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Bulls strengthen grip on Dalal Street; Nifty surpasses 19,800 mark
Sep-08-2023

It turned out to be a fabulous week of trade for Indian equity benchmarks where Bulls completely dominated bears as traders remained optimistic on the back of rising expectations of a rate hike pause by the US Federal Reserve. The markets’ mood remained up-beat throughout the week and there appeared not even an iota of profit booking, as the benchmarks fervently gained from strength to strength, as investors continued hunt for fundamentally strong stocks. Markets started the week on an optimistic note as traders got encouragement after Reserve Bank governor Shaktikanta Das said the central bank expects retail inflation to start declining from this month. Traders also took support from Economic Affairs Secretary Ajay Seth’s statement that the government is confident of meeting the fiscal deficit target of 5.9 per cent of gross domestic product (GDP) and the nominal GDP target of 10.5 per cent despite pressure in the initial months of FY24. Traders shrugged off reports that India’s services sector growth eased in the month of August, but remained among the best in 13 years, with a series-record increase in new export business inducing another sharp expansion in total sales. The seasonally adjusted S&P Global India Services PMI Business Activity Index fell at 60.1 in August from 62.3 in July. Traders took support with Union Finance Minister Nirmala Sitharaman stating that there has been a threefold increase in income tax filing in each bracket, an indication of significant improvement in the formalisation of the economy. Markets extended gains taking support from Finance Ministry in its annual status report stating that India’s external debt declined to 18.9 per cent of GDP at the end of March 2023 from 20 per cent last year. Some support also came as government think tank Niti Aayog member Ramesh Chand’s statement that India's agro-chemical industry has the potential to grow more than the current nine per cent notwithstanding the competition from China. He also observed that many Western countries are shifting from agrochemicals to biopesticides and the Indian industry needs to pay attention to this aspect. Traders also took a note of Reserve Bank of India Governor Shaktikanta Das’ statement that the Unified Payments Interface (UPI) has played a phenomenal role in the FinTech revolution in India. He added Indian fintech industry projected to generate around $200 billion in revenue by 2030. Rally on final day of the week helped markets to extend weekly gains as traders got encouragement with a private report that inflation in India was likely to have eased in August from a 15-month high in July, led by cooling vegetable prices. Erratic monsoon rains have ruined some crops of staple food items, prompting the government to subsidise vegetable prices and ban exports of some cereals, providing temporary relief to households. Sentiments remained optimistic after a G20 document prepared by the World Bank stated that India has achieved financial inclusion targets in just 6 years which would otherwise have taken at least 47 long years. The document highlights the groundbreaking measures taken by Central Government and the pivotal role of government policy and regulation in shaping the Digital Public Infrastructure (DPI) landscape.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 1211.75 points or 1.85% to 66,598.91 during the week ended September 08, 2023. The BSE Midcap index gained 1236.38 points or 3.93% to 32,672.00 and Smallcap index surged 846 points or 2.26% to 38,266.53. On the sectoral front, S&P BSE PSU was up by 647.69 points or 5.52% to 12,385.36, S&P BSE Realty was up by 221.34 points or 4.91% to 4,732.59, S&P BSE Capital Goods was up by 2,197.48 points or 4.84% to 47,604.04, S&P BSE Power was up by 210.02 points or 4.70% to 4,680.72 and S&P BSE Oil & Gas was up by 697.28 points or 3.71% to 19,485.32 were the top gainers, while there were no losers on the BSE.

NSE movement for the week

The Nifty surged 384.65 points or 1.98% to 19,819.95. On the National Stock Exchange (NSE), Bank Nifty was up by 720.30 points or 1.62% to 45,156.40, Nifty IT was up by 901.30 points or 2.86% to 32,415.65, Nifty Mid Cap 100 increased 1532.15 points or 3.88% to 40,977.75 and Nifty Next 50 increased 1311.05 points or 2.93% to 46,110.80.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 52,995.19 crore and gross sales of Rs 58,456.39 crore, leading to a net outflow of Rs 5,461.20 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 2,839.22 crore against gross sales of Rs 2,365.91 crore, resulting in a net inflow of Rs 473.31 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 188.19 crore and gross sales of Rs 141.79 crore, leading to a net inflow of Rs 46.40 crore.

Industry and Economy

Expressing optimism over India’s exports, Chairman, CII national committee on EXIM, Sanjay Budhia, has said that negotiating trade pacts with certain G20 countries and diversifying exports to regions like Brazil and Mexico could help India boost outbound shipments and manufacturing in the years to come. He said that tapping into opportunities in G20 countries is crucial for India’s economic growth and global influence. He said India should diversify its export markets within the G20 countries. He added that while traditional partners like the United States and the European Union remain important, exploring emerging markets within the G20, such as Brazil, South Africa, Indonesia, and Mexico, can open up new avenues for Indian goods and services.

Outlook for the coming week

In the passing week, Indian markets garnered around two percent of gains as traders remained hopeful of a pause in US interest rate hikes.

On September 12, traders will keep an eye on Index of Industrial Production (IIP) and Consumer Price Index (CPI) respectively. Retail price inflation in India jumped to 7.44% in July 2023, the highest since April 2022, compared to an upwardly revised 4.87% in June and market forecasts of 6.4%.
 
Traders will also be looking forward toward the Wholesale Price Index (WPI) data, scheduled to be release on September 14. Foreign Exchange Reserves and Balance of Trade data going to be released on September 15.

On the global front, investors would be eyeing few economic data from world’s largest economy, United States (US), starting with Consumer Inflation Expectations on September 11 followed by Redbook on September 12, Inflation Rate on September 13, Initial Jobless Claims, Producer Price Inflation, Retail Sales on September 14, Industrial Production, Manufacturing Production, Import and export prices, Michigan Consumer Sentiment and Baker Hughes Oil Rig Count on September 15.

Top Gainers

  • Coal India up by 22.63% was the top gainer on Nifty for the week - Coal India gained traction as its coal production increased by 13.2% to 52.3 million tonnes (MT) in August 2023 as against 46.2 MT in August 2022. The company’s production in the April- August 2023 period increased 11.1 per cent to 281.5 MT, compared with 253.3 MT in the year-ago period. The company's offtake increased by 15.3% to 59.0 MT in August, 2023, over 51.2 MT in the corresponding month of the previous financial year.  Its offtake in the April- August 2023 period increased by 7.9% to 305.5 MT over 283.1 MT in the year-ago period.
  • NTPC up by 9.06% was another top gainer on Nifty for the week - NTPC gained after it signed a MoU with Oil India to explore collaboration in the areas of Renewable Energy, Green Hydrogen & its derivatives, Geothermal and other Decarbonization initiatives. The MoU shall facilitate knowledge and experience sharing on the upcoming Decarbonisation technologies like Carbon Sequestration. The two Maharatna giants, through this MoU, intend to enhance their footprint in Renewable Energy domain and foray into sustainable solutions to advance the efforts towards achieving the nation’s Net-Zero targets. 
Top Losers

  • Cipla down by 1.03% was the top loser of the week on Nifty -  Cipla traded under pressure amid reports that Dr Reddy’s Laboratories declined to comment on market speculation that it was in the fray for a stake in Cipla. Dr Reddy’s said ‘there is currently no such event or information which requires a disclosure under Regulation 30 of the SEBI Listing Regulations’. Meanwhile, Cipla’s 100% owned subsidiary -- Cipla South Africa signed a binding term sheet with Actor Holdings (Pty) to acquire 100% of the issued ordinary shares of Actor Pharma (Pty) (Actor). The transaction is expected to close in the next three to four months.
  • Asian Paints down by 0.55% was another top loser of the week on Nifty - Paint industry stocks came under pressure as crude oil prices increased this past week to their highest level since November 2022 following the extension of Saudi Arabia's and Russia's voluntary supply cutbacks through the end of the year, worrying investors about potential shortages during peak winter demand. Crude oil is a major raw material used in the production of Paints and emulsions. Hence, an increase in crude oil prices means an increase in the prices of raw materials for the paint companies, which in turn is negative for them.
Technical viewpoints

During the week, CNX Nifty touched the highest level of 19,867.15 on September 8 and lowest level of 19,432.85 on September 4. On the last trading day, the Nifty closed at 19,819.95 with weekly gain of 384.65 points or 1.98 percent. For the coming week, 19,546.15 followed by 19,272.35 are likely to be good support levels for the Nifty, while the index may face resistance at 19,980.45 and further at 20,140.95 levels.

US Market

The U.S. markets ended lower during the passing week amid ongoing concerns about the outlook for interest rates following recent economic data. A recent surge in crude oil prices also added to the negative sentiment amid worries higher oil prices could keep inflation at elevated levels. The price of crude oil has reached its highest levels since last November during the week after Saudi Arabia and Russia extended supply cuts until the end of the year. Adding to the interest rate concerns, activity in the U.S. service sector unexpectedly grew at a faster pace in the month of August, according to a report released by the Institute for Supply Management (ISM). The ISM said its services PMI rose to 54.5 in August from 52.7 in July, with a reading above 50 indicating growth in the sector. The increase surprised participants, who had expected the index to edge down to 52.5.
 
The report said the new orders index climbed to 57.5 in August from 55.0 in July, while the employment index jumped to 54.7 in August from 50.7 in July. The business activity index also crept up to 57.3 from 57.1. On the inflation front, the prices index rose to 58.9 in August from 56.8 in July, indicating an acceleration in the pace of price growth. Meanwhile, first-time claims for U.S. unemployment benefits unexpectedly saw a continued decline in the week ended September 2nd, according to a report released by the Labor Department. The report said initial jobless claims fell to 216,000, a decrease of 13,000 from the previous week's revised level of 229,000. Street had expected jobless claims to rise to 234,000 from the 228,000 originally reported for the previous week. Jobless claims decreased for the fourth consecutive week, falling to their lowest level since a matching figure in the week ended February 11th. 

The Labor Department said the less volatile four-week moving average also slipped to 229,250, a decrease of 8,500 from the previous week's revised average of 237,750. Continuing claims, a reading on the number of people receiving ongoing unemployment, also slid by 40,000 to 1.679 million in the week ended August 26th. Besides, the Commerce Department released a report showing the U.S. trade deficit widened in the month of July. The report said the trade deficit increased to $65.0 billion in July from a revised $63.7 billion in June. Street had expected the trade deficit to rise to $65.8 billion from the $65.5 billion originally reported for the previous month. The wider trade deficit came as the value of imports increased by slightly more than the value of exports. The value of imports climbed by 1.7 percent to $316.7 billion, while the value of exports rose by 1.6 percent to $251.7 billion.

European Market

European markets ended passing week in deep red. The start of the week was on a lower note, as Eurozone investor sentiment weakened in August reinforcing the fears of economic downturn as Germany burdens the entire zone with a deep recession. The survey data from the behavioral research institute Sentix showed that the Sentix investor confidence index fell to -21.5 in September from -18.9 in August. The score was forecast to ease to -19.6. At -22.0, the current situation index declined from -20.5 in the previous month. The score was the lowest since November 2022. Besides, Germany's trade surplus declined more than expected in July on weak exports and rising imports, exacerbating the possibility of economic contraction in the third quarter. The Destatis reported that exports posted a monthly decline of 0.9 percent in July, in contrast to June's 0.2 percent increase.

Markets extended their losses towards end of the week, after the UK services sector witnessed a downturn for the first time this year, mostly due to weaker business and consumer spending. The survey results from S&P Global and the Chartered Institute of Procurement & Supply showed that the final services business activity index dropped to 49.5 in August from 51.5 in the previous month. The flash score was 48.7. Any score below 50 indicates contraction in the sector, while a reading above 50 suggests expansion in the sector. Besides, the euro area economy logged only a marginal growth in the second quarter reigniting fears of a recession after the net trade acted as a drag on growth. Revised estimate published by the Eurostat showed that the 20-nation currency bloc grew by a marginal 0.1 percent in the June quarter. The rate was revised down from 0.3 percent estimated on August 16.

On the inflation front, Eurozone producer prices declined for the third straight month in July and at the fastest pace in fourteen years on a sharp reduction in energy prices. The data released by Eurostat showed that the producer price index posted an annual decline of 7.6 percent in July, faster than the 3.4 percent decrease in June. That was in line with expectations. Moreover, this was the steepest decline since July 2009, when prices had fallen 8.2 percent. Further, Germany's inflation slowed marginally in August as estimated but the rate remained elevated due to the increases in energy and food prices. The final data from Destatis revealed that consumer price inflation slowed to 6.1 percent in August from 6.2 percent in July. The statistical office confirmed the provisional estimate published on August 30. 

Asian Market

Asian markets, barring Nikkei composite index, ended in red during the passing week following the broadly negative cues from global markets and reflecting ongoing concerns about the outlook for the global economy following the recent release of disappointing economic data across the globe. The spike in crude oil prices and the strength of the US dollar against major Asian currencies also weighed on sentiment. The stronger-than-expected US services sector data further renewed inflation and interest rate concerns.

Chinese Shanghai edged marginally lower as weak Chinese services data revived concerns about growth and spurred risk aversion. China's service sector grew at the slowest pace in eight months in August largely due to weaker new business. The Caixin services Purchasing Managers' Index slipped more-than-expected to 51.8 from 54.1 in July. The expected score was 53.6. Some concern also came with customs data showing that Chinese exports fell 8.8 percent year on year to $284.9 billion last month, extending declines for the fourth straight month as a result of weak external demand and persistent supply chain issues. However, the decline was less than the 14.5 percent plunge in July. Imports fell 7.3 percent last month to $216.5 billion, showing some improvement after a 12.4 percent decline in July.

Bucking the trend, Japanese shares rose by around a percent, as Ministry of Finance said Japan posted a current account surplus of 2.772 trillion yen in July. That exceeded expectations for a surplus of 2.295 trillion yen and was up from the 1.509 trillion yen surplus in June. Exports dipped 0.6 percent on year to 8.556 trillion yen, while imports slumped an annual 13.3 percent to 8.488 trillion yen for a trade surplus of 682 billion yen. Traders overlooked government data showed Japan's GDP grew less than earlier estimated in the last quarter and wages slumped in July, underscoring the fragile state of the country's economy. GDP grew by an annualized 4.8 percent in the April-June quarter, below the earlier estimate of 6 percent growth and expectations for a revised 5.5 percent expansion.
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