It turned out to be a nightmarish week of trade for Indian equity benchmarks where key gauges lost around four percentage points to end below their crucial 54,900 (Sensex) and 16,450 (Nifty). Sentiments remained dampened throughout the holiday truncated week as traders remained concerned over raining rate hikes, selling by foreign investors, increasing inflation and Russia-Ukraine war. Markets made a pessimistic start to the week as traders remain concerned after the growth of eight core infrastructure industries slowed down to 4.3 per cent in March against 12.6 per cent in the year-ago period due to a decline in the output of coal and crude oil. Some concern also came as India's foreign exchange (forex) reserves dipped by $3.27 billion to $600.42 billion for the week ended April 22, registering the seventh straight week of fall. Traders shrugged off reports that India Manufacturing PMI rose from 54.0 in March to 54.7 in April, as a retreat of COVID-19 restrictions continued to support demand. Meanwhile, services PMI rose to 57.9 in April from 53.6 in March. Markets extended losses after the RBI announced a surprise repo rate hike in an unscheduled meeting. RBI has increased the policy repo rate under the liquidity adjustment facility (LAF) by 40 basis points to 4.40 per cent with immediate effect. RBI said core inflation is likely to remain elevated in the coming months, reflecting high domestic pump prices and pressures from prices of essential medicines. Markets, however, witnessed some consolidation as sentiments got some solace in reaction to the US Fed meeting outcome, which came in line with the market expectations. But, selling on final day of trade ensured that markets will go home with a huge cut of around four percent as India Ratings said inflation, supply chain disruptions and a weak consumption demand could upset the revival in credit growth in the medium term. It said the reversal of the interest rate cycle--marked by the Reserve Bank of India’s 40 basis points increase in policy repo rate -- would weigh down credit growth as borrowings become costlier. Adding some pessimism, in as consequent to the 40 basis point hike in the repo rate announced by the RBI on Wednesday, large banks such as ICICI Bank and Bank of Baroda have raised their lending rates by an equal amount on loans linked to the external benchmark. BSE movement for the week The Bombay Stock Exchange (BSE) Sensex slipped 2225.29 points or 3.90% to 54,835.58 during the week ended May 06, 2022. The BSE Midcap index lost 1288.43 points or 5.28% to 23,129.61, while Smallcap index tumbled 1519.51 points or 5.31% to 27,092.41. On the sectoral front, S&P BSE Power was up by 63.65 points or 1.33% to 4,839.16. On the flip side, S&P BSE Consumer Durables down by 3,703.20 points or 8.68% to 38,963.39, S&P BSE Realty down by 282.90 points or 8.02% to 3,246.06, S&P BSE Consumer Discretionary Goods & Services down by 352.69 points or 6.28% to 5,267.19, S&P BSE Healthcare down by 1,424.69 points or 5.85% to 22,916.19 and S&P BSE Auto was down by 1,247.90 points or 4.95% to 23,962.27. NSE movement for the week The Nifty slipped 691.30 or 4.04% to 16,411.25. On the National Stock Exchange (NSE), Bank Nifty was down by 1496.95 points or 4.15% to 34,591.20, Nifty IT was down by 902.95 points or 2.86% to 30,719.45, Nifty Mid Cap 100 decreased 1296.15 points or 4.34% to 28,584.20 and Nifty Next 50 lost 2,179.70 points or 5.12% to 40,354.25. FII transactions during the week Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 40,151.22 crore and gross sales of Rs 46,568.64 crore, leading to a net outflow of Rs 6,417.42 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 2,708.14 crore against gross sales of Rs 3,793.58 crore, resulting in a net outflow of Rs 1,085.44 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 106.40 crore and gross sales of Rs 115.51 crore, leading to a net outflow of Rs 9.11 crore. Industry and Economy SBI research in its latest Ecowrap report has said that the share of incremental bank credit in incremental nominal Gross Domestic Product (GDP) is likely to cross the 50 per cent mark in the current financial year (FY23), from a decade low of 27 per cent in FY2022. The incremental credit to GDP share was as high as 63 per cent in the pre-pandemic year (FY19). The average share was 50 per cent for the seven-year period ended FY20. A higher credit-to-GDP ratio indicates aggressive and active participation of the banking sector in the real economy, while a lower number shows the need for more formal credit. Outlook for the coming week In the passing week, the passing week turned out to be a disappointing one for Indian equity markets, which nursed heavy loss of around 4% each weighed down by a surprise interest rate hike by the Reserve Bank of India, foreign fund outflows and mixed corporate earnings results. On the economy front, market-participants would be eyeing the data of Index of Industrial Production (IIP), which is scheduled to be release on May 12, Industrial production in India grew 1.7 percent year-on-year in February of 2022, advancing from an upwardly revised 1.5 percent rise in the previous month. On the same day, Consumer Price Index (CPI) for the month of April also be releasing. Annual inflation rate in India increased to 6.95% in March of 2022, the highest since October of 2020, and above market forecasts of 6.35%. Apart from capital markets there will be buzz from the primary market too, as one important IPOs lined up. Prudent Corporate Advisory Services which provides retail wealth management services will be entering the primary market to raise up to Rs 539 crore in a price band of Rs 595-630 per share. In the ongoing result season, traders will be eyeing earnings of prominent companies, including Aarti Drugs, BASF India, PVR, UPL, Asian Paints, Cera Sanitarywar, Cipla, Vodafone Idea, MGL, MRF, Birla Corporation, Petronet LNG, PNB, Relaxo Footwears, ICRA, L&T, Tata Motors, HAL, Tech Mahindra, Adani Ports etc. On the global front, investors would be eyeing few economic data from world’s largest economy, Fed Bostic Speech on May 9 followed by Redbook on May 10, Inflation Rate, Monthly Budget Statement on May 11, Jobless Claims on May 12 and finally Michigan Consumer Sentiment and Baker Hughes Total Rig Count on May 13. Top Gainers ITC up by 2.13% was the top gainer on Nifty for the week - ITC remained on buyers’ radar ahead of its January-March quarter and year end results likely to be out on May 18, 2022. There are expectation that the company will report strong earnings. Separately, the company has entered into a partnership with IIT Delhi to support research in identified STEM (science, technology, engineering and mathematics) areas. A memorandum of understanding has been signed to this effect with the institute with an aim to accelerate India's journey towards achieving its sustainable development goals.
Hero MotoCorp up by 1.83% was another top gainer on Nifty for the week - Hero MotoCorp gained on reporting a double-digit growth of 12.4% in sales at 418,622 units in April 2022 over the corresponding month of the previous year (April 2021), when the company had sold 372,285 units. With the economy gradually opening up and continued government policy support, April volumes indicate the continuously improving consumer sentiments. Recently, the company partnered with Directorate of Indian Army Veterans and handed over Hero Destini 125 scooters to the soldiers who were disabled while in service.
Top Losers Apollo Hospitals Enterprise down by 15.66% was the top loser of the week on Nifty - Apollo Hospitals Enterprise witnessed profit booking in line with sell-off on the overall market amid weak global cues. Meanwhile, the company is likely to come up with its fourth quarter (Q4) and year ended March 31, 2022 results on May 25, 2022. Further, Apollo Hospitals Enterprise was conferred the Best COVID-19 response award at the Moneycontrol Family Business Leader Awards for its contribution to the battle against the pandemic over the last two years.
Axis Bank down by 13.64% was another top loser of the week on Nifty - Axis Bank came under pressure as its EVP & Head, cards & Payments Sanjeev Moghe reportedly said the Reserve Bank of India’s new guidelines for issuing credit cards could impact the number of outstanding cards and margins of the banking sector. Besides, India Ratings said the surprise rate hike of 0.40 per cent by the RBI signalling a reversal of the interest rate cycle will weigh down on the banking system's credit growth, which was showing signs of revival with an 11 percent growth.
Technical viewpoints During the week, CNX Nifty touched the highest level of 17,132.85 on May 4 and lowest level of 16,340.90 on May 6. On the last trading day, the Nifty closed at 16,411.25 with weekly loss of 691.30 points or 4.04 percent. For the coming week, 16,123.82 followed by 15,836.38 are likely to be good support levels for the Nifty, while the index may face resistance at 16,915.77 and further at 17,420.28 levels. US Market The U.S. markets ended mostly higher during the passing week after the Federal Reserve announced its widely expected decision to raise interest rates by half a percentage point. The Fed announced that it has decided to raise the target range for the federal funds rate by 50 basis points to 0.75 to 1.0 percent and said it anticipates that ongoing increases in the target range will be appropriate. In addition, the Fed decided to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities on June 1. The widely expected decision to raise interest rates came even though the Fed acknowledged that overall U.S. economy activity edged down in the first quarter. The central bank noted that household spending and business fixed investment have remained strong, while job gains have been robust. The Fed said inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures. Further, some support also came in as new orders for U.S. manufactured goods spiked by more than expected in the month of March, according to a report released by the Commerce Department. The report showed factory orders surged by 2.2 percent in March following a revised 0.1 percent uptick in February. Street had expected factory orders to jump by 1.1 percent compared to the 0.5 percent drop originally reported for the previous month. However, upside remained capped as labor productivity in the U.S. showed a substantial pullback in the first quarter of 2022, according to a report released by the Labor Department. The Labor Department said labor productivity plunged by 7.5 percent in the first quarter, reflecting the largest decline since the third quarter of 1947. The steep drop in the first quarter came after labor productivity surged by a revised 6.3 percent in the fourth quarter of 2021. Street had expected productivity to tumble by 5.4 percent in the first quarter compared to the 6.6 percent spike that had been reported for the previous quarter. Meanwhile, the Labor Department released a report showing a modest increase in first-time claims for U.S. unemployment benefits in the week ended April 30th. The report showed initial jobless claims rose to 200,000, an increase of 19,000 from the previous week's revised level of 181,000. Street had expected jobless claims to inch up to 182,000 from the 180,000 originally reported for the previous week. With the bigger than expected uptick, jobless claims reached their highest level since hitting 209,000 in the week ended February 12th. The Labor Department said the less volatile four-week moving average also edged up to 188,000, an increase of 8,000 from the previous week's revised average of 180,000. European Market European markets ended passing week with huge losses. After a mixed start of the week, markets remained weak, as Eurozone manufacturing activity grew at the slowest pace in more than a year in April amid sustained supply-side pressures and disruptions to demand and production due to the ongoing war in Ukraine. The survey data from S&P Global showed that the final manufacturing Purchasing Managers' Index fell to a 15-month low of 55.5 in April from 56.5 in the previous month. However, this was above the flash reading of 55.3. Besides, Swiss consumer sentiment deteriorated sharply in the first quarter as households turned far more pessimistic about future general economic situation. The survey data from the State Secretariat for Economic Affairs, or SECO, showed that the consumer sentiment index fell to -27.4 in the second quarter from -3.8 in the first quarter. The index logged its biggest decline since the onset of the pandemic in the spring of 2020. Indices added more losses towards end of the week, after Germany's exports declined more than expected in March, while imports growth exceeded expectations. The data released by Destatis revealed that exports fell 3.3 percent month-on-month in March, in contrast to the 6.2 percent expansion seen in February. Shipments were forecast to drop 2.0 percent. At the same time, overall imports grew 3.4 percent, following a 4.7 percent rise in February. Further, Eurozone retail sales declined more-than-expected in March as sales of automotive fuel and non-food products weakened. The data published by Eurostat showed that retail Sales dropped 0.4 percent in March, in contrast to a 0.4 percent in rise in February. Automotive fuel sales in specialized stores shrunk declined 2.9 percent and non-food products registered a fall of 1.2 percent. Mail orders and internet sales decreased 4.3 percent compared to last month. On the inflation front, Hungary's producer price inflation accelerated in March and remained high. The figures from the Hungarian Central Statistical Office showed that the producer price index rose 25.9 percent year-on-year in March, following a 22.4 percent increase in February. Besides, Swiss consumer price inflation accelerated further to its highest since October 2008. The data from the Federal Statistical Office showed that consumer prices rose 2.5 percent year-on-year in April, following a 2.4 percent increase March. This was the highest since October 2008, when inflation was 2.6 percent. On a monthly basis, consumer prices rose 0.4 percent in April, after a 0.6 percent growth in the previous month. Prices for heating oil, new cars and air transport increased in April, data showed. In contrast, prices for hotel accommodation and supplementary accommodation declined. Asian market Asian markets ended mostly in red during the passing week as traders continued to react to the Federal Reserve's monetary policy announcement, where the central bank raised interest rates by 50 basis points as expected. Concerns about higher rates, inflation and the economic outlook too dampened sentiments. Geopolitical tensions also remained on investors' radar as the EU proposed a gradual ban on Russian oil in the sixth round of sanctions against Moscow. Chinese Shanghai Composite edge lower during the week as the country’s services sector activity contracted at the second-steepest rate on record in April, as tighter COVID curbs halted the industry, leading to sharper reductions in new business and employment. The Caixin services purchasing managers' index (PMI) fell to 36.2 in April, the second-lowest since the survey begun in November 2005 and down from 42 in March. The index hit 26.5 in February 2020 during the onset of the pandemic, representing the biggest contraction in activity on record. Bucking the trend, Japanese markets remained higher as it traded only once during the week and remained closed for rest of the week on account of public holidays. In economic news, overall consumer prices in the Tokyo region were up 2.5 percent on year in April. That topped expectations for an increase of 2.2 percent and was up from 1.3 percent in March. On a monthly basis, overall inflation rose 0.4 percent. Core CPI, which excludes the volatile costs of food, increased 1.9 percent on year - also exceeding forecasts for 1.8 percent and up from 0.8 percent in the previous month.
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