Weekly Musings – Index performance for week ended September 08, 2023

11 Sep 2023 , 06:47 AM

The week to September 08, 2023 saw the Nifty gaining sharply by 1.98% as the index closed at a 7-week high. Th Nifty closed the week at 19,820, just about 172 points short of its all-time high. There were no real data flows during the week, other than the services PMI. However, the feel-good factor came from India hosting the G-20 Summit at New Delhi. While China and Russia will not be attending the summit for their own reasons, most of the developed world is here and that should go as a statement for India’s rise as an economic power. Remember, in a world that is struggling to grow its GDP, India is likely to be the fastest growing large economy (among nations with GDP of more than $1 trillion) for 2 years in succession. It is in this context that India’s larger and more prominent role in global affairs is being viewed through the lens of the G-20 Summit hosted by India.

Even as the markets are speculating about the Nifty scaling above 20,000 in the coming week, there are going to be some very critical data points. India consumer inflation will be announced this week as will the IIP numbers. In July, the consumer inflation had touched 7.44% and economists expect CPI inflation for August also to be above 7%. It is against this benchmark that the actual inflation number will be assessed. In addition, the US consumer inflation number will also be announced this week, which will set the tone for what the Fed would do with interest rates later this month. FPI flows were negative in this week but for now, the markets are not going to read too much into it. Data flows will hold the key for the coming week. (For live impact, check market map)

NIFTY 50 INDEX – BANKING AND OIL BOOST NIFTY

The table below captures the movement of the Nifty 50 index in the week to September 08, 2023.

Date	High	Low	Close
08-Sep-23	19,867.15	19,727.05	19,819.95
07-Sep-23	19,737.00	19,550.05	19,727.05
06-Sep-23	19,636.45	19,491.50	19,611.05
05-Sep-23	19,587.05	19,525.75	19,574.90
04-Sep-23	19,545.15	19,432.85	19,528.80
01-Sep-23	19,458.55	19,255.70	19,435.30
	Weekly Returns	+1.98%

Data Source: NSE

During the week the Nifty decisively broke above two crucial resistance levels of 19,600 and 19,800, positioning the Nifty just about 172 points short of the 20,000 mark. The 1.98% rally in the Nifty during the week is the best rally over the last 7 weeks. The Nifty rally was largely driven by banks and oil stocks. While the upstream oil stocks gained from higher Brent crude prices, the banks gained from the RBI’s decision to phase out the Incremental CRR (I-CRR) in a phased manner. Of course, at a macro level, the G-20 Summit in Delhi provided the much needed sentimental boost to the markets.

NIFTY NEXT 50 INDEX – CONTINUES ITS UPWARD MOVE

The table captures the movement of Nifty Next 50 index in the week to September 08, 2023.

Date	High	Low	Close
08-Sep-23	46,207.10	45,739.35	46,110.80
07-Sep-23	45,794.90	45,508.15	45,739.35
06-Sep-23	45,531.20	45,287.50	45,508.15
05-Sep-23	45,433.70	45,126.30	45,294.10
04-Sep-23	45,244.25	44,799.75	45,201.00
01-Sep-23	44,836.70	44,403.55	44,799.75
	Weekly Returns	+2.93%

Data Source: NSE

In last few weeks, the Nifty Next 50 had shown the tendency to mirror the Nifty. For starters, the Nifty Next-50 is a collection of stocks with the potential to become Nifty stocks in the future, or Nifty aspirants. The Nifty Next-20 started the week below the 45,000 mark but managed to close the week above the 46,000 mark. Power related stocks like Tata Power and Havells were the big gainers in the Nifty Next 50 index. Much of the gains in the index during the week came from the PSU stocks, most of which have been seeing persistently improved ratings in the stock market.

NIFTY MID-CAP 100 INDEX – MID-CAPS STILL THE KING OF ALPHA

The table captures the movement of Nifty Mid-Cap 100 in the week to September 08, 2023.

Date	High	Low	Close
08-Sep-23	41,011.15	40,593.90	40,977.75
07-Sep-23	40,619.15	40,284.10	40,593.90
06-Sep-23	40,377.30	40,154.80	40,284.10
05-Sep-23	40,292.15	39,830.35	40,253.60
04-Sep-23	39,885.30	39,445.60	39,830.35
01-Sep-23	39,480.50	39,035.80	39,445.60
	Weekly Returns	+3.88%

Data Source: NSE

It was another strong week for the Mid-cap index which scaled its all-time high during the week. Here again, the story was all about power stocks with REC, PFC, JSW Energy, and BHEL among the big gainers for the week. The bets were on a sizable increase in capex in the power space and that took the mid-cap index to new highs. In fact, since the start of 2023, the mid-cap index has topped 35% gains. Even the advance decline ratio of the mid-cap index during the week was decisively in favour of the advances. In a market where the generic indices are very close to the peaks, investors are seeing a lot of natural value in these mid-cap stocks with focused business models and low debt quotient.

NIFTY SMALL-CAP 100 INDEX – SMALL CAPS STAGE SMART RECOVERY

The table captures the movement of Nifty Small Cap 100 index in the week to September 08, 2023.

Date	High	Low	Close
08-Sep-23	12,843.10	12,734.15	12,812.30
07-Sep-23	12,773.35	12,674.90	12,734.15
06-Sep-23	12,721.45	12,621.05	12,674.90
05-Sep-23	12,701.05	12,550.75	12,656.25
04-Sep-23	12,595.50	12,386.45	12,550.75
01-Sep-23	12,400.05	12,268.20	12,386.45
	Weekly Returns	+3.44%

Data Source: NSE

Like the mid-cap index, even the small-cap index scaled new highs during the week. The index had started the year below 10,000 and it is now closing in on 13,000; outperforming the Nifty by a huge margin. At 3.44%, the returns on the small cap index were not as impressive as last week, but the bounce from the recent correction in small cap stocks has bene quite impressive. There were a number of railway and defence stocks, but the underlying theme still appeared to be capex spending. Listed market related stocks like BSE Ltd and CDSL Ltd also gained from the record surge in demat accounts in August 2023.

BANK NIFTY INDEX – WITHDRAWAL OF I-CRR BUOYS BANKS

The table below captures the movement of BANKNIFTY in the week to September 08, 2023.

Date	High	Low	Close
08-Sep-23	45,383.35	44,812.15	45,156.40
07-Sep-23	44,915.55	44,341.20	44,878.35
06-Sep-23	44,577.00	44,207.25	44,409.10
05-Sep-23	44,668.70	44,401.70	44,532.15
04-Sep-23	44,656.05	44,310.95	44,578.30
01-Sep-23	44,568.55	43,830.75	44,436.10
	Weekly Returns	+1.62%

Data Source: NSE

With a 37% weightage for the financials in the Nifty, what is good for Bank Nifty is obviously good for the Nifty also. The Bank Nifty index may be still away from its all-time highs, but the benefits of the phased withdrawal of I-CRR was evident in banking stocks. During the August monetary policy announcement, RBI had imposed incremental CRR of 10% on specific deposits to absorb the surplus liquidity coming from the surrender of Rs2,000 denomination notes. This will be done in a phased manner till the first week of October, but promises to immediately start releasing liquidity for banks to lend. That is seen as NIM positive for the banks, amidst concerns that NIMs may have peaked out for banks.

NIFTY IT INDEX – STILL PREFERRED AS A DOLLAR DEFENSIVE

The table captures the movement of Nifty IT index in the week to September 08, 2023.

Date	High	Low	Close
08-Sep-23	32,450.75	32,561.25	32,353.40
07-Sep-23	32,264.50	32,497.65	32,153.40
06-Sep-23	32,437.85	32,515.05	32,038.55
05-Sep-23	32,207.40	32,482.65	32,014.95
04-Sep-23	31,552.50	32,197.85	31,454.50
01-Sep-23	31,166.60	31,550.95	31,149.25
	Weekly Returns	+2.86%

Data Source: NSE

Like in the previous week, the IT index continued to throw a surprisingly positive package. It was a week where Apple corrected sharply and the NASDAQ also struggled to hold higher levels. However, amidst this uncertainty, the Indian IT index rallied by 2.86%. Mid-cap IT stocks have rallied relentlessly even in the midst of the scepticism. However, the bigger story was the large caps holding up. To an extent, it was a hedge against the falling rupee, with the rupee dipping to an all-time low of Rs83.16/$, before gaining over the weekend. However, the markets are betting that RBI support would be limited considering its implications for forex reserves. Buying IT stocks is a much better way to hedge the currency risk. That has been driving the IT stocks rally in the last few weeks.

NIFTY OIL & GAS INDEX – GAINING FROM BUOYANT CRUDE PRICES

The table captures the movement of Nifty Oil & Gas index in the week to September 08, 2023.

Date	High	Low	Close
08-Sep-23	8,119.65	8,017.75	8,107.30
07-Sep-23	8,028.95	7,978.35	8,017.75
06-Sep-23	8,016.60	7,938.05	7,999.10
05-Sep-23	7,993.05	7,878.25	7,938.05
04-Sep-23	7,920.65	7,849.35	7,878.25
01-Sep-23	7,864.50	7,738.15	7,849.35
	Weekly Returns	3.29%

Data Source: NSE

During the week, the oil & gas index closed with smart gains of 3.20% and this had largely to do with surging crude prices. During the week, crude sustained above $90/bbl. While rising oil prices may be a concern for the Indian economy, specific upstream stocks like Reliance, ONGC, OIL and GAIL hav benefited from the buoyancy in oil prices. Higher crude prices imply higher realizations for upstream oil companies per barrel and logically higher gas prices too. Also, the higher oil prices normally lead to improved gross refining margins (GRMs) as well as higher gains on inventory translation. It was this combined impact of higher crude prices that took the oil index higher. With supplies under stress from OPEC and Russia and demand still robust; the oil prices appear poised to stay around the $90/bbl levels.

NIFTY AUTO INDEX – AUTO STOCKS TAKE A WELL-DESERVED BREATHER

The table captures the movement of Nifty Auto index in the week to September 08, 2023.

Date	High	Low	Close
08-Sep-23	16,130.45	15,995.85	16,102.90
07-Sep-23	16,014.75	15,898.20	15,995.85
06-Sep-23	15,974.85	15,842.80	15,921.25
05-Sep-23	16,030.35	15,919.05	15,942.75
04-Sep-23	16,040.40	15,855.90	15,943.60
01-Sep-23	15,964.60	15,667.40	15,928.30
	Weekly Returns	+1.10%

Data Source: NSE

In the last few weeks, stocks like Maruti and M&M have helped the auto index rally to new highs. Auto index was also at its life-time highs and this week largely belonged to the two-wheeler stocks, even as the four-wheeler stocks were largely neutral. However, auto stocks in India have the overhang of rich valuations and that could limit any sharp upside in this sector. For now, the weak rural demand and tepid export performance are likely to be an overhang on the auto index performance.

NIFTY FMCG INDEX – FMCG RECOVERS DESPITE OIL PRICE SPIKE

The table captures the movement of Nifty FMCG index in the week to September 08, 2023.

Date	High	Low	Close
08-Sep-23	51,981.50	51,709.45	51,778.30
07-Sep-23	52,110.60	51,807.80	51,853.10
06-Sep-23	52,136.25	51,498.05	52,064.85
05-Sep-23	51,634.95	51,171.75	51,548.45
04-Sep-23	51,419.20	50,932.55	51,171.75
01-Sep-23	51,326.55	51,079.90	51,240.50
	Weekly Returns	1.05%

Data Source: NSE

Last week, the FMCG index was the only major index to close with significant losses. The major reason for the sharp fall in FMCG stocks last week was the spike in crude prices. This week, the rally continued with crude above $90/bbl. However, with the overall India story playing out favourably this week, the FMCG sector also latched on to the consumer story. Indian FMCG companies are making a big bet on food products and even tweak product sizes and packaging to make them more affordable in rural areas. However, there are concerns over slowing sales growth, especially on the rural sales front. This sector is expected to be neutral at an optimistic level.

WHAT WE READ FROM THE MARKETS THIS WEEK?

Here are the major takeaways from the week ended September 08, 2023. 

• Nifty decisively broke above two key resistances of 19,600 and 19,800 mark; closing just 172 points short of the 20,000 mark. However, sentiments substantially improved after the 7.2% GDP growth reported last week and the feel-good factor of India hosting the G-20 Summit in Delhi in the current week. 
   

FPI flows during the week was negative at $(658) million, hence most of the index action was coming from domestic institutions.