Markets end volatile week in red terrain

Indian equity markets ended the volatile week of trade in red terrain as traders remained on sideline amid aggressive US Fed tightening and China covid fears. Markets made a pessimistic start to the week as a private report cut India's 2022-23 economic growth forecast by 70 basis points to 7 percent, citing slowing global growth due to high commodity prices, and weak local demand because of energy price hikes, inflationary pressures and a struggling labour market. Some cautiousness also came as the Centre for Monitoring of Indian Economy stated that India’s labour force fell by 38 lakhs in the month of March to the lowest level in the last eight months, comprising a decline in the count of both employed and unemployed. Markets also witnessed selling during the week as traders remained cautious with the International Monetary Fund’s (IMF) Asia and Pacific Department’s Acting Director Anne-Marie Gulde-Wolf stating that the surge in oil prices due to the Ukrainian war has pushed up inflation in India, which needs monetary tightening and measures to address structural weaknesses to improve growth potential. Sentiments also remained down-beat with a private report stating that the pandemic seems to have dented the prospects of beneficiaries hoping to enrol in minority schemes. While the fund utilisation under minority schemes had reached its peak in 2019-20, with the government spending Rs 6,575 crore, it has since declined. However, market witnessed recovery on couple of the trade during the week taking encouragement with CII President TV Narendran’s statement that India’s economy is expected to grow 7.5-8 per cent this fiscal year with exports playing a key role in the country’s success story. Some support also came with report that India and the EU will return to the negotiating table to start serious talks for a free trade agreement (FTA) in June after a gap of nine years. The street also found support with private report stated that as the country recovers from the pandemic, the retail industry has resumed its growth trajectory and is likely to witness 10 per cent annual growth to reach approximately $2 trillion by 2032. Selling on final day of the week mainly dragged key gauges lower for the week as traders turn concerned with ICRA’s stating that capacity utilisation in India is expected to dip in the first quarter of current fiscal and is expected to gradually rise by the third quarter, and indicated that the economic recovery will be hurt by the Russia Ukraine tensions.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex slipped 136.28 points or 0.24% to 57,060.87 during the week ended April 29, 2022. The BSE Midcap index losses 280.33 points or 1.14% to 24,418.04, while Smallcap index slipped 636.06 points or 2.17% to 28,611.92. On the sectoral front, S&P BSE Oil & Gas was down by 709.19 points or 3.51% to 19,497.83, S&P BSE PSU was down by 312.29 points or 3.41% to 8,848.53, S&P BSE Metal was down by 641.14 points or 2.88% to 21,654.75, S&P BSE Information Technology was down by 705.99 points or 2.16% to 31,989.90 and S&P BSE TECK was down by 312.25 points or 2.13% to 14,339.02 were the top losers on the BSE sectoral front, while S&P BSE Fast Moving Consumer Goods was up by 100.88 points or 0.72% to 14,082.17 and S&P BSE Auto was up by 150.09 points or 0.60% to 25,210.17 were the only gainers on the BSE sectoral front.

NSE movement for the week

The Nifty slipped 69.40 or 0.40% to 17,102.55. On the National Stock Exchange (NSE), Bank Nifty was up by 43.40 points or 0.12% to 36,088.15. On the other side, Nifty Mid Cap 100 decreased 435.50 points or 1.44% to 29,880.35, Nifty Next 50 lost 400.60 points or 0.93% to 42,533.95 and Nifty IT was down by 804.30 points or 2.48% to 31,622.40.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 39,710.10 crore and gross sales of Rs 44,567.40 crore, leading to a net outflow of Rs 4,857.30 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 1,717.80 crore against gross sales of Rs 4,874.71 crore, resulting in a net outflow of Rs 3,156.91 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 225.78 crore and gross sales of Rs 62.25 crore, leading to a net inflow of Rs 163.53 crore.

Industry and Economy

The International Monetary Fund’s (IMF) Asia and Pacific Department’s Acting Director Anne-Marie Gulde-Wolf said that the surge in oil prices due to the Ukrainian war has pushed up inflation in India, which needs monetary tightening and measures to address structural weaknesses to improve growth potential. She said according to estimates, the country's economy is likely to grow at 8.2 per cent in 2022-23, down 0.8 per percentage points. She added ‘So while still strong, it is a significant downgrade. We really see the difficult policy tradeoff for policymakers supporting the worldwide controlling of inflation, which has already started going up’.

Outlook for the coming week

The passing week turned somber one for Indian equity markets, with both Sensex and Nifty ended below the psychologically crucial 57,100 and 17,150 respectively triggered by aggressive US Fed tightening and China covid fears.

In the coming holiday truncated week, which marks the start of new month, market-participants would be watching out S&P Global Manufacturing PMI, schedule to be release on May 02. The S&P Global India Manufacturing unexpectedly fell to 54.0 in March 2022 from 54.9 in February. Stock markets would be shut for trade on May 3 on account of ‘Id-Ul-Fitr (Ramzan Id)’.

Further, auto and cement companies would be in focus for the coming week as these companies will report their monthly sales figures.

In the ongoing result season, traders will be eyeing earnings of prominent companies, including Yes Bank, Britannia Industries, HDFC, Inox Leisure, Godrej Properties, Hero Motocorp, Tata Steel, Adani Green, Kotak Mahindra Bank, Tata Consumer Products, Blue Dart Express, Ceat, Dabur India, Marico, TVS Motor Company, Voltas, Tata Power etc.

On the global front, investors would be eyeing few economic data from world’s largest economy, United States (US), starting from S&P Global Manufacturing PMI Final on May 02, followed by Redbook, Factory Orders on May 03, Balance of Trade, Fed Interest Rate Decision on May 04, Challenger Job Cuts, Initial Jobless Claims on May 05 and finally Baker Hughes Oil Rig Count on May 06.

Top Gainers

  • Hero MotoCorp up by 8.15% was the top gainer on Nifty for the week - Hero Motocorp gained traction on partnering with Directorate of Indian Army Veterans. Saluting the exemplary grit and determination of Indian Army veterans, Hero MotoCorp, the world's largest manufacturer of motorcycles and scooters, handed over Hero Destini 125 scooters to the soldiers who were disabled while in service. These retro-fitted Hero Destini 125 scooters are supported by two auxiliary wheels in the rear - which have been customised to provide a safe and convenient riding experience.
  • Asian Paints up by 2.50% was another top gainer on Nifty for the week - Select paint industry stocks gained amid a private stating that global paints and coatings market size was valued at $160.03 billion in 2021. The market size is expected to rise from $167.04 billion in 2022 to $235.06 billion by 2029 at a CAGR of 5% during the projected period. As per the report, the market is projected to rise during the forecast period due to increasing expansion of the construction industry. Meanwhile, Asian Paints is likely to come up with its result on May 10, 2022.

Top Losers

  • Coal India down by 11.62% was the top loser of the week on Nifty - Coal India witnessed profit booking after recent gains. The company had 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.
  • Hindalco down by 10.66% was another top loser of the week on Nifty - Metal stocks were under pressure following global trend after shares of aluminium giant Alcoa plunged 18% as the company failed to meet the market's expectations in the January-March quarter. While Alcoa reported substantial numbers in the quarter ended March, the correction in aluminium prices dampened its stock performance. As per a private report, there are expectations that metal prices, which rallied sharply in the last few months, to peak in the near term along with demand.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 17,377.65 on April 29 and lowest level of 16,888.70 on April 25. On the last trading day, the Nifty closed at 17,102.55 with weekly loss of 69.40 points or 0.40 percent. For the coming week, 16,868.28 followed by 16,634.02 are likely to be good support levels for the Nifty, while the index may face resistance at 17,357.23 and further at 17,611.92 levels.

US Market

The U.S. markets ended marginally higher during the passing week on upbeat earnings news. Microsoft posted a better-than-expected quarterly report and issued optimistic forward revenue guidance. Chipmaker Qualcomm (QCOM) also reported quarterly results that beat expectations on both the top and bottom lines. Some support also came in as first-time claims for U.S. unemployment benefits edged slightly lower in the week ended April 23rd, the Labor Department revealed in a report. The report showed initial jobless claims dipped to 180,000, a decrease of 5,000 from the previous week's revised level of 185,000. Street had expected jobless claims to slip to 180,000 from the 184,000 originally reported for the previous week. However, upside remained capped amid concerns about slowing global growth, rising inflation and the Federal Reserve’s monetary tightening.

Further, cautiousness also prevailed in the markets as U.S. economic activity unexpectedly contracted in the first quarter of 2022, according to a report released by the Commerce Department. The report said real gross domestic product declined by 1.4 percent in the first quarter after spiking by 6.9 percent in the fourth quarter of 2021. The pullback surprised participants, who had expected GDP to increase by 1.1 percent. The Commerce Department said the unexpected drop in GDP reflected decreases in private inventory investment, exports, and government spending along with an increase in imports, which are a subtraction in the calculation of GDP. The decrease in private inventory investment was led by declines in wholesale trade and retail trade, while the slump in exports reflected widespread decreases in exports of non-durable goods. The report said the drop in federal government spending primarily reflected a decrease in defense spending on intermediate goods and services.

Meanwhile, pending home sales in the U.S. decreased for the fifth straight month in March, according to a report released by the National Association of Realtors (NAR). NAR said its pending home sales slumped by 1.2 percent to 103.7 in March after plunging by 4.0 percent to a revised 105.0 in February.  Street had expected pending home sales to tumble by 1.6 percent. A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale. Besides, the Conference Board released a report showing a modest decrease in U.S. consumer confidence in the month of April. The Conference Board said its consumer confidence index edged down to 107.3 in April from an upwardly revised 107.6 in March. Street had expected the consumer confidence index to dip to 106.8 from the 107.2 originally reported for the previous month.

European Market

European markets ended passing week in green terrain. Markets made a negative start of the week, as Euro area consumer confidence unexpectedly improved in April, after falling sharply in the previous month, yet remained in the negative territory indicating pessimism. The preliminary figures from the European Commission showed that the flash consumer confidence index rose to -16.9 from -18.7 in March, which was the weakest since May 2020 shortly after the coronavirus pandemic began. Economists had forecast a score of -20. Besides, UK consumer confidence dropped to a near historic low in April as rising inflation and interest rates dampened household finances. The survey results from the market research group GfK showed that the consumer sentiment index declined to -38 in April from -31 in March. All five measures were down in comparison to the March 25th announcement.

But, indices added more gains towards end of the week, after Germany's business confidence unexpectedly improved in April as the economy showed its resilience after the initial shock of the Russian attack. The survey data published by the ifo Institute showed that the business climate index rose to 91.8 in April from 90.8 in March. The reading was forecast to fall to 89.1. The improvement reflects less pessimism in companies' expectations, while their view on the current situation is minimally better. Further, the UK public sector net borrowing decreased in March. The Office for National Statistics said that public sector net borrowing excluding banks decreased by GBP 8.8 billion from the last year to GBP 18.1 billion in March. However, the deficit was the second-highest for the month of March since records began in 1993. In the financial year ending March 2022, the budget deficit excluding banks totaled GBP 151.8 billion or around 6.4 percent of gross domestic product.

On the global front, Sweden's producer prices rose at the fastest rate in March and trade surplus increased from last year. The figures from Statistics Sweden showed that the producer price index grew 24.5 percent year-on-year in March, following a 19.3 percent rise in February. Besides, Germany's inflation unexpectedly accelerated further in April to set a new high in over four decades, driven by runaway energy prices and increased production costs due to supply bottlenecks in the backdrop of the Russia's invasion of Ukraine. The flash consumer price index rose 7.4 percent year-on-year following a 7.3 percent increase in the previous month, preliminary estimates from Destatis showed Thursday. Economists had expected annual inflation to slow to 7.2 percent. The harmonized index of consumer prices, or HICP, rose 7.8 percent annually in April after a 7.6 percent increase in March. Economists had expected the rate to remain steady.

Asian market

Asian equity benchmarks, barring Hang Seng Composite Index, ended in red terrain during the passing week, on concerns of elevated inflation and the potential economic impact from the widely expected U.S. monetary tightening continued to weigh on investors as they digest the latest earnings news. Lingering worries also remain about the Covid-19 lockdowns in China and the ongoing war in Ukraine.

Japanese Nikkei edged lower by around a percent, as the Ministry of Economy, Trade and Industry said industrial production in Japan was up a seasonally adjusted 0.3 percent on month in March. That was shy of expectations for an increase of 0.5 percent and down from 2.0 percent in February. On a yearly basis, industrial production slipped 1.7 percent, also missing forecasts for a decline of 0.5 percent following the 0.5 percent increase in the previous month. However, the Ministry said the value of retail sales in Japan was up a seasonally adjusted 2.0 percent on month in March, coming in at 13.628 trillion yen. That beat forecasts for an increase of 1 percent following the downwardly revised 0.9 percent decline in February (originally -0.8 percent). Meanwhile, the unemployment rate in Japan came in at a seasonally adjusted 2.6 percent in March. That was shy of expectations for 2.7 percent, which would have been unchanged from the February reading.

Chinese Shanghai fell by over a percent even as the covid cases dip and on optimism over dovish measures by the policy makers in efforts to bolster the economy. Coronavirus infection cases in Shanghai declined for a fifth day on Wednesday to the lowest in more than three weeks. Besides, South Korea's Kospi fell even as the latest GDP print suggested a rebound from the travails of the pandemic. GDP grew an annual 3.1 percent in the first quarter of the year, up 0.7 percent from the previous quarter.