Indian markets end the passing week in red

Indian equity benchmarks ended the passing week in red terrain as traders opted to book profit in blue-chip stocks after a strong recent rally. Markets started the week on an optimistic note as sentiments got boost with Union Finance Minister Nirmala Sitharaman’s statement that the Indian government remains committed to bring the economy on the path of fiscal consolidation in the near-to-medium term, setting the target to reduce fiscal deficit to 4.5 per cent by 2025-26. Some support also came after RBI data stated that the country's foreign exchange reserves rose by $2.039 billion to 639.516 billion in the week ended October, 8. On the very next day, markets took U-turn as traders opted to book profit at higher levels as traders got anxious with a private report stating that rising global commodity prices, led by crude, coal and metals, will shave a lot off the current account leading to higher imports and a rise in current account deficit, which is likely to print at 1.3 per cent of the GDP or $40 billion, up from 0.9 per cent surplus last fiscal. Selling further crept in, as International Monetary Fund downgraded its 2021 economic growth forecast for Asia after the highly infectious Covid-19 delta variant caused a spike in cases in parts of the region. Markets extended losses as data showed that Foreign Institutional Investors (FIIs) were net sellers in the capital market as they offloaded shares worth Rs 1,843.09 crore, while Domestic Institutional Investors (DIIs) were net sellers to the tune of Rs 1,680.73 crore in the Indian equity market on Wednesday. Sentiments remained dampened as traders turned cautious with report stated that amid concerns about the rising oil prices, India, the world's third-largest energy consumer, has warned that high oil prices will undermine global economic recovery, and nudged Saudi Arabia and other OPEC nations to work towards affordable and reliable supplies. Markets participants continued to remain on sidelines on final day of trade despite ICRA’s report that the economy finally looks nearly out of the pandemic woods, helping the Q2 GDP print at 7.7 per cent, with half of the 15 high-frequency indicators recovering to the pre-pandemic levels in the second quarter.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex slipped 484.33 points or 0.79% to 60,821.62 during the week ended October 22, 2021. The BSE Midcap index losses 1133.05 points or 4.24% to 25,566.64, while Smallcap index slipped 1556.75 points or 5.21% to 28,336.31. On the sectoral front, S&P BSE Consumer Discretionary Goods & Services was down by 402.55 points or 6.55% to 5,738.83, S&P BSE Fast Moving Consumer Goods was down by 925.72 points or 6.08% to 14,304.42, S&P BSE Consumer Durables was down by 2,804.19 points or 6.06% to 43,468.40, S&P BSE Metal was down by 1,159.21 points or 5.39% to 20,333.74 and S&P BSE Healthcare was down by 1,369.92 points or 5.18% to 25,072.50 were the top losers on the BSE sectoral front, while S&P BSE BANKEX was up by 1,345.58 points or 3.01% to 46,105.17 and S&P BSE Finance was up by 126.30 points or 1.43% to 8,980.30 were the only gainers on the BSE sectoral front.

NSE movement for the week

The Nifty slipped 223.65 or 1.22% to 18,114.90. On the National Stock Exchange (NSE), Nifty IT was down by 350.15 points or 0.98% to 35,394.65, Nifty Mid Cap 100 decreased 1421.05 points or 4.37% to 31,082.45, Nifty Next 50 lost 2193.60 points or 4.92% to 42,403.80. On the other side, Bank Nifty was up by 982.75 points or 2.50% to 40,323.65.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 60,367.77 crore and gross sales of Rs 62,924.79 crore, leading to a net outflow of Rs 2,557.02 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 2,810.39 crore against gross sales of Rs 4,001.00 crore, resulting in a net outflow of Rs 1,190.61 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 198.59 crore and gross sales of Rs 188.10 crore, leading to a net inflow of Rs 10.49 crore.

Industry and Economy

Union Minister Hardeep Singh Puri has exuded confidence that India will become a $5-trillion economy by 2024-25 and $10-trillion by 2030. On economic growth momentum, he said petrol consumption is 16% higher than pre-COVID levels, while diesel consumption is 10-12% higher. He noted that even the stock market has registered a growth of 250% since March 2020. Puri mentioned that the pandemic has led to a different set of growth drivers -- revival of health sector, exports, global manufacturing risk index, increased economic activity, achieving renewable energy target and initiative like Gati Shakti, Foreign exchange reserve.

Outlook for the coming week

In the passing week, domestic bourses ended on week note due to profit-booking at higher levels, weak Q2 results, and bearish global market.

The next week is likely to see some volatility with scheduled F&O series expiry on 28 October and traders balancing their positions going ahead for the next series. On economic front, investors will be eyeing the data of core sector growth, schedule to be release on 29 October. Core sector growth in India jumped 11.6% year-on-year in August of 2021, the biggest annual gain in 3 months.

Meanwhile, stock-specific activity may dominate trade as earnings flows in. ICICI Bank, MCX, CSB Bank, ICRA, SRF, Tech Mahindra, Axis Bank, Bajaj Finance, CERA Sanitaryware, Cipla, Adani Ports, Bajaj Auto, ITC, L&T, Lupin, Maruti Suzuki India, PNB, SBI Life Insurance Company, Tata Chemicals, Titan Company, UBL, Zee Entertainment Enterprises, Bajaj Finserv, InterGlobe Aviation, M&M Financial Services, Tata Power, Adani Power, Cadila Healthcare, Dr Reddy, Escorts, Gail, UPL would report their earnings in the coming week.

On global front, US economy will release September month existing and new home sales data; durable goods orders details for the last month; consumer confidence and consumer sentiment reports for the current month and weekly jobless claims data in the coming week. Besides this, the largest economy of the world is also scheduled to announce its gross domestic product (GDP) data (advance figures) for the third quarter on October 28 (Thursday).

Top Gainers

  • Kotak Mahindra Bank up by 7.61% was the top gainer on Nifty for the week - Kotak Mahindra Bank gained traction on entering into a partnership with Pine Labs, a leading merchant commerce platform, specialising in merchant acquisition through innovative payment products. This tie-up will enable the bank to expand its merchant acquiring and Point of Sale (PoS) services to more merchants, especially retailers. Additionally, the bank will come out with its Q2 results in the coming week.
  • Tech Mahindra up by 6.06% was another top gainer on Nifty for the week - Tech Mahindra gained ahead of its September quarter (Q2FY21) results to be out in coming week. The Company had reported a 25.1% sequential rise in consolidated net profit to Rs 1353 crore for the quarter ended June. In dollar terms, the company’s revenues rose 4.1% sequentially, while in constant currency terms it climbed 3.9%. The company had reported standalone net profit of Rs 986.20 crore for Q1FY21.

Top Losers

  • Asian Paints down by 9.56% was the top loser of the week on Nifty - Asian Paints witnessed selling pressure on reporting 28.23% fall in its consolidated net profit for the period attributable to owners of the company at Rs 595.96 crore for Q2FY21 as against net profit of Rs 830.37 crore for Q2FY20. The company has reported dip in consolidated profit even as revenue grew as high input costs dented the market leader’s margins. However, total income of the company stood at Rs 7234.21 crore for Q2FY22.
  • Hindalco down by 8.85% was another top loser of the week on Nifty - Hindalco ended with weekly loss as traders opted to book profit at higher levels. Recently, Hindalco Industries' share price had jumped after a global brokerage reiterated the ‘outperform’ call on the stock. Also, metal stocks were under pressure as industrial metals declined, following a recent strong rally, after the Chinese government stepped up efforts to tame record high coal prices and ensure coal mines operate at full capacity.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 18,604.45 on October 19 and lowest level of 18,034.35 on October 22. On the last trading day, the Nifty closed at 18,114.90 with weekly loss of 223.65 points or 1.22 percent. For the coming week, 17,898.02 followed by 17,681.13 are likely to be good support levels for the Nifty, while the index may face resistance at 18,468.12 and further at 18,821.33 levels.

US Market

The U.S. markets ended higher during the passing week as major companies continued to report strong third-quarter earnings, easing concerns that persistent Covid cases. Upbeat earnings reports from Travelers Companies Inc., Johnson & Johnson, Procter & Gamble and Verizon lifted sentiment. The strength on markets came after a report from the Labor Department showed first-time claims for U.S. unemployment benefits unexpectedly edged lower in the week ended October 16th. The Labor Department said initial jobless claims slipped to 290,000, a decrease of 6,000 from the previous week's revised level of 296,000. The modest decrease surprised participants, who had expected jobless claims to inch up to 300,000 from the 293,000 originally reported for the previous week. With the unexpected dip, jobless claims once again fell to their lowest level since hitting 256,000 in the week ended March 14, 2020.

Further, some support also came in as the National Association of Realtors (NAR) released a report showing existing home sales rebounded by much more than expected in the month of September. NAR said existing home sales spiked by 7.0 percent to an annual rate of 6.29 million in September after slumping by 2.0 percent to a rate of 5.88 million in August. Street had expected existing home sales to jump by 3.6 percent to a rate of 6.09 million. Existing home sales reached their highest annual rate since January but were still down by 2.3 percent compared to the same month a year ago. Meanwhile, a report released by the National Association of Home Builders showed a notable improvement in U.S. homebuilder confidence in the month of October. The report said the NAHB/Wells Fargo Housing Market Index climbed to 80 in October from 76 in September. Street had expected the index to come in unchanged.

However, economic activity in the U.S. has recently grown at a modest to moderate rate, according to the Federal Reserve's Beige Book, although the pace of growth has slowed. The Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts, attributed the slowdown to supply chain disruptions, labor shortages, and uncertainty around the Delta variant of COVID-19. The report said a majority of Fed districts indicated positive growth in consumer spending, although auto sales were widely reported as declining due to low inventory levels and rising prices. Manufacturing grew moderately to robustly in most parts of the country, the Beige Book said, while growth in non-manufacturing activity ranged from slight to moderate for most districts. The Fed also said employment increased at a modest to moderate rate in recent weeks, as demand for workers was high, but labor growth was dampened by a low supply of workers.

European Market

European markets ended passing week on a higher note. The start of the week was in red, as the euro area current account surplus declined sharply in August. The European Central Bank said that the current account surplus fell to EUR 13 billion in August from EUR 23 billion in July. The surplus on goods trade came in at EUR 17 billion versus EUR 26 billion a month ago. At the same time, the balance on services trade showed a deficit of EUR 1 billion compared to a surplus of EUR 7 billion in the previous month. Besides, the UK budget registered its second biggest deficit for the month of September since the records began in 1993. The Office for National Statistics said that public sector net borrowing excluding public sector banks was GBP 21.8 billion in September, the second-highest September borrowing since monthly records began in 1993. This was GBP 7.0 billion less than in September 2020.

However, markets added gains towards end of the week, after Sweden's jobless rate decreased in September. The figures from Statistics Sweden showed that the jobless rate fell to a seasonally adjusted 8.2 percent in September from 8.5 percent in August. The number of unemployed persons increased to 454,300 in September from 478,500 in the previous month. Further, confidence among French manufacturers remained unchanged in October. The survey results from the statistical office Insee showed that the manufacturing confidence index held steady at 107 in October. The score was forecast to fall to 105 from September's initially estimated value of 106.

On the inflation front, UK consumer price inflation slowed slightly in September. The Office for National Statistics said that consumer price inflation slowed slightly to 3.1 percent from 3.2 percent in August. Inflation remained well above the central bank's 2 percent target. Besides, Germany's producer prices rose at the fastest pace since 1974 on strong energy prices. The data released by Destatis showed that producer prices increased 14.2 percent year-on-year in September after rising 12 percent in August. Prices were expected to gain 12.7 percent. This was the highest growth since October 1974, when prices surged 14.5 percent amid the first oil crisis.

Asian market

Asian equity benchmarks, barring KLSE Composite index, ended in green terrain during the passing week, following the broadly positive cues from Wall Street, as traders reacted positively to some upbeat earnings news from top U.S. firms and rising crude oil prices. Meanwhile, the International Monetary Fund on Tuesday slashed its 2021 economic growth outlook for Asia and warned that supply chain disruptions, inflation pressures and a looming fresh wave of COVID-19 infections pose downside risks. However, it raised the economic growth outlook for 2022.

Japanese Nikkei surged by around a percent after the latest survey from Jibun Bank showed the manufacturing sector in Japan continued to expand in October, and at a faster pace, with a manufacturing PMI score of 53.0. That's up from 51.5 in September, and it moves further above the boom-or-bust line of 50 that separates expansion from contraction. The survey also showed that the services PMI climbed to 50.7 in October from 47.4 in September, while the composite also rose to 50.7 from 47.9 a month earlier. Further, overall inflation in Japan was up 0.2 percent on year in September. That exceeded expectations for an increase of 0.1 percent following the 0.4 percent drop in August.

Chinese Shanghai too ended higher by over half percent after reports that Chinese developer Evergrande Group has secured more than 3-month extension period on a defaulted $260 million bond, a day after a deal to sell a $2.6 billion stake in its property services unit failed. However, gains remain capped with report stated that China’s economic growth in the third quarter slumped to its slowest pace in a year, as a property slowdown and energy shortages highlighted rising pressure on policymakers. Data released by the National Bureau of Statistics said Gross domestic product grew 4.9 per cent year on year between July and September, compared with 7.9 per cent in the three months ending in June. Besides, China's central bank PBoC kept its benchmark Loan Prime Rate (LPR) unchanged for the 18th consecutive month. The one-year LPR remained at 3.85% and five-year LPR at 4.65%.