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Ease in crude oil prices take markets higher for the week
Sep-09-2022

It turned out to be an optimistic week of trade for Indian equity benchmark, where frontline gauges garnering a weekly gain of over one and a half percentage points as traders remain encouraged on the back of falling crude oil prices. Markets made a promising start to the week as traders took encouragement with a State Bank of India’s report stating that India is likely to become the third largest economy by 2029. India is currently ranked fifth largest economy. Some support also came as hoping for a double-digit growth in GDP in this financial year, Union Finance Minister Nirmala Sitharaman said the nation is on a strong wicket when compared to others, and is responsive in terms of extending hand-holding to the required sections. Adding more optimism, S&P Global in a report said India’s Services PMI rose to 57.2 in August from July’s 4-month low of 55.5, on stronger expansion in new work intakes, upturn in business activity, and the sharpest rise in employment for over 14 year. However, markets witnessed some profit booking as traders turned cautious as Finance Ministry in its report on ‘India's external debt’ has said that India's external debt rose by 8.2 per cent year-on-year to $620.7 billion as of March 2022. It stated while 53.2 per cent of it was denominated in the US dollar, Indian rupee-denominated debt, estimated at 31.2 per cent, was the second largest. Traders shrugged off report that credit rating agency Moody’s has allotted a Baa3 rating for the Government of India with a stable outlook. Sentiments remain dampened as domestic ratings agency ICRA said India's current account deficit (CAD) will widen to 5 per cent of the GDP in the September quarter due to higher merchandise trade deficit. The trade deficit has doubled to $28.7 billion for August due to a 36.8 per cent expansion in imports and a 1.2 per cent decline in export earnings. But, rally on final two days of the week helped markets to enlarge their gains as traders took encouragement as International Monetary Fund's (IMF) Managing Director Kristalina Georgieva said that despite global uncertainty and headwinds, India continues to be a bright spot in the global economy. Investors continued to take support with Sanjiv Bajaj, President of industry body CII stating that India is in a much better position to deal with the challenges related to growth and inflation. Traders also took encouragement with Finance Minister Nirmala Sitharaman's statement that India has ramped up the import of crude oil from Russia at discounted prices amid sanctions on Moscow as part of the country's inflation management.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 989.81 points or 1.68% to 59,793.14 during the week ended September 09, 2022. The BSE Midcap index gained 473.31 points or 1.86% to 25,937.22 and Smallcap index surged 727.92 points or 2.53% to 29,528.74. On the sectoral front, S&P BSE TECK was up by 453.72 points or 3.48% to 13,475.70, S&P BSE Information Technology was up by 985.96 points or 3.48% to 29,285.35, S&P BSE PSU was up by 232.74 points or 2.57% to 9,277.39, S&P BSE BANKEX was up by 1,091.83 points or 2.42% to 46,288.97 and S&P BSE Metal was up by 441.41 points or 2.36% to 19,134.59 were the top gainers on the BSE sectoral front, while there were no losers on the BSE sectoral front.

NSE movement for the week

The Nifty surged 293.90 or 1.68% to 17,833.35. On the National Stock Exchange (NSE), Nifty Mid Cap 100 was up by 633.60 points or 2.02% to 32,035.90, Nifty Next 50 was up by 476.40 points or 1.09% to 44,109.95, Bank Nifty was up by 994.70 points or 2.52% to 40,415.70 and Nifty IT was up by 978.20 points or 3.53% to 28,724.00.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 33,042.23 crore and gross sales of Rs 29,411.50 crore, leading to a net inflow of Rs 3,630.73 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 3,507.11 crore against gross sales of Rs 3,467.62 crore, resulting in a net inflow of Rs 39.49 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 449.57 crore and gross sales of Rs 132.42 crore, leading to a net inflow of Rs 317.15 crore.

Industry and Economy

Retaining its sovereign rating on India, Moody's Investor Service has said that the impact of higher inflation, the Russia-Ukraine conflict and tightening global financial conditions are unlikely to disrupt India's economic recovery from the pandemic. The agency has retained Baa3 sovereign rating on India with a stable outlook. Also, Moody's saw the Indian economy expanding by 7.6 per cent in the current fiscal compared to 8.7 per cent growth in the last financial year that ended on March 31. For 2023-24, it estimates a 6.3 per cent GDP growth. It’s Baa3 rating on India is the lowest investment grade rating. In October last year, it revised upwards the rating outlook to stable from negative.

Outlook for the coming week

Passing week turned out be splendid one for the Indian equity markets, which rallied around 2% each and settled above the psychological 59,700 (Sensex) and 17,800 (Nifty) levels supported by strength across global markets as crude oil prices eased.

On September 12, traders will keep an eye Index of Industrial Production (IIP) and Consumer Price Index (CPI) respectively. Annual inflation rate in India edged lower to a five-month low of 6.71% in July of 2022 from 7.01% in June and Industrial production in India advanced by 12.3 percent year-on-year in June of 2022, following a 19.6 percent.

Traders will also be looking forward toward the Wholesale Price Index (WPI) data for the month of August, scheduled to be release on September 14. The annual wholesale price inflation rate in India fell to 13.93 percent in July 2022 from 15.18 percent in the prior month.

On the global front, investors would be eyeing few economic data from world’s largest economy, United States (US), starting with Consumer Inflation Expectations on September 12 followed by Inflation Rate, Redbook on September 13, Retail Sales, Initial Jobless Claims, Industrial Production on September 15 and finally Michigan Inflation Expectations and Baker Hughes Oil Rig Count on September 16.

Top Gainers

  • Shree Cement up by 13.52% was the top gainer on Nifty for the week - Cement companies stocks were buzzing amid expectations that demand will improve after monsoon season ends. Currently, cement prices are declining in most markets due to monsoon. As per a private report, all-India average prices are currently below January 2022 average when cost pressure was less. The recent price hike comes after fall in cement prices by around Rs 40 to 60 per bag since May 2022. The dealers have also indicated pressure on prices due to ramp-up of newly commissioned clinker capacity by Shree Cement, UltraTech and Dalmia.
  • Adani Ports and Special Economic Zone (Adani Ports) up by 8.24% was another top gainer on Nifty for the week - Adani Ports remained on buyers’ radar after it handled 29.3 MMT of cargo in August 2022, implying 18% Y-o-Y increase. The dry bulk volume grew by 44% and containers by 8%. In a record 49 days, the company achieved a cargo throughput of 50 MMT. In a separate development, the Supreme Court has given relief to the company by allowing it to withdraw its petition challenging the high court's order that cited the company’s disqualification from a Visakhapatnam Port Trust project. 

Top Losers

  • Bajaj Auto down by 5.59% was the top loser of the week on Nifty - Bajaj Auto came under pressure after it reported a small jump in total sales and a massive 28 percent plunge in export volume. Exports of the company stood at 1,44,840 units in the reporting month compared to 2,00,675 in the same month last year. As per a private report, the sharp fall in two-wheeler exports came as Nigeria, one of the largest export markets for Bajaj Auto, has restricted two-wheeler movement. Following this, a private global brokerage has downgraded its rating on the stock to ‘outperform’ from ‘buy’.
  • Tata Motors down by 4.50% was another top loser of the week on Nifty - Auto industry stocks were under pressure amid private report that Care Ratings expect the third hike in repo rates by the Reserve Bank of India to restrain high inflation will make auto loans costlier. This may restrict the growth, especially in entry-level vehicle segments which have price-sensitive customers. Meanwhile, Tata Motors’ total sales increased by 36% to 78,843 units in August 2022 as compared to 57,995 units sold in in August 2021. Its total domestic sales increased by 41% to 76,479 units in August.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 17,925.95 on September 9 and lowest level of 17,484.30 on September 7. On the last trading day, the Nifty closed at 17,833.35 with weekly gain of 293.90 points or 1.68 percent. For the coming week, 17,569.78 followed by 17,306.22 are likely to be good support levels for the Nifty, while the index may face resistance at 18,011.43 and further at 18,189.52 levels.

US Market

The U.S. markets ended higher during the passing week as traders looked to pick up stocks at reduced levels following the recent weakness. Markets saw further upside following the release of the Federal Reserve's Beige Book, which said economic activity in the U.S. has been essentially unchanged since early July. The Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts, noted five districts reported slight to modest growth in activity and five others reported slight to modest softening.  With regard to inflation, the Fed said prices remained highly elevated, with substantial price increases reported across all districts, particularly for food, rent, utilities, and hospitality services. However, the Beige Book noted nine districts reported some degree of moderation in rate of price growth in recent months.

Meanwhile, traders digested comments from Federal Reserve Chair Jerome Powell, who reiterated the central bank's commitment to aggressively fighting inflation. Powell also once again warned about the dangers of allowing elevated prices to become entrenched, noting the Fed has a responsibility to bring inflation back down to 2 percent. He said the longer inflation remains well above target, the greater the risk the public does begin to see higher inflation as the norm, and that has the capacity to raise the costs of getting inflation down. On the economic data front, first-time claims for U.S. unemployment benefits unexpectedly showed a modest decrease in the week ended September 3rd, according to a report released by the Labor Department. The report showed initial jobless claims edged down to 222,000, a decrease of 6,000 from the previous week's revised level of 228,000. Street had expected jobless claims to inch up to 240,000 from the 232,000 originally reported for the previous week.

A report released by the Commerce Department showed the U.S. trade deficit narrowed significantly in the month of July. The Commerce Department said the trade deficit shrank to $70.6 billion in July from a revised $80.9 billion in June. Street had expected the trade deficit to narrow to $70.3 billion from the $79.6 billion originally reported for the previous month. The trade deficit for July represents the smallest deficit since the $68.2 billion reported for last October. The narrower deficit was largely due to a steep drop in the value of imports, which tumbled by 2.9 percent to $329.9 billion in July after edging down by 0.2 percent to $339.6 billion in June. Imports of consumer goods led the way lower, although the sharp decline was partly due to a significant decrease in volatile pharmaceuticals. The report also showed a notable decrease in imports of industrial supplies and materials, while imports of automotive vehicles, parts and engines saw considerable growth.

European Market

European markets ended passing week in red. Markets made a dismal start as Eurozone investor confidence deteriorated to the lowest in more than two years in September signaling that the recession is deepening. The survey results from the behavioral research institute Sentix showed that the investor confidence index declined to -31.8 in September from -25.2 in August. Besides, the UK service sector expanded at the slowest pace in the current 18-month sequence of growth amid escalating economic uncertainty and concerns about high inflation. The final data from S&P Global showed that the Chartered Institute of Procurement and Supply final services Purchasing Managers' Index posted 50.9 in August, down from 52.6 in the previous month. The score was well below the flash 52.5. The composite output index declined to 49.6 in August from 52.1 a month ago. The flash score was 50.9. The index was pulled down by a severe and accelerated drop in manufacturing output.

However, towards end of the week, markets staged some recovery, after the euro area economy expanded more than estimated in the second quarter. The latest figures from Eurostat showed that gross domestic product advanced 0.8 percent sequentially, following a 0.7 percent rise in the first quarter. The second quarter figure was revised up from a 0.6 percent expansion seen in the second estimate published on August 17. At the same time, the annual GDP growth eased to 4.1 percent from 5.4 percent a quarter ago. The annual rate was revised up from 3.9 percent. Further, Sweden's industrial production expanded strongly in July, after falling in the previous month. The data from Statistics Sweden showed that industrial production climbed a calendar-adjusted 7.8 percent year-over-year in July, reversing a 1.3 percent fall in June. The latest upward trend was driven primarily by the chemical and pharmaceutical industry, which grew 47.0 percent from the previous year.

On the inflation front, Eurozone producer price inflation accelerated unexpectedly to a fresh record high in July on soaring energy prices. The data released by Eurostat showed that producer prices surged 37.9 percent year-on-year in July, following a 36.0 percent rise in June, which was revised up from 35.8 percent. Besides, the Netherlands' inflation accelerated further in August to set a new record and continued to be driven by higher energy prices. The preliminary data from the Central Bureau of Statistics showed that the consumer price index rose 12.0 percent year-on-year following a 10.3 percent increase in July. Headline inflation accelerated for a second straight month. Energy inflation shot up to 151 percent from 108 percent in the previous month. Food prices rose 13.1 percent annually after a 12.3 percent increase in July. Higher prices for clothing also contributed to inflation.

Asian Market

Asian markets ended mostly in green during the passing week as investors digested Federal Reserve Chair Jerome Powell and ECB President Christine Lagarde’s comments advocating for higher rates to combat runaway inflation. Sentiments also remained upbeat after senior officials from China’s central bank and leading ministries promised fresh measures to follow a stimulus package released in May. The yuan rebounded from a more than two-year low against the U.S. dollar after the central bank slashed the amount of foreign-exchange deposits banks need to set aside as reserves for the second time this year.

Chinese Shanghai Composite edged higher as data showed inflation slowed more than expected in August. China's consumer inflation rose an annual 2.5 percent in August, the National Bureau of Statistics said earlier today. That was shy of forecasts for 2.8 percent and down from 2.7 percent in July. The bureau also said that producer prices were up 2.3 percent year-on-year - missing forecasts for 3.1 percent and down sharply from the 4.2 percent gain a month earlier. Traders shrugged off reports that export growth slowed sharply in August amid softening global demand. Overseas shipments rose an annual 7.1 percent, compared to the 18 percent growth in July, China's General Administration of Customs said. Import growth slowed to 0.3 percent from 2.3 percent in July.

Japanese Nikkei also edged higher as the yen's rapid depreciation raised hopes for a better outlook for exporters. Sentiments also remained buoyant on report that Japanese economy grew more than initially estimated in the second quarter as a result of increased capital expenditure by businesses. Market participants ignored disappointing economic data where the au Jibun Bank Japan Services PMI was revised higher to 49.5 in August of 2022, compared with a preliminary reading of 49.2, and after a final 50.3 a month earlier. The latest print signalled the first contraction in services activity since March, due to a surge in COVID-19 infections, which dampened customer demand and led to stagnation in total new work.
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