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Rising crude oil prices, FII outflow drag Markets lower for the week
Sep-29-2023

Indian equity benchmarks ended the passing week in red terrain as traders remained concerned over rising Crude oil prices. Continued selling by foreign institutional investors (FII) too dented sentiments. Key gauges started the week on quiet note as traders remain concerned after the Reserve Bank statement that India’s foreign exchange reserves declined $867 million to $593.037 billion in the week ended September 15. Traders took note of report that S&P Global Ratings retained India’s growth forecast for current fiscal at 6 per cent citing slowing world economy, rising risk of subnormal monsoons and delayed effect of rate hike. It sees the recent spike in vegetable price inflation as being temporary, but revised up the full fiscal retail inflation forecast to 5.5 per cent, from 5 per cent earlier, on higher global oil prices. Domestic indices traded in a tight band as traders continued to selloff risky assets as rising oil prices fueled fears of further inflationary pressures. However, downside remained capped as Chief Economic Advisor V Anantha Nageswaran said the inclusion of Indian government bonds in JP Morgan's emerging market debt index is expected to broaden India's investor base, potentially appreciate the rupee, and make it easier for Indian financial institutions to lend money. Markets somehow managed to move northward during the week as traders took support with S&P Global Market Intelligence stating that Indian banks will continue attracting global investment from investors looking for better returns as credit growth, improved margins and stable asset quality boost the country’s lenders. Some support also came with the Global Trade Research Initiative’s (GTRI) statement that steps like streamlining port and customs operations, and setting up of national trade network will help Indian firms integrate with global value chains and add $1.2 trillion in the country’s foreign trade by 2030. But, huge selling on penultimate day of the week dragged the markets lower amid reports stating that India's current account deficit (CAD) surged to $9.2 billion in the first quarter of 2023-24, more than seven times what it was in the preceding quarter. According to data released by the Reserve Bank of India (RBI), CAD in April-June amounted to 1.1 percent of GDP. Traders overlooked Fitch Ratings’ statement that the inclusion of certain Indian sovereign bonds in key emerging-market bond indices managed by JP Morgan will support a diversification of the investor base for Indian government securities. Traders also paid no heed towards External Affairs Minister S Jaishankar’s statement that in the next 25 years, the country's Amrit Kaal as espoused by Prime Minister Narendra Modi, India will strive to be a developed country and it is logical that it also seeks to be a global power. However, buying on final day of the week helped markets to recoup most of their weekly losses as traders opted to buy beaten down but fundamentally strong stocks. Meanwhile, India Ratings and Research (Ind-Ra) in its ‘September 2023 edition of its Credit Market Tracker’ report said that the tightness in the liquidity market is likely to ease meaningfully in the coming quarter, as the government spending has increased, followed by a further release of money from the incremental cash reserve ratio funds.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex decreased 180.74 points or 0.27% to 65,828.41 during the week ended September 29, 2023. The BSE Midcap index gained 391.95 points or 1.23% to 32,340.71 and Smallcap index surged 504.75 points or 1.36% to 37,562.23. On the sectoral front, S&P BSE Information Technology was down by 928.20 points or 2.81% to 32,065.34, S&P BSE TECK was down by 335.52 points or 2.27% to 14,470.90, S&P BSE Consumer Durables was down by 591.39 points or 1.29% to 45,359.94, S&P BSE Auto was down by 170.89 points or 0.46% to 36,628.82 and S&P BSE Consumer Discretionary Goods & Services was down by 23.67 points or 0.34% to 6,973.02 were the top losers, while S&P BSE Healthcare was up by 733.60 points or 2.64% to 28,497.52, S&P BSE Realty was up by 113.94 points or 2.54% to 4,605.93, S&P BSE Capital Goods was up by 1,009.25 points or 2.16% to 47,729.02, S&P BSE Metal was up by 490.37 points or 2.16% to 23,206.33 and S&P BSE PSU was up by 197.52 points or 1.59% to 12,646.89 were the top gainers on the BSE.

NSE movement for the week

The Nifty decreased 35.95 points or 0.18% to 19,638.30. On the National Stock Exchange (NSE), Bank Nifty was down by 27.50 points or 0.06% to 44,584.55, Nifty IT was down by 1121.90 points or 3.41% to 31,784.40 and Nifty Next 50 was down by 139.35 points or 0.31% to 45,036.65, while Nifty Mid Cap 100 increased 397.90 points or 0.99% to 40,537.05.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 39,569.91 crore and gross sales of Rs 44,173.29 crore, leading to a net outflow of Rs 4,603.38 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 3,864.88 crore against gross sales of Rs 3,221.07 crore, resulting in a net inflow of Rs 643.81 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 66.55 crore and gross sales of Rs 35.70 crore, leading to a net inflow of Rs 30.85 crore. (Provisional)

Industry and Economy

Crisil Ratings in its report said has said that the credit growth is likely to moderate to 13-13.5 per cent this fiscal but will improve slightly to 13.5-14 per cent next financial year as the economic pace picks up. As per the report, the biggest factor driving the moderation is low demand in wholesale credit, which constitutes as much as 60 per cent of the overall credit. Wholesale credit is seen slowing to 11-11.5 per cent this fiscal from a decadal high of 15 per cent in 2022-23. A key monitorable, which will determine credit growth going forward, is the extent to which deposit growth picks up for banks. The retail credit demand will continue to go up in this fiscal but corporate credit demand is lagging, which is likely to pick up in the next fiscal on capex revival.

Outlook for the coming week

In the passing week, Indian markets ended in red as Crude Oil continues to stay above $90 level which will be a threat to inflation. Persistent foreign fund outflows too dented sentiments.

The coming week is going to be very crucial as it’s the start of the new month and there will be lots of macroeconomic data to guide the markets. Auto and cement stocks will be reacting to their monthly sales numbers in the start of the week. Traders will be eyeing the S&P Global Manufacturing PMI data, which scheduled to be released on October 03 and S&P Global Composite PMI, S&P Global Services PMI on October 05. Besides, RBI Interest Rate Decision, Cash Reserve Ratio, Foreign Exchange Reserves, Bank Loan Growth and Deposit Growth data scheduled to be released on October 06.

The 52nd meeting of the GST Council, chaired by Union finance minister and comprising state ministers will be held on October 07, 2023 at Vigyan Bhawan, New Delhi. The council may take up the matter of reducing the GST rate on millet-based mixes to 5% or nil from 12% or 18% to promote millet consumption.

On the global front, investors would be eyeing few economic data from world’s largest economy, United States (US), starting with S&P Global Manufacturing PMI, ISM Manufacturing PMI, ISM Manufacturing Employment on October 02 followed by Redbook, JOLTs Job Openings on October 03, S&P Global Services PMI Final, S&P Global Composite PMI, ISM Services PMI, ISM Services Employment, Factory Orders on October 04, Initial Jobless Claims, Balance of Trade on October 05, Unemployment Rate, Non-Farm Payrolls, Participation Rate, Baker Hughes Total Rig Count on October 06.

Top Gainers

  • Coal India up by 5.26% was the top gainer on Nifty for the week - Coal India traded with traction amid reports that the company and NHPC are likely to join hands to explore the possibility of converting abandoned or closed mines into pump storage projects (PSP). Meanwhile, the representatives of trade unions have decided to postpone their strike at Coal India and its subsidiaries. Originally planned for October 5-7, 2023, the strike is now slated for October 12-14, 2023. This decision follows negotiations with the Coal India management, where the trade unions expressed their concerns and demands.
  • Bajaj Finance up by 4.36% was another top gainer on Nifty for the week - Bajaj Finance traded higher as meeting of the Board of Directors of the company will be held on October 05, 2023 to consider, inter alia, proposal for raising of funds through any or all of various methods including by way of preferential issue, qualified institutions placement, subject to such regulatory/statutory approvals as may be required, including approval of the shareholders of the company. Recently, the company raised Rs 500 crore through allotment of 50,000 Secured Redeemable NCDs, at the face value of Rs 1 lakh each.
Top Losers

  • Wipro down by 5.34% was the top loser of the week on Nifty - Wipro traded under pressure amid reports that the American Depository Receipts (ADRs) of Wipro slumped in overnight trade on the New York Stock Exchange as peer Accenture Plc’s growth guidance left investors in dismay. Accenture, which released its earnings for the three months ended August, guided a meagre 2-5% growth in annual revenue in the backdrop of a subdued business environment for IT services. Meanwhile, Wipro has partnered with ServiceNow to create Wipro CyberTransform - Intelligent ServiceNow Risk and Security Solutions.
  • Tech Mahindra down by 5.33% was another top loser of the week on Nifty - Most of the IT stocks traded under pressure after a tepid set of Q4 results from Accenture and its muted guidance for next year. Accenture follows the September-August financial year. Accenture's 3% sequential decline in deal-bookings in the August-ended quarter versus earlier guidance of flat growth likely to hit other IT stocks. Meanwhile, Tech Mahindra inaugurated a local innovation centre in Espoo, Finland. This expansion comes after a sustained period of growth in the region.
Technical viewpoints

During the week, CNX Nifty touched the highest level of 19,766.65 on September 28 and lowest level of 19,492.10 on September 28. On the last trading day, the Nifty closed at 19,638.30 with weekly loss of 35.95 points or 0.18 percent. For the coming week, 19,498.05 followed by 19,357.80 are likely to be good support levels for the Nifty, while the index may face resistance at 19,772.60 and further at 19,906.90 levels.

US Market

The U.S. markets ended lower during the passing week amid ongoing concerns about the outlook for interest rates and worries about the economic outlook. Sentiments were weak after a report released by the National Association of Realtors (NAR) showed a much steeper than expected drop in U.S. pending home sales in the month of August. NAR said its pending home sales plunged by 7.1 percent to 71.8 in August after rising by 0.5 percent to a downwardly revised 77.3 in July. Street had expected pending home sales to decrease by 0.8 percent compared to the 0.9 percent advance originally reported for the previous month. A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale. The sharp pullback in pending home sales reflected weakness throughout much of the country, with pending home sales in the South leading the way lower with a 9.1 percent plunge.

Further, a report released by the Conference Board showed a much bigger than expected decrease in U.S. consumer confidence in the month of September. The Conference Board said its consumer confidence index tumbled to 103.0 in September from an upwardly revised 108.7 in August. Street had expected the consumer confidence index to edge down to 105.8 from the 106.1 originally reported for the previous month. The steep drop by the headline index was partly due to a significant deterioration in consumer expectations, as the expectations index tumbled to 73.7 in September from 83.3 in August. The Conference Board noted an expectations index reading below 80 historically signals a recession within the next year. Meanwhile, the report said the present situation index crept up to 147.1 in September from 146.7 in August.

Besides, new home sales in the U.S. saw a substantial pullback in the month of August, the Commerce Department revealed in a report released. The report said new home sales plummeted by 8.7 percent to an annual rate of 675,000 in August after soaring by 8.0 percent to an upwardly revised rate of 739,000 in July. Street had expected new home sales to decrease to an annual rate of 700,000 from the 714,000 originally reported for the previous month. Meanwhile, the pace of U.S. economic growth in the second quarter of 2023 was unrevised from the previous estimate, the Commerce Department revealed in a report. The Commerce Department said real gross domestic product increased by 2.1 percent in the second quarter, unrevised from the estimate provided last month. The unrevised reading matched street estimates. The unrevised GDP growth in the second quarter still reflects a slight slowdown compared to the 2.2 percent growth in the first quarter.

European Market

European markets ended passing week on a muted note amid persistent fears of higher U.S. interest rates and concerns over China's beleaguered property market. The start of the week was lower, as the euro area private sector remained in the contraction territory in September, adding to fears of a recession in the second half of the year. The flash results of the purchasing managers' survey by S&P Global showed that the HCOB flash composite output index rose to 47.1 in September from 46.7 a month ago, while it was expected to fall to 46.5. Besides, the UK private sector activity contracted at the fastest pace in more than two-and-a-half years in September amid steep declines in both manufacturing and services activity. The purchasing managers' survey results from S&P Global and the Chartered Institute of Procurement & Supply showed that the flash composite output index dropped to 46.8 from 48.6 in the previous month. Any score below 50 indicates contraction in the sector.

Markets extended their losses towards end of the week, as Germany's consumer confidence is set to erode again in October, as households turned more cautious on spending amid persistently high inflation and little chance of improvement in the economic outlook, resulting in a sharp rise in their saving intentions. The results of the monthly survey by the market research group GfK showed that the forward-looking GfK consumer confidence index for October fell to -26.5 from a revised -25.6 in September. Street had forecast a score of -26. Besides, Eurozone economic confidence weakened in September largely driven by the deterioration in sentiment among consumers. The survey results from the European Commission showed that the economic confidence index fell to 93.3 in September from 93.6 in the previous month. But the reading was above streets' forecast of 92.5.

On the inflation front, Spain producer prices declined at the fastest pace on record in August driven by cheaper energy prices. The the statistical office INE said that producer prices registered an annual decline of 10.0 percent in August after an 8.6 percent decrease in July. This was the sixth consecutive fall and also marked the biggest fall since records began in 1976. Excluding energy, producer price inflation slowed marginally to 1.7 percent in August from 1.8 percent in the previous month. Further, Germany inflation slowed in September to the lowest since the outbreak of the war in Ukraine. The provisional data from Destatis showed that the consumer price index registered an annual increase of 4.5 percent in September, following a 6.1 percent rise in August. This was the lowest rate since February 2022, when inflation stood at 4.3 percent and also weaker than streets' forecast of 4.6 percent.

Asian Market

Asian markets ended the passing week mostly in red terrain following the broadly negative cues from Wall Street, as worries about inflation, higher interest rates and economic slowdown weighed on the market after the US Fed forecast another rate hike before the end of the year and indicated they may leave rates higher for longer than previously anticipated through 2024.

Japanese Nikkei fell by over one and half percent, as Industrial output in Japan came in flat in August, beating expectations for a decline of 0.8 percent following the 1.8 percent drop in July. On a yearly basis, industrial production fell 3.8 percent after slipping 2.3 percent in the previous month. Traders overlooked the Ministry of Economy, Trade and Industry (METI) stating that the value of retail sales in Japan jumped 7.0 percent on year in August, coming in at 13.391 trillion yen. That exceeded expectations for a gain of 6.0 percent following the upwardly revised 7.0 percent gain in July (originally 6.8 percent). Besides, the Ministry of Internal Affairs and Communications (MIAC) said the unemployment rate in Japan came in at a seasonally adjusted 2.7 percent in August. That was unchanged from the July reading, although it missed expectations for 2.6 percent.

Chinese stocks too ended lower by over half percent as investors awaited industrial profit, manufacturing and services PMI data for direction. Sentiments remained weak even as profits at Chinese industrial firms posted a surprise surge of 17.2 percent in August from a year earlier, pointing to signs of economic recovery in the world's second-largest economy.
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