Weekly Musings – Index performance for week ended January 05, 2024

8 Jan 2024 , 08:14 AM

FPI FLOWS SLOW DOWN IN FIRST WEEK OF JANUARY 2024

It was not like the FPIs came down with heavy selling in the week. They continued to be net buyers in the week. The only difference was that the FPI buying was more subdued. At $573 million, the net FPI buying in the week was much lower than the previous weeks. In the 5 week prior to the current week, the FPIs had infused $9 billion into Indian equities, with more than 85% of the flows coming into the secondary markets. The BFSI space continued to be the pick and it saw nearly $3.6 billion of flows in the month of December alone. That was more due to the FPIs raising their stakes in the index stocks, in line with the routine exposure required to the heavyweight BFSI sector. However, in the week, the FPIs were quite disappointed by the fact that the Fed did not give any timeline for the rate cuts. In fact, the Fed did not even clearly spell out; if and when it would commence cutting the rates. For a market that had become overly optimistic about rate cuts, that was something that disappointed the FPIs. That was evident in the colour of FPI flows into India.

YEAR END EFFECT IMPACTS THE LARGE CAP INDICES

It was the Nifty and the Sensex that ended the first week on a flat to negative note. The small cap index, the mid cap index; and even the Nifty Next 50 index all ended with strong gains for the week. That is due to selective buying in smaller stocks. Some of the stocks that attracted a lot of attention in the latest week were mid-cap IT stocks, defence stocks, stocks into EVs, metal stocks etc. Investors found a lot of attractive stories in the smaller names and there were enough opportunities for alpha hunting. Also, the upcoming Q3 results are likely to be one of the best quarters for small and mid-cap companies, while the heavyweights like the banking and IT stocks were likely to have a subdued quarter in terms of top line growth, constant currency revenue growth and operating margins. (For live updates market map)

BSE SENSEX 30 INDEX – CLOSES MARGINALLY LOWER FOR THE WEEK

The table captures the movement of the BSE SENSEX 30 for the week to January 05, 2024.

Date	High	Low	Close
05-Jan-24	72,156.48	71,779.83	72,026.15
04-Jan-24	71,954.79	71,546.60	71,847.57
03-Jan-24	71,862.00	71,303.97	71,356.60
02-Jan-24	72,332.85	71,613.74	71,892.48
01-Jan-24	72,561.91	72,031.23	72,271.94
29-Dec-23	72,417.01	72,082.64	72,240.26
	Weekly Returns	-0.30%

Data Source: NSE

Sensex closed the week with gains -0.30% lower for the week. There were several headwinds for the Sensex in the week. The JN.1 variant continues to spread its wings; although not exactly virulent. The geopolitical situation is getting worse, with Maersk withdrawing from sailing through the Red Sea. Add to that, the crude oil prices traversed from around $73/bbl to above $78/bbl amidst the Red Sea crisis. The Sensex ended 214 points lower during the week but held above the 72,000 levels during the current week. It has the next visible resistance only at 75,000 levels; but news flows are an overhang.

NIFTY 50 INDEX – CLOSES FLAT AMIDST NEWS FLOW OVERHANG

The table captures the movement of Nifty 50 index in the week to January 05, 2024.

Date	High	Low	Close
05-Jan-24	21,749.60	21,629.20	21,710.80
04-Jan-24	21,685.65	21,564.55	21,658.60
03-Jan-24	21,677.00	21,500.35	21,517.35
02-Jan-24	21,755.60	21,555.65	21,665.80
01-Jan-24	21,834.35	21,680.85	21,741.90
29-Dec-23	21,770.30	21,676.90	21,731.40
	Weekly Returns	-0.09%

Data Source: NSE

The latest week saw FPI buying of $573 million. That is a far cry from the $9 billion that was infused by the FPIs in the previous 5 weeks. The Nifty continued to hover near its peak levels, after the PSU stocks continued to see robust buying in the week. During the week, the Nifty closed almost flat. The good news is that the VIX has tapered back to the 12.6 levels after touch highs of 15.5 about a week back. The falling VIX in the latest week is a signal that it continues to be a buy-on-dips market and any dip in the Nifty would be used by the investors to accumulate stocks. The pent up demand for long buying in Nifty is still huge.

NIFTY NEXT 50 INDEX – BUCKS THE TREND AND CLOSES HIGHER

The table captures the movement of Nifty Next 50 for the week to January 05, 2024.

Date	High	Low	Close
05-Jan-24	54,687.60	53,949.00	54,295.25
04-Jan-24	54,434.20	53,897.80	54,359.95
03-Jan-24	53,842.10	53,225.20	53,680.35
02-Jan-24	53,604.40	52,605.20	53,277.50
01-Jan-24	53,648.95	53,297.90	53,409.80
29-Dec-23	53,388.90	52,845.05	53,344.80
	Weekly Returns	+1.78%

Data Source: NSE

The Nifty Next 50 generally mirrors the Nifty. Like the trend in the last few weeks, the Nifty Next 50 outperformed the Nifty 50 index by a big margin. The Nifty Next 50 is the list of 50 companies with potential to become Nifty companies in the near future. For the week, the Nifty Next 50 closed scaled its highest point at 54,688, but closed lower at 54,295. The rally was prominent during the week, gaining 950 points during the week; largely led by defence, railway, and PSU stocks in that space.

NIFTY MID-CAP 100 INDEX – WITNESSES ALPHA BUYING DEMAND

The table captures the movement of Nifty Mid-Cap 100 in the week to January 05, 2024.

Date	High	Low	Close
05-Jan-24	47,647.90	47,064.20	47,396.30
04-Jan-24	47,345.25	46,728.20	47,309.70
03-Jan-24	46,652.45	46,183.85	46,529.05
02-Jan-24	46,652.25	45,858.60	46,389.65
01-Jan-24	46,633.70	46,244.85	46,472.45
29-Dec-23	46,248.65	45,731.15	46,181.65
	Weekly Returns	+2.63%

Data Source: NSE

The Nifty Mid-Cap index gained 1,214 points during the week as alpha hunting was visible in the mid-cap counters. Unlike the frontline indices like the Nifty and the Sensex, the Mid-cap index gained sharply by 2.63% for the week as specific stories like defence, EVs, and mid-cap IT continued to attract attention of buyers. The mid-cap index is at its 52-week high. The index had briefly fallen out of favour after the recent rally, but is back on its feet now. In the coming year, lot of fresh mutual fund allocations are also expected in the mid-cap space.

NIFTY SMALL-CAP 100 INDEX – ENJOYS ANOTHER GOOD WEEK

The table captures movement of Nifty Small Cap 100 in the week to January 05, 2024.

Date	High	Low	Close
05-Jan-24	15,458.05	15,285.75	15,438.85
04-Jan-24	15,367.95	15,263.45	15,339.20
03-Jan-24	15,226.95	15,096.25	15,188.80
02-Jan-24	15,324.75	15,015.20	15,189.90
01-Jan-24	15,274.35	15,182.10	15,226.10
29-Dec-23	15,165.00	15,019.80	15,143.65
	Weekly Returns	+1.95%

Data Source: NSE

In the last 4 weeks, the Nifty Small Cap index had a cumulative gain of over 10% and the latest week topped it up with another 1.95% rise. For the latest week, the small cap index closed 295 points higher. Momentum is surely back in the small cap index in the last few weeks as alpha hunting is back. The small cap stocks are also seeing a lot of buying attention from mutual funds. With a slew of muti-cap and small cap NFOs likely to be launched by mutual funds in the coming weeks, expect the demand for small cap stocks to be buoyant. SIP flows will also be a proxy for retail interest in the small cap stocks.

BANK NIFTY INDEX – HEAVYWEIGHT PRIVATE BANKS SELL OFF

The table below captures the movement of BANKNIFTY in the week to January 05, 2024.

Date	High	Low	Close
05-Jan-24	48,381.95	47,822.85	48,159.00
04-Jan-24	48,281.20	47,738.15	48,195.85
03-Jan-24	47,798.75	47,481.35	47,704.95
02-Jan-24	48,223.55	47,689.80	47,761.65
01-Jan-24	48,450.00	48,044.15	48,234.30
29-Dec-23	48,477.70	48,091.85	48,292.25
	Weekly Returns	-0.28%

Data Source: NSE

The private banks like HDFC Bank and ICICI Bank, with the highest weight in the Bank Nifty, saw selling pressure during the week. That led the Bank Nifty to close lower for the week. There are concerns that the upcoming Q3 results may show the first signs of stress on NII growth and NIM margins. These two factors had largely triggered the banking rally in the last 4 months. However, with rates topping out, both the gains are now saturated. Markets are likely to remain tad cautious about banking stocks, especially the private sector banks, ahead of the Q3 results this quarter.

NIFTY IT INDEX – THIRD CONSECUTIVE WEEK OF LOSSES

The table captures the movement of Nifty IT index in the week to January 05, 2024.

Date	High	Low	Close
05-Jan-24	34,991.55	34,459.45	34,851.70
04-Jan-24	34,800.35	34,236.60	34,409.40
03-Jan-24	35,076.95	34,367.75	34,395.45
02-Jan-24	35,701.80	35,106.15	35,283.10
01-Jan-24	35,890.75	35,353.85	35,695.90
29-Dec-23	35,781.10	35,395.05	35,515.00
	Weekly Returns	-1.87%

Data Source: NSE

For the third week in succession, the IT index was down; only it was down much sharper this week. The index lost 34 bps last week and 40 bps in the week before that. However, in the latest week to January 05, 2024, the IT index lost 187 bps. The IT Q3 results are likely to start with TCS, HCL Technologies and Wipro in the coming week. The challenge, once again, is going to be on the constant currency (CC) growth in the revenues. That is likely to come in at just about 1.6% for the full year and that is not going to go down well with the investors. More so, since the IT stocks have shown a very sharp rally in the last 3 months. IT stocks were in trouble during the middle of the year, but recovered sharply in the second half of 2023. For calendar 2023, IT sector returns had bettered the Nifty returns by 600 bps.

NIFTY OIL & GAS INDEX – CONTINUES TO BE THE SHINING BEACON

The table captures the Nifty Oil & Gas index for the week to January 05, 2024.

Date	High	Low	Close
05-Jan-24	9,816.45	9,719.65	9,770.30
04-Jan-24	9,766.05	9,679.00	9,745.40
03-Jan-24	9,742.35	9,645.95	9,688.95
02-Jan-24	9,664.25	9,472.40	9,635.85
01-Jan-24	9,617.70	9,526.45	9,572.85
29-Dec-23	9,558.75	9,474.40	9,496.15
	Weekly Returns	+2.89%

Data Source: NSE

In the previous 8 weeks, the Oil & Gas index had already gained over 25%, so some correction was expected. However, oil & gas index managed to buck the trend and close 2.89% higher. The bet has been on subdued oil prices, but that may be changing. With the Red Sea crisis worsening and the leading shipping line (Maersk) opting out of the Red Sea route, one can expect an all-out escalation in freight costs, insurance costs and the resultant cost of crude oil. That is likely to weight on oil stocks in the coming weeks.

NIFTY AUTO INDEX – COMES UNDER PRESSURE AFTER TEPID NUMBERS

The table captures the movement of Nifty Auto index in the week to January 05, 2024.

Date	High	Low	Close
05-Jan-24	18,514.75	18,345.20	18,406.95
04-Jan-24	18,428.95	18,296.75	18,326.75
03-Jan-24	18,395.45	18,175.50	18,317.50
02-Jan-24	18,664.35	18,241.00	18,339.35
01-Jan-24	18,707.80	18,565.05	18,594.35
29-Dec-23	18,719.50	18,417.85	18,618.20
	Weekly Returns	-1.13%

Data Source: NSE

For calendar year 2023, the Auto index with 45% gains was the star sectoral performer. However, two concerns cropped up in the latest week. Firstly, valuation concerns are already there due to the steep P/E ratios of the sector. Secondly, the auto numbers were mixed with most auto companies seeing pressure in December. Also, tractor sales fell sharply in the week due to a mix of factors like weak monsoons, lower Kharif & Rabi output as well as higher cost of loans. All these factors pulled down the auto index for the week.

NIFTY FMCG INDEX – MAKES SMART GAINS IN THE WEEK

The table captures the movement of Nifty FMCG index in the week to January 05, 2024.

Date	High	Low	Close
05-Jan-24	57,966.70	57,455.85	57,667.35
04-Jan-24	57,922.20	57,327.25	57,703.90
03-Jan-24	57,631.60	57,058.45	57,213.30
02-Jan-24	57,430.00	56,763.70	57,209.50
01-Jan-24	57,503.15	56,899.40	57,292.35
29-Dec-23	57,055.80	56,481.10	56,987.20
	Weekly Returns	+1.19%

Data Source: NSE

This is the fourth week in a row that FMCG index is gaining more than 1%. Most FMCG stocks, barring Hindustan Unilever, are close to their 52-week highs, but the sentiments over rural demand are still quote ambivalent. Defensive bets on the FMCG stocks continued in this week. While the likely gains of low crude prices may be waning, rural demand and rightsizing brands is helping. ITC, Colgate, Britannia and Nestle are filling in as big boys.