Bulls strengthen grip on Dalal Street; Sensex reclaims 61,200 mark

Bulls strengthened grip on Dalal Strength with frontline gauges extending gaining streak for fourth straight week and settling above their crucial 61,200 (Sensex) and 18,250 (Nifty) levels. Sentiments remained upbeat since beginning of the week as National Statistical Office (NSO) in its first advance estimate indicated that the Indian economy remains on track to regain its position as the world's fastest-growing major economy and put the GDP expansion at a tempered 9.2 per cent this fiscal. Traders also remain energized with SBI Ecowrap report stating that India's real GDP is expected to grow at around 9.5 per cent in 2021-22 on a year-on-year (YoY). Markets extended gains as investor sentiments magnified with the World Bank retained its FY22 growth forecast for India at 8.3 per cent but upgraded it to 8.7 per cent for FY23, from 7.5 per cent estimated earlier, citing improving growth prospects, especially a reviving private capex cycle. Some optimism came with former chief economic adviser Arvind Virmani’s statement that the Indian economy is likely to register a growth of 9.5 per cent in this financial year. Traders continued to buy fundamental stocks taking support with the World Bank’s statement that the government’s Production-Linked Incentive (PLI) Scheme will likely help India’s economy grow at 8.7% in the next financial year 2022-23, beating emerging market peers including China. Traders shrugged off subdued macro-economic data. India’s industrial production growth remained subdued for the third straight month and expanded by 1.4 per cent in November, mainly due to the waning low base effect. Also, rising prices of essential kitchen items pushed the retail inflation to a six-month high of 5.59 per cent in December, close to the Reserve Bank’s upper tolerance limit of 6 per cent. Final day witnessed some consolidation as traders remained on edge with United Nations’ report that India is forecast to grow at 6.5 per cent in fiscal year 2022, a decline from the 8.4 per cent GDP estimate in previous financial year, though rise in India’s merchandise exports and ease in WPI inflation helped market to cap downside. Exports in December 2021 were $37.81 billion, as compared to $27.22 billion in December 2020, exhibiting a positive growth of 38.91 per cent. Meanwhile, WPI eased to 13.56% in the month of December as against 14.23% in November.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 1478.38 points or 2.47% to 61,223.03 during the week ended January 14, 2022. The BSE Midcap index gained 612.41 points or 2.40% to 26,085.24 and Smallcap index surged 919.14 points or 3.06% to 30,951.28. On the sectoral front, S&P BSE Power was up by 266.24 points or 7.44% to 3,846.99, S&P BSE Capital Goods was up by 1,786.40 points or 6.14% to 30,875.16, S&P BSE Realty was up by 188.58 points or 4.89% to 4,041.33, S&P BSE PSU was up by 274.59 points or 3.21% to 8,834.67 and S&P BSE Information Technology was up by 1,184.49 points or 3.18% to 38,441.55 were the top gainers on the BSE sectoral front, while S&P BSE Fast Moving Consumer Goods was down by 4.56 points or 0.03% to 13,932.85 were the only losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 443.05 or 2.49% to 18,255.75. On the National Stock Exchange (NSE), Nifty Mid Cap 100 increased 878.10 points or 2.82% to 31,989.65, Nifty Next 50 gained 725.40 points or 1.69% to 43,551.75, Bank Nifty was up by 630.80 points or 1.67% to 38,370.40 and Nifty IT was up by 687.00 points or 1.80% to 38,826.85.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 36,922.13 crore and gross sales of Rs 38,267.62 crore, leading to a net outflow of Rs 1,345.49 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 3,363.94 crore against gross sales of Rs 2,632.95 crore, resulting in a net inflow of Rs 730.99 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 1,782.09 crore and gross sales of Rs 29.65 crore, leading to a net inflow of Rs 1,752.44 crore.

Industry and Economy

The World Bank in its latest Global Economic Prospects report has retained India’s gross domestic product (GDP) growth forecast at 8.3 percent for current fiscal year 2021-22 (FY22) as what was stated in its last projection released in October 2021. Besides, it upgraded the country’s growth forecast for FY23 to 8.7 percent from 7.5 percent estimated earlier. It cited improving growth prospects, especially a reviving private capex cycle for up-gradation.

Outlook for the coming week

Markets rallied over 2.5% for the passing week, which lifted both Sensex and Nifty above psychologically crucial 61,200 and 18,250 levels respectively as investors are not too worried about the COVID-19 situation as reports suggest the fast-spreading Omicron variant is not virulent and hospitalisation cases are very low.

In economic releases, traders will be eyeing the Consumer price index for Industrial Workers for the month of December, slated to be released on January 20. Traders will also be eyeing the Passenger Vehicles Sales data on January 17. Total passenger vehicles sales in India dropped 4.7 percent from the previous month to 215,626 units in November 2021, reversing from a 41.4 percent jump in the previous month.

Investors for the coming week would be eyeing results from majors Tata Steel Long Products, Ultratech Cement, Bajaj Finance, ICICI Prudential Life Insurance Company, L&T Technology Services, Trident, Tata Elxsi, Bajaj Auto, ICICI Lombard General Insurance Company, JSW Energy, Larsen & Toubro Infotech, Nelco, Tata Communications, Bajaj Finserv, Havells India, Hindustan Unilever, HDFC Life, JSW Steel, PVR, Reliance Industries etc among others.

Meanwhile, trend in investment by foreign institutional investors and the movement of rupee against the dollar will be also be closely watched by the market-participants.

On the global front from the US, traders will first be eyeing NAHB Housing Market Index on January 17 followed by Redbook on January 19, Initial Jobless Claims, Philadelphia Fed Manufacturing Index on January 20 and finally Baker Hughes Total Rig Count on January 21.

Top Gainers

  • Grasim Industries up by 7.95% was the top gainer on Nifty for the week - Select textile industry stocks traded higher as the textile ministry said that the textile sector has maintained trade surplus with exports higher than imports. In FY21, there was a deceleration in textile exports due to pandemic disrupting the supply chain and demand. However, it added signs of recovery arose in 2021-22. During April-December, 2021 the total Textiles & Apparel including Handicrafts exports was $29.8 billion as compared to $21.2 billion for the same period last year.
  • Oil and Natural Gas Corporation (ONGC) up by 6.80% was another top gainer on Nifty for the week - ONGC’s premier upstream R&D Institute KDMIPE Dehradun and National Institute of Oceanography (NIO) Goa have entered into a five-year MoU. This MoU will establish a formal affiliation for the purpose of enhancing the relationship between both institutions, in synergizing their respective strengths and to work together to promote sharing of industrial knowledge, expert lectures and to explore field of common areas for developing cutting-edge research.

Top Losers

  • Wipro down by 9.34% was the top loser of the week on Nifty - Wipro came under pressure as its standalone net profit for the quarter ending December fell by 8.67 per cent to Rs 2419.8 crore from Rs 2649.7 crore in the corresponding quarter last year. However, its revenue from operations increased 21.29 per cent year-on-year (YoY) to Rs 15,278 crore from Rs 12,596 crore in the same quarter last year, which is lower than the street estimates.
  • Asian Paints down by 4.27% was another top loser of the week on Nifty - Asian paints witnessed selling pressure as investors are looking ahead to the third quarter numbers to be out in coming week that is on January 20, 2022. As per a private report, the company is likely to report fall in net profit for the October-December quarter of FY22. Earlier, the company had signed a MoU with the Government of Gujarat, commencing the proposed expansion of Ankleshwar, Gujarat manufacturing capacity of paint from 130,000 KL to 250,000 KL.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 18,286.95 on January 14 and lowest level of 17,879.15 on January 10. On the last trading day, the Nifty closed at 18,255.75 with weekly gain of 443.05 points or 2.49 percent. For the coming week, 17,994.28 followed by 17,732.82 are likely to be good support levels for the Nifty, while the index may face resistance at 18,402.08 and further at 18,548.42 levels.

US Market

The U.S. markets ended lower during the passing week on lingering concerns about the economic impact of the Omicron variant of the coronavirus. Meanwhile, with growth constrained by ongoing supply chain disruptions and labor shortages, the Federal Reserve's Beige Book said that U.S. economic activity expanded at a modest pace in the final weeks of 2021.The Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts, noted demand for materials, inputs and workers remained elevated among businesses. While the report said consumer spending continued to grow at a steady pace ahead of the rapid spread of the Omicron variant of the coronavirus, the increase in new cases led to a sudden pullback in leisure travel, hotel occupancy and patronage at restaurants. The Fed also said optimism remained generally high, although several districts cited reports from businesses that expectations for growth over the next several months cooled somewhat.

Sentiments were also weak as a highly anticipated report released by the Labor Department showed the annual rate of U.S. consumer price growth once again reached the highest level in almost 40 years in December. The report showed the annual rate of consumer price growth accelerated to 7.0 percent in December from 6.8 percent in November, showing the biggest yearly jump since June of 1982. Core consumer prices, which exclude food and energy prices, were up by 5.5 percent year-over-year in December compared to the 4.9 percent spike in November. The annual growth reflected the biggest surge since February of 1991. The continued acceleration in the annual rate of consumer price growth came as prices increased by slightly more than expected on a monthly basis.

The Labor Department released a report showing only a slight uptick in U.S. producer prices in the month of December. The Labor Department said its producer price index for final demand edged up by 0.2 percent in December after jumping by an upwardly revised 1.0 percent in November. Street had expected producer prices to rise by 0.4 percent compared to the 0.8 percent increase originally reported for the previous month. Besides, first-time claims for U.S. unemployment benefits unexpectedly increased in the week ended January 8th, according to a report released by the Labor Department. The report said initial jobless claims rose to 230,000, an increase of 23,000 from the previous week's unrevised level of 207,000. Street had expected jobless claims to edge down to 200,000. With the unexpected increase, jobless claims reached their highest level since hitting 270,000 in the week ended November 13th.

European Market

European markets ended passing week on a higher note. Markets made a negative start of the week, as UK output per hour worked decreased in the third quarter but remained above the pre-pandemic level. The Office for National Statistics said that output per hour worked decreased 1.4 percent from the second quarter. Nonetheless, this was 1.1 percent above the average level in 2019, prior to the coronavirus pandemic. Besides, Italy's retail sales decreased for the first time in four months in November, defying expectations for further gains. The preliminary data from the statistical office ISTAT showed that retail sales fell 0.4 percent from October, when they grew 0.2 percent. On a year-on-year basis, retail sales climbed for a ninth month in a row, up 12.5 percent, in November after a 4.0 percent gain in the previous month. The growth was the strongest since May.

However, key indices added gains towards end of the week, after Eurozone industrial production rose for the first time in four months in November. The preliminary data from Eurostat showed that industrial production grew 2.3 percent month-on-month following a 1.3 percent fall in the previous month. Production of non-durable consumer goods rose 3.2 percent and that of capital goods increased 1.5 percent. Further, Italy's industrial production growth accelerated more than expected in November. The statistical office Istat said that industrial production grew by calendar adjusted 6.3 percent on a yearly basis in November, much faster than the 1.9 percent increase in October and the forecast of +3.7 percent. The production growth on unadjusted terms also came in at 6.3 percent, reversing a 1.2 percent fall in October.

On the inflation front, Germany's wholesale price inflation moderated in December but remained at an elevated level. The data from Destatis showed that wholesale prices increased 16.1 percent year-on-year in December, following November's 16.6 percent increase, the fastest growth since 1962. The annual price growth reflects the sharp rise in prices for raw materials and intermediate products. Wholesale prices of petroleum products surged 50.6 percent in December. Besides, the Netherlands' inflation climbed further in December to reach its highest level since 1982, driven by higher prices for energy and food. The preliminary data from the Central Statistical Bureau showed that the consumer price index rose 5.7 percent year-on-year following a 5.2 percent increase in November.

Asian market

Asian markets ended mixed during the passing week, following the broadly negative cues from Wall Street, with energy and technology stocks primarily dragging the markets to the downside. Traders remain worried and cautious amid the rapid spread of the coronavirus Omicron variant in most countries and the likely economic impact of the related curbs. Seoul stocks ended lower even as South Korean exports jumped an annual 24.4 percent in the January 1-10 period, helped by strong demand for semiconductors, petrochemical goods and cars, data showed earlier in the day.

Chinese Shanghai edged lower by over one and half percent amid growing concerns over the coronavirus situation, the strict lockdowns and the resultant impact on the economy. Traders overlooked data showed inflationary pressure in the county eased further in December, thanks to lower food and commodity prices. Consumer prices in China were up 1.5 percent year-on-year in December. That was shy of expectations for an increase of 1.8 percent and was down sharply from 2.3 percent in November. The bureau also said that producer prices climbed an annual 10.3 percent, missing forecasts for an increase of 11.1 percent and slowing from 12.1 percent a month earlier.

Japanese Nikkei too fell by over a percent, as Japan plans to maintain its strict border restrictions until late February in a bid to stave off the rapid spread of the omicron coronavirus variant. Traders also took a note of data showing that Japan posted a current account surplus of 897.3 billion yen in November, down 48.2 percent on year. That still beat forecasts for a surplus of 585 billion yen following the upwardly revised 1.180 trillion yen surplus in October (originally 1.018 trillion yen). Exports were up 23.2 percent on year to 7.445 trillion yen, while imports jumped an annual 44.9 percent to 7.877 trillion yen for a trade deficit of 431.3 billion yen.