Markets start New Year on optimistic note; garner weekly gain of 2.5%

Bulls showed strength in start of the New Year and frontline gauges ended first week of the fresh Calendar Year above their crucial 17,800 (Nifty) and 59,700 (Sensex) levels, as investors hoping Covid-related restrictions to ease sooner-than-expected as Omicron variant looks less sever. Markets started the week with jubilation on the back of better than expected macro-economic data. Growth of eight core infrastructure industries grew 3.1 percent in November 2021 as against 1.1 percent contraction in same month last year. GST revenue collected in December 2021 was over Rs 1.29 lakh crore, 13 per cent higher than the same month last year. However, traders overlooked report that India’s manufacturing activity lost some momentum in December easing to a three month low. The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) eased to 55.5 in December from November's ten-month high of 57.6. Meanwhile, services PMI eased to 55.5 in December from 58.1 in November, the lowest since September but still well above the 50-mark that separates growth from contraction. Markets extended gains  taking support from government data showing that India’s exports surged 37 percent on an annual basis to $37.29 billion in December 2021, the highest-ever monthly figure, on the back of healthy performance by sectors like engineering, textiles and chemicals, even as the trade deficit widened to $21.99 billion. Imports in December too rose by 38 per cent to $59.27 billion on account of an increase in oil imports, which soared 65.17 per cent to $15.9 billion. However, markets witnessed some profit booking on penultimate day of the week as rising Coronavirus cases in the country sparked fears of renewed curbs to contain the spread of the virus which may impact the nascent economic growth in the country. The sentiments remained down-beat as ICRA Ratings warned that the third wave of the pandemic is likely to shave 40 bps of the fourth quarter Gross Domestic Product (GDP) growth that may print in at 4.5-5 per cent. Buying on final day of trade ensured that key gauges will go with gains of over 2.5 percent each as traders remained hopeful of good corporate earning starting from next week.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 1490.83 points or 2.56% to 59,744.65 during the week ended January 07, 2022. The BSE Midcap index gained 502.75 points or 2.01% to 25,472.83 and Smallcap index surged 574.38 points or 1.95% to 30,032.14. On the sectoral front, S&P BSE BANKEX was up by 2,637.83 points or 6.53% to 43,046.33, S&P BSE Oil & Gas was up by 931.77 points or 5.32% to 18,439.80, S&P BSE PSU was up by 418.86 points or 5.14% to 8,560.08, S&P BSE Finance was up by 390.35 points or 4.85% to 8,439.14 and S&P BSE Metal was up by 607.91 points or 3.16% to 19,853.66 were the top gainers on the BSE sectoral front, while S&P BSE Healthcare was down by 571.91 points or 2.18% to 25,633.82, S&P BSE Information Technology was down by 587.43 points or 1.55% to 37,257.06 and S&P BSE TECK was down by 183.86 points or 1.11% to 16,432.30 were the few losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 458.65 or 2.64% to 17,812.70. On the National Stock Exchange (NSE), Bank Nifty was up by 2257.90 points or 6.36% to 37,739.60, Nifty IT was down by 561.15 points or 1.45% to 38,139.85. On the other side, Nifty Mid Cap 100 increased 668.65 points or 2.20% to 31,111.55 and Nifty Next 50 was up by 608.45 points or 1.44% to 42,826.35.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 30,189.92 crore and gross sales of Rs 26,987.85 crore, leading to a net inflow of Rs 3,202.07 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 1,307.18 crore against gross sales of Rs 1,124.48 crore, resulting in a net inflow of Rs 182.70 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 35.37 crore and gross sales of Rs 44.39 crore, leading to a net outflow of Rs 9.02 crore.

Industry and Economy

Amid a massive surge in COVID infections across the country, especially in the metro, a domestic rating agency -- India Ratings and Research in its latest report has said that the Omicron variant spread will impact the January-March quarter (Q4) Gross Domestic Product (GDP) by 0.40 per cent and shave off 0.10 per cent from the FY22 growth, as many states resort to restrictions to limit infections. It added that curbs in various forms such as reducing the capacity of market/market complexes and night/weekend curfews to check human mobility/contact have already started in several states, which are impacting economic activities. The surge in cases seen over the last fortnight will have an adverse impact on the fourth-quarter GDP and the growth will come at 5.7 per cent during the quarter, which is 0.40 per cent lower than the earlier estimate of 6.1 per cent.

Outlook for the coming week

The first week of New Calendar Year (2022) turned out to be a cheerful one for Indian equity markets, whereby benchmark equity indices puffed up gains of over two and a half percent.

The coming week would be extremely crucial one as the market-participants will be eyeing the next big trigger, i.e, earning season, which will kick start once bellwether stock of the technology index, Infosys, TCS and Wipro release its third quarter results on January 12. However, it is quite likely that top IT companies are expected to post a revenue growth around 3-4.5%.

On the economy front, market-participants would be eyeing the data of Index of Industrial Production (IIP), which is scheduled to be release on January 12. On the same day Consumer Price Index (CPI) also scheduled to release. Annual inflation rate in India edged up to 4.91% in November of 2021 from 4.48% in October.

On January 14, traders will be looking forward toward the Wholesale Price Index (WPI) data for the month of December. The annual wholesale price inflation rate in India rose to 14.23 percent in November 2021 from 12.54 percent in the previous month.

On the global front, investors will be eyeing macro-economic reports from world’s largest economy, United States, starting with Wholesale Inventories on January 10, followed Redbook on January 11, Inflation Rate on January 12, Monthly Budget Statement, Initial Jobless Claims, Core PPI on January 13 and finally Retail Sales, Michigan Inflation Expectations and Baker Hughes Total Rig Count on January 14.

Top Gainers

  • Grasim Industries up by 12.80% was the top gainer on Nifty for the week - Grasim Industries witnessed short covering after two weeks of continuous bashing. Recently, the company had successfully commissioned projects in Rehla in Jharkhand and Balabhadrapuram in the state of Andhra Pradesh. The ongoing expansion project at Rehla has been completed and the company has successfully commissioned the second phase of the expansion project at Rehla, taking overall Caustic Soda Lye capacity of Rehla Unit to 550 TPD.
  • ONGC up by 11.78% was another top gainer on Nifty for the week - Oil and Natural Gas Corporation (ONGC) gained after Alka Mittal, the incumbent HR director in ONGC, is announced as the company's new chairman and managing director. ONGC's last full-time head Shashi Shanker retired on March 31, 2021 and as his replacement was not selected Mr. Kumar, who was the senior most director on the board, was given additional charge.

Top Losers

  • Tech Mahindra down by 5.34% was the top loser of the week on Nifty - Tech Mahindra came under pressure ahead of its December quarter result. There are expectation that the company likely to post decent growth in net profit of quarter ended December 31, 2021. Separately, Tech Mahindra has achieved the Data Analytics specialization certification in the Google Cloud Partner Advantage Program, solidifying its expertise within the data analytics space.
  • Infosys down by 4.15% was another top loser of the week on Nifty - Infosys witnessed selling pressure as investors are looking ahead to the third quarter numbers to be out in coming week that is on January 12, 2022. As per a private report, the company is likely to report decent numbers for the October-December quarter of FY22. Earlier, the company’s wholly-owned subsidiary -- Infosys Consulting had acquired Singaporean telecom major Singtel’s delivery centre in Malaysia.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 17,944.70 on January 5 and lowest level of 17,383.30 on January 3. On the last trading day, the Nifty closed at 17,812.70 with weekly gain of 458.65 points or 2.64 percent. For the coming week, 17,482.43 followed by 17,152.17 are likely to be good support levels for the Nifty, while the index may face resistance at 18,043.83 and further at 18,274.97 levels.

US Market

The U.S. markets ended lower during the passing week as the Fed minutes seemed to have a more hawkish tone, raising concerns the central bank will be more aggressive than anticipated. According to the minutes of the December 14-15 meeting, members of the Fed are preparing to begin reducing the size of the central bank's approximately $8.8 trillion balance sheet soon after raising interest rates. While the previous balance sheet runoff commenced almost two years after policy rate liftoff, participants judge that the appropriate timing this time around would likely be closer to that of policy rate liftoff. The minutes said they noted that current conditions included a stronger economic outlook, higher inflation, and a larger balance sheet and thus could warrant a potentially faster pace of policy rate normalization. The discussions about reducing the size of the central bank's balance sheet came as the Fed also agreed to accelerate the pace of reductions to its asset purchases, with the program currently slated to come to an end in mid-March.

On the economic data front, the U.S. trade deficit widened significantly in the month of November, according to a report released by the Commerce Department. The report said the trade deficit widened to $80.2 billion in November from a revised $67.2 billion in October. Street had expected the deficit to widen to $77.1 billion from the $67.1 billion originally reported for the previous month. Meanwhile, after reporting U.S. service sector growth at a record high in the previous month, the Institute for Supply Management (ISM) released a report showing a notable slowdown in the pace of growth in the sector in the month of December. The ISM said its services PMI slid to 62.0 in December from 69.1 in November, although a reading above 50 still indicates growth. Street had expected the index to drop to 66.9. The pullback by the headline index came as the new orders index tumbled to 61.5 in December from 69.7 in November and the business activity index slumped to 67.6 from 74.6 in the previous month.

Besides, with the more closely watched monthly jobs report looming, the Labor Department released a report unexpectedly showing a modest increase in first-time claims for U.S. unemployment benefits in the week ended January 1st. The report showed initial jobless claims crept up to 207,000, an increase of 7,000 from the previous week's revised level of 200,000. The uptick came as a surprise to participants, who had expected jobless claims to edge down to 197,000 from the 198,000 originally reported for the previous week. However, a report released by the Commerce Department showed new orders for U.S. manufactured goods increased by more than expected in the month of November. The Commerce Department said factory orders surged by 1.6 percent in November after jumping by an upwardly revised 1.2 percent in October. Street had expected factory orders to shoot up by 1.3 percent compared to the 1.0 percent advance originally reported for the previous month.

European Market

European equity benchmarks ended passing week in red. The start of the week was on strong note, as the UK manufacturing sector upturn continued in December, with further growth of production, new orders and employment. The final data from IHS Markit showed that the IHS Markit/the Chartered Institute of Procurement & Supply manufacturing Purchasing Managers' Index rose to 57.9 in December, little changed from November's three-month high of 58.1. The flash score was 57.6. Besides, French consumer confidence unexpectedly improved in December. The survey results from the statistical office Insee showed that the consumer sentiment index fell to 100 in December from 98 in November. The score was forecast to fall to 97.

But, markets cut gains towards end of the week, after the euro area private sector growth eased to a nine-month low in December, resuming a slowdown trend amid a resurgence of COVID-19 infections. The survey results from IHS Markit showed that the composite output index fell to 53.3 in December from 55.4 in November. The score was slightly below the flash 53.4. Further, the UK service sector expanded at the slowest pace in ten months in December as the Omicron variant led to a steep fall in spending on face-to-face consumer services. The final survey results from IHS Markit showed that the Chartered Institute of Procurement & Supply services Purchasing Managers' Index fell to 53.6 in December from 58.5 in November. However, the score was above the flash 53.2.

On the inflation front, Eurozone producer prices rose at a faster pace in November, mainly driven by high energy prices. The preliminary figures from Eurostat showed that the producer price index on the domestic market climbed 23.7 percent year-on-year following a 21.9 percent increase in October. Economists had forecast a 22.9 percent rise. Producer prices for the energy industry surged 66.0 percent year-on-year after a 62.4 percent jump in the previous month. Besides, France's consumer price inflation was stable in December with prices rising at a slower pace from the previous month. The preliminary data from the statistical office INSEE showed that the flash consumer price index rose 2.8 percent year-on-year, same as in the previous month.

Asian market

Asian markets ended mostly in red during the passing week after the minutes from the Federal Reserve's most recent meeting suggested that most members of the committee were thinking interest rates would need to go higher due to inflation as well as a tight labor market. Traders also concerned after several countries across the world announced stricter restrictions on movements to curb the fast spreading Omicron variant of the coronavirus. Focus turned to the U.S. jobs report out later in the day, which would give further indication on how soon the central bank may raise rates.

Chinese Shanghai edged lower by over one and half percent after the country's top market regulator imposed fines against Alibaba, Tencent Holdings and Bilibili Inc for failing to properly report about a dozen deals. Traders paid no heed towards a private sector survey showed activity in China's services sector expanded at a faster pace in December amid higher demand and easing inflationary pressure but continuing small-scale COVID-19 outbreaks weighed on the outlook. The Caixin/Markit services Purchasing Managers' Index (PMI) rose to 53.1 in December from 52.1 in November, remaining above the 50-point mark that separates growth from contraction on a monthly basis.

Japanese Nikkei too fell by over a percent, after data released showed a plunge in household spending and a jump in inflation. Japan's household spending posted an annual drop for the fourth straight month in November, while core consumer prices in Tokyo rose at the fastest pace in nearly two years in December. Traders took a note of the latest survey from Jibun Bank revealed that the services sector in Japan continued to expand in December, albeit at a slower pace, with a services PMI score of 52.1. That's down from 53.0 in November, although it remains above the boom-or-bust line of 50 that separates expansion from contraction. The survey also showed that the composite index fell to 52.5 in December from 53.3 in November.