Weekly Musings – Index performance for week ended October 27, 2023

30 Oct 2023 , 07:12 AM

BIG SELL-OFF IN NIFTY AND SENSEX

It was a massive sell-off on the Nifty and the Sensex during the week, despite the late bounce on Friday. The indices still ended 2.5% lower for the week on the back of a massive sell-off by the FPIs. In fact, the FPIs sold close to $1.52 billion of equities just in the last 2 days of the week. But the real issue was the massive unwinding positions by many retail and HNI investors and that was evident in the sharp fall in the mid-cap indices. All the major sectoral indices were in the red and that was not surprising. It was a combination of the twin factors of rising geopolitical stress in the middle east and the rising bond yields in the US. Obviously, there is a bigger message in the sell-off that most investors appear to be missing out. The markets are actually factoring in a distinct slowdown globally.

CAN A GLOBAL SLOWDOWN REALLY HAPPEN?

There were several reasons for the markets to be disappointed, apart from the routine issues like FPI selling. In fact, the FPI selling was more an effect than a cause. The first big factor was reflected in the rising tensions in the Middle East and West Asia. The immediate reaction was for oil to get back to $90/bbl in the Brent market. However, despite the obvious pressures from geopolitics in West Asia, the price of oil did not rally in a big way. That is indicative of the fact that markets are now pegging a very strong possibility of a global slowdown in growth. This is despite the fact that the GDP estimates for the third quarter in the US had surged in the week to 4.9%. The market view is that the Fed may return to its hawkish ways to tame inflation and that could actually tip the world into a slowdown. That is evident in the hesitancy of oil prices. (For live impact, check market map)

BSE SENSEX 30 INDEX – ALMOST LOOKED LIKE A FLASH CRASH

The table captures the movement of the BSE SENSEX 30 for the week to October 27, 2023.

Date	High	Low	Close
27-Oct-23	63,913.13	63,393.37	63,782.80
26-Oct-23	63,774.16	63,092.98	63,148.15
25-Oct-23	64,787.08	63,912.16	64,049.06
24-Oct-23	65,453.92	64,502.68	64,571.88
23-Oct-23	65,453.92	64,502.68	64,571.88
20-Oct-23	65,555.14	65,308.61	65,397.62
	Weekly Returns	-2.47%

Data Source: NSE

During the latest week, the Sensex was extremely volatile and despite a 635 points on Friday, the Sensex still closed more than 1,600 points for the week. In fact, in the six days running up to Thursday, the Sensex lost more than 3,000 points. In the previous week, the Sensex had traded above 66,000, but it dipped as low as 63,000 in the current week on the back of a massive sell-off in the first 3 days of the week. This was a truncated week, with Tuesday being a market holiday on account of Dussehra. Overall, India’s oldest index showed a lot of underlying weakness with the Friday bounce looking more like a dead cat bounce on the back of short covering.

NIFTY 50 INDEX – MAY STRUGGLE TO HOLD ABOVE 19,000 LEVELS

The table captures the movement of Nifty 50 index in the week to October 27, 2023.

Date	High	Low	Close
27-Oct-23	19,076.15	18,926.65	19,047.25
26-Oct-23	19,041.70	18,837.85	18,857.25
25-Oct-23	19,347.30	19,074.15	19,122.15
24-Oct-23	19,556.85	19,257.85	19,281.75
23-Oct-23	19,556.85	19,257.85	19,281.75
20-Oct-23	19,593.80	19,518.70	19,542.65
	Weekly Returns	-2.53%

Data Source: NSE

It was one of the worst weeks in terms of FPI selling, with equities of $1.52 billion being sold in the last 2 days of the week. The domestic institutions like LIC and mutual funds have been trying to fill the gap to some extent, but the global pressures are evident. Nifty had also run up rapidly in the last few weeks and there was some degree of ennui setting in. Towards the end of the week, the positive GDP data from the US at 4.9% for the third quarter came as some consolation as the Nifty managed a bounce on Friday. However, it was still 2.53% lower for the week.

NIFTY NEXT 50 INDEX – DIPS BELOW 43,000, BEFORE A LATE BOUNCE

The table captures the movement of Nifty Next 50 for the week to October 27, 2023.

Date	High	Low	Close
27-Oct-23	43,939.40	43,252.50	43,837.50
26-Oct-23	43,228.40	42,539.15	42,994.50
25-Oct-23	44,022.85	43,144.15	43,418.65
24-Oct-23	44,604.15	43,574.55	43,684.75
23-Oct-23	44,604.15	43,574.55	43,684.75
20-Oct-23	44,911.10	44,464.85	44,547.65
	Weekly Returns	-1.59%

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 only difference was that the bounce in the Nifty Next 50 was very sharp in the last couple of days, which helped the index to lose much less than the Nifty. On Thursday, the index closed below the psychological support level of 43,000 before recovering sharply over the weekend. There were bouts of profit booking in non-Nifty stocks, with retail and HNIs selling off in the non-index stocks too. It remains to be seen if the late bounce can be sustained in the coming week.

NIFTY MID-CAP 100 INDEX – MID-CAPS WITNESS A MASSIVE SELL-OFF

The table captures the movement of Nifty Mid-Cap 100 in the week to October 27, 2023.

Date	High	Low	Close
27-Oct-23	38,828.35	38,383.00	38,701.85
26-Oct-23	38,365.80	37,655.85	38,116.75
25-Oct-23	39,083.40	38,187.65	38,564.25
24-Oct-23	39,971.90	38,706.10	38,817.35
23-Oct-23	39,971.90	38,706.10	38,817.35
20-Oct-23	40,322.40	39,754.45	39,878.75
	Weekly Returns	-2.95%

Data Source: NSE

It was one of the worst performing indices in the week, losing nearly 3%, despite the luxury of a sharp recovery on Friday. After facing resistance at 41,000 in the last few weeks, the mid-cap index fell below 38,000 this week, before staging a bounce on Friday. However, one must not lose sight of the fact that the Mid-cap index had already gained more than 35% since the start of the year, so interim corrections are more of noise and should not be taken too seriously. However, there appears to be a sense of panic in the latest round of sell-off as unwinding appears to be quite strong and rapid. A lot will depend on how the mid-cap quarterly results pan out, but they have been generally positive till date. That would be the key driver of the sentiments in the weeks ahead as far as mid-cap index is concerned.

NIFTY SMALL-CAP 100 INDEX – EVEN SMALL CAPS WERE NOT SPARED

The table captures movement of Nifty Small Cap 100 in the week to October 27, 2023.

Date	High	Low	Close
27-Oct-23	12,672.05	12,510.95	12,639.30
26-Oct-23	12,421.65	12,048.75	12,390.70
25-Oct-23	12,645.85	12,266.00	12,433.50
24-Oct-23	13,019.95	12,424.35	12,463.90
23-Oct-23	13,019.95	12,424.35	12,463.90
20-Oct-23	13,086.00	12,883.70	12,927.40
	Weekly Returns	-2.23%

Data Source: NSE

In the last few weeks, this was one index that was holding up amidst the chaos in markets. However, that was not to be this week as the small cap index also fell 2.23%. The pressure on oil and rupee are starting to show on the smaller stocks. The specific stories that drove up the small cap story like railways, healthcare, IT, AI, and defence are facing the law of large returns. The index spent the whole week below 13,000 levels and actually dropped close to the 12,000 levels during the week, before bouncing back. This index is a barometer of retail participation and assumes importance in the light of the huge account accretions.

BANK NIFTY INDEX – RISING US BOND YIELDS PUT PRESSURE ON BANKS

The table below captures the movement of BANKNIFTY in the week to October 27, 2023.

Date	High	Low	Close
27-Oct-23	42,840.15	42,482.75	42,782.00
26-Oct-23	42,716.20	42,105.40	42,280.15
25-Oct-23	43,397.45	42,758.40	42,832.00
24-Oct-23	43,831.30	43,029.45	43,151.20
23-Oct-23	43,831.30	43,029.45	43,151.20
20-Oct-23	43,877.50	43,567.45	43,723.05
	Weekly Returns	-2.15%

Data Source: NSE

Bank Nifty continued to be under pressure in the current week losing 2.15%. 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 banks on tenterhooks. This week, the US GDP figure at 4.9% and the PCE inflation at 3.4% hint that hawkishness would come back in the Fed lingo, sooner rather than later. To add to the problems, banking numbers have betrayed 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 43,000 and even went as low as the 42,100 levels amidst the sell-off this week. A lot of the pressure on the Bank Nifty is coming from HDFC Bank, where brokerages have flagged concerns about the ability to hold margins post the merger.

NIFTY IT INDEX – WEAK GUIDANCE AND LOWER HEADCOUNT WORRY MARKETS

The table captures the movement of Nifty IT index in the week to October 27, 2023.

Date	High	Low	Close
27-Oct-23	30,676.95	30,313.95	30,599.70
26-Oct-23	30,312.45	30,054.20	30,225.65
25-Oct-23	31,004.20	30,469.00	30,530.50
24-Oct-23	31,456.10	30,802.05	30,848.40
23-Oct-23	31,456.10	30,802.05	30,848.40
20-Oct-23	31,605.75	31,360.50	31,469.35
	Weekly Returns	-2.76%

Data Source: NSE

After a sharp correction of 3% in the previous 2 weeks, the latest week saw the IT index fall by another 2.76%. That is a lot of value lost, especially after a slew of big IT results disappointed the street in terms of its guidance and the sharp fall in headcount. The good news is that there are fewer people in the bench, but the concern is that it is a reaction to the pressure that IT companies are facing on the pricing and margin front. Most of the big names like Infosys, HCL Tech, Wipro and Tech Mahindra disappointed in terms of guidance given for constant currency growth and margins. In the last 2 weeks, NASDAQ index has fallen by 6% and that remains an overhang for the IT index in India.

NIFTY OIL & GAS INDEX – RELIANCE KEEPS OIL INDEX UNDER PRESSURE

The table captures the Nifty Oil & Gas index for the week to October 27, 2023.

Date	High	Low	Close
27-Oct-23	7,565.00	7,480.60	7,549.00
26-Oct-23	7,544.85	7,422.45	7,453.60
25-Oct-23	7,665.95	7,520.50	7,566.85
24-Oct-23	7,758.20	7,585.05	7,606.90
23-Oct-23	7,758.20	7,585.05	7,606.90
20-Oct-23	7,860.55	7,735.00	7,758.15
	Weekly Returns	-2.70%

Data Source: NSE

After breaking below the 8,000 mark a couple of weeks back, the oil & gas index has seen renewed pressure. Much of the pressure has come from Reliance Industries that has remained close to the 52-week low during the week. Volatile oil prices amidst geopolitical risk remains the big challenge for the oil sector in India. While the upstream companies will gain from oil prices rising, the windfall tax will take away most of the gains.

NIFTY AUTO INDEX – AUTO STOCKS ALSO JOIN THE SELL-OFF

The table captures the movement of Nifty Auto index in the week to October 27, 2023.

Date	High	Low	Close
27-Oct-23	16,279.80	16,002.15	16,169.15
26-Oct-23	16,155.70	15,928.60	15,953.05
25-Oct-23	16,343.65	16,082.45	16,210.45
24-Oct-23	16,538.10	16,253.75	16,277.85
23-Oct-23	16,538.10	16,253.75	16,277.85
20-Oct-23	16,664.85	16,470.25	16,497.85
	Weekly Returns	-1.99%

Data Source: NSE

In a week that saw aggressive selling by FPIs in their favourite counters, even auto stocks were not spared. After a long break, auto index fell by nearly 2% in the week with a big sell-off across most of the two-wheelers and the four-wheelers.

NIFTY FMCG INDEX – DEFENSIVE BUYING HELPS FMCG STOCKS

The table captures the movement of Nifty FMCG index in the week to October 27, 2023.

Date	High	Low	Close
27-Oct-23	51,502.45	50,948.10	51,395.00
26-Oct-23	51,089.85	50,607.00	50,941.10
25-Oct-23	51,619.60	50,954.35	51,216.85
24-Oct-23	51,956.50	51,335.05	51,421.65
23-Oct-23	51,956.50	51,335.05	51,421.65
20-Oct-23	52,400.60	51,762.45	51,823.35
	Weekly Returns	-0.83%

Data Source: NSE

A sharp fall in FMCG index is a rarity. After losing 1.33% last week, the FMCG index lost a subdued 0.83% this week. While selling was visible, there was also a rush to buy defensives amidst the sell-off. For now, the question marks over rural demand remain, but the markets are not overly worried about that. FMCG remained the one defensive bet in Indian equities.