Selling on final day of the week forced key gauges to wipeout all their initial gains to end flat as traders turned anxious after PacWest confirmed that it is reviewing strategic options, including a potential sale. Mixed signals from the Fed on rate hike path also weighed on markets. Domestic indices made an optimistic start to the holiday shortened week as traders took encouragement with favourable domestic macroeconomic data. Manufacturing activities in India accelerated further and touched a four-month high in April, boosted by robust new business growth and improving supply-chain conditions. The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) increased from 56.4 in March to 57.2 in April. Meanwhile, India's services sector surged in April as the sector's Purchasing Managers' Index (PMI) jumped to 62.0 from 57.8 in March. At 62.0, the services PMI is the highest in nearly 13 years. It has stayed above the key level of 50 that separates expansion in activity from a contraction for 21 months in a row. Traders got support as GST collection grew by 12 per cent in April to Rs 1.87 lakh crore, the highest monthly mop-up since the rollout of the indirect tax regime. Traders shrugged off report that India's eight core sectors grew by 3.6 percent in March 2023, the slowest in the last five months. In the year-ago period, the core sectors had grown by 4.3 percent. Some support also came after the International Monetary Fund (IMF) projected that India would be the fastest-growing economy in the world, despite confronting considerable challenges such as financial sector turmoil, inflationary pressures, effects of the Russia-Ukraine war, and the persistent impact of the Covid-19 pandemic over the past three years. However, some cautiousness came with a private report that India’s unemployment rate climbed to a four-month high, as there were more people joining the workforce compared to available jobs in Asia’s third largest economy. Markets witnessed buying on penultimate day of the week as market participants took support from another private report stating that as many as 163 Indian companies have invested more than $40 billion in the United States so far which has created nearly 425,000 jobs in the country. Adding to the optimism, Union Agriculture Minister Narendra Singh Tomar emphasized that agriculture remains prime pulse of the Indian economy, and said that the agriculture is at the core of the socio-economic development of the country. But selling on final day of the week mainly played spoil sports for Indian equity benchmarks and forced markets to pare all their gains to end flat amid renewed concerns about the health of the U.S. banking sector after lenders PacWest Bancorp and First Horizon said they were reviewing their options. BSE movement for the week The Bombay Stock Exchange (BSE) Sensex slipped 58.15 points or 0.10% to 61,054.29 during the week ended May 05, 2023. The BSE Midcap index gained 359.43 points or 1.41% to 25,851.86 and Smallcap index surged 366.8 points or 1.27% to 29,283.87 S&P BSE Consumer Durables was up by 958.44 points or 2.50% to 39,332.62, S&P BSE Consumer Discretionary Goods & Services was up by 104.89 points or 1.84% to 5,820.27, S&P BSE Power was up by 59.88 points or 1.60% to 3,803.75, S&P BSE Auto was up by 386.20 points or 1.27% to 30,711.71 and S&P BSE PSU was up by 122.51 points or 1.20% to 10,307.32 were the top gainers, while S&P BSE BANKEX was down by 509.11 points or 1.04% to 48,472.72, S&P BSE Finance was down by 57.16 points or 0.64% to 8,914.12 and S&P BSE TECK was down by 6.06 points or 0.05% to 12,531.96 were the few losers on the BSE. NSE movement for the week The Nifty surged 4.00 or 0.02% to 18,069.00. On the National Stock Exchange (NSE), Nifty IT was up by 11.75 points or 0.04% to 27,719.95, Nifty Mid Cap 100 increased 354.10 points or 1.11% to 32,148.85 and Nifty Next 50 increased 577.05 points or 1.46% to 40,091.25. On the other side, Bank Nifty was down by 572.70 points or 1.32% to 42,661.20. FII transactions during the week Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 34,550.75 crore and gross sales of Rs 23,700.76 crore, leading to a net inflow of Rs 10,849.99 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 2,428.65 crore against gross sales of Rs 4,888.93 crore, resulting in a net outflow of Rs 2,460.28 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 35.73 crore and gross sales of Rs 20.95 crore, leading to a net inflow of Rs 14.78 crore. (Provisional) Industry and Economy The International Monetary Fund (IMF) in its ‘Regional Economic Outlook - Asia and Pacific’ report has stated that growth in the dynamic Asia-Pacific region is likely to increase to 4.6% this year (2023) from the 3.8% recorded in 2022. It added that the region would contribute around 70% of global growth. It noted that Asia and Pacific will be the most dynamic of the world’s major regions in 2023, predominantly driven by the buoyant outlook for China and India, and added that the two largest emerging market economies of the region are expected to contribute around half of global growth this year, with the rest of Asia and Pacific contributing an additional fifth. Outlook for the coming week In the passing week, Indian equity markets ended flat despite strong Q4 earnings and favourable domestic macroeconomic data. 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, 2023. India's industrial production growth accelerated to 5.6 percent year-on-year in February 2023, up from an upwardly revised 5.5 percent the month before and above market expectations of 5.1 percent. On the same day, Consumer Price Index (CPI) for the month of April also be releasing. Annual consumer inflation in India eased to 5.66% in March of 2023, the lowest since December of 2021 from 6.44% in February, and slightly below market forecasts of 5.8%. In the ongoing result season, traders will be eyeing earnings of prominent companies, including Bank of India, Union Bank of India, Coal India, Canara Bank, CG Power and Industrial Solutions, Exide Industries, HFCL, Kalpataru Power Transmission, Pidilite Industries, UPL, Apollo Tyres, JM Financial, Lupin, Raymond, BOSCH, Dr. Reddy's Laboratories, Escorts Kubota, Godrej Consumer Products, Larsen & Toubro, Asian Paints, Eicher Motors, Intellect Design Arena, Siemens, South Indian Bank, Cipla, HPCL, Hindustan Aeronautics, Indian Overseas Bank, Manappuram Finance, Polycab India, Tata Motors, Avenue Supermarts etc. On the global front, investors would be eyeing few economic data from Redbook, IBD/TIPP Economic Optimism Index on May 09 followed by Inflation Rate on May 10, Jobless Claims, Core producer prices on May 11 and finally Michigan consumer sentiment, Baker Hughes Total Rig Count on May 12. Top Gainers - Britannia Industries up by 4.76% was the top gainer on Nifty for the week - Britannia Industries traded with traction ahead of its quarterly (Q4FY23) result to be announce on May 05, 2023. There are reports that the company is likely to report decent set of earnings. Also, the margins of the company are likely to improve in the quarter ended March 31, 2023. Last month, Britannia approved an interim dividend of Rs 72 per share for the financial year that ended on March 31. This is the highest dividend payout by the confectionary company in the past three years.
- Maruti Suzuki up by 4.75% was another top gainer on Nifty for the week - Maruti Suzuki traded higher on reporting a 7% rise in total wholesales at 1,60,529 units in April 2023 as compared to 1,50,661 units in April 2022. Last month, the company's domestic sales rose 9% to 1,43,558 units as against 1,32,248 units in April 2022. Sales in the compact segment, including models such as Swift, Celerio, Ignis, Baleno and Dzire, rose 27% to 74,935 units as against 59,184 cars in April 2022. During the month under review, sales of mid-sized sedan Ciaz increased to 1,017 units over 579 units in April 2022.
Top Losers - Indusind Bank down by 6.24% was the top loser of the week on Nifty - Indusind Bank witnessed profit booking after recent rally post decent Q4 numbers. The bank reported 45.89% rise in its consolidated net profit at Rs 2,043.44 crore in Q4FY23 as compared to Rs 1,400.64 crore in Q4FY22. Total income of bank increased by 24.70% at Rs 12,174.31 crore in Q4FY23 as compared Rs 9,763.00 crore in Q4FY22. Meanwhile, banking stocks took some hit tracking fall in US regional banks as the industry’s worst crisis since 2008 rumbled on, with California-based lender PacWest exploring a possible sale.
- HDFC Bank down by 3.29% was another top loser of the week on Nifty - HDFC Bank came under selling pressure amid private report that MSCI will use an adjustment factor of 0.5 while computing the weightage of the merged entity of HDFC and HDFC Bank. MSCI said that post the merger, it will include the merged entity in its large-cap index, however, instead of using the adjustment factor of 1, the adjustment factor would be 0.5. as per the report, this will result in an outflow of $150 to $200 million in the merged entity. Meanwhile, HDFC Bank is aiming to double its SURU business in the next three to four years.
Technical viewpoints During the week, CNX Nifty touched the highest level of 18,267.45 on May 4 and lowest level of 18,042.40 on May 3. On the last trading day, the Nifty closed at 18,069.00 with weekly gain of 4.00 points or 0.02 percent. For the coming week, 17,985.12 followed by 17,901.23 are likely to be good support levels for the Nifty, while the index may face resistance at 18,210.17 and further at 18,351.33 levels. US Market The U.S. markets ended lower during the passing week after the Federal Reserve announced its decision to raise interest rates by another quarter point. The Fed decided to raise the target range for the federal funds rate by 25 basis points to 5 to 5.25 percent, making the tenth straight rate hike. The unanimous decision to continue raising rates came as the Fed noted inflation remains elevated while also observing that job gains have been robust in recent months and the unemployment rate has remained low. Notably, however, the Fed omitted a sentence included in the March statement that said the central bank anticipates that some additional policy firming may be appropriate to return inflation to 2 percent over time. The Fed also tweaked language regarding the outlook for monetary policy, saying the extent to which additional policy firming may be appropriate rather than 'the extent of future increases in the target range. The central bank reiterated futures decisions would will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. The Fed also once again said it would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of its dual goals of maximum employment and inflation at the rate of 2 percent over the longer run. The statement also described the U.S. banking system as sound and resilient but acknowledged tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. Further, weakness also prevailed in the markets as PacWest's move to explore strategic options deepened fears about the health of U.S. lenders and hit shares of regional banks. On the economic data front, the Labor Department released a report showing U.S. labor productivity tumbled by much more than expected in the first quarter of 2023. The report said labor productivity plunged by 2.7 percent in the first quarter after jumping by a revised 1.6 percent in the fourth quarter. Street had expected labor productivity to slump by 1.8 percent compared to the 1.7 percent surge that had been reported for the previous quarter. Meanwhile, the Labor Department released a report showing first-time claims for U.S. unemployment benefits rose by slightly more than expected in the week ended April 29th. The report said initial jobless claims climbed to 242,000, an increase of 13,000 from the previous week's revised level of 229,000. Street had expected jobless claims to rise to 240,000 from the 230,000 originally reported for the previous week. European Market European markets ended passing week in deep red after the European Central Bank raised interest rates by 25 basis points and ECB President Christine Lagarde's remarks suggested the bank is unlikely to pause its policy tightening anytime soon. Markets made a negative start of the week, as Germany's retail sales declined for the second successive month in March and at a faster pace, as both food and non-food sales contracted. The figures from Destatis showed that retail sales decreased by a real 2.4 percent on a monthly basis in March, after a 0.3 percent drop in February.Further, Eurozone banks intend to tighten credit standards on loans to firms and for house purchases in the second quarter. The Bank Lending Survey from the European Central Bank showed that in the first quarter, credit standards applied on loans to enterprises tightened substantially. Lackluster trade continued towards end of the week, after euro area manufacturing activity contracted for the tenth straight month in April with the latest fall being the biggest since May 2020 on declining production and orders. The final data from S&P Global and Hamburg Commercial Bank showed that the HCOB factory Purchasing Managers' Index dropped to 45.8 in April from 47.3 in March. The score has remained below the 50.0 no-change mark that separates growth from contraction for a tenth straight month. Besides, Germany's exports registered a renewed sharper-than-expected decline in March on weak demand from China and the US. The Destatis reported that exports decreased 5.2 percent on a monthly basis in March, offsetting the 4.0 percent increase in February. Exports were forecast to drop moderately by 2.4 percent. Similarly, imports slid 6.4 percent after a 4.4 percent gain in the preceding month. On the inflation front, Eurozone inflation rose slightly in April on food and non-energy industrial goods prices, while core inflation slowed marginally. The flash data from Eurostat showed that the harmonized inflation of consumer prices posted an annual growth of 7.0 percent in April, following a 6.9 percent rise in March. Excluding energy, food, alcohol and tobacco prices, core inflation slowed slightly to 5.6 percent from 5.7 percent a month ago. The core rate was expected to remain unchanged at 5.7 percent. Besides, Italy's consumer price inflation accelerated in April, driven by a sharp growth in non-regulated energy products. Consumer price inflation accelerated to 8.3 percent in April from 7.6 percent in May. The annual price growth for non-regulated energy products quickened to 26.7 percent in April from 18.9 percent. Charges for services related to recreation, including repair and personal care, rose 6.7 percent. Meanwhile, prices of regulated energy products showed a further sharp decline of 26.7 percent. Asian Market Asian markets ended the passing week mostly in green despite mixed signals from the U.S. Federal Reserve on rate-hike plans. Federal Reserve delivered another quarter-point rate hike but signaled a potential pause in its tightening cycle depending on incoming data on inflation and other factors. However, gains remained capped as weak manufacturing data from China and uncertainty over the U.S. debt ceiling kept investors nervous. On the economic front, Chinese service activity grew for a fourth month in April, as businesses benefitted from a return toward pre-pandemic levels of demand and output, although the momentum slowed. The Caixin/S&P Global services purchasing managers’ index (PMI) stood at 56.4 in April, above the 50-point mark that separates expansion and contraction in activity on a monthly basis, down from 57.8 the month prior. Meanwhile, the country’s manufacturing activity unexpectedly shrank in April, raising pressure on policymakers seeking to boost an economy struggling for a post-COVID lift-off amid subdued global demand and persistent property weakness. The official manufacturing purchasing managers' index (PMI) declined to 49.2 from 51.9 in March, below the 50-point mark that separates expansion and contraction in activity on a monthly basis. Japanese Nikkei edged higher during the week as the local currency yen tumbled followed by the dovish stance of Bank of Japan, boosting the outlook for export-heavy Japanese industries and making Japanese assets more attractive to foreign investors. Meanwhile, the monetary base in Japan was down 1.7 percent on year in April, the Bank of Japan said on Tuesday - coming in at 675.928 trillion yen. That follows the upwardly revised 1.0 percent contraction in March (originally -1.2 percent). The seasonally adjusted monetary base slumped 7.5 percent on month after jumping 13.5 percent in the previous month.
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