Markets extend winning streak for third straight week

Indian equity benchmarks extended winning streak for third straight week as bulls continued to dominate bears amid strong inflows from foreign investors. Markets started the week on a very optimistic note as most of the weekly gain comes on day one only as foreign investors turned net buyers and invested nearly Rs 5,000 crore in Indian equities in July on softening dollar index and good corporate earnings. Some optimism also came with the government data showed that the output of eight core infrastructure sectors expanded by 12.7 per cent in June against 9.4 per cent in the year-ago period. Sentiments remained upbeat as India's manufacturing sector activity gained momentum in July, hitting an eight-month high driven by a significant uptick in business orders. The seasonally adjusted S&P Global India Manufacturing Purchasing Managers' Index rose from 53.9 in June, to 56.4 in July. Adding the optimism, India collected Rs 1.49 lakh crore as Goods and Services Tax (GST) in July, posting an increase of 28 percent from the same month last year. Compared to the money collected in June, the July GST mop-up was 3 percent higher. Key gauges extended gains taking support from finance minister Nirmala Sitharaman’s statement that India’s macroeconomic fundamentals are intact and there is no risk of the economy entering into recession or stagflation. She said the government is trying to keep inflation below 7%. Some support also came with Centre for Monitoring Indian Economy (CMIE) data showing that the country's unemployment rate fell from 7.80 per cent in June to 6.80 per cent in July, the lowest level in the last six months, amid rising agriculture activities during monsoon. Afterwards, markets largely witnessed consolidation during the week as traders got anxious with data showing that India’s trade deficit widened to a record $31 billion in July with a sequential decline in exports and somewhat flat imports owing to growing recessionary trends in developed economies and elevated commodity prices. Traders also remain worried after the S&P Global India Services Purchasing Managers' Index sank to 55.5 in July from 59.2 in June, its lowest since March. Key gauges ended the final day of trade slightly in the green as a hawkish monetary policy by the Reserve Bank of India (RBI) led to a tug of war between bulls and bears. RBI increased the repo rate for third time by 50 basis points (bps) to 5.40% as the monetary authority seeks to bring down inflation to its comfort band. SDF rate adjusted to 5.15% and MSF and bank rate revised at 5.65%.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 817.68 points or 1.42% to 58,387.93 during the week ended August 05, 2022. The BSE Midcap index gained 428.15 points or 1.78% to 24,479.05 and Smallcap index surged 548.7 points or 2.03% to 27,605.08. On the sectoral front, S&P BSE TECK was up by 409.89 points or 3.05% to 13,838.91, S&P BSE Information Technology was up by 897.93 points or 3.05% to 30,386.31, S&P BSE Power was up by 130.95 points or 2.87% to 4,687.23, S&P BSE Auto was up by 636.94 points or 2.22% to 29,365.58 and S&P BSE Consumer Discretionary Goods & Services was up by 108.10 points or 1.88% to 5,854.86 were the top gainers on the BSE sectoral front, S&P BSE Realty was down by 105.29 points or 2.93% to 3,485.95, S&P BSE Capital Goods was down by 18.53 points or 0.06% to 29,698.73 were the only losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 239.25 or 1.39% to 17,397.50. On the National Stock Exchange (NSE), Bank Nifty was up by 429.20 points or 1.14% to 37,920.60, Nifty IT was up by 821.25 points or 2.82% to 29,973.55, Nifty Mid Cap 100 was up by 624.10 points or 2.11% to 30,258.35 and Nifty Next 50 was up by 778.10 points or 1.90% to 41,684.25.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 54,789.11 crore and gross sales of Rs 40,613.82 crore, leading to a net inflow of Rs 14,175.29 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 1,752.07 crore against gross sales of Rs 1,522.34 crore, resulting in a net inflow of Rs 229.73 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 50.23 crore and gross sales of Rs 321.37 crore, leading to a net outflow of Rs 271.14 crore.

Industry and Economy

The Centre for Monitoring Indian Economy (CMIE) in its latest data has showed that the country's unemployment rate fell from 7.80 per cent in June to 6.80 per cent in July, the lowest level in the last six months, amid rising agriculture activities during monsoon. Rural unemployment declined 6.14 per cent to 272.1 million last month from 265.2 million or 8.03 per cent in June. On the other hand, urban unemployment jumped to 8.21 per cent in July from 7.80 per cent in June as the number of jobs fell both in industry as well as services. The employment in urban India fell by 0.6 million, from 125.7 million to 125.1 million.

Outlook for the coming week

Markets remained firm in the passing week with both Sensex and Nifty posting gains by over 1% each amid continuous foreign fund inflows and largely positive trend in global markets. Also, Reserve Bank of India’s hike in repo rate by 50 basis points to take it to pre-pandemic levels also supported markets sentiments.

On the economy front, market-participants would be eyeing the data of Index of Industrial Production (IIP), which is scheduled to be release on Aug 12, Industrial production in India jumped 19.6 percent year-on-year in May of 2022, advancing sharply from a downwardly revised 6.7 percent rise in the previous month. On the same day, Consumer Price Index (CPI) for the month of May also be releasing. Consumer prices in India increased 0.52 percent from a month earlier in June of 2022, after a 0.94 percent advance in May.

Further, in the ongoing earning season, investors would first react to results of Amara Raja Batteries, Birla Corporation, BPCL, Hindpetro, Indian Overseas Bank, Marico, MGL, State Bank Of India, Adani Ports, Bharti Airtel, IRCON International, Power Grid, IDFC, IGL, MRF, NCC, Tata Chemicals, Abbott India, IRCTC, Oil India, SAIL, Tata Consumer Products, Bajaj Electricals, Grasim Industries, HAL, Hero Motocorp, ONGC etc among others.

On the global front, investors would be eyeing few economic data from world’s largest economy, United States (US), starting with Redbook on August 09, followed by Core Inflation Rate on August 10, Initial Jobless Claims on August 11 and finally Michigan Consumer Sentiment Prel, Baker Hughes Total Rig Count on August 12.

Top Gainers

  • JSW Steel up by 8.18% was the top gainer on Nifty for the week - Most of steel industry stocks remained on buyers’ radar after a private report stated that the government is likely to halve or eliminate the export duty on steel products amid falling prices and rising domestic supply. Earlier, in last month, the company reported a fall of 85.78% in its consolidated net profit at Rs 839 crore for Q1FY23 as compared to Rs 5,900 crore for the same quarter in the previous year. However, total income of the company increased by 31.53% at Rs 38,275 crore for Q1FY23 as compared Rs 29,100 crore for Q1FY22.
  • Mahindra & Mahindra (M&M) up by 7.55% was another top gainer on Nifty for the week - M&M gained on reporting consolidated net profit of Rs 2,360.70 crore for Q1FY23 as compared to net loss of Rs 331.74 crore for the same quarter in the previous year. Total income of the company increased by 47.81% at Rs 28,628.39 crore for Q1FY23 as compared Rs 19,368.16 crore for the corresponding quarter previous year. On standalone basis, the company has reported a rise of 66.94% in its net profit at Rs 1,430.16 crore for Q1FY23 as compared to Rs 856.67 crore for the same quarter in the previous year.

Top Losers

  • Britannia Industries down by 4.68% was the top loser of the week on Nifty - Britannia Industries witnessed selling pressure on reporting 13.25% fall in its consolidated net profit at Rs 335.74 crore for Q1FY23 as compared to Rs 387.01 crore for Q1FY22. Total income of the company increased by 8.45% at Rs 3,756.46 crore for Q1FY23 as compared Rs 3,463.93 crore for the corresponding quarter previous year. Also, a private report stated that Britannia Industries will continue to take price increases in Q2FY23 as price increases taken in the previous quarters were not enough to cover inflation.
  • Tata Consumer Products down by 2.70% was another top loser of the week on Nifty - Tata Consumer Products came under pressure ahead of its Q1 FY23 result, which is likely to be out in next week on August 10, 2022. Meanwhile, the company’s subsidiary -- Tata Coffee reported 42.36% rise in its consolidated net profit to Rs 65.49 crore Y-o-Y basis. Moreover, its consolidated total income for the quarter was higher due to improved performance of Eight O' Clock coffee, superior performance of instant coffee business both in India and Vietnam and higher sales realisations in coffee plantation business.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 17,490.70 on August 4 and lowest level of 17,154.80 on August 1. On the last trading day, the Nifty closed at 17,397.50 with weekly gain of 239.25 points or 1.39 percent. For the coming week, 17,204.63 followed by 17,011.77 are likely to be good support levels for the Nifty, while the index may face resistance at 17,540.53 and further at 17,683.57 levels.

US Market

The U.S. markets ended mostly higher during the passing week following upbeat economic data. A report released by the Institute for Supply Management (ISM) showed an unexpected acceleration in the pace of growth in U.S. services sector activity in the month of July. The ISM said its services PMI rose to 56.7 in July from 55.3 in June, with a reading above 50 indicating growth in the sector. The uptick came as a surprise to participants, who had expected the index to dip to 53.5. The unexpected increase by the services PMI came after the index edged down to its lowest reading since May 2020 in the previous month. The report showed the business activity index shot up to 59.9 in July from 56.1 in June, while the new orders index jumped to 59.9 from 55.6. The employment index also rose to 49.1 in July from 47.4 in June, although the reading below 50 indicates employment in the services sector contracted for the second consecutive month.

New orders for U.S. manufactured goods showed a significant increase in the month of June, according to a report released by the Commerce Department. The report showed factory orders shot up by 2.0 percent in June after surging by an upwardly revised 1.8 percent in May. Street had expected factory orders to advance by 1.1 percent compared to the 1.6 percent jump originally reported for the previous month. Meanwhile, reflecting a jump in exports and a modest decrease in imports, the Commerce Department released a report showing the U.S. trade deficit narrowed by more than expected in the month of June. The report showed the trade deficit narrowed to $79.6 billion in June from a revised $84.9 billion in May. Street had expected the trade deficit to shrink to $81.9 billion from the $85.5 billion originally reported for the previous month.

The U.S. trade deficit has narrowed significantly since reaching a record high of $107.7 billion in March. The deficit for June is the smallest since it hit $78.9 billion in last December. The decrease in the size of the trade deficit came as the value of exports surged by 1.7 percent to $260.8 billion in June after jumping by 1.5 percent to $256.5 billion in May. However, upside remained capped as rising tensions between the U.S. and China, and signs of slowing global growth weighed on sentiment. Tensions between the U.S. and China have risen due to U.S. House Speaker Nancy Pelosi's visit to Taiwan. It is feared that Pelosi's trip to Taiwan would raise tensions between the two economic superpowers. Chinese foreign ministry spokesman Zhao Lijian said that Pelosi's visit would lead to very serious developments and consequences. The White House has warned China against turning her visit into a crisis.

European Market

European markets ended passing week on a higher note. After a negative start of the week, markets initially remained lower, as the euro area manufacturing sector contracted in July as production logged the sharpest fall since the initial wave of the COVID-19 lockdowns in early 2020. The final data from S&P Global showed that the final manufacturing Purchasing Managers' Index fell to a 25-month low of 49.8 in July from 52.1 in June. The flash reading was 49.6. A score below 50.0 indicates contraction. The reading signaled the first deterioration in manufacturing conditions for just over two years. Besides, Sweden's manufacturing sector expanded at the slowest pace in two years in July. The survey data from Swedbank and the logistics association SILF showed that the purchasing managers' index for the manufacturing sector fell to 53.1 in July from 53.6 in June. However, a PMI reading above 50 suggests growth in the manufacturing sector. Employment was the most significant negative contributor to the decline in the PMI total, followed by manufacturing, while orders received, delivery times, and purchased inventories contributed positively.

However, indices staged recovery towards end of the week, after Germany's exports growth accelerated more than expected in June, while imports increased at a weaker pace. The official data showed that exports climbed 4.5 percent in June from the previous month. Meanwhile, imports growth eased more-than-expected to 0.2 percent from revised 3.2 percent in May. As a result, the trade surplus rose to EUR 6.4 billion from revised EUR 0.8 billion in May. The surplus was expected to fall to EUR 0.2 billion. Further, Spain's industrial production growth accelerated in June to reach its highest level in one year, largely driven by output growth in the capital goods and energy sector. The preliminary data from the statistical office INE showed that industrial production climbed a seasonally and calendar-adjusted 7.0 percent year-over-year in June, faster than the revised 4.5 percent gain in May. Output produced in the energy sector was 14.4 percent higher in June compared to a year ago. Capital goods output rose 10.8 percent, while that of intermediate goods registered a moderate increase of 0.1 percent.

On the inflation front, Switzerland's consumer price inflation held steady in July to remain at its highest level in twenty-nine years. The data from the Federal Statistical Office showed that consumer prices rose 3.4 percent year-on-year in July, the same rate of increase as in June. A higher rate of inflation was last seen in October 1993. On a monthly basis, consumer prices showed no variations in July versus an expected fall of 0.1 percent. Besides, UK house price inflation accelerated less-than-expected in July, after easing in the previous three months. The survey results from the Nationwide Building Society showed that the house price index logged a double-digit annual growth of 11.0 percent in July, faster than the 10.7 percent rise in June. On a monthly basis, house prices edged up 0.1 percent in July, following a 0.2 percent rise in the previous month. This was the twelfth successive monthly increase.

Asian Market

Asian equity indices, barring Shanghai Composite Index, ended in green during the passing week following the broadly positive cues from global markets, as traders reacted positively to some upbeat U.S. economic data on services sector activity and manufactured goods new orders, which helped ease concerns about a lingering recession and sharper interest rate hikes. Investors awaited an update on the U.S. jobs market for clues on the pace of monetary policy tightening going ahead.

Japanese Nikkei edged higher by around half percent with the declining local currency yen and better than expected corporate earnings report. Traders also took note of the latest survey from Jibun Bank revealed that the services sector in Japan continued to expand in July, albeit at a slower pace, with a services PMI score of 50.2. That's down from 53.0 in June, although it remains above the boom-or-bust line of 50 that separates expansion from contraction. However, a preliminary figure showed the au Jibun Bank Japan Manufacturing PMI declined to a ten-month low of 52.2 in July 2022 from a final 52.7 a month earlier, amid rising energy and wage costs as well as persistent inflationary pressures.

However, Shanghai Composite edged lower by around two percent amid sluggish economic health of the country and intensified geo-political tensions. Some concern also came with unexpected contraction in China's factory activity in July, with the corresponding PMI falling to 49 from 50.2 in June as a result of fresh COVID-19 outbreaks. Market participants overlooked a private-sector survey that showed China's services activity grew at the fastest rate in 15 months in July as easing COVID curbs boosted consumer confidence, but foreign demand fell and companies cut staff for the seventh month in a row. The Caixin services purchasing managers' index (PM) rose to 55.5 in July, the fastest growth since April 2021, rising further from the robust reading of 54.5 in June.