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EQUITY
Key gauges edged higher during the week ahead of GDP
May-26-2023

Indian equity benchmarks ended the passing week with a gain of around one and a half percent with frontline gauges recapturing their crucial 62,500 (Sensex) and 18,450 (Nifty) levels ahead of key gross domestic product data due next week. Sentiments largely remained upbeat during the week buoyed by a decent Q4FY23 earnings print, even though the quality of earnings was weak. Global cues too remained mixed as investors remain worried about the ongoing debt ceiling negotiations in the US, the resilience of the banking space and the geopolitical situation in Europe. Domestic bourses made an optimistic start to the week as the engineering export promotion council said India’s exports of engineering goods to Russia jumped 11 times in April this year to $133.6 million as compared to year-ago month while the US and China markets continued to soften. Traders took encouragement with a Reserve Bank of India (RBI) article stating that India’s growth in the April-June quarter is likely to be driven by private consumption, supported by reviving rural demand, and renewed buoyancy in manufacturing. Some support also came as the federal finance ministry in its monthly economic review said that domestic demand will aid India’s economy and help lay the foundation for the capex cycle, despite global headwinds that pose a downside risk to growth. However, sentiments turned pessimistic during the week as traders turned anxious with the finance ministry in its report stating that there are downside risks to growth and upside risks to inflation, partly channelled through the external sector and partially originating from weather uncertainties. It said consumption has shown steady and broad-based growth, while investment in capacity creation and real estate is finding traction. Traders overlooked Commerce and industry Minister Piyush Goyal’s statement that India has a strong foreign exchange reserve and the country is in a comfortable position to meet all the requirements even in any worst-case scenario in the next five-six years. However, rally on final day of the week mainly helped markets to garner a decent weekly gains as traders cheered reports of Normal Monsoon this year. India has reconfirmed its expectation of a normal monsoon this year, alleviating concerns regarding weather-related impacts on inflation. During the June-September season, the rainfall is projected to be around 96 percent of the long-term average. Sentiments also got boost with foreign brokerage expressing confidence in India’s enduring structural narrative and believes that it is only a matter of time before the BSE benchmark Sensex crosses the remarkable 1,00,000 milestone.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 772.01 points or 1.25% to 62,501.69 during the week ended May 26, 2023. The BSE Midcap index gained 650.88 points or 2.49% to 26,803.15 and Smallcap index surged 414.52 points or 1.39% to 30,162.66. On the sectoral front, S&P BSE Information Technology was up by 1,042.90 points or 3.69% to 29,271.27, S&P BSE TECK was up by 433.88 points or 3.41% to 13,140.71, S&P BSE Healthcare was up by 748.08 points or 3.28% to 23,531.61, S&P BSE Fast Moving Consumer Goods was up by 546.12 points or 3.11% to 18,127.40 and S&P BSE Realty was up by 111.08 points or 3.03% to 3,783.06 were the top gainers, while there were no loser on the BSE.

NSE movement for the week

The Nifty surged 295.95 points or 1.63% to 18,499.35. On the National Stock Exchange (NSE), Bank Nifty was up by 48.60 points or 0.11% to 44,018.00, Nifty IT was up by 1052.25 points or 3.72% to 29,355.90, Nifty Mid Cap 100 increased 874.75 points or 2.69% to 33,425.10 and Nifty Next 50 gained 1138.55 points or 2.81% to 41,684.70.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 30,504.69 crore and gross sales of Rs 26,645.20 crore, leading to a net inflow of Rs 3,859.49 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 2,835.88 crore against gross sales of Rs 2,461.00 crore, resulting in a net inflow of Rs 374.88 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 109.15 crore and gross sales of Rs 170.29 crore, leading to a net outflow of Rs 61.14 crore. (Provisional)

Industry and Economy

Expressing optimism over India’s economic situation, the Reserve Bank of India (RBI) Governor Shaktikanta Das has said that the growth for 2022-23 is likely to be more than the advance estimate of 7 per cent on the back of economic momentum maintained in the third and fourth quarters of the last fiscal. He said ‘there is a possibility that it could be even more…it will not be a surprise if the GDP growth of last year comes slightly above 7 per cent’. As per the second advance estimate released by the National Statistical Office (NSO) in February, the economy is estimated to grow at 7 per cent in 2022-23 against 8.7 per cent in the preceding fiscal. 

Outlook for the coming week

In the passing week, Indian markets ended with gains of over a percent tracking fall in crude oil prices. The coming week marks the start of a fresh month and is expected to be a data heavy week. In stock-specific activity, auto and cement companies would grab some attention, as these companies will declare their monthly sales figures in the up-coming week. 

On the economy front, market-participants would be eyeing the data of India GDP Annual Growth Rate which is scheduled to be release on May 31, 2023. The Indian economy expanded 4.4% year-on-year in the three months to December of 2022, below 6.3% in the three months to September and forecasts of 4.6%. Traders will also be looking forward S&P Global Manufacturing PMI, schedule to be release on June 01. The S&P Global India Manufacturing PMI increased to a four-month high of 57.2 in April 2023 from 56.4 in the previous month, beating market forecasts of 55.8, as both output and new orders grew the most in four months, amid sustaining expansions in sales. Further, bank’s loan and deposit Growth data on June 02. 

Traders will be reacting to important earnings in the last leg of the result season starting with Adani Transmission, Campus Activewear, DCM, IRCTC, IPCA Laboratories, Jindal Poly Films, Jubilant Pharmova, Natco Pharma, NBCC, NHPC, NIIT, Rail Vikas Nigam, Adani Ports and Special Economic Zone, Apollo Hospitals Enterprise etc. 

On the global front, investors would be eyeing few economic data from world’s largest economy, starting with House Price Index, CB Consumer Confidence, Dallas Fed Manufacturing Index on May 30 followed by Redbook, Chicago PMI on May 31, API Crude Oil Stock Change, Initial Jobless Claims, ADP Employment Change, S&P Global Manufacturing PMI, ISM Manufacturing PMI, ISM Manufacturing Employment, EIA Gasoline Stocks Change on June 01, Unemployment Rate, Non-Farm Payrolls, Participation Rate, Average Hourly Earnings, Baker Hughes Total Rig Count on June 02.

Top Gainers

  • Adani Enterprises up by 34.62% was the top gainer on Nifty for the week - Adani Enterprises traded with traction amid a private report that the company may consider monetising select real estate assets. Some support also came in with an another report that the markets regulator SEBI drew a blank in investigations into suspected violations in overseas investments in the Adani Group. Also, a Supreme Court-appointed panel said it found no regulatory failure related to price manipulation in the conglomerate's stocks and violation of minimum public shareholding rules. Meanwhile, Vietnam government said Adani Group is exploring $3-billion investment in the country's seaport ecosystem and wind and solar energy projects.
  • Divi's Laboratories up by 11.43% was another top gainer on Nifty for the week - Divi's Laboratories edged higher on value buying post fourth quarter (Q4) earning. The company reported 4.62% rise in its consolidated net profit at Rs 320.97 crore for the quarter under review as compared to Rs 306.80 crore for third quarter ended December 31, 2022. Total income of the company increased by 10.70% at Rs 2,016.92 crore for Q4FY23 as compared to Rs 1,821.93 crore for Q3FY23. Meanwhile, the Board of Directors of the company proposed a dividend of Rs 30 per share of face value Rs 2 each i.e., 1500% for the financial year 2022-23, subject to approval of members.
Top Losers

  • Housing Development Finance Corporation (HDFC) down by 2.41% was the top loser of the week on Nifty - HDFC witnessed selling pressure as investors continue to analyze the impact of merger with HDFC Bank. The HDFC-HDFC Bank merger is likely to be in coming 4-5 weeks. Meanwhile, HDFC has further sold 1,86,38,101 shares representing 2.14% of the paid-up share capital of Siti Networks, which includes sale of 30,00,000 shares representing 0.34% of the paid-up share capital of Siti done on May 24, 2023.
  • HDFC Bank down by 1.78% was another top loser of the week on Nifty - HDFC Bank came under selling pressure ahead of merger. The HDFC-HDFC Bank merger is likely to be in coming 4-5 weeks and there are expectations that it would result in lower net interest margin (NIM) for the lender this year. Meanwhile, the SEBI has granted approval for a change in control of HDFC Asset Management Company (HDFC AMC) due to the amalgamation of HDFC and HDFC Bank. This move paves the way for HDFC Bank to become the new owner of HDFC AMC, subject to compliance with applicable regulations.

Technical viewpoints

During the week, CNX Nifty touched the highest level of 18,508.55 on May 26 and lowest level of 18,178.85 on May 22. On the last trading day, the Nifty closed at 18,499.35 with weekly gain of 295.95 points or 1.63 percent. For the coming week, 18,282.62 followed by 18,065.88 are likely to be good support levels for the Nifty, while the index may face resistance at 18,612.32 and further at 18,725.28 levels.

US Market

The U.S. markets ended mostly lower during the passing week as investors jitter grew over lack of progress in U.S. debt limit talks. U.S. President Joe Biden and House Speaker Kevin McCarthy said they held productive talks but there was no agreement on how to raise the government's $31.4 trillion debt ceiling. The lack of progress on raising the U.S. government's $31.4 trillion debt limit ahead of a June 1 deadline, with several rounds of inconclusive talks, has made investors edgier as the risk of a catastrophic default looms larger. Further, hawkish comments from a few Fed officials have raised concerns about outlook for interest rates. Federal Reserve Bank of St. Louis President James Bullard said that he backed two more increases. Federal Reserve of Minneapolis President Neel Kashkari said if the central bank does pause, it should signal tightening is not over.

Cautiousness also prevailed in the markets as the Federal Reserve released the minutes of its May monetary policy meeting, indicating uncertainty about the outlook for interest rates. The minutes revealed participants generally agreed that in light of the lagged effects of cumulative tightening in monetary policy and the potential effects on the economy of a further tightening in credit conditions, the extent to which additional rate hikes may be appropriate had become ‘less certain.’ Some participants felt additional rate increases would likely to be warranted at future meetings due to expectations that progress in returning inflation to 2 percent could continue to be unacceptably slow. Meanwhile, several others noted that if the economy evolved along the lines of their current outlooks, then further rate hikes may not be necessary.

On the economic data front, a report released by the Labor Department showed a modest increase in first-time claims for U.S. unemployment benefits in the week ended May 20th. The Labor Department said initial jobless claims crept up to 229,000, an increase of 4,000 from the previous week's downwardly revised level of 225,000. Street had expected jobless claims to inch up to 245,000 from the 242,000 originally reported for the previous week. Meanwhile, economic growth in the U.S. slowed less than previously estimated in the first three month of 2023, according to revised data released by the Commerce Department. The Commerce Department said gross domestic product climbed by 1.3 percent in the first quarter compared to the previously estimated 1.1 percent increase. Street had expected the pace of GDP growth to be unrevised. The stronger than previously estimated GDP growth primarily reflected an upward revision to private inventory investment. 

European Market

European markets witnessed selloff during the passing week weighed down by concerns about a potential debt default in the U.S., weak economic outlook, and prospects of further policy tightening by central banks. Worries about slowing economic growth and worsening ties between Washington and Beijing too dampened sentiments. Sentiments also remain dampened after Eurozone manufacturing sector contraction deepened in May to hit a 36-month low due to weak demand and a fall in selling prices. France’s CAC 40 edged lower amid growth concerns after a survey showed business activity in the country grew at the slowest pace in four months in May. The flash reading for the May composite PMI - which comprises both the services and manufacturing sectors - fell from 52.4 to 51.4 - marking the lowest level since a January reading of 49.0. The street forecast a reading of 52.0 points.

Germany’s DAX fell during the week as growth concerns resurfaced after official data showing that German economy entered into a technical recession in the first quarter of this year. GDP declined a seasonally and calendar adjusted 0.3 percent from the fourth quarter of last year as household consumption slumped amid the rising cost of living that is fueled by high inflation. Meanwhile, German business activity expanded for a fourth month running in May as a services sector revival more than offset decline in manufacturing activity, in Europe’s largest economy, a preliminary survey showed earlier today. The HCOB German flash composite purchasing managers' index (PMI), compiled by S&P Global, rose to 54.3 in May from 54.2 in April - expanding at the fastest pace in over a year. Street were looking for a reading of 53.5.

In U.K., consumer price inflation slowed in April, but the core rate accelerated unexpectedly. The consumer price index registered an annual increase of 8.7 percent in April after a 10.1 percent gain in March. Inflation was forecast to ease to 8.3 percent. Input price inflation hit its lowest level since February 2021 while factory gate inflation reached the weakest since July 2021. Moreover, the U.K. retail sales recovered in April driven by food and non-food turnover. The retail sales volume increased 0.5 percent month-on-month, in contrast to the 1.2 percent fall in March. Sales were forecast to grow more moderately by 0.3 percent. On a yearly basis, retail sales dropped at a slower pace of 3.0 percent, in line with expectations, after a 3.9 percent decrease in March. 

Asian Market

Asian markets ended the passing week mostly in red as lingering concerns about economic slowdown, and fears of a U.S. debt default rendered the mood bearish. Chinese Shanghai edged lower as sentiments remain dampened amid fears of a resurgence in China-U.S. trade tensions after China banned U.S. chip maker Micron from selling its products to Chinese companies working on key infrastructure projects. Growth concerns also weighed after recent economic data suggested that a post-COVID rebound in the country was running out of steam.

Meanwhile, Hong Kong’s Hang Seng Index tumbled 1.9 percent to 18,746.92 following disappointing earnings from electric-vehicle maker XPeng Inc. Seoul stocks ended on a flat note as data showed business sentiment improved slightly for June amid expectations that earnings in key sectors and domestic demand may improve.

Japanese shares edged lower from a 33-year high on optimism over the Bank of Japan maintaining its ultra-dovish policy. In economic news, Japanese manufacturing activity expanded for the first time in seven months in May, while growth in the services sector hit a record high. Moreover, overall consumer prices in the Tokyo region of Japan were up 3.2 percent on year in May. That was shy of expectations for an increase of 3.9 percent and was down from 3.5 percent in April. Core CPI, which excludes the volatile costs of food, also was up 3.2 percent on year in May - beneath expectations for a rise of 3.3 percent and down from 3.5 percent in the previous month. Meanwhile, producer prices in Japan were up 1.6 percent on year in April, the Bank of Japan said on Friday. That exceeded expectations for an increase of 1.4 percent following the upwardly revised 1.7 percent gain in March (originally 1.6 percent). On a monthly basis, producer prices rose 0.2 percent - easing from the 0.6 percent gain in the previous month.

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