Bears take control over Dalal Street during the passing week

Bears took control over Dalal Street during the passing with frontline gauges settling below their crucial levels of 57,200 (Sensex) and 17,200 (Nifty) as major companies disappointed street with their Q4 numbers. Markets made a gap down opening to the week as the World Bank cut its economic growth forecast for India and the whole South Asian region, citing worsening supply bottlenecks and rising inflation risks caused by the Ukraine crisis. The international lender lowered its growth estimate for India to 8% from 8.7% for the current fiscal year to March, 2023. Sentiments remained dampened as India’s March wholesale price index-based inflation rose to 14.55 per cent as compared to 13.11 per cent in last month. According to the data released by the industry department, the high rate of inflation in March 2022 was primarily due to rise in prices of crude petroleum and natural gas, mineral oils, basic metals, owing to disruption in global supply chain caused by Russia-Ukraine conflict. Markets extended losses after the International Monetary Fund (IMF) warned that the debt piled on by the private sector during the coronavirus pandemic could lower growth for emerging markets by 1.3 percent over three years. However, markets managed to trim losses in following two sessions of trade as private report stated that hiring activity witnessed a 6 per cent year-on-year growth in March this year, supported by a rebound in economic activities and led by sectors such as banking and telecom. Adding enthusiasm among traders, Service Export Promotion Council (SEPC) stated that services sector exports are likely to touch $350 billion in the current fiscal. It said the target has been revised from $300 billion to $350 billion for 2022-23 and is set in consideration to the sectors which couldn't perform in the last 2 years due to the pandemic and hopefully will bounce back in FY23, like travel and tourism, hospitality, education and entertainment. The street was also positive with retirement fund body EPFO said it added 14.12 lakh subscribers in February 2022, 14 per cent more than 12.37 lakh enrolled in the same month a year ago. But, selling on final day of the week dragged markets below their crucial levels as crude oil prices rose buffeted by concerns about tightened supply as the European Union mulls a potential ban on Russian oil imports that would further restrict worldwide oil trade. Adding more pessimism, foreign institutional investors (FII) net sold Indian shares worth Rs 713.7 crore -- a tenth straight day of outflow for the Street.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex slipped 1141.78 points or 1.96% to 57,197.15 during the week ended April 22, 2022. The BSE Midcap index losses 286.88 points or 1.15% to 24,698.37, while Smallcap index slipped 273.62 points or 0.93% to 29,247.98. On the sectoral front, S&P BSE Auto was up by 696.40 points or 2.86% to 25,060.08, S&P BSE Oil & Gas was up by 297.37 points or 1.49% to 20,207.02, S&P BSE Consumer Discretionary Goods & Services was up by 33.72 points or 0.60% to 5,658.73, S&P BSE Consumer Durables was up by 182.88 points or 0.43% to 42,954.64 and S&P BSE Power was up by 9.41 points or 0.20% to 4,791.35 were the top gainers on the BSE sectoral front, while S&P BSE Information Technology was down by 1,902.93 points or 5.50% to 32,695.89, S&P BSE TECK was down by 797.61 points or 5.16% to 14,651.27, S&P BSE Finance was down by 328.64 points or 4.03% to 7,825.81, S&P BSE BANKEX was down by 1,509.44 points or 3.50% to 41,565.21 and S&P BSE Realty was down by 125.82 points or 3.41% to 3,559.00 were the top losers on the BSE sectoral front.

NSE movement for the week

The Nifty slipped 303.70 or 1.74% to 17,171.95. On the National Stock Exchange (NSE), Bank Nifty was down by 1418.65 points or 3.79% to 36,044.75, Nifty IT was down by 1928.05 points or 5.61% to 32,426.70, Nifty Mid Cap 100 was down by 480.45 points or 1.56% to 30,315.85 and Nifty Next 50 was down by 509.35 points or 1.17% to 42,934.55.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 38,168.46 crore and gross sales of Rs 53,643.53 crore, leading to a net outflow of Rs 15,475.07 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 2,148.24 crore against gross sales of Rs 4,417.53 crore, resulting in a net outflow of Rs 2,269.29 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 56.97 crore and gross sales of Rs 89.53 crore, leading to a net outflow of Rs 32.56 crore.

Industry and Economy

The IMF in its latest World Economic Outlook (WEO) report has slashed its GDP growth forecast of India to 8.2 per cent for fiscal year 2022-23 (FY23) from 9 per cent forecasted earlier. It said that higher commodity prices will weigh on private consumption and investment. This was one of the steepest cuts for emerging economies compared to the IMF’s January WEO forecasts. The agency cut its global growth outlook for calendar year 2022 to 3.6 per cent from 4.4 per cent, saying that global economic prospects have worsened significantly due to commodity price volatility and disruption of supply chains caused by the war in Europe and added that both Russia and Ukraine could experience large GDP contractions.

Outlook for the coming week

In the passing week, Indian markets ended in red terrain with Nifty and Sensex posting losses of more than 300 and 1100 points respectively, as large-caps like Infosys and HDFC Bank’s Q4 earnings disappointed the market. Also, U.S. Federal Reserve hint at an increasingly aggressive rate hike amid concerns about high inflation also dented traders’ sentiments.

Further, the coming week is expected to be a volatile one on account of futures & options (F&O) expiry, with the near month April 2022 derivatives contract expiring on Thursday, April 28, 2022. It also the start of new month and both cement and auto stocks would be buzzing on reporting monthly sales figures.

On the economy front traders will be eyeing the India Infrastructure Output or Consumer price index (CPI) to be released on April 29. Infrastructure output in India increased 5.8% year-on-year in February of 2022, following an upwardly revised 4% rise in January.

In the ongoing result season, market-participants would be eyeing earnings from ICICI Bank, Bajaj Finance, Nelco, Tata Coffee, UBL, VST Industries, Bajaj Auto, HDFC AMC, Hindustan Unilever, IEX, Ambuja Cements, Yes Bank, Axis Bank, Bajaj Holdings & Investment, SBI Life Insurance Company, Indusind Bank, L&T Finance Holdings, Tata Chemicals, Ultratech Cement, Wipro, IDFC First Bank etc.

On the global front, investors would be eyeing few economic data from world’s largest economy, United States (US), starting from Redbook, Dallas Fed Services Index on April 26, followed by Goods Trade Balance on April 27, GDP Growth Rate, Initial Jobless Claims, Kansas Fed Composite Index on April 28 and finally Chicago, Baker Hughes Total Rig Count on April 29.

Top Gainers

  • Reliance Industries up by 8.45% was the top gainer on Nifty for the week - Reliance Brands (RBL), part of India's largest private sector company Reliance Industries, has signed a definitive agreement to invest (either by itself and / or through its affiliates) in India’s foremost Couturiers Abu Jani Sandeep Khosla (AJSK) for a 51% majority stake. The strategic partnership is aimed at accelerating the 35-year-old couture house’s growth plans in India and across the globe. Separately, its telecom arm -- Jio has waived entry fee and installation charges for new customers opting for postpaid Jiofiber connectionst.
  • Coal India up by 6.70% was another top gainer on Nifty for the week - Coal India has raised its supplies to thermal power stations by 14.2% during the first half of April 2022 compared to same period last April amid the spiraling power generation. Its supplies have hit 1.64 million tonnes (MT) per day during this period against 1.43 MTs of similar period April 2021. The company had accelerated its production to 26.4 MTs during the first half of April 2022 registering 27 percent year-on-year growth. Recently, Coal India has scaled up its capex to Rs 14,834 crore ending FY22, the highest so far.

Top Losers

  • Cipla down by 5.92% was the top loser of the week on Nifty - Cipla witnessed profit taking after recent gains. A private report stated that India’s pharma industry’s overall hiring is decreased by 7.79% in March 2022 when compared with February 2022. It registered a 1.2% drop in IT hiring activity in March 2022 when compared with the previous month. Meanwhile, the company is likely to post its result for the fourth quarter (January-March) and year ended March 31, 2022 on May 10, 2022.
  • JSW Steel down by 5.79% was another top loser of the week on Nifty - JSW Steel came under pressure on account of profit booking after recent gains. Recently, JSW Steel’s wholly-owned subsidiary -- JSW Utkal Steel has received the environmental clearance (EC) for setting up of a greenfield Integrated Steel Plant (ISP) of 13.2 million tonnes per annum (MTPA) crude steel from the Union Ministry of Environment & Forest and Climate Change (MoEF&CC). The mega project will generate huge employment opportunities in the region, which in turn will boost the economy of Odisha state.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 17,414.70 on April 21 and lowest level of 16,824.70 on April 19. On the last trading day, the Nifty closed at 17,171.95 with weekly loss of 303.70 points or 1.74 percent. For the coming week, 16,859.53 followed by 16,547.12 are likely to be good support levels for the Nifty, while the index may face resistance at 17,449.53 and further at 17,727.12 levels.

US Market

The U.S. markets ended mostly higher during the passing week as new residential construction in the U.S. expectedly saw modest growth in the month of March, according to a report released by the Commerce Department. The report showed housing starts rose by 0.3 percent to an annual rate of 1.793 million in March after spiking by 6.5 percent to an upwardly revised rate of 1.788 million in February. Further, despite headwinds from the war in Ukraine, the Conference Board released a report showing its reading on leading U.S. economic indicators increased in line with street estimates in the month of March. The Conference Board said its leading economic index rose by 0.3 percent in March after climbing by an upwardly revised 0.6 percent in February. Street had expected the leading economic index to rise by 0.3 percent, matching the increase originally reported for the previous month.

The Labor Department released a report showing a slight decrease in first-time claims for U.S. unemployment benefits in the week ended April 16th. The report showed initial jobless claims edged down to 184,000, a decrease of 2,000 from the previous week's revised level of 186,000. Street had expected jobless claims to dip to 180,000 from the 185,000 originally reported for the previous week. However, upside remained capped on concerns about the outlook for interest rates contributed to the rebound by Treasury yields. Federal Reserve Chair Jerome Powell said he believes it would be appropriate to raise rates a little more quickly and predicted a 50 basis point rate hike would be on the table at the Fed’s May meeting. Powell said ‘Our goal is to use our tools to get demand and supply back in synch, so that inflation moves down and does so without a slowdown that amounts to a recession.’

Besides, the central bank released its Beige Book. The Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts, said U.S. economic activity has expanded at a moderate pace since mid-February. The Fed noted consumer spending accelerated among retail and non-financial service firms, as Covid-19 cases tapered across the country.  Manufacturing activity was also described as solid overall, although the Fed said labor market tightness and elevated input costs continued to pose challenges on firms' abilities to meet demand. The elevated input costs came as inflationary pressures remained strong, with firms continuing to swiftly pass rising costs on to customers. While firms were generally allowed to pass through higher input cost to customers due to strong demand, the Fed noted some districts saw negative sales impacts from rising prices.

European Market

European markets ended passing week on a higher note, as investors continued to react to corporate earnings updates and largely shrugged off geopolitical concerns and worries about inflation. Indices made a negative start of the week, as Finland's economic output increased at a softer pace in February. The data from Statistics Finland showed that output of the national economy rose a working-day adjusted 2.9 percent year-on-year in February, following a 3.1 percent gain in January. This was the lowest since November last year. Besides, Greece's industrial turnover grew at a softer pace in February. The data from the Hellenic Statistical Authority showed that industrial turnover increased 33.8 percent yearly in February, after a 36.0 percent growth in January.

Markets added some gains towards end of the week, after Eurozone industrial production rose more than expected in February after falling in the previous month. The data from Eurostat showed that industrial output rose 0.7 percent month-on-month in February, reversing a 0.7 percent decrease in January, which was revised from a no change reading. Further, France manufacturing confidence rose slightly in April underpinned by the improvement in order books. The survey results from the statistical office Insee showed that the manufacturing confidence index unexpectedly rose to 108 in April from a 5-month low of 107 in March. The score was forecast to fall to 105.

On the inflation front, Germany's producer price inflation accelerated to a record high in March, driven by soaring energy prices. The preliminary data from Destatis showed that the producer price index rose 30.9 percent year-on-year following a 25.9 percent increase in February. Besides, Eurozone inflation accelerated sharply, but less than initially estimated, to set a record high in March underpinned by surging energy prices. The final data from Eurostat showed that consumer price annual inflation jumped to 7.4 percent from 5.9 percent in February. Although the rate was revised down slightly from the flash estimate of 7.5 percent, it was the strongest on record.

Asian market

Asian equity benchmarks ended mostly in red terrain during the passing week, tracking a sell-off on Wall Street, driven by hawkish comments from US Federal Reserve Chief Jerome Powell that signaled prospects of faster and sharper interest rate hikes, including a 50-basis points raise. Besides, the continued escalation in the Russia-Ukraine conflict and the prospects of increasing stringent sanctions to be imposed on Russia by the Western countries rendered the mood cautious. The strict restrictions on movements in several parts in China to curb the spread of the pandemic have also raised supply chain concerns.

Chinese Shanghai fell by four and half percent, with the continued uncertainty over the country’s economic health and as the Central bank failed to infuse more stimulus as widely expected amid lockdowns due to resurgence in coronavirus infections. China's zero Covid approach has also come under scrutiny as several companies were forced to remain shut down.  Some concern also came as Chinese central bank surprisingly kept its benchmark lending rates steady. The one-year loan prime rate (LPR) was kept at 3.70% and the five-year LPR was unchanged at 4.60%, which markets see as Beijing’s cautious approach to rolling out more easing measures. Sentiments remained down-beat even as China’s GDP data topped forecasts. Data showed that China's GDP grew an annual 4.8% during January to March, picking up pace from a 4% increase in the fourth quarter last year.

Japanese Nikkei too edged marginally lower, as the Ministry of Finance said Japan posted a merchandise trade deficit of 412.4 billion yen in March. That missed expectations for a shortfall of 100.8 billion yen following the downwardly revised 669.7 billion yen in February (originally -668.3 billion yen). However, losses remain capped as the latest survey from Jibun Bank showed the manufacturing sector in Japan continued to expand in April, albeit at a slower rate, with a manufacturing PMI score of 53.4. That's down from 54.1 in March, although it remains above the boom-or-bust line of 50 that separates expansion from contraction.