Weekly Musings – Index performance for week ended January 12, 2024

15 Jan 2024 , 08:58 AM

A WEEK OF MIXED SECTORAL PERFORMANCE

The Nifty and the Sensex closed the week in the positive although the gains were below 100 bps. But that is not the point. The real issue was the sharp dichotomy in performance of sectors. The heavyweight banking sector ended the week sharply lower after inflation signals put pressure on the US markets and also in the Indian markets. The other sector to lag was the FMCG sector. This is likely to be a quarter of elevated pressure for the FMCG stocks due to pressure on rural sales growth and overall margins. 

However, there were sectors at the other extreme that did very well. Despite the lower than expected CC guidance and lower profits, the IT stocks gained due to better margins and hopes that the strong dollar would boost numbers in the coming quarters. The other sector that gained sharply in the week was oil & gas with Reliance touching new highs during the week. With crude edging up to $78/bbl, oil stocks gained across the board. Even auto stocks did better on the back of recovery in select auto names.

FPIS ON THE SELL SIDE, BUT DOMESTICS ARE BUYING

It was a week when the FPIs were on the sell side, but that was not too significant. For the week ended January 12, 2024, the FPIs were net sellers to the tune of $110 million. That is just a small speck of the $9.55 billion of FPI flows that came into India in the 6 weeks prior to that. However, the more encouraging factor is the steady inflows from domestic institutions. In the previous calendar year, the FPIs infused $20 billion, which got a lot of press coverage, with most of the flows coming in the last quarter.

However, what also happened silently was that the domestic institutions infused $23 billion into Indian equities. Today Indian mutual funds have AUM of $610 billion and coupled with LIC and the private insurers, the Indian institutions manage close to $1.50 trillion of money. That is nearly twice the AUM of FPIs and is a significant factor that we cannot oversee. More importantly, domestic inflows have the ability and the depth to hold fort when FPIs are selling. This makes them doubly valuable. (For live updates market map)

BSE SENSEX 30 INDEX – BACK TO ITS WINNING WAYS

The table captures the movement of the BSE SENSEX 30 for the week to January 12, 2024.

Date	High	Low	Close
12-Jan-24	72,720.96	71,982.29	72,568.45
11-Jan-24	71,999.47	71,543.19	71,721.18
10-Jan-24	71,733.84	71,110.98	71,657.71
09-Jan-24	72,035.47	71,307.27	71,386.21
08-Jan-24	72,181.77	71,301.04	71,355.22
05-Jan-24	72,156.48	71,779.83	72,026.15
	Weekly Returns	+0.75%

Data Source: NSE

Sensex closed the week +0.75% higher for the week. There were several headwinds for the Sensex in the week. The inflation in the US and the inflation in India were higher than the previous month while the IIP growth was sharply lower in the latest month. The geopolitical situation is going from bad to worse. Add to that, the crude oil prices traversed from around $76/bbl to above $78/bbl amidst the Red Sea crisis. Despite concerns on the data front, the Sensex closed the week higher on the back of a surge in IT stocks. The Sensex ended 543 points higher during the week and closed above the 72,500 levels during the current week. It has the next visible resistance only at 75,000 levels; but the road is likely to be bumpy.

NIFTY 50 INDEX – IT, OIL HELP NIFTY EDGE HIGHER

The table captures the movement of Nifty 50 index in the week to January 12, 2024.

Date	High	Low	Close
12-Jan-24	21,928.25	21,715.15	21,894.55
11-Jan-24	21,726.50	21,593.75	21,647.20
10-Jan-24	21,641.85	21,448.65	21,618.70
09-Jan-24	21,724.45	21,517.85	21,544.85
08-Jan-24	21,763.95	21,492.90	21,513.00
05-Jan-24	21,749.60	21,629.20	21,710.80
	Weekly Returns	+0.85%

Data Source: NSE

The latest week saw FPI selling of $110 million. That is a far cry from the $9.55 billion that was infused by the FPIs in the previous 6 weeks. The Nifty continued to hover near its peak levels, with futures already indicating a breach above 22,000 levels. During the week, the Nifty closed almost 184 points higher. The good news is that the VIX is subdued at 13.10 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 Nifty rally was driven by IT and oil & gas stocks.

NIFTY NEXT 50 INDEX – ALMOST MIRRORS NIFTY TREND

The table captures the movement of Nifty Next 50 for the week to January 12, 2024.

Date	High	Low	Close
12-Jan-24	54,852.90	54,587.10	54,742.90
11-Jan-24	54,675.55	54,318.90	54,595.60
10-Jan-24	54,131.95	53,490.05	54,077.65
09-Jan-24	54,297.60	53,891.65	53,960.65
08-Jan-24	54,450.00	53,670.00	53,728.90
05-Jan-24	54,687.60	53,949.00	54,295.25
	Weekly Returns	+0.82%

Data Source: NSE

The Nifty Next 50 generally mirrors the Nifty and that is almost exactly what it did in the latest week. Unlike the trend of the last few weeks, Nifty Next 50 did not outperform the Nifty 50 index. 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 index scaled its highest point at 54,853, but closed lower at 54,743. The gains were, once again, in defence and PSU stocks, but the gains were relatively subdued compared to the previous week.

NIFTY MID-CAP 100 INDEX – ALPHA STORY MISSING THIS WEEK

The table captures the movement of Nifty Mid-Cap 100 in the week to January 12, 2024.

Date	High	Low	Close
12-Jan-24	47,595.40	47,363.65	47,512.60
11-Jan-24	47,434.75	47,197.40	47,337.30
10-Jan-24	47,130.15	46,576.85	47,107.15
09-Jan-24	47,360.65	46,901.00	46,969.95
08-Jan-24	47,560.00	46,845.35	46,894.35
05-Jan-24	47,647.90	47,064.20	47,396.30
	Weekly Returns	+0.25%

Data Source: NSE

The Nifty Mid-Cap index gained just 117 points during the week as alpha hunting took a back seat with the general preference for large caps. Unlike the frontline indices like the Nifty and the Sensex, the Mid-cap index gained just 0.25% as traders and investors decided to play a bit cautious considering mid-cap valuations. The mid-cap index is at its 52-week high. In 2024, bulk of fresh mutual fund allocations are likely in the mid-cap space.

NIFTY SMALL-CAP 100 INDEX – GOOD WEEK, NOTHING GREAT

The table captures movement of Nifty Small Cap 100 in the week to January 12, 2024.

Date	High	Low	Close
12-Jan-24	15,609.70	15,526.90	15,544.65
11-Jan-24	15,496.25	15,420.70	15,476.45
10-Jan-24	15,465.80	15,288.30	15,386.70
09-Jan-24	15,506.80	15,384.25	15,409.70
08-Jan-24	15,523.80	15,326.85	15,342.55
05-Jan-24	15,458.05	15,285.75	15,438.85
	Weekly Returns	+0.69%

Data Source: NSE

In the last 5 weeks, the Nifty Small Cap index had a cumulative gain of over 13%, so the 0.69% gain in the latest week may pale in significance. For the latest week, the small cap index closed 106 points higher. While small cap remains a good story, it has just taken a back seat this week as fresh allocations are targeting large caps. With a slew of muti-cap and small cap NFOs likely to be launched by mutual funds in the coming weeks, one can only expect demand for small cap stocks to be buoyant. SIP flows are also a proxy for retail interest in small cap stocks.

BANK NIFTY INDEX – BANKS SELL-OFF AMIDST DATA WORRIES

The table below captures the movement of BANKNIFTY in the week to January 12, 2024.

Date	High	Low	Close
12-Jan-24	47,873.70	47,408.50	47,709.80
11-Jan-24	47,662.10	47,237.00	47,438.35
10-Jan-24	47,423.45	47,010.80	47,360.85
09-Jan-24	47,939.30	47,156.05	47,242.65
08-Jan-24	48,154.50	47,387.35	47,450.25
05-Jan-24	48,381.95	47,822.85	48,159.00
	Weekly Returns	-0.93%

Data Source: NSE

The heavyweight banking sector saw fairly heavy selling in the week across private and PSU banks. That led the Bank Nifty to close lower for the second week in a row. Apart from concerns over upcoming Q3 results on NII growth and NIM margins, banks were also disappointed by the higher than expected inflation in India and the US. That raises questions about whether the central banks would revert to their hawkish strategy. Markets are likely to remain tad cautious about banking stocks, especially the private sector banks, ahead of the Q3 results. Weak IIP and higher inflation are also an overhang.

NIFTY IT INDEX – AN INCREDIBLE BOUNCE IN IT STOCKS

The table captures the movement of Nifty IT index in the week to January 12, 2024.

Date	High	Low	Close
12-Jan-24	36,581.10	35,659.55	36,521.70
11-Jan-24	35,104.95	34,665.10	34,735.25
10-Jan-24	34,941.00	34,546.95	34,834.35
09-Jan-24	35,139.35	34,608.45	34,662.45
08-Jan-24	34,881.80	34,419.75	34,514.65
05-Jan-24	34,991.55	34,459.45	34,851.70
	Weekly Returns	+4.79%

Data Source: NSE

In the last 3 weeks prior to the current week, the IT stocks had lost 270 bps, but all that was compensated in the current week when IT stocks gained a full 479 bps. On paper, the IT results of Infosys and TCS were below expectations. Not only was top line growth below the expectations, but the guidance given by Infosys was also weaker than expected. However, two things worked in favour of IT stocks. Firstly, the operating margins were better as IT companies have largely reduces the flab in their manpower. Secondly, the higher inflation in the US is likely to strengthen the dollar and that is a natural advantage for the dollar denominated revenues of IT companies. However, IT stocks have shown a very sharp rally in the last 3 months, so some caution may be warranted. It may be recollected that in calendar 2023, IT sector returns had bettered the Nifty returns by over 600 bps. 

NIFTY OIL & GAS INDEX – RELIANCE INDUSTRIES DOES THE HONOURS

The table captures the Nifty Oil & Gas index for the week to January 12, 2024.

Date	High	Low	Close
12-Jan-24	10,034.80	9,842.85	10,019.95
11-Jan-24	9,888.30	9,765.20	9,875.20
10-Jan-24	9,748.80	9,566.00	9,731.65
09-Jan-24	9,812.65	9,719.30	9,731.05
08-Jan-24	9,874.40	9,698.40	9,720.80
05-Jan-24	9,816.45	9,719.65	9,770.30
	Weekly Returns	+2.56%

Data Source: NSE

In the previous 9 weeks, the Oil & Gas index had already gained over 28%, so some correction was expected. However, oil & gas index managed to buck the trend and close 2.56% higher. Oil & Gas was the star of the last quarter of 2023. Reliance is nearing its all-time highs, but if you look at the net impact of Reliance (excluding Jio Financial), the stock is already at a high. Oil has generally gained on the back of elevated oil prices and robust gross refining margins (GRMs). That is unlikely to change in the near future.

NIFTY AUTO INDEX – WHY SHOULD CARS HAVE ALL THE FUN?

The table captures the movement of Nifty Auto index in the week to January 12, 2024.

Date	High	Low	Close
12-Jan-24	18,798.75	18,588.15	18,715.20
11-Jan-24	18,826.90	18,631.45	18,755.10
10-Jan-24	18,575.10	18,384.45	18,559.10
09-Jan-24	18,606.15	18,402.40	18,519.80
08-Jan-24	18,556.75	18,332.30	18,350.20
05-Jan-24	18,514.75	18,345.20	18,406.95
	Weekly Returns	+1.67%

Data Source: NSE

For a long time, the story was all about four-wheelers. In the last few months, the two-wheeler stocks have managed to touch new highs. During the week, the stocks that got close to their lifetime highs were the two wheeler stocks like Bajaj Auto, Hero Moto and TVS Motors. There is a big bet on rural demand reviving and also that the export demand has not been hit too much by the trade related challenges. Tractors are likely to remain under pressure with the recent negative growth seen in December numbers.

NIFTY FMCG INDEX – CAUTIOUS AHEAD OF Q3 RESULTS

The table captures the movement of Nifty FMCG index in the week to January 12, 2024.

Date	High	Low	Close
12-Jan-24	56,559.90	56,008.00	56,485.75
11-Jan-24	56,688.00	56,123.80	56,228.55
10-Jan-24	56,794.85	56,134.65	56,348.95
09-Jan-24	56,996.25	56,487.65	56,573.10
08-Jan-24	57,748.35	56,636.45	56,672.85
05-Jan-24	57,966.70	57,455.85	57,667.35
	Weekly Returns	-2.05%

Data Source: NSE

After four weeks of gains, the FMCG index fell by 2.05% in the latest week. FMCG stocks are showing some pressure due to the upcoming quarterly results and the risk of weak growth in rural revenues and margins. However, defensive bets on the FMCG stocks are unlikely to go away in a hurry. While the likely gains of low crude prices may be waning, rightsizing of brands is helping. ITC, Colgate, Britannia, and Tata Consumer are playing big boys now.