Weekly Musings – Index performance for week ended September 22, 2023

25 Sep 2023 , 07:00 AM

It happened just a week after the Nifty had broken decisively above the 20,200 mark and looks all set to traverse higher. However, the market had other plans. In the last 3 days of the week, the Nifty lost over 500 points and the Sensex lost more than 1,500 points as the markets faced selling pressure through the week. The week to September 22, 2023 saw the Nifty falling sharply by -2.57% as the Nifty closed below the 19,700 mark for the week. Now the only credible support that the Nifty really has are 19,600 and 19,400 and below that further downsides could open up. In a world that is struggling to grow its GDP, India is already the fastest growing large economy (among nations with GDP of more than $1 trillion) for 2 years in succession. However, such macros did not really matter as global investors and even domestic traders decided to stay light in the market.

The trigger for the fall in the markets came from the Fed statement. While the Fed did not raise rates in the September FOMC meeting, the tone was very hawkish. Fed members hinted at more rate hikes as well as fewer cuts in 2024, so Fed rates would stay above 5.1% even towards the end of 2024. That spiked bond yields and pulled down equities across the board. Secondly, the diplomatic stand-off with Canada soured market sentiments, since Canadian funds have more than $25 billion invested in India. FPIs were also net sellers and for the month of September till date, FPIs have sold more than $1.22 billion in equities. This is in stark to the $18.5 billion that FPIs had infused into Indian equities between May 2023 and August 2023. (For live impact, check market map)

NIFTY 50 INDEX – NIFTY HAS A DISAPPOINTING FALL

The table below captures the movement of the Nifty 50 index in the week to September 22, 2023.

Date	High	Low	Close
22-Sep-23	19,798.65	19,657.50	19,674.25
21-Sep-23	19,848.75	19,709.95	19,742.35
20-Sep-23	20,050.65	19,878.85	19,901.40
19-Sep-23	20,195.35	20,115.70	20,133.30
18-Sep-23	20,195.35	20,115.70	20,133.30
15-Sep-23	20,222.45	20,129.70	20,192.35
	Weekly Returns	-2.57%

Data Source: NSE

It was a truncated week with no trading in the markets on Tuesday. However, in the last 3 days of the week, the Nifty fell from 20,133 to 19,674, losing 459 points in just 3 days. During these 3 days, the Nifty broke two key support levels of 20,000 and 19,800. It closed the week at 16,674 positioning the Nifty a full 326 points below the psychological 20,000 mark. The fall was triggered by banking stocks, which cracked sharply after the hawkish tone of the Fed. Also, there were reports that HDFC Bank may struggle to maintain margins post the merger with the HDFC and that also soured the sentiments in the market. The Nifty closed with losses on all 4 trading days of the week.

NIFTY NEXT 50 INDEX – CLOSES THE WEEK, WELL BELOW 46,000

The table captures the movement of Nifty Next 50 index in the week to September 22, 2023.

Date	High	Low	Close
22-Sep-23	45,506.85	45,008.05	45,176.00
21-Sep-23	45,718.90	45,125.95	45,231.20
20-Sep-23	46,058.00	45,550.20	45,620.65
19-09-202	46,296.40	45,979.70	46,026.05
18-Sep-23	46,296.40	45,979.70	46,026.05
15-Sep-23	46,146.50	45,889.30	46,051.85
	Weekly Returns	-1.90%

Data Source: NSE

In last few weeks, the Nifty Next 50 may have shown the tendency to mirror the Nifty, but this week it fell less than the Nifty, although the undertone was still negative. The story appeared to be of profit booking in non-Nifty stocks and this trend also hit the mid-caps and small cap stocks. For starters, the Nifty Next-50 is a collection of stocks with the potential to become Nifty stocks at a future date; what we call as Nifty aspirants. The Nifty Next-20 started the week above the 46,000 mark, and fell closer to the 45,000 levels in the last 3 trading days of the week. There has been a lot of mutual funds churning their non-large cap stocks and that has had an impact. 46,000 will remain the resistance for now.

NIFTY MID-CAP 100 INDEX – MID-CAP SHINE WAS AGAIN DENTED THIS WEEK

The table captures the movement of Nifty Mid-Cap 100 in the week to September 22, 2023.

Date	High	Low	Close
22-Sep-23	40,399.55	39,909.25	40,139.15
21-Sep-23	40,664.95	40,095.45	40,184.85
20-Sep-23	40,714.45	40,311.65	40,543.85
19-Sep-23	40,890.50	40,633.10	40,658.20
18-Sep-23	40,890.50	40,633.10	40,658.20
15-Sep-23	40,982.75	40,711.60	40,829.90
	Weekly Returns	-1.69%

Data Source: NSE

It was a relatively bad week for the Mid-cap index which continues to face resistance at the 41,000 levels. Here again, the story was all about unwinding and that is hardly surprising considering the kind of gains that this segment has seen in recent months. Since the start of 2023, mid-cap index gained more than 35%, so some profit taking is likely to be par for the course. Many of the mid-cap stocks were under pressure even in the previous week and that trend continued in the current week also. The fall was not as sharp as the Nifty or the Bank Nifty, but the spike in crude oil prices and the volatile rupee had its impact on the mid-cap stocks. For now, 41,000 continues to be a major resistance for the mid-cap index.

NIFTY SMALL-CAP 100 INDEX – SELLS OFF QUITE SHARPLY THIS WEEK

The table captures the movement of Nifty Small Cap 100 index in the week to September 22, 2023.

Date	High	Low	Close
22-Sep-23	12,532.70	12,333.85	12,476.25
21-Sep-23	12,658.00	12,414.40	12,444.45
20-Sep-23	12,744.05	12,539.85	12,613.05
19-Sep-23	12,851.20	12,705.05	12,725.20
18-Sep-23	12,851.20	12,705.05	12,725.20
15-Sep-23	12,859.35	12,748.70	12,793.75
	Weekly Returns	-2.48%

Data Source: NSE

Like the mid-cap index, even the small-cap index saw stock-specific selling pressure. In the small cap index, many sub-sectors like railway and defence stocks as well as mid-cap IT and digital stocks had outperformed. Some profit booking on these counters was visible during the week. The underlying theme still appeared to be capex spending and that is not going away in a hurry; and that is where most of the small cap stocks could miss out. This index has a direct bearing on the participation of the retail and small investors and hence holds the key to the market mood. Like the mid-cap index, the small cap index had also scaled life-time highs, but the risk perception tends to increase at higher levels of the market.

BANK NIFTY INDEX – FED HAWKISHNESS HITS BANK NIFTY STORY

The table below captures the movement of BANKNIFTY in the week to September 22, 2023.

Date	High	Low	Close
22-Sep-23	44,996.75	44,548.90	44,612.05
21-Sep-23	45,276.80	44,592.45	44,623.85
20-Sep-23	45,745.15	45,276.40	45,384.60
18-Sep-23	46,252.95	45,906.90	45,979.85
18-Sep-23	46,252.95	45,906.90	45,979.85
15-Sep-23	46,310.40	46,028.75	46,231.50
	Weekly Returns	-3.50%

Data Source: NSE

The previous week had seen buoyancy in the Bank Nifty due to the RBI announcing the phased withdrawal of the Incremental cash reserve ratio (I-CRR). That got reversed this week as the Bank Nifty faced pressure post the Fed statement. While the Fed did not hike rates, the Fed tone was adequately hawkish and that had a deep imprint on the banking stocks. The index started the week above 46,000 but closed the week below 44,700 mark. The Bank Nifty has already corrected from its yearly highs, so the downside risk may not be too much. However, the big story of expanding NIIs and wider NIMs is gradually coming into question, especially on whether it would be sustainable. That is hitting the banks.

NIFTY IT INDEX – COULD NOT ESCAPE THE SELL-OFF

The table captures the movement of Nifty IT index in the week to September 22, 2023.

Date	High	Low	Close
22-Sep-23	33,109.65	32,664.40	32,906.30
21-Sep-23	32,976.85	32,504.75	32,919.95
20-Sep-23	33,167.30	32,851.75	32,949.20
19-Sep-23	33,266.90	33,030.35	33,129.50
18-Sep-23	33,266.90	33,030.35	33,129.50
15-Sep-23	33,402.75	33,156.20	33,355.05
	Weekly Returns	-1.35%

Data Source: NSE

Other than the Bank Nifty, the IT index remains the big heavyweight in the index. In the past, the Nifty IT index has largely tried to mirror the NASDAQ. In the current week, the NASDAQ fell by 458 points or 3.35%, so some rub-off effect on the IT index was inevitable. However, despite the sharp fall in the NASDAQ this week, the Nifty IT index fell by just about -1.35% indicating that investors still see value in IT as a dollar defensive, if not as an aggressive business bet or a growth bet. At the end of the day, the IT stocks are cash-rich and still generate most of the profits of India Inc. That cannot be wished away. They have also been the best sectoral performers in 4 out of the last 10 years. 

NIFTY OIL & GAS INDEX – OIL & GAS INDEX FALLS BELOW 8,000 LEVELS

The table captures the movement of Nifty Oil & Gas index in the week to September 22, 2023.

Date	High	Low	Close
22-Sep-23	7,961.15	7,878.30	7,884.45
21-Sep-23	7,987.90	7,904.05	7,915.55
20-Sep-23	8,026.00	7,929.95	7,954.75
19-Sep-23	8,049.00	7,994.15	8,028.35
18-Sep-23	8,049.00	7,994.15	8,028.35
15-Sep-23	8,144.60	8,013.00	8,025.20
	Weekly Returns	-1.75%

Data Source: NSE

The oil & gas index had traversed above the 8,000 mark after a lot of effort. This week, the Oil index started above 8,000, but gradually fell below the mark. The big trigger for the fall in the oil & gas index was the weakness in Reliance Industries, which remains the biggest play on the oil index. For now, the crude prices appear to have peaked at around $93/bbl and that is limiting the realization potential of the upstream oil stocks. It remains to be seen if Brent Crude really gets above $100/bbl mark, as the likes of Goldman Sachs has projected. While such a level may be technically positive for upstream oil stocks, it is a level at which subsidy sharing becomes the bigger challenge, especially as India approaches election year.

NIFTY AUTO INDEX – WEAK RURAL DEMAND PLAYS SPOILSPORT

The table captures the movement of Nifty Auto index in the week to September 22, 2023.

Date	High	Low	Close
22-Sep-23	16,301.30	16,129.05	16,234.35
21-Sep-23	16,516.55	16,160.60	16,200.40
20-Sep-23	16,628.95	16,411.60	16,479.70
19-Sep-23	16,647.05	16,397.40	16,563.90
18-Sep-23	16,647.05	16,397.40	16,563.90
15-Sep-23	16,456.80	16,241.55	16,425.80
	Weekly Returns	-1.17%

Data Source: NSE

In the last couple of weeks, the Auto index scaled its life-time highs and that trend was marginally dented in the current week. In recent weeks, both two-wheelers and four-wheelers have surged. It is a longer term trend of supply struggling to keep up with demand and that has been generally positive for the auto stocks. However, rural demand continues to be the overhang, with not much positive news coming on the rural inflation and rural demand front. Two wheeler stocks, however, continue to see demand but that is more on the back of low stock prices and attractive dividend yields.

NIFTY FMCG INDEX – NOT AS BAD AS THE OVERALL MARKETS

The table captures the movement of Nifty FMCG index in the week to September 22, 2023.

Date	High	Low	Close
22-Sep-23	51,716.70	51,344.65	51,608.50
21-Sep-23	51,921.85	51,332.15	51,672.65
20-Sep-23	52,066.80	51,813.80	51,924.15
19-Sep-23	52,243.15	51,804.10	52,198.60
18-Sep-23	52,243.15	51,804.10	52,198.60
15-Sep-23	52,178.25	51,817.65	51,895.15
	Weekly Returns	-0.55%

Data Source: NSE

In a week, when the Nifty fell by 2.6%, the FMCG index lost just about 0.55%, showing that it still remains the best exemplar of India consumption story. There have been hints of a revival in rural demand, although the spike in crude prices to $93/bbl remains a concern for the FMCG sector. Also, rising food inflation would keep a lid on the FMCG story. They are changing strategy to narrow cast to customers, but that can only help up to a point.

WHAT WE READ FROM THE MARKETS THIS WEEK?

Here are the major takeaways from the week ended September 22, 2023. 

• Two event risks played out in the week. The hawkishness of the Fed and the diplomatic standoff with Canada hit market sentiments. Canada, after all, has more than $25 billion invested in Indian stocks.

   

FPIs have sold $1.22 billion in September so far, and for now, domestic buying is holding up. It remains to be seen, how long the domestic support can continue for markets.