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Markets start FY25 on an optimistic note
Apr-05-2024

Key gauges started the first week of FY25 on an optimistic note propelled by comments from US Federal Reserve Chair Jerome Powell. Powell’s statement, indicating a potential policy rate reduction later this year, provided crucial insights for investors, enhancing their awareness of market trends. Hopes of better corporate results for the March quarter also lifted sentiment. Kay gauges made a positive start to the week as traders took support with Finance Minister Nirmala Sitharaman’s statement that India's gross domestic product (GDP) is on track to grow by 8 percent or more in the quarter ended March 31. Some support also came as growth in output of the eight key infrastructure sectors - known as the core sector - rose to a three-month high of 6.7 per cent (Y-o-Y) in February from 4.1 per cent in January. Additional support came in with a report that foreign investors made a strong return by injecting more than Rs 2 lakh crore into Indian equities in 2023-24, driven by optimism surrounding the country's robust economic fundamentals amidst a challenging global environment. On the very next day, traders booked some of their gains amid report by the United Nations Conference on Trade and Development (UNCTAD) showing that India’s dependence for trade on the European Union (EU) and China is rising as global trade has seen a restructuring along the geopolitical lines in the past two years. Traders overlooked a private survey showing that the manufacturing sector in India closed out FY24 with a stellar performance in March, as companies stepped up hiring in response to strong production and new orders. The HSBC India Manufacturing PMI rose to a 16-year high of 59.1 in March, from 56.9 in February. While this number was the highest since February 2008, it was lower than HSBC's preliminary estimate of 59.2. A reading of over 50 separates expansion from contraction. Traders also paid no heed towards report that the Centre collected Rs 1.78 lakh crore as gross goods and services tax in the month of March, up 11.5% against the same month last year. This is the second highest monthly gross GST collection. However, markets once again started moving northward after dribbling for couple of days as traders took support with CBIC chairman Sanjay Kumar Agarwal’s statement that the indirect tax collection for FY24 has exceeded the revised estimates (RE) of Rs 14.84 trillion by “a handsome margin”, helped by a record GST mop-up. Tax collection is a reflection of economic activity. Traders also took encouragement with data showing that India's services activity continued to expand in March, with the HSBC Purchasing Managers' Index (PMI) for the sector coming in at 61.2. Rising from 60.6 in February to 61.2 in March, the seasonally adjusted HSBC India Services Business Activity Index pointed to one of the strongest growth rates seen in over 13-and-a-half years. Domestic bourses witnessed consolidation on final day of the week as Reserve Bank of India (RBI) maintained status quo. The RBI’s Monetary Policy Committee (MPC) has decided to Keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50 per cent for the seventh consecutive time. Consequently, the standing deposit facility (SDF) rate remains unchanged at 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent. Besides, hawkish comments from Fed officials spurred concerns about the outlook for inflation and interest rates.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 596.87 points or 0.81% to 74,248.22 during the week ended April 05, 2024. The BSE Midcap index gained 1508.42 points or 3.84% to 40,830.54 and Smallcap index surged 2866.37 points or 6.64% to 46,032.71. On the sectoral front, S&P BSE Metal was up by 1,338.62 points or 4.75% to 29,534.70, S&P BSE Power was up by 315.75 points or 4.71% to 7,017.49, S&P BSE PSU was up by 759.50 points or 4.16% to 19,034.07, S&P BSE Realty was up by 284.62 points or 4.00% to 7,392.99 and S&P BSE Finance was up by 364.04 points or 3.53% to 10,679.39 were the top gainers on the BSE sectoral front, while there were no losers on the BSE.

NSE movement for the week

The Nifty surged 186.80 points or 0.84% to 22,513.70. On the National Stock Exchange (NSE), Bank Nifty was up by 1368.45 points or 2.90% to 48,493.05, Nifty IT was up by 349.75 points or 1.00% to 35,247.90, Nifty Mid Cap 100 increased 1947.10 points or 4.05% to 50,022.85 and Nifty Next 50 increased 2071.80 points or 3.42% to 62,696.10.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 83,619.83 crore and gross sales of Rs 83,944.47 crore, leading to a net outflow of Rs 324.64 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 12,507.80 crore against gross sales of Rs 11,293.05 crore, resulting in a net inflow of Rs 1,214.75 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 121.76 crore and gross sales of Rs 77.92 crore, leading to a net inflow of Rs 43.84 crore.

Industry and Economy

The United Nations in its latest report ‘the Economic and Social Survey of Asia and the Pacific 2024’ has said that India has become the world’s fastest-growing major economy in 2023 amid strong household consumption and public investment in infrastructure. India registered an economic growth rate of 6.8 per cent in FY2023 supported by government spending on infrastructure and strong growth in manufacturing, mining and construction, which offset lower agricultural output. Formal unemployment was at a 12-year low of 4.1 per cent. Gross fixed capital formation increased by 9 per cent in the final quarter of FY23 to reach a share of 34 per cent of GDP, the highest since 2012-2013. 

Outlook for the coming week

Indian equity markets ended the passing week with the gains over half a percent amid positive HSBC India Manufacturing PMI and India Services PMI data. Meanwhile, Reserve Bank of India, as expected, kept the repo rate unchanged at 6.5 percent for the seventh straight time.

In the coming week, market-participants would be eyeing the release of Index of Industrial Production (IIP) data, scheduled to be released on April 12. Industrial production in India increased 3.8% year-on-year in January 2024, after an upwardly revised 4.2% rise in the previous month and below market expectations of 4.1%. On the same day, Consumer Price Index (CPI) data is also going to be out. The Consumer Price Index in India increased 0.16 percent in February of 2024 over the previous month. 

The coming week is expected to be a crucial one for Indian equity markets as it marks the start of Q4 earning season, which would formally commence with the earnings of IT bellwether, TCS on April 12, 2024.

On the global front, investors would be eyeing few economic data from world’s largest economy, United States (US), starting from Consumer Inflation Expectations on April 08 followed by Redbook on April 09, Core Inflation Rate, Fed Goolsbe Speech, FOMC Minutes on April 10, Producer Price Index (PPI), Initial Jobless Claims, Fed Bostic Speech on April 11, Import-Export data, Michigan Consumer Sentiment, Baker Hughes Oil Rig Count on April 12.

Top Gainers

  • Divi's Lab up by 8.79% was the top gainer on Nifty for the week - Divi’s Laboratories edged higher after several broking firms upgraded its target on expectation of the company performing well in coming time. Moreover, a likely bottoming of margin in near-term and relative valuation provide an attractive entry point. Earlier, the company, on consolidated basis, reported 16.99% rise in net profit at Rs 358 crore for Q3FY24 as compared to Rs 306 crore for the same quarter in the previous year. Total income of the company increased by 7.08% at Rs 1950 crore for Q3FY24 as compared Rs 1821 crore for corresponding quarter of the previous year.
  • HDFC Bank up by 7.02% was another top gainer on Nifty for the week - HDFC Bank traded higher after it reported growth of around 55.4% in its gross advances to around Rs 25,080 billion as of March 31, 2024 as compared to Rs 16,142 billion as of March 31, 2023 and a growth of around 1.6% (Rs 387 billion) over Rs 24,693 billion as of December 31, 2023. The Bank’s deposits aggregated to around Rs 23,800 billion as of March 31, 2024, a growth of around 26.4% over Rs 18,834 billion as of March 31, 2023 and a growth of around 7.5% (Rs 1,660 billion) over Rs 22,140 billion as of December 31, 2023. 
Top Losers

  • Hero MotoCorp down by 4.18% was the top loser of the week on Nifty - Hero MotoCorp reported 5.57% fall in sales at 4,90,415 units in March 2024 as compared to 519,342 units sold in March 2023. Of the total sales in March 2024, the company sold 456,724 motorcycles and 33,691 scooters as against 485,896 motorcycles and 33,446 scooters sold in March 2023. Domestic sales stood at 459,257 units in March 2024, down from sales of 502,730 units in March last year. Besides, the company's exports increased to 31,158 units in March 2024versus 16,612 units in March 2023. 
  • Nestle down by 3.23% was another top loser of the week on Nifty - Nestle traded under pressure despite a report that the National Consumer Dispute Redressal Commission has dismissed the Central government's plea against the company alleging indulgence in 'unfair trade practice' by selling Maggi noodles. The Department of Consumer Affairs had filed the complaint in 2015 before the NCDRC alleging that the company indulged in unfair trade practices by manufacturing and selling hazardous and defective goods to the public. NCDRC dismissed the plea in favour of Nestle India on April 2, 2024.
Technical viewpoints

During the week, CNX Nifty touched the highest level of 22,619.00 on April 4 and lowest level of 22,303.80 on April 4. On the last trading day, the Nifty closed at 22,513.70 with weekly gain of 186.80 points or 0.84 percent. For the coming week, 22,338.67 followed by 22,163.63 are likely to be good support levels for the Nifty, while the index may face resistance at 22,653.87 and further at 22,794.03 levels.

US Market

The U.S. markets ended lower during the passing week after federal Reserve Chair Jerome Powell said that the central bank is not in a hurry to begin lowering interest rates. Powell pointed to higher inflation data over January and February as a reason for the Fed to be cautious but acknowledged it is too soon to say whether the recent readings represent more than just a bump. Powell said ‘We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent.’ He added ‘Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy.’ Nonetheless, Powell said he continues to believe rates are likely at their peak for this tightening cycle and noted most Fed officials see it as likely to be appropriate to begin lowering rates at some point this year.

The Fed chief described the outlook as quite uncertain and suggested there are risks to both cutting rates too soon or too late. On the economic data front, a report released by the Commerce Department showed the U.S. trade deficit unexpectedly widened in the month of February. The Commerce Department said the trade deficit increased to $68.9 billion in February from a revised $67.6 billion in January. Street had expected the trade deficit to narrow to $67.0 billion from the $67.4 billion originally reported for the previous month. The wider trade deficit in February matched the largest gap between imports and exports since the deficit reached $72.2 billion last April. The increase in the size of the trade deficit came even though the goods deficit narrowed to $91.4 billion in February from $91.7 billion in January, as the services surplus shrank to $22.5 billion from $24.1 billion.

The Labor Department released a report showing first-time claims for U.S. unemployment benefits rose by more than expected in the week ended March 30th. The report said initial jobless claims climbed to 221,000, an increase of 9,000 from the previous week's revised level of 212,000. Street had expected jobless claims to inch up to 214,000 from the 210,000 originally reported for the previous week. Besides, service sector growth in the U.S. unexpectedly slowed in the month of March, the Institute for Supply Management (ISM) revealed in a report released. The ISM said its services PMI dipped to 51.4 in March from 52.6 in February. While a reading above 50 still indicates growth in the sector, street had expected the index to inch up to 52.7. The unexpected decrease by the headline index partly reflected a slowdown in the pace of growth in new orders, with the new orders index falling to 54.4 in March from 56.1 in February.

European Market

European markets ended passing week with losses as investors reacted to hawkish comments from Federal Reserve officials and escalating tensions in the Middle East. The start of the week was on a muted note, as the euro area manufacturing activity shrunk the most in three months in March despite signs of positive momentum building in output, new orders and business sentiment. A survey compiled by HCOB and S&P Global showed that the final manufacturing Purchasing Managers' Index fell to a three-month low of 46.1 in March from 46.5 in February. At 45.7, the flash reading was even weaker. Manufacturing output extended the decrease to exactly one year. Nonetheless, the pace of decline was the softest since April 2023. Similarly, new orders continued to fall but the downturn slowed over the past five months.

Markets remained lackluster during the week, as Switzerland's retail sales decreased unexpectedly in February after recovering in the previous month. The data from the Federal Statistical Office showed that retail sales adjusted for sales days and holidays fell a working-day adjusted 0.2 percent year-on-year in February, reversing a 0.3 percent rise in January. Further, Italy's unemployment rate rose to a three month high in February. The statistical office ISTAT reported that the jobless rate advanced to 7.5 percent in February, while it was expected to fall to 7.2 percent. The rate was 7.3 percent in both January and December. In February 2023, the unemployment rate stood at 7.8 percent. At the same time, the employment rate edged up to 61.9 percent in February from 61.8 percent in the previous month.

On the inflation front, Consumer price inflation in Germany slowed for a third straight month in March to its lowest level in nearly three years but core inflation remained high. The consumer price index rose 2.2 percent year-on-year following a 2.5 percent increase in February.The preliminary figures from the statistical office Destatis showed that the rate matched expectations and was the lowest since April and May of 2021, when inflation was 2 percent in each of the two months. Core inflation, which excludes prices of food and energy, eased slightly to 3.3 percent from 3.4 percent. Further, Eurozone inflation softened in March. The flash estimate from Eurostat showed that the harmonized index of consumer prices registered an increase of 2.4 percent annually, slower than the 2.6 percent rise in February. Prices were forecast to climb 2.5 percent. Likewise, core inflation eased to 2.9 percent in March from 3.1 percent in the previous month. 

Asian Market

Asian markets ended mostly in green during the passing week as traders reacted to the latest remarks from US Fed officials that helped ease recent concerns about the outlook for interest rates. Fed Chair Jerome Powell reiterated that the central bank is not in a hurry to begin lowering interest rates, but reaffirmed his view that they will likely cut interest rates this year.

Chinese Shanghai rose by around two percent as a private survey showed China service sector activity grew as expected in March, as persistent measures from Beijing to shore up liquidity and improve local demand helped spur new business. The Caixin services purchasing managers index (PMI) grew 52.7 in March, as expected. The index picked up slightly from the 52.5 reading seen in the prior month. Some support also came with a report that China’s factory activity in March expanded by its strongest pace in more than a year, in signs of stabilizing growth in the world’s second-largest economy. The Caixin/S&P Global China manufacturing purchasing managers’ index was 51.1 in March -- its strongest since February 2023 -- after coming in at 50.9 in February. The 50-point mark separates expansion from contraction. 

However, Japanese Nikkei fell by around a percent as rate concerns weighed on the tech sector and the yen rebounded from recent losses to a two-week high on concerns that sticky inflation could elicit more interest rate hikes by the Bank of Japan. Traders overlooked the latest survey from Jibun Bank revealed that the service sector in Japan continued to expand in March, and at a faster rate, with a service PMI score of 54.1. That's up from 52.9 and it moves further above the boom-or-bust line of 50 that separates expansion from contraction.  Traders also took a note of the Ministry of Internal Affairs and Communications stating that the average household spending in Japan was down 0.5 percent on year in February- standing at 279,868 yen. That beat expectations for a decline of 2.8 percent following the 6.3 percent slide in January. 
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