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Positive macro-economic data takes benchmarks to all-time highs
Sep-15-2023

It turned out to be a fabulous week of trade for Indian equity benchmarks with frontline gauges ending at all-time highs, supported by better-than-expected macro-economic data. Key gauges started the week on an optimistic note as traders got encouragement after Finance Minister Nirmala Sitharaman said India’s external debt of $624.7 billion at March-end 2023 with a debt-service ratio of 5.3 per cent is within the comfort zone and modest from a cross-country perspective. Some support also came in as the Reserve Bank said India’s forex reserves jumped by $4.039 billion to $598.897 billion for the week ended September 1. In the previous reporting week, the overall reserves had dropped by $30 million to $594.858 billion. On the very next day, domestic markets witnessed some consolidation as rising global crude oil prices making investors jittery as this could fuel inflation and force central banks worldwide to maintain the rate hike regime. Investors were worried amid a private report stating that foreign institutional investors have sold around $800 million in local equities in the past four sessions even as local bourses near their all-time highs. But, ease in retail inflation and a rise in industrial output boosted invertors’ sentiments which helped markets to hit all-time highs. Retail inflation based on the Consumer Price Index (CPI) declined to 6.83 per cent in August 2023 mainly due to softening prices of vegetables. Moreover, inflation based on wholesale price index (WPI) remained in the negative territory for the fifth straight month in August 2023 at (-) 0.52% as against (-) 1.36% recorded in July 2023. Besides, India’s industrial production measured in Index of Industrial Production (IIP) jumped to 5.7 per cent in July 2023 from 3.7 per cent in June 2023. Markets extended gains after Fitch Ratings in its September update of the Global Economic Outlook has said that the Indian economy continues to show resilience despite tighter monetary policy and weakness in exports, with growth outpacing other countries in the region, retaining India’s growth forecast at 6.3% for the current fiscal year (FY24). Investors digested the US consumer-price index data showing inflation picked up in August, but likely not by enough to prompt a September interest rate hike by the Federal Reserve. Rally on final day of the week helped markets to end at fresh all-time closing highs. Traders took support with Financial services secretary Ajay Seth’s statement that the total revenue from corporate and excise tax collections is expected to be in line with budget estimates for the current fiscal year (FY24). Sentiments also remained upbeat after a private report stated that India has become the 13th country authorised to certify 'measuring and weighing instruments' based on globally accepted standards of the Paris-based IOLM, a development that will boost domestic exports of such products. An IOLM-approved certificate is mandatory to sell weighing or measuring instruments in the international market at present.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 1239.72 points or 1.86% to 67,838.63 during the week ended September 15, 2023. The BSE Midcap index losses 166.63 points or 0.51% to 32,505.37, while Smallcap index slipped 437.97 points or 1.14% to 37,828.56. On the sectoral front, S&P BSE TECK was up by 464.77 points or 3.19% to 15,024.28, S&P BSE BANKEX was up by 1,271.91 points or 2.51% to 51,844.91, S&P BSE Information Technology was up by 770.46 points or 2.36% to 33,468.30, S&P BSE Auto was up by 678.95 points or 1.86% to 37,161.01 and S&P BSE Finance was up by 178.64 points or 1.84% to 9,907.76 were the top gainers, while S&P BSE PSU was down by 6.93 points or 0.06% to 12378.43, S&P BSE Realty was down by 39.57 points or 0.84% to 4693.02, S&P BSE Oil & Gas was down by 225.60 points or 1.16% to 19259.72, S&P BSE Capital Goods was down by 558.37 points or 1.17% to 47045.67 and S&P BSE Power was down by 56.86 points or 1.21% to 4623.86 were the top losers.

NSE movement for the week

The Nifty surged 372.40 points or 1.88% to 20,192.35. On the National Stock Exchange (NSE), Bank Nifty was up by 1075.10 points or 2.38% to 46,231.50 and Nifty IT was up by 939.40 points or 2.90% to 33,355.05. On the other side, Nifty Mid Cap 100 decreased 147.85 points or 0.36% to 40,829.90 and Nifty Next 50 lost 58.95 points or 0.13% to 46,051.85.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 55,220.91 crore and gross sales of Rs 55,786.39 crore, leading to a net outflow of Rs 565.48 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 4,590.82 crore against gross sales of Rs 3,212.15 crore, resulting in a net inflow of Rs 1,378.67 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 172.50 crore and gross sales of Rs 162.88 crore, leading to a net inflow of Rs 9.62 crore.

Industry and Economy

Retaining India’s growth forecast at 6.3% for the current fiscal year (FY24), Fitch Ratings in its September update of the Global Economic Outlook has said that the Indian economy continues to show resilience despite tighter monetary policy and weakness in exports, with growth outpacing other countries in the region. But, it said upped year-end inflation projection on El Nino to threaten growth. The Indian economy grew 7.8% in the April-June quarter of current fiscal on strong services sector activity and robust demand. The agency has forecasted 6.5% growth rate for the next fiscal. However, it said that high-frequency indicators suggest that the pace of growth in the July-September quarter is likely to moderate, as exports continue to weaken, credit growth flatlines and the Reserve Bank of India’s latest bimonthly consumer confidence survey shows consumers becoming a little more pessimistic on income and employment prospects. 

Outlook for the coming week

In the passing week, key gauges witnessed powerful performance, with Nifty and Sensex settling above their psychological levels of 20,150 and 67,800 respectively amid ease in retail inflation and a rise in industrial output. 

In economic releases, traders will be eyeing the Foreign Exchange Reserves data, slated to be released on September 22. Foreign Exchange Reserves in India increased to $598900 million in September 1 from $594860 million in the previous week. On the same day, Bank Loan growth and Deposit growth data are going to be released. The value of loans in India increased 19.8 percent year-on-year in the fortnight ending August 25, 2023. Meanwhile, trend in investment by foreign institutional investors and the movement of rupee against the dollar will be also be closely watched by the market-participants.

The government has called a special session of Parliament from September 18 to 22. The bulletins issued by both the Rajya Sabha and Lok Sabha noted that on September 18, the first day of the special session, there will be a discussion on the subject, ‘Parliamentary Journey of 75 years starting from Samvidhan Sabha - Achievements, Experiences, Memories and Learnings’. The agenda indicates that the government could use the special session to finally shift to the new Parliament building.

On the global front, investors would be eyeing few economic data from world’s largest economy, United States (US), starting with Net Long-term TIC Flows, Building Permits, Housing Starts, Redbook on September 19, followed by Fed Interest Rate Decision, FOMC Economic Projections on September 20, Fed Press Conference, Philadelphia Fed Manufacturing Index, Initial Jobless Claims, Existing Home Sales on September 21, S&P Global Manufacturing PMI Flash, S&P Global Services PMI Flash, S&P Global Composite PMI Flash and Baker Hughes Total Rig Count on September 22.

Top Gainers

  • Bajaj Auto up by 8.76% was the top gainer on Nifty for the week - Most of the auto stocks remained on buyers’ radar after industry body -- the Society of Indian Automobile Manufacturers (SIAM) in report showed that passenger vehicle wholesales in India rose 9 per cent year-on-year to 3,59,228 units in August 2023 from 3,28,376 units in August 2022, with strong demand for utility models. Meanwhile, an American multinational investment banking division has upgraded Bajaj Auto and expects a 14-15 per cent revenue compound annual growth rate (CAGR) over FY23-26.
  • Bharti Airtel up by 6.95% was another top gainer on Nifty for the week - Traders continued to buy the stock. Bharti Airtel’s arm -- Airtel Payments Bank, identity technology company IDEMIA and Nokia brand phone maker HMD Global have joined hands to bring Central Bank Digital Currency (CBDC) on feature phones in India. All three organizations would be working together to introduce an advanced offline payment system over the next few months that would facilitate the use of the digital rupee on feature phones and promoting financial inclusion.
Top Losers

  • HDFC Life Insurance down by 1.80% was the top loser of the week on Nifty - The company witnessed profit booking after recent gains. Recently, HDFC Group launched life insurance and asset management services at International Financial Services Centre (IFSC) in Gujarat's GIFT City. HDFC International Life and Re has been set up by HDFC Life, while HDFC AMC International (IFSC) has been established by HDFC AMC to offer services to NRIs and the global Indian diaspora. The new unit under brand name HDFC Life International will offer US dollar-denominated life, health insurance solutions.
  • Asian Paints down by 1.53% was another top loser of the week on Nifty - Paint industry stocks remained under pressure for yet another week as crude oil prices continued their uptrend. Oil prices jumped higher with U.S. crude topping $90 a barrel, amid expectations of a tighter supply. The International Energy Agency said Saudi Arabia and Russia have extended their oil output cuts to the end of 2023, and the move could result in a substantial market deficit for the rest of 2023. Higher crude oil prices adversely impact the paint industry as it is a major raw material used in the production of Paints and emulsions.
Technical viewpoints

During the week, CNX Nifty touched the highest level of 20,222.45 on September 15 and lowest level of 19,865.35 on September 11. On the last trading day, the Nifty closed at 20,192.35 with weekly gain of 372.40 points or 1.88 percent. For the coming week, 19,964.32 followed by 19,736.28 are likely to be good support levels for the Nifty, while the index may face resistance at 20,321.42 and further at 20,450.48 levels.

US Market

The U.S. markets ended higher during the passing week as higher-than-expected retail sales data eased worries about a recession without raising fears of a Federal Reserve rate hike next week.  Retail sales in the U.S. increased by much more than expected in the month of August, according to a report released by the Commerce Department. The report said retail sales climbed by 0.6 percent in August after rising by a downwardly revised 0.5 percent in July. Street had expected retail sales to inch up by 0.2 percent compared to the 0.7 percent increase originally reported for the previous month. Excluding a modest rebound in sales by motor vehicles and parts dealers, retail sales still rose by 0.6 percent in August following a downwardly revised 0.7 percent advance in July. Ex-auto sales were expected to rise by 0.4 percent compared to the 1.0 percent jump originally reported for the previous month. 

Further, traders got some support as the Labor Department in its report has said that consumer prices in the U.S. increased in line with street estimates in the month of August. The report said the consumer price index climbed by 0.6 percent in August after inching up by 0.2 percent in July. The price growth matched expectations. The increase in consumer prices was largely due to a spike in gasoline prices, which skyrocketed by 10.6 percent, accounting for over half of the advance by the headline index. The surge in gasoline prices contributed to a 5.6 percent jump in energy prices, while food prices crept up by 0.2 percent during the month. Excluding food and energy prices, core consumer prices rose by 0.3 percent in August after edging up by 0.2 percent in July. Street had expected another 0.2 percent uptick. 

The slightly bigger than expected increase in core prices reflected higher prices for rent, owners' equivalent rent, motor vehicle insurance, medical care, and personal care. Lower prices for lodging away from home, used cars and trucks, and recreation helped limit the upside for core prices. Meanwhile, a report released by the Labor Department showed first-time claims for U.S. unemployment benefits edged up by less than expected in the week ended September 9th. The report said initial jobless claims crept up to 220,000, an increase of 3,000 from the previous week's revised level of 217,000. Street had expected jobless claims to rise to 225,000 from the 216,000 originally reported for the previous week. The smaller-than-expected uptick came a week after jobless claims dipped to their lowest level since the week ended February 18.

European Market

European markets ended passing week with gains, as the European Central Bank (ECB), which raised interest once again, signaled the end of its rate-hike campaign. After a positive start, markets remained lackluster during the week, as Italy's industrial production decreased for the first time in three months in July, and at a faster-than-expected rate. The statistical office ISTAT showed that Industrial production dropped 0.7 percent month-over-month in July, reversing a 0.5 percent increase in June. Meanwhile, production was forecast to fall by 0.3 percent. All components contributed negatively in July, except energy production, which grew 3.7 percent. Further, Germany's residential construction sector crisis continued to intensify in August with the number of project cancellations hitting a new high, mainly due to rising costs and higher interest rates. A survey from the ifo Institute revealed that in August, 20.7 percent of companies reported canceled housing projects, up from 18.9 percent in the previous month. 

Towards end of the week, indices staged recovery, after the European Central Bank raised its key interest rates for the tenth policy session in a row as rate-setters assessed the euro area inflation to remain too high for too long, but signaled a pause, possibly a long one, in the tightening cycle as the bank saw it prudent to guide that the current level of interest rates if maintained for long would ensure a timely return of inflation to the 2 percent target. Besides, Finland's gross domestic product rebounded in July largely on the back of strong growth in the primary sector. The data from Statistics Finland showed that output of the national economy rose a working-day-adjusted 1.5 percent year-over-year in July, in contrast to a 0.3 percent decrease in the prior month. Among sectors, primary sector production grew sharply by about 13 percent. The output produced in the tertiary sector advanced by 3.0 percent, while secondary activity decreased by 4.0 percent.

On the inflation front, Germany's wholesale prices fell for the fifth month in a row in August, driven by a slump in prices of mineral oil products. The preliminary figures from the statistical office Destatis showed that the wholesale price index, or WPI, declined 2.7 percent year-on-year after a 2.8 percent fall in the previous month. The index has been decreasing since April. Compared to the previous month, the WPI rose 0.2 percent, reversing a 0.2 percent fall in July. Besides, Spain's consumer prices inflation climbed for the second month in a row in August, while core price growth slowed slightly. The latest data from the statistical office INE showed that the consumer price index, or CPI, rose 2.6 percent year-on-year in August following a 2.3 percent rise in July. Core inflation, which excludes the volatile prices of fresh food and energy, eased to 6.1 percent from 6.2 percent. On a month-on-month basis, the CPI moved up 0.5 percent following a 0.2 percent increase in July. 

Asian Market

Asian markets ended mostly in green during the passing week as investors cheered strong economic data from the U.S. and China as well as signs that the world's biggest central banks may soon end their tightening campaigns.

Japanese shares rose by over one and half percent after overnight data showed underlying U.S. inflation remained on a downward trajectory. Investors shrugged off government data showing the value of core machine orders in Japan slumped a seasonally adjusted 1.1 percent on month in July in the face of sluggish global growth and weakness in major market China- coming in at 844.9 billion yen. That missed expectations for a decline of 0.9 percent following the 2.7 percent increase in June.  Besides, the Bank of Japan said producer prices in Japan were up 0.3 percent on month in August. That beat forecasts for an increase of 0.1 percent, which would have been unchanged from the July reading. 

Chinese Shanghai edged marginally higher on better-than-expected economic data and the announcement of a fresh cut to the amount of cash that banks must hold as reserves. Chinese gauges of retail sales and industrial output for August came in above expectations, in a rare boost after policymakers stepped up stimulus measures to support the world's second-biggest economy. However, China's new home prices fell at the fastest pace in 10 months in August, highlighting challenges in the property sector.
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