	31,807.95
	Weekly Returns	-1.06%

Data Source: NSE

After a sharp correction of -1.65% in the previous week, Nifty IT index fell another -1.06% in the current week. That is not hard to fathom. IT companies results may have been good, but the guidance on constant currency (CC) growth in top line and the operating margins continue to be very subdued and cautious. If it was Infosys and HCL Tech that disappointed in the previous week, it was Wipro reporting negative sales growth and deepening negative guidance that took its toll on the IT index. Global headwinds are still a reality as weak tech spending and pressure on IT margins will strain the performance of IT companies in the coming quarters. In the latest week, the NASDAQ index has fallen by 3.5% and that remains a bellwether for the IT index in India.

NIFTY OIL & GAS INDEX – FRONTLINE SELLING HITS OIL STOCKS

The table captures the Nifty Oil & Gas index for the week to October 20, 2023.

Date	High	Low	Close
20-Oct-23	7,860.55	7,735.00	7,758.15
19-Oct-23	7,890.05	7,853.85	7,871.15
18-Oct-23	8,013.05	7,903.85	7,913.10
17-Oct-23	7,986.35	7,933.30	7,980.55
16-Oct-23	7,956.20	7,887.40	7,923.70
13-Oct-23	7,937.55	7,884.45	7,902.50
	Weekly Returns	-1.83%

Data Source: NSE

After breaking below the 8,000 mark a couple of weeks back, the oil & gas index has seen renewed pressure. The pressure of windfall tax on upstream oil stocks eased last week, but Reliance came under pressure in the week along with other upstream and downstream oil companies. Volatile oil prices amidst geopolitical risk remains the big challenge for the oil sector in India. With global oil market still undersupplied by 2 million barrels of crude per day a rush for $100/bbl looks very likely for Brent, amidst the geopolitical risk churn.

NIFTY AUTO INDEX – AUTO STOCKS HOLD UP; BUT ONLY JUST

The table captures the movement of Nifty Auto index in the week to October 20, 2023.

Date	High	Low	Close
20-Oct-23	16,664.85	16,470.25	16,497.85
19-Oct-23	16,645.70	16,445.25	16,618.00
18-Oct-23	16,592.95	16,482.65	16,535.40
17-Oct-23	16,618.45	16,490.55	16,522.75
16-Oct-23	16,551.90	16,446.15	16,519.35
13-Oct-23	16,468.00	16,229.35	16,444.95
	Weekly Returns	+0.32%

Data Source: NSE

After growth at a breathtaking 2.84% in the previous week, the Auto Index was more subdued amidst pressure on rural demand likely to manifest gradually on auto demand. Tractors and two wheelers are likely to remain the best proxies for rural demand and that is where we could see pressure. However, auto stocks have already been through a very intense and long rally. Hence base effect could now come into play for auto stocks.

NIFTY FMCG INDEX – ITC, HUL NUMBERS DENT FMCG SENTIMENTS

The table captures the movement of Nifty FMCG index in the week to October 20, 2023.

Date	High	Low	Close
20-Oct-23	52,400.60	51,762.45	51,823.35
19-Oct-23	52,667.20	52,077.10	52,516.35
18-Oct-23	52,772.80	52,381.20	52,442.05
17-Oct-23	52,851.45	52,383.45	52,665.30
16-Oct-23	52,588.30	52,305.60	52,401.95
13-Oct-23	52,655.75	52,130.05	52,520.70
	Weekly Returns	-1.33%

Data Source: NSE

A sharp fall in FMCG index is a rarity; which his normally an island of peace amidst an ocean of market turmoil. However, this week, the FMCG index lost -1.33%. it was largely due to the pressure on 2 FMCG majors (HUL and ITC) in Q2FY24. While question marks over rural demand remain, the quarter number showed pressure on margins and growth for the two largest FMCG players in India. Of course, FMCG companies are finding new ways to delight customer by launching smaller products, cutting costs, and expanding their basket. That, however, does not change the base narrative on demand.