Bulls continue to dominate bears for fourth straight week

Indian equity benchmarks extended their winning streak for fourth straight week as traders remain encouraged by US inflation data for July, which came below the estimate and eased worries about Federal Reserve aggressive rate hike in near term. Sentiments remained up-beat since beginning of the holiday shortened week as traders took encouragement with Reserve Bank Governor Shaktikanta Das’ statement that India is unlikely to be impacted by any adverse developments in Taiwan. The Governor said Taiwan accounts for only 0.7 per cent of India's overall trade and the capital flows from the island are also not very high. Traders also took support from the Reserve Bank of India’s data showed that India's foreign exchange (forex) reserves rose by $2.315 billion to $573.875 billion for the week ended July 29 on the back of robust capital inflows in the equities markets and strengthening of rupee from the record low. However, markets witnessed some consolidation on the next trading session as traders turned cautious with data released by Association of Mutual Funds in India (AMFI) showing that equity mutual funds attracted Rs 8,898 crore in July, a 43 per cent decline compared to the preceding month as markets continued to remain volatile amid concerns over inflation and rate hike expectations. But hefty buying across the sectors on final two day of the week helped markets to go home with handsome gains as market participants turned optimistic and took encouragement with a private report that India is likely to be the fastest-growing Asian economy in 2022-23. The report expects India’s gross domestic product growth to average 7 per cent during this period - the strongest among the largest economies - and contributing 28 per cent and 22 per cent to Asian and global growth, respectively. Sentiments remained upbeat with report that RBI in its latest data has showing that bank credit rose 14.52 per cent to Rs 123.69 lakh crore and deposits increased 9.14 per cent to Rs 169.72 lakh crore in the fortnight ended July 29. Sentiments also got some support with a private report that India will be the fastest growing major economy this year and the next despite headwinds from rising inflation, widening trade deficit and a declining rupee. It added that the 7 per cent decline in rupee value against the US dollar this year was not worrisome, and the government and RBI are confident of managing the situation. Also, S&P Global Ratings said the Indian economy can handle some erosion of its foreign exchange reserves as its external position is very strong.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 1074.85 points or 1.84% to 59,462.78 during the week ended August 12, 2022. The BSE Midcap index gained 286.00 points or 1.17% to 24,765.05 and Smallcap index surged 300.83 points or 1.09% to 27,905.91. On the sectoral front S&P BSE Metal was up by 885.72 points or 4.83% to 19,239.98, S&P BSE Capital Goods was up by 1,245.34 points or 4.19% to 30,944.07, S&P BSE Power was up by 170.81 points or 3.64% to 4,858.04, S&P BSE Finance was up by 232.40 points or 2.86% to 8,365.14 and S&P BSE Bankex was up by 1,207.32 points or 2.77% to 44,758.13 were the top gainers on the BSE sectoral front, while S&P BSE Fast Moving Consumer Goods was down by 167.16 points or 1.07% to 15,471.79, S&P BSE Healthcare was down by 137.27 points or 0.59% to 23,047.47, S&P BSE Telecom was down by 5.33 points or 0.32% to 1,640.34, S&P BSE TECK was down by 19.18 points or 0.14% to 13,819.73 and S&P BSE Information Technology was down by 35.51 points or 0.12% to 30,350.80 were the top losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 300.65 or 1.73% to 17,698.15. On the National Stock Exchange (NSE), Nifty Mid Cap 100 increased 548.00 points or 1.81% to 30,806.35, Nifty Next 50 gained 527.15 points or 1.26% to 42,211.40, Bank Nifty was up by 1121.70 points or 2.96% to 39,042.30, while Nifty IT was down by 87.65 points or 0.29% to 29,885.90.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 44,003.87 crore and gross sales of Rs 35,726.61 crore, leading to a net inflow of Rs 8,277.26 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 4,867.98 crore against gross sales of Rs 3,350.19 crore, resulting in a net inflow of Rs 1,517.79 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 7.89 crore and gross sales of Rs 321.64 crore, leading to a net outflow of Rs 313.75 crore.

Industry and Economy

With an aim to help the economy revive better, Chief Economic Advisor V Anantha Nageswaran has said the private sector needs to invest more in technology and research and development (R&D), and pay the MSME suppliers on time. Stating that Indian economy cannot remain exempt from the global challenges he said but it remains resilient and is poised for a rebound as the banking system is better, inflationary issues are peaking out and ongoing recovery is healthy. He said ‘It is to our credit so far that we have managed to keep the impact at more manageable levels so far. But it should require continuous vigilance, continuous action and discipline for policymakers.’ As several economies facing very high inflation, Nageswaran said India is in a relatively better position and the majority of its sectors are doing quite well despite market volatility and inflation.

Outlook for the coming week

Indian equity markets, extending gains for the fourth straight week, accumulated profit of over one and half percent each in the week gone by. Falling crude oil prices and continuous FII inflows into the markets in the last few sessions aided the sentiments.

The next holiday truncated week would be crucial one as investor’s would be keenly eyeing the data of Wholesale Price Index (WPI) for the month of July supposed to be release on August 16. The annual wholesale price inflation rate in India fell to 15.18 percent in June 2022 from 15.88 percent in the prior month and less than market estimates of 15.5 percent. Further, Consumer price index (both Agricultural Labourers/ Rural Labourers) data, scheduled to be released on Thursday, August 18, 2022, too would be tracked. The stock market remains closed on Monday, August 15, 2022, on account of Independence Day.

Balance of Trade Final, Import & Export data will going to release on August 16. India recorded an all-time high trade deficit of $31.02 billion in July of 2022, three times higher than $11 billion gap a year earlier, pushed higher by a rise in crude oil and coal imports. Meanwhile, trend in investment by foreign institutional investors and the movement of rupee against the dollar will be also be closely watched by the market-participants.

On the global front, investors would be eyeing few economic data from world’s largest economy, United States (US), starting with Redbook, Industrial Production on August 16, followed by Retail Sales, FOMC Minutes on August 17, Initial Jobless Claims, Philadelphia Fed Manufacturing Index on August 18 and finally Baker Hughes Total Rig Count on August 19.

Top Gainers

  • UPL up by 7.81% was the top gainer on Nifty for the week - UPL continue to remain on buyers’ radar after recently reporting 34.18% rise in its consolidated net profit at Rs 1,005 crore for first quarter ended June 30, 2022 as compared to Rs 749 crore for the same quarter in the previous year. Total income of the company increased by 27.22% at Rs 10,894 crore for Q1FY23 as compared Rs 8,563 crore for the corresponding quarter previous year. On standalone basis, the company has reported 77.41% rise in its net profit at Rs 479 crore for Q1FY23 as compared to Rs 270 crore for Q1FY22.
  • Coal India up by 7.00% was another top gainer on Nifty for the week - Coal India gained on reporting around 3-fold jump in its consolidated net profit at Rs 8,834.22 crore for first quarter ended June 30, 2022 as compared to Rs 3,174.15 crore for the same quarter in the previous year. Total income of the company increased by 38.99% at Rs 36,086.68 crore for Q1FY23 as compared Rs 25,963.13 crore for the corresponding quarter previous year. On standalone basis, the company has reported net profit of Rs 160.98 crore for Q1FY23 as compared to net loss of Rs 49.82 crore for Q1FY22.

Top Losers

  • Divi's Lab down by 4.17% was the top loser of the week on Nifty - Divi's Lab witnessed profit booking after it reported a rise of 26.01% in its consolidated net profit at Rs 702.01 crore for Q1FY23 as compared to Rs 557.11 crore for the same quarter in the previous year. Total income of the company increased by 17.34% at Rs 2342.91 crore for Q1FY23 as compared Rs 1996.61 crore for the corresponding quarter previous year. On standalone basis, the company has reported a rise of 25.30% in its net profit at Rs 691.61 crore for Q1FY23 as compared to Rs 551.97 crore for the same quarter in the previous year.
  • Tata Consumer Products down by 3.27% was another top loser of the week on Nifty - Tata Consumer Products came under pressure after it reported a fall of 23.35% in its standalone net profit at Rs 232.83 crore for Q1FY23 as compared to Rs 303.74 crore for the same quarter in the previous year. However, total income of the company increased marginally by 0.88% at Rs 2130.78 crore for Q1FY23 as compared Rs 2112.12 crore for the corresponding quarter previous year. On the consolidated basis, the company has reported Y-o-Y rise of 14.90% in its net profit at Rs 276.51 crore Q1FY23.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 17,724.65 on August 12 and lowest level of 17,359.75 on August 8. On the last trading day, the Nifty closed at 17,698.15 with weekly gain of 300.65 points or 1.73 percent. For the coming week, 17463.72 followed by 17229.28 are likely to be good support levels for the Nifty, while the index may face resistance at 17828.62 and further at 17959.08 levels.

US Market

The U.S. markets ended higher during the passing week after key report showed slowdown in inflation. The Labor Department released a report showing U.S. consumer prices unexpectedly came in flat in the month of July. The Labor Department said its consumer price index was unchanged in July after jumping by 1.3 percent in June. Street had expected consumer prices to edge up by 0.2 percent. Compared to the same month a year ago, consumer prices in July were up by 8.5 percent, reflecting a bigger than expected slowdown from the 9.1 percent spike in June. The annual rate of price growth was expected to slow to 8.7 percent from the four-decade high seen in the previous month. Meanwhile, the report said core consumer prices, which exclude food and energy prices, rose by 0.3 percent in July after climbing by 0.7 percent in June. Core prices were expected to increase by 0.5 percent.

The annual rate of core consumer price growth was unchanged at 5.9 percent, while Street had expected an acceleration to 6.1 percent. The tamer than expected inflation data has led to speculation that the Federal Reserve will slow the pace of interest rate hikes at its September meeting. Further, support also came in as the Labor Department released a report showing producer prices unexpectedly decreased during the month. The Labor Department said its producer price index for final demand fell by 0.5 percent in July after surging by a revised 1.0 percent in June. The pullback came as a surprise to participants, who had expected producer prices to edge up by 0.2 percent compared to the 1.1 percent jump originally reported for the previous month. The unexpected decrease in producer producers, which marked the first drop since April 2020, largely reflected a sharp pullback in energy prices.

However, first-time claims for U.S. unemployment benefits saw another modest increase in the week ended August 6th, according to a report released by the Labor Department. The report showed initial jobless claims rose to 262,000, an increase of 14,000 from the previous week's revised level of 248,000. Street had expected jobless claims to inch up to 263,000 from the 260,000 originally reported for the previous week. Meanwhile, a report released by the Labor Department showed U.S. labor productivity continued to slump in the second quarter, while labor costs continued to soar. The Labor Department said labor productivity tumbled by 4.6 percent in the second quarter after plummeting by a revised 7.4 percent in the first quarter. Street had expected productivity to plunge by 4.7 percent compared to the 7.3 percent nosedive that had been reported for the previous quarter.

European Market

European markets ended passing week on a higher note. After a positive start of the week, markets witnessed some volatility during the week, as Sweden's industrial production declined in June, after rebounding in the previous month. The data from Statistics Sweden showed that industrial production fell a calendar-adjusted 0.5 percent year-over-year in June, reversing a 0.3 percent rise in May. The most recent downward trend was driven primarily by the automobile industry, which fell 19.8 percent from the previous year. Meanwhile, construction output grew 2.7 percent annually in June, slower than the 5.8 percent gain in the previous month. Further, Hungary's trade balance swung to a deficit in June from a surplus in the previous year, as imports rose more than exports. The preliminary data from the Hungarian Central Statistical Office showed that the trade balance logged a deficit of EUR 471 million in June versus a surplus of EUR 565 million in the corresponding month last year. In May, there was a shortfall of EUR 95 million. Exports climbed 13.0 percent year-over-year in June, while imports grew at a much faster pace of 24.0 percent.

But, key indices bounced back towards end of the week, after Eurozone investor confidence improved in August but less than expected suggesting that the economy is undergoing a downturn. The results of a closely-watched survey showed that the investor confidence index rose to -25.2 in August from -26.4 in July. Besides, the UK economy logged only a marginal contraction in the second quarter despite the challenges posed by the rising interest rates and high inflation that is squeezing real income. Gross domestic product shrank 0.1 percent from the first quarter, when output had advanced 0.8 percent, the Office for National Statistics said Friday. Nonetheless, the pace of contraction was slower than the 0.2 percent drop expected by economists. The Bank of England had projected the economy to enter recession later this year and to contract throughout next year. The bank estimated a quarterly fall of 0.4 percent in the third quarter of 2022.

On the inflation front, Germany consumer price inflation slowed as initially estimated in July but remained at an elevated level. The final data from Destatis showed that consumer price inflation slowed to 7.5 percent from 7.6 percent in June. The rate matched the flash estimate published on July 28. In May, headline inflation hit a record high 7.9 percent. Although the rate of inflation was slightly down again, it remained at a high level clearly above 7 percent. Further, Italy's consumer price inflation eased marginally as initially estimated in July. The latest figures from the statistical office Istat showed that consumer price inflation slowed to 7.9 percent in July from 8.0 percent in June. That was in line with the flash data published on July 29. Prices for energy alone grew 42.9 percent annually in July and those for processed food goods rose 9.5 percent. Utility costs were 24.7 percent more expensive in July compared to last year, and prices for food and non-alcoholic beverages registered a sharp growth of 10.0 percent. Excluding energy and fresh food, core inflation accelerated to 4.1 percent from 3.8 percent, as estimated.

Asian Market

Asian equity indices ended mostly in green during the passing week, as traders reacted to another US Labor Department report showing an unexpected decrease in producer prices in the month of July, raising hopes that inflation in the U.S. may have peaked, which could allow the Fed to slow the pace of interest rate increases. However, comments from Fed officials seemed to downplay the data, with Chicago Fed President Charles Evans saying inflation remains ‘unacceptably high’.

Shanghai Composite edged higher by over one and half percent, as the Bank of China’s affirmation that it would closely monitor domestic and external inflation changes while balancing economic growth and price stability, boosted market sentiments. Sentiments remained up-beat with data from China's customs showed China's export growth continued to rise in July, sending trade surplus to a record high. China's exports grew 18% to $333 billion compared to the same period last year, and were up from 17.9% in June. Some support also came as producer price inflation slowed to 4.2 percent in July from 6.1 percent in June as commodity prices weakened. However, China’s consumer inflation accelerated in July to the highest level in two years, largely due to surging pork costs, while weak consumer demand kept overall price pressures in check.

However, Japanese Nikkei edged lower by over a percent as disappointing corporate earnings news weighed on Japan’s market sentiment. Some concern also came with a report stated that the prices that Japanese firms pay each other for goods rose for the 17th straight month in July, renewing record highs. Prices rose for over 80 percent of items, prompting firms to pass along higher costs to consumers. Traders also took a note of data showing that Japan posted a current account deficit of 132.4 billion yen in June, beating expectations for a shortfall of 703.8 billion yen and previous month’s 128.4 billion yen surplus. Imports were up by 49.2% YoY to 9.697 trillion yen, and exports advanced an annual 20.4% to 8.583 trillion yen for a trade deficit of 1.114 trillion yen.