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Markets eke out slender gains during the passing week
Jul-01-2022

Indian equity benchmarks managed to eke out slender gains during the passing week and ended above their crucial 52,900 (Sensex) and 15,750 (Nifty) levels. Markets made an optimistic start to the week as sentiments got a boost with Commerce and Industry Minister Piyush Goyal’s statement that India is one of the fastest-growing economies in the world and it is expected to reach $30 trillion in the coming 30 years. He said if India grows at 8 per cent every year on a compounded annual growth basis, the economy will double in about nine years. Some optimism also came as a private report stated that India is rapidly emerging as a preferred country for foreign investments as the steps taken by the government led by Prime Minister Narendra Modi during the last eight years have borne fruit as is evident from the ever-increasing volumes of FDI inflow setting new records. Markets extend gains as traders took support with a report by the government think-tank NITI Aayog where it estimates that India’s gig economy could employ 2.35 crore people by FY30, representing a three-and-a-half-times increase over 10 years. The gig economy employed around 68 lakh people in FY20. However, markets took U-turn from thereon and wiped out most of the weekly gains as inflation and recession fears hurt sentiment. Some cautiousness came in with a private report that after a gap, the prices of select varieties of pulses have started rising for the past few days due to a delay in the onset of the southwest monsoon over major growing regions of Madhya Pradesh, Maharashtra, and Gujarat. Some concerns also came after the Reserve Bank of India (RBI) in its latest data has showed that the growth in Scheduled Commercial Banks (SCBs) deposits moderated to 10 per cent year-on-year in March 2022, compared to an increase of 11.9 per cent a year ago. During 2021-2022, current, savings and term deposits rose by 10.9 per cent, 13.3 per cent and 7.9 per cent, respectively. Sentiments also remain dampened amid reports that the Goods and Services Tax (GST) Council’s two-day meeting concluded without any decision on extending compensation to states - for revenue loss on account of the regime’s implementation five years ago - beyond June 30. This was despite at least two dozen states raising the issue. Traders also remained anxious with the latest public debt management report showing that the government’s total liabilities rose 3.74 per cent to Rs 133.22 lakh crore in the March quarter from Rs 128.41 lakh crore in the three months ended December 2021.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 179.95 points or 0.34% to 52,907.93 during the week ended July 01, 2022. The BSE Midcap index gained 55.77 points or 0.26% to 21,858.93 and Smallcap index surged 285.81 points or 1.17% to 24,807.74. On the sectoral front, S&P BSE Power was up by 120.34 points or 3.07% to 4,035.52, S&P BSE Capital Goods was up by 658.28 points or 2.59% to 26,027.08, S&P BSE Fast Moving Consumer Goods was up by 329.43 points or 2.39% to 14,105.56, S&P BSE Realty was up by 68.31 points or 2.24% to 3,118.85 and S&P BSE Metal was up by 336.08 points or 2.20% to 15,612.50 were the top gainers on the BSE sectoral front, while S&P BSE Consumer Durables was down by 552.61 points or 1.56% to 34,866.29 and S&P BSE BANKEX was down by 75.74 points or 0.20% to 38,626.25 were the only losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 52.80 or 0.34% to 15,752.05. On the National Stock Exchange (NSE), Nifty IT was up by 286.45 points or 1.03% to 28,064.25, Nifty Mid Cap 100 was up by 138.25 points or 0.52% to 26,587.30, Nifty Next 50 was up by 284.90 points or 0.78% to 36,901.20. On the other side, Bank Nifty was down by 88.00 points or 0.26% to 33,539.45.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 30,627.27 crore and gross sales of Rs 35,249.90 crore, leading to a net outflow of Rs 4,622.63 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 943.65 crore against gross sales of Rs 3,469.55 crore, resulting in a net outflow of Rs 2,525.90 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 51.01 crore and gross sales of Rs 82.13 crore, leading to a net outflow of Rs 31.12 crore.

Industry and Economy

Finance Minister Nirmala Sitharaman has said any increase in Goods and Services Tax (GST) rates under the rate rationalisation exercise is intended to make up for the ‘inefficiencies’ in the value chain. Stating that all states are aware of the potential impact of rate rationalisation on inflation, she said any increase in tax rates will also make up for the tax burden, which is being borne by some other activities in that value chain. She said ‘Technology may correct anomalies for inefficiencies and therefore may have a possible impact on revenue collection. But the revenue-neutral rate of the RBI study has been breached to the disadvantage of the system… That calls for a correction…’.

Outlook for the coming week

Extending last week’s uptrend, benchmark equity indices ended the week in green terrain and ended past the crucial 52,900 (Sensex) and 15,750 (Nifty) levels respectively.

The coming week, would also be a crucial one as this marks the start of fresh earning season, with information and technology service major, TCS announcing its first quarter results on July 08, 2022.

Additionally, investor’s would also await the release of S&P Global Services PMI on July 05, S&P Global India Services PMI increased to 58.9 in May 2022, the highest since April 2011, from 57.9 in April. The latest figure also marked the 10th straight month of growth in services activity, buoyed by a substantial pick-up in new business growth as demand continued to recover following the reopening of the economy after COVID-19 lockdowns.

On the global front, investors would be eyeing few economic data from world’s largest economy, United States (US), starting with Factory Orders MoM on July 5, followed by MBA Purchase Index, Redbook, S&P Global Services PMI Final, FOMC Minutes on July 6, Balance of Trade, Initial Jobless Claims on July 07 and finally Baker Hughes Total Rig Count on July 08.

Top Gainers

  • Mahindra & Mahindra (M&M) up by 7.75% was the top gainer on Nifty for the week - M&M gained traction on launching much-awaited SUV - the All-New 'Scorpio-N' - starting at Rs 11.99 lakh. Poised to take forward the 'game-changer' legacy of the Scorpio brand, the All-New Scorpio-N is designed, engineered and built to disrupt the SUV segment with its class-leading attributes, features and capabilities, to be acknowledged as the ‘BigDaddyOfSUVs’. The All-New Scorpio-N is completely new ground-up, with no carryover components of the existing Scorpio.
  • Hindalco Industries up by 7.41% was another top gainer on Nifty for the week - Hindalco Industries gained on getting board’s approval to make an investment of 71.50 lakh in the equity share capital of Cleanwin Energy SIX. The aggregate cost of acquisition is Rs 71,50,000 for acquiring 26% stake in Cleanwin Energy SIX. The company has contributed its initial equity contribution on May 30, 2022. It is exploring avenues for reducing the energy cost and one of the option available is through open access from renewable energy generators in captive mode.

Top Losers

  • Titan Company down by 4.66% was the top loser of the week on Nifty - Jewelry industry stocks witnessed selling pressure after the government hiked gold import duty to 15% from 10.75% to check the current account deficit (CAD) and rising import of the yellow metal. The duty changes came into effect from June 30. With this changes, importing gold will become costlier and gold jewellers would be impacted as hiked rates are likely to hit demand. The government hiked gold import duty following a sudden surge in gold imports. In the month of May, a total of 107 tonnes of gold was imported.
  • Bajaj Auto down by 4.23% was another top loser of the week on Nifty - Bajaj Auto came under pressure after its total domestic sales decreased by 15% to 1,38,351 units in June as compared to 1,61,836 units in June 2021. Though, the company reported marginal rise in total sales to 3,47,004 units in June 2022 as against 3,46,136 in the same month last year. Total Commercial Vehicles sales stood at 31,056 units in June 2022 as against 35,558 units in June 2021, registering a fall of 13%. Total two-wheeler sales were up 2% at 3,15,948 units as compared to 3,10,578 units in the year-ago month.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 15,927.45 on June 27 and lowest level of 15,511.05 on July 1. On the last trading day, the Nifty closed at 15,752.05 with weekly gain of 52.80 points or 0.34 percent. For the coming week, 15,532.92 followed by 15,313.78 are likely to be good support levels for the Nifty, while the index may face resistance at 15,949.32 and further at 16,146.58 levels.

US Market

The U.S. markets ended lower during the passing week amid lingering concerns about the global economic outlook and the possibility of a recession. Revised data released by the Commerce Department showed U.S. economic activity shrank by slightly more than previously estimated in the first quarter of 2022. The report showed the decrease in real gross domestic product in the first quarter was revised to 1.6 percent from the previously reported 1.5 percent. Street had expected the drop in GDP to be unrevised. The slightly bigger than previously estimated decline in GDP in the first quarter came on the heels of the 6.9 percent spike in GDP in the fourth quarter of 2021. GDP fell by more than previously estimated as the increase in consumer spending during the quarter was downwardly revised to 1.8 percent from 3.1 percent. The Commerce Department noted the significant downward revision to consumer spending growth was partly offset by an upward revision to private inventory investment.

Besides, a report from the Commerce Department provided further evidence of an economic slowdown, showing personal spending increased by less than expected in the month of May. The Commerce Department personal spending edged up by 0.2 percent in May after climbing by a downwardly revised 0.6 percent in April. Street had expected personal spending to increase by 0.5 percent compared to the 0.9 percent advance originally reported for the previous month. Real personal spending, which excludes price changes, fell by 0.4 percent in May after rising by 0.3 percent in April. Meanwhile, MNI Indicators released a report showing growth in Chicago-area business activity slowed by more than expected in the month of June. The report showed the Chicago business barometer slumped to 56.0 in June from 60.3 in May. While a reading above 50 still indicates growth, street had expected the business barometer to dip to 58.0.

Weakness also prevailed in the markets as consumer confidence in the U.S. continued to deteriorate in the month of June, according to a report released by the Conference Board. The Conference Board said its consumer confidence index slid to 98.7 in June from a downwardly revised 103.2 in May. Street had expected the index to drop to 101.0 from the 106.4 originally reported for the previous month. With the continued decrease, the consumer confidence index fell to its lowest level since hitting 95.2 in February of 2021. However, a report released by the Labor Department showed a modest decrease in first-time claims for U.S. unemployment benefits in the week ended June 25th. The Labor Department said initial jobless claims slipped to 231,000, a decrease of 2,000 from the previous week's revised level of 233,000. Street had expected jobless claims to edge down to 228,000 from the 229,000 originally reported for the previous month.

European Market

European markets ended passing week on a lower note. The start of the week was in green, as Italy's industrial turnover rose for the fourth month in a row in April. The data from the statistical office Istat showed that industrial turnover increased 2.7 percent month-on-month in April, following a 2.5 percent rise in March. Domestic turnover rose 2.7 percent monthly in April, following a 2.8 percent growth in March. Foreign turnover gained 2.7 percent, after a 1.9 percent rise. Turnover of energy grew 6.0 percent monthly in April and that of intermediate goods rose 2.0 percent. Besides, Germany's retail turnover recovered in May driven by non-food sales. The data published by Destatis showed that Retail sales grew by real 0.6 percent in May, in contrast to a 5.4 percent fall in April. After a significant decline in April, food retailing dropped slightly by 0.6 percent from the previous month. Non-food sales logged an increase of 2.9 percent. Clothing and footwear sales achieved a strong growth of 10.6 percent. On a yearly basis, retail sales decreased 3.6 percent in May, bigger than the expected fall of 2.0 percent.

However, markets trimmed their gains towards end of the week, after Sweden's economic sentiment worsened to a 15-month low in June, while consumer confidence declined further to a record low on concerns over the impact of the Russia-Ukraine war. The data from the National Institute of Economic Research showed that the economic tendency indicator fell 4.4 points to 105.9 in June from 110.3 in May. All sectors, except construction, contributed negatively to the headline index in June, with the consumer confidence index falling the most, by 5.8 points, to 65.5 from 71.3 in May. Further, Switzerland's retail sales declined for the third straight month in May.The data from the Federal Statistical Office showed that Retail sales fell a working-day-adjusted 1.6 percent year-over-year in May, following a revised 5.5 percent decrease in April. In nominal terms, retail sales showed no variations in May compared to last year, after a 4.6 percent drop in the previous month.

On the inflation front, Spain's consumer price inflation accelerated at a faster-than-expected pace in June to reach its highest level in more than thirty-seven years, largely driven by higher fuel and food prices. The flash data from the statistical office INE revealed that the consumer price index climbed 10.2 percent year-over-year in June, following an 8.7 percent rise in the previous month. Besides, Germany's consumer price inflation unexpectedly slowed in June from a record high. The preliminary data from Destatis showed that Consumer price inflation eased to 7.6 percent in June from 7.9 percent in May. The rate was expected to rise to a new record 8.0 percent. Similarly, the EU measure of inflation, or HICP, slowed to 8.2 percent from 8.7 percent in May. Energy prices advanced 38.0 percent from the previous year, similar to the rates seen in the previous months. Food prices also increased at an above-average pace of 12.7 percent in June.

Asian market

Asian equity benchmarks ended mixed during the passing week amid growth worries, as a slew of surveys showed regional manufacturing activity stalled in June and many companies were hit by supply disruptions caused by China's strict COVID-19 lockdowns.  Seoul stocks ended lower after separate reports revealed manufacturing activity expanded at a slower pace in June. Also, a survey showed consumer confidence in South Korea took a hit in June.

Japanese Nikkei edged marginally lower after the Bank of Japan's quarterly Tankan Survey of business sentiment showed that large manufacturing in Japan weakened in the second quarter, with a diffusion index score of +9. That missed forecasts for a reading of +13 and was down from +14 three months ago. Some concern also came after data showed Japanese industrial output fell the most in two years, stoking fears of an economic slowdown. Besides, the unemployment rate in Japan came in at a seasonally adjusted 2.6 percent in May. That was higher than forecasts for 2.5 percent, which would have been unchanged from the April reading.  Traders also took a note of the latest survey from Jibun Bank showed the manufacturing sector in June continued to expand in Japan, albeit at a slower pace, with a manufacturing PMI score of 52.7.That's down from 53.3 in May although it remains above the boom-or-bust line of 50 that separates expansion from contraction.

Chinese Shanghai edged higher by around one and half percent, after China announced changes to testing and quarantine rules in the first step towards easing border controls. Sentiments remained upbeat as survey showed that China's private Caixin/Markit Manufacturing Purchasing Managers' Index (PMI), an index that measures factory activity, rebounded back into the expansion territory of 51.7 in June, up 3.6 percentage points from May, and beating market expectations of 50.1. Sentiment was underpinned by an official's remarks that China will roll out tools in its policy reserve in a timely way to cope with more economic challenges.
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