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EQUITY
Late selloff eats weekly gain; traders eye macro-economic data
Apr-12-2024

Key gauges ended unchanged as selling on final day of the week ate all of their initial weekly gains as traders opted to book initial profit ahead of macro-economic data. Indian equity benchmarks started the holiday truncated week on an optimistic note as latest data by the Reserve Bank of India (RBI) showing that India’s foreign exchange reserves rose to a new high for the third straight week, reaching $645.58 billion in the week ended March 29. The total reserves rose by $2.95 billion in the previous week. Some optimism also came as India Ratings and Research (Ind-Ra) has put out a report maintaining a neutral outlook on the finances of Indian states for the fiscal year 2024-2025 (FY25), showing States' aggregate revenue deficit is projected to be 0.4 per cent of gross domestic product (GDP) for FY25, down from 0.5 per cent in FY24. The buoyancy in sentiment continued, led by sectorial tailwinds and Q4 earnings growth expectations. On the very next day, local indices witnessed consolidation as traders turned cautious with the RBI’s Report stating that frequent weather shocks caused by climate change pose challenges for the monetary policy as well as downside risks to economic growth. It said global average temperatures are on a rise, with accompanying increase in extreme weather events (EWE), and the economic and social impact of global warming is becoming increasingly evident. Domestic bourses once again got momentum and hit all-time highs with Sensex crossing 75,000 mark for the first time as traders took support with a private report that India is expected to see a normal monsoon in 2024, promising some respite after a prediction of more-than-normal heat wave days in the summer preceding the June-September rainy season. Monsoon rains are expected to be 102% of the long-period average of 868.6 mm for the four-month period. Traders took a note of the US National Security Advisor’s statement that the partnership between India and the United States has reached a new height with collaboration on technology and other fields. Traders overlooked report by credit rating agency ICRA in which it has revised the banking sector outlook to Stable from Positive on the expectation of moderation in credit growth and profitability metrics, though the same would continue to remain healthy. It said while the compression in the interest margins over the last 18 months has been driven by rising deposit cost, the expectations of a rate cut in H2 FY2025 could lead to margin pressure, driven by a likely downward repricing of advances. Traders also paid no heed towards report that the Indian Meteorological Department has predicted that in the April-June period, various parts of the country could record 10-20 heat wave days compared to the normal four to eight days. But selling on final day of the week mainly played spoilsport for the markets and pulled markets back to the neutral lines as market participants avoided to take long positions ahead of the macro-economic data -- Index of Industrial Production (IIP) and Consumer Price Index (CPI) -- for more directional cues. Traders remained cautious with a private report that India's consumer price inflation likely eased to a five-month low of 4.91% in March but was still above the Reserve Bank of India's 4% medium-term target as food price rises persist.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex decreased 3.32 points to 74,244.90 during the week ended April 12, 2024. The BSE Midcap index gained 78.49 points or 0.19% to 40,909.03, while Smallcap index slipped 160.64 points or 0.35% to 45,872.07. On the sectoral front, S&P BSE Consumer Durables was down by 472.47 points or 0.88% to 53,028.38, S&P BSE Healthcare was down by 284.02 points or 0.80% to 35,261.84, S&P BSE Information Technology was down by 282.92 points or 0.78% to 35,781.66, S&P BSE Fast Moving Consumer Goods was down by 86.92 points or 0.45% to 19,334.04 and S&P BSE Capital Goods was down by 217.23 points or 0.35% to 62,251.73 were the top losers, while S&P BSE Metal was up by 813.72 points or 2.76% to 30,348.42, S&P BSE Oil & Gas was up by 412.07 points or 1.48% to 28,245.21, S&P BSE Realty was up by 103.46 points or 1.40% to 7,496.45, S&P BSE Auto was up by 335.67 points or 0.68% to 49,732.34 and S&P BSE Consumer Discretionary Goods & Services was up by 53.13 points or 0.60% to 8,865.84 were the top gainers.

NSE movement for the week

The Nifty increased 5.70 points or 0.03% to 22,519.40. On the National Stock Exchange (NSE), Bank Nifty was up by 71.50 points or 0.15% to 48,564.55, Nifty Mid Cap 100 increased 44.70 points or 0.09% to 50,067.55 and Nifty Next 50 gained 371.75 points or 0.59% to 63,067.85, while Nifty IT was down by 229.80 points or 0.65% to 35,018.10.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 58,290.39 crore and gross sales of Rs 44,618.36 crore, leading to a net inflow of Rs 13,672.03 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 5,922.14 crore against gross sales of Rs 5,614.98 crore, resulting in a net inflow of Rs 307.16 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 210.70 crore and gross sales of Rs 181.82 crore, leading to a net inflow of Rs 28.88 crore.

Industry and Economy

With the help of public and private sector investment demand and gradual improvement in consumer demand, the Asian Development Bank (ADB) has raised India's Gross Domestic Product (GDP) growth forecast to 7 per cent for the current fiscal (FY25) from 6.7 per cent earlier. Though, the growth estimates for 2024-25 is lower than 7.6 per cent projected for the 2022-23 fiscal. It noted that strong investment drove GDP growth in the 2022-23 fiscal as consumption was muted. The ADB had in December last year projected the Indian economy to expand 6.7 per cent in the 2024-25 fiscal. 

Outlook for the coming week

Indian equity markets snapped the passing week on flat note as traders were cautious ahead of the India’s Consumer Price Index (CPI) inflation and Index of Industrial Production (IIP) data to be out later in the day. 

On the economy front, market-participants would be eyeing the data of Wholesale price index (WPI), which is scheduled to be release on April 15. On the same day, imports and exports data also scheduled to be release. India's merchandise trade deficit widened to $18.7 billion in February 2024 from a $16.6 billion gap a year earlier, and compared to market forecasts of an $18.3 billion shortfall. Foreign Exchange Reserves, Monetary Policy Meeting Minutes, Deposit growth and Bank Loan growth data scheduled to be release on April 19. 

The coming week will mainly be guided by earnings, as lots of important companies will be announcing their numbers. Crisil, ICICI Lombard General Insurance, Tata Communications, Bajaj Auto, HDFC Life Insurance Company, Infosys, Mastek, HDFC Asset Management Company, Jio Financial Services, Wipro, HDFC Bank etc. 

On the global front from the US, traders will first be eyeing NY Empire State Manufacturing Index, Retail Sales, NAHB Housing Market Index on April 15, Fed Daly Speech, Building Permits Prel, Redbook, Industrial Production, Manufacturing Production on April 16, Initial Jobless Claims, Philadelphia Fed Manufacturing Index, Fed Williams Speech, Existing Home Sales, Fed Bostic Speech on April 18, Fed Bostic Speech, Baker Hughes Total Rigs Count on April 19.

Top Gainers

  • Eicher Motors up by 9.36% was the top gainer on Nifty for the week - Some of the Auto industry stocks remained on buyers’ radar after Federation of Automobile Dealers Associations (FADA) said that automobile retail sales in India saw double-digit growth in 2023-24 driven by record offtake of passenger vehicles, three- wheelers and tractors. The retail sales across segments rose by 10 per cent to 2,45,30,334 units last fiscal as compared with 2,22,41,361 units in 2022-23.
  • Kotak Mahindra Bank up by 4.73% was another top gainer on Nifty for the week - Kotak Mahindra Bank’s asset management arm -- Kotak Alternate Asset Managers raised Rs 2,000 crore to invest in equities. The fund aims to solve the challenge of building and maintaining equity portfolios amid the difficulties faced by investors due to the market volatalities. Kotak Alternate Asset Managers’ ‘Iconic Fund’ is a Sebi-registered category III Alternative Investment Fund (AIF).
Top Losers

  • Cipla down by 5.08% was the top loser of the week on Nifty - The USFDA has concluded routine current Good Manufacturing Practices (cGMP) inspection at Cipla’s manufacturing facility located in Patalganga, Maharashtra, India from March 28, 2024 to April 4, 2024. On conclusion of the inspection, the company has received 6 inspectional observations in Form 483. The company will work closely with the USFDA and is committed to address these comprehensively within the stipulated time.
  • Sun Pharma by 4.93% was another top loser of the week on Nifty - Sun Pharma came under pressure after the US drug regulator classified its Dadra facility as Official Action Indicated (OAI). OAI means regulatory or administrative actions are recommended. The US Food and Drug Administration (USFDA) conducted an inspection at the company's Dadra facility from December 4, 2023 to December 15, 2023. The company will work with the regulator to achieve fully compliant status.
Technical viewpoints

During the week, CNX Nifty touched the highest level of 22,775.70 on April 10 and lowest level of 22,503.75 on April 12. On the last trading day, the Nifty closed at 22,519.40 with weekly gain of 5.70 points or 0.03 percent. For the coming week, 22,423.53 followed by 22,327.67 are likely to be good support levels for the Nifty, while the index may face resistance at 22,695.48 and further at 22,871.57 levels.

US Market

The U.S. markets ended mostly in red during the passing week as inflation data reignites interest rate worries. Largely reflecting continued growth in prices for shelter and gasoline, the Labor Department released a report showing U.S. consumer prices advanced by slightly more than expected in the month of March. The Labor Department said its consumer price index climbed by 0.4 percent in March, matching the increase seen in February. Street had expected consumer prices to rise by 0.3 percent. Shelter prices rose by 0.4 percent and gasoline prices jumped by 1.7 percent, contributing over half of the monthly increase by the index. Excluding prices for food and energy, core consumer prices still rose by 0.4 percent for the third consecutive month. Core consumer prices were also expected to increase by 0.3 percent.

The advance by core prices reflected the increase in shelter prices as well as higher prices for motor vehicle insurance, medical care, apparel and personal care. Decreases in pries for used cars and trucks, recreation and new vehicles helped limit the upside. The report also said the annual rate of consumer price growth accelerated to 3.5 percent in March from 3.2 percent in February. Street had expected a more modest acceleration to 3.4 percent. The annual rate of core consumer price growth came in at 3.8 percent in March, unchanged from February. Core price growth was expected to slow to 3.7 percent. Meanwhile, the Labor Department released a report showing U.S. producer prices increased in line with street estimates in the month of March. The Labor Department said its producer price index for final demand crept up by 0.2 percent in March after climbing by 0.6 percent in February. 

The uptick matched expectations. The report said the annual rate of producer price growth accelerated to 2.1 percent in March from 1.6 percent in February. The annual rate of growth was the fastest since surging 2.3 percent last April but came in slightly slower than the 2.2 percent jump forecast by street. The modest monthly increase in producer prices was led by higher services prices, which rose by 0.3 percent for the second straight month. However, a report released by the Labor Department showed first-time claims for U.S. unemployment benefits pulled back by more than expected in the week ended April 6th after reaching a two-month high in the previous week. The Labor Department said initial jobless claims fell to 211,000, a decrease of 11,000 from the previous week's revised level of 222,000. Street had expected jobless claims to slip to 215,000 from the 221,000 originally reported for the previous week.

European Market

European markets ended passing week on a subdued note, amid inflation concerns and uncertainty about the Federal Reserve cutting interest rate in June. The markets also digested the European Central Bank's decision to hold interest rates unchanged. The start of the week was on a higher note, as Germany's industrial production growth accelerated more than expected in February. The data from Destatis showed that industrial output posted a monthly growth of 2.1 percent, following a revised 1.3 percent rise in January. Besides, Euro area investor confidence strengthened for the sixth month in a row to reach a 26-month high in April as expectations turned positive for the first time since the start of the war in Ukraine. The data from the behavioral research institute Sentix showed that the headline investor sentiment index advanced to -5.9 in April from -10.5 in March. This was the highest score since February 2022.

However, indices remained muted towards end of the week, after Ireland's manufacturing output declined sharply for the second straight month in February. The preliminary figures from the Central Statistics Office showed that manufacturing output plunged a seasonally adjusted 37.6 percent year-on-year in February, reversing a 32.8 percent slump in January. On a monthly basis, output in the manufacturing sector rebounded 2.2 percent from January, when it plunged by 45.7 percent. Further, the UK economy posted a meagre growth in February. The Office for National Statistics reported that real gross domestic product edged up 0.1 percent on a monthly basis in February, following a revised 0.3 percent expansion in January. The growth came in line with expectations. In February, services output growth softened to 0.1 percent from 0.3 percent. Meanwhile, industrial production was the largest contributor to the growth, which climbed 1.1 percent, reversing a revised 0.3 percent fall.

On the inflation front, Spain's consumer price inflation increased, as initially estimated in March. The latest data from the statistical office INE showed that the consumer price index advanced 3.2 percent on a yearly basis, following February's 2.8 percent rise. That was in line with the flash data published on March 27. Excluding food and energy prices, underlying inflation softened to 3.3 percent from 3.5 percent a month ago, as estimated. However, German consumer price inflation eased to the lowest level in nearly three years, as initially estimated in March amid lower costs for food and energy. The final data from Destatis revealed that consumer price inflation slowed to 2.2 percent in March from 2.5 percent in February. That was in line with the flash data published earlier. Moreover, the latest inflation was the weakest since May 2021, when prices had risen the same 2.2 percent. 

Asian Market

Asian markets ended mixed during the passing week amid fading hopes of an interest rate cut anytime soon by the US Fed after latest data showed a bigger than expected increase in U.S. consumer price inflation in March. Traders waited for the U.S. earnings season to kick off with large-cap banking names. Investors also looked ahead to a rate decision by the People's Bank of China on Monday, with the central bank expected to leave the key policy rate unchanged.

Chinese Shanghai fell by over a percent as the U.S. crackdown on China's tech sector intensified. The United States has added six Chinese companies to an export blacklist accusing them of seeking to acquire AI chips for China's military or helping to procure drones for use by Russia. Some concern also came as China's March exports and imports figures missed estimates by large margins. Exports fell 7.5 percent year-on-year in the month, while imports unexpectedly shrank 1.9 percent, customs data showed. Adding to the pessimism, ratings agency Fitch revised its outlook on China's sovereign credit rating to negative, citing risks to public finances as the economy faced increasing uncertainty in its shift to new growth models.

However, Japanese Nikkei rose by over a percent led by chip-related stocks, while the yen’s ongoing weakness against the US dollar supported exporter issues. Some support came as the Bank of Japan stated that the M2 money stock in Japan was up 2.5 percent on year in March- coming in at 1,243.9 trillion yen. That exceeded expectations for an increase of 2.4 percent, which would have been unchanged from the February reading following a downward revision from 2.5 percent. However, Japan’s current account surplus came in below estimates in February, while real wages in the country declined for the 23rd consecutive month.
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