Weekly Musings – Index performance for week ended June 14, 2024

18 Jun 2024 , 09:30 AM

FED SAYS, “HIGHER FOR LONGER”

If there was one theme that came out of the Fed policy statement this week, it was that the interest rates would stay higher for longer. It clearly looked like the hawks currently have the upper hand in the FOMC narrative. Here are some key signals from the Fed statement as part of its June Monetary Policy.

• The Fed kept its key interest rate unchanged in the range of 5.25%-5.50%. However, it also signalled that just one rate cut is to be expected in 2024; and even that would be subject to dovish signals from inflation. Rate cuts could be accelerated in 2025.
• In an interesting shift, Fed statement used the words “modest further progress” towards the target of 2% inflation on a sustainable basis. This is a departure from the May 2024 wordings, which said, “lack of further progress on inflation.”
• The CME Fedwatch, the market indicator, is pencilling around 3 to 4 rate cuts by July 2025. While there will be just 1 rate cut in 2024; there could be 4 to 5 rate cuts of 100 to 125 basis points in the year 2025.
• There were also some interesting indications coming from the quarterly projections update for June 2024. With higher inflation peg for the long term at 2.8% instead of 2.6%, the projected interest rate at the end of 2024 is at 5.1%. That is higher by 50 bps from the previous estimate. Clearly, Fed wants to keep rates higher for longer.
• Compared to the March update on macros, the headline inflation and the core inflation for the current year and next year have been upped by 20 bps in the latest June estimates. This is on the back of anticipated pressures from West Asia and the ongoing Red Sea crisis. That could see oil on the boil for some more time.
• Powell summed it up, saying that said that while the data was encouraging, it was not robust enough to warrant rate cuts at this juncture. However, there are some positives for the Fed in its inflation control story. For example, the lates update on the first quarter GDP growth has come in lower at 1.3% even as the jobs situation is getting more into balance. In short, the growth macros are finally conducive to lower inflation levels.

However, the markets were not entirely disappointed. The CME Fedwatch continues to estimate 2 rate cuts in 2024, although the Fed has guided for just one rate cut. In addition, the markets are impressed by the Fed’s commitment to make up with sharper rate cuts in 2025. Of course, the discourse now shifts to how inflation pans out in coming months. Let us now turn to how the stock markets in India performed in the wee, through the index mirror.

BSE SENSEX 30 INDEX – CLOSES VERY NEAR TO 77,000

The table captures the movement of the BSE SENSEX 30 for the week to June 14, 2024.

Date	Open	High	Low	Close
14-Jun-24	76,912.38	77,081.30	76,549.05	76,992.77
13-Jun-24	77,102.05	77,145.46	76,719.70	76,810.90
12-Jun-24	76,679.11	77,050.53	76,533.78	76,606.57
11-Jun-24	76,680.90	76,860.53	76,296.44	76,456.59
10-Jun-24	76,935.41	77,079.04	76,379.73	76,490.08
07-Jun-24	75,031.79	76,795.31	74,941.88	76,693.36
		Weekly Returns		+0.39%

Data Source: BSE

The Sensex rallied and closed higher despite a volatile week. It was more a celebration of the end of uncertainty and the formation of the Modi 3.0 government. Broadly, macros were also supportive. Sensex closed the week at lifetime highs. The Sensex gained 0.39% in the week; adding to the gains of the previous week. During the week, the Sensex touched a high of 77,145 and a low of 74,942. The Sensex closed the week 299 points higher. Now, 81,000 looks to be the next big resistance for the Sensex, and it is just over 5% away.

NIFTY 50 INDEX – FPIS LEND SUPPORT DURING THE WEEK

The table captures the movement of Nifty 50 index in the week to June 14, 2024.

Date	Open	High	Low	Close
14-Jun-24	23,464.95	23,490.40	23,334.25	23,465.60
13-Jun-24	23,480.95	23,481.05	23,353.90	23,398.90
12-Jun-24	23,344.45	23,441.95	23,295.95	23,322.95
11-Jun-24	23,283.75	23,389.45	23,206.65	23,264.85
10-Jun-24	23,319.15	23,411.90	23,227.15	23,259.20
07-Jun-24	22,821.85	23,320.20	22,789.05	23,290.15
		Weekly Returns		+0.75%

Data Source: NSE

If the Nifty rallied sharply in the previous week, despite the FPI net selling, this week saw support from FPIs in the form of net buying of $1.41 Billion. For the week, the Nifty closed with 0.75% gains as the formation of the new government and allocation of portfolios eased the uncertainty in the market. VIX also tapered to around 12.8 levels. For the week, the Nifty gained a total of 166 points. For the week, the Nifty touched a high of 23,490 and a low of 23,206, eventually closing the week just above close to 23,466 levels. Overall, the Nifty was in a narrow range this week. IT and FMCG were the laggards for the week, even as oil & gas took the markets higher. The real action was in smaller stocks.

NIFTY NEXT 50 INDEX – CLOSES VERY NEAR TO 72,000 FOR THE WEEK

The table captures the movement of Nifty Next 50 for the week to June 14, 2024.

Date	Open	High	Low	Close
14-Jun-24	71,215.55	71,970.25	71,078.05	71,892.15
13-Jun-24	70,831.40	70,933.55	70,231.80	70,842.55
12-Jun-24	69,991.35	70,361.95	69,858.40	70,202.15
11-Jun-24	69,922.15	70,183.90	69,598.10	69,678.70
10-Jun-24	69,722.25	70,049.50	69,233.40	69,744.60
07-Jun-24	68,331.05	69,300.00	67,897.70	69,222.25
		Weekly Returns		+3.86%

Data Source: NSE

If the Nifty Next 50 index and the Sensex closed the week with gains; the real action was in the second level indices. The Nifty Next 50 index closed the week with 3.86% gains, even did much better than the Nifty index. The Nifty Next 50 is the residual list after Nifty 50 stocks are removed from Nifty 100. Nifty Next-50 offers a mid-point between the dry beta of large caps and the risky alpha of smaller stocks. This week, the index touched a high of 71,970 level and a low of 69,233, before closing the week at  71,892. The sharp spike was due to the predominance of defence stocks. The Next 50 gained  2,670 points in the week.

NIFTY MID-CAP 100 INDEX – ACTION SHIFTS TO THE MIDDLE SEGMENT

The table captures the movement of Nifty Mid-Cap 100 in the week to June 14, 2024.

Date	Open	High	Low	Close
14-Jun-24	54,834.45	55,270.95	54,612.70	55,225.95
13-Jun-24	54,647.10	54,753.20	54,357.45	54,652.25
12-Jun-24	53,911.20	54,308.80	53,857.60	54,226.10
11-Jun-24	53,450.30	53,880.50	53,282.75	53,666.50
10-Jun-24	53,463.75	53,705.80	52,990.85	53,235.75
07-Jun-24	52,537.25	53,234.65	52,327.35	53,194.70
		Weekly Returns		+3.82%

Data Source: NSE

After the Nifty Mid cap had shown a bounce of 2.88% last week, it added to gains with a 3.82% rally in the latest week. During the week, the advance / decline ratio also turned sharply positive for the overall market; which was reflected in the mid-cap narrative. During the week, the Mid-Cap 100 index touched a high of 55,271 and a low of 52,991. After breaking above the 50,000 levels, the Nifty Mid-Cap index has built on the gains.

NIFTY SMALL-CAP 100 INDEX – AGAIN, SMALL IS BEAUTIFUL

The table captures movement of Nifty Small Cap 100 in the week to June 14, 2024.

Date	Open	High	Low	Close
14-Jun-24	17,978.55	18,089.15	17,883.65	18,043.60
13-Jun-24	17,909.25	17,925.15	17,784.30	17,908.10
12-Jun-24	17,652.40	17,809.15	17,646.15	17,788.30
11-Jun-24	17,535.75	17,665.55	17,455.55	17,571.60
10-Jun-24	17,362.30	17,528.65	17,277.75	17,475.15
07-Jun-24	16,915.50	17,226.15	16,831.30	17,215.55
		Weekly Returns		+4.81%

Data Source: NSE

As the VIX has started to taper, the smaller stocks are picking up from where they left before the sell-off. After gaining 3.11% in the previous week, the Nifty Small Cap 100 added another 4.81% in the current week. For the week, the Nifty Small Cap index gained 828 points. During the week, the index touched a high of 18,089 levels and a low of 17,278, but ended the week very close to the high point of the week.

BANK NIFTY INDEX – ALMOST MIRRORING THE NIFTY

The table below captures the movement of BANKNIFTY in the week to June 14, 2024.

Date	Open	High	Low	Close
14-Jun-24	49,993.95	50,102.60	49,693.35	50,002.00
13-Jun-24	50,179.00	50,186.45	49,799.65	49,846.70
12-Jun-24	49,857.45	50,233.40	49,697.35	49,895.10
11-Jun-24	49,751.20	49,970.30	49,530.45	49,705.75
10-Jun-24	49,808.15	50,252.95	49,622.75	49,780.90
07-Jun-24	49,316.95	49,943.20	49,080.45	49,803.20
		Weekly Returns		+0.40%

Data Source: NSE

Bank Nifty added 199 points this week, gaining 0.40%; although the gains were subdued compared to the other sectoral indices. Bank Nifty has rallied in the last 20 days, after the RBI announced a bumper dividend of ₹2.11 Trillion to the government. However, there are concerns that the NII growth and the NIMs would be tough to sustain in coming quarters. During the week, the Bank Nifty touched a high of 50,186 and a low of 49,530. The close for the week above 50,000 is significant.

NIFTY IT INDEX – IT WAS THE LULL AFTER THE STORM

The table captures the movement of Nifty IT index in the week to June 14, 2024.

Date	Open	High	Low	Close
14-Jun-24	35,035.70	35,035.70	34,568.85	34,598.55
13-Jun-24	34,796.40	35,039.55	34,783.20	34,902.05
12-Jun-24	34,860.05	35,016.40	34,505.90	34,547.45
11-Jun-24	34,600.85	34,751.30	34,483.40	34,531.45
10-Jun-24	35,140.45	35,167.75	34,360.65	34,526.25
07-Jun-24	34,274.60	35,248.10	34,256.30	35,169.90
		Weekly Returns		-1.62%

Data Source: NSE

Just in the previous week, the Nifty IT index had gained a whopping 8.60%. It was a mix of strong US growth data and strong dollar that were expected to boost IT spending to new highs. This week was more of a return to reality. The Nifty IT index closed with weekly losses of -1.62%. For the week, the Nifty IT index touched a high of 35,168 and a low of 34,361. While the importance of the IT sector stems from being good dollar defensive when the greenback is hardening; the previous week gains may have overstretched itself.

NIFTY OIL & GAS INDEX – CLOSES WITH BIG SECTORAL GAINS

The table captures the Nifty Oil & Gas index for the week to June 14, 2024.

Date	Open	High	Low	Close
14-Jun-24	12,056.05	12,133.20	11,993.40	12,095.25
13-Jun-24	12,027.65	12,036.25	11,914.25	12,023.25
12-Jun-24	11,944.95	12,039.20	11,895.50	11,940.30
11-Jun-24	11,762.10	11,896.25	11,658.45	11,842.00
10-Jun-24	11,786.00	11,844.55	11,662.10	11,686.85
07-Jun-24	11,475.15	11,713.25	11,427.45	11,696.65
		Weekly Returns		+3.41%

Data Source: NSE

Reliance Industries showed smart gains in the week as did the oil upstream companies. Global Brent Crude prices have been stable around the $80/bbl mark. For the week, the Oil & Gas index was up by 399 points or +3.41% as there appeared to be all-round buying in oil & gas stocks during the week. The Oil & Gas index touched a high of 12,133 and a low of 11,658 levels in the week to June 14, 2024.

NIFTY AUTO INDEX – SUSTAINS ITS WINNING WAYS

The table captures the movement of Nifty Auto index in the week to June 14, 2024.

Date	Open	High	Low	Close
14-Jun-24	25,437.80	25,774.70	25,347.35	25,722.10
13-Jun-24	25,482.30	25,482.30	25,162.50	25,393.20
12-Jun-24	25,296.65	25,407.15	25,198.05	25,217.60
11-Jun-24	25,075.25	25,342.20	25,008.20	25,230.80
10-Jun-24	25,100.50	25,260.05	24,912.60	25,022.65
07-Jun-24	24,317.75	25,043.35	24,282.40	25,020.20
		Weekly Returns		+2.81%

Data Source: NSE

If the auto index had gained a full 6.83% in the previous week, it closed the latest week to June 14, 2024 with healthy gains of 2.81%. For the week, the Auto Index made a high of 25,775 and a low of 24,913; closing near to the high point of the week. Strong volumes, favourable input pricing and a gradual revival in rural sales helped the auto story, although the latest WPI is hinting at higher input costs. The auto index gained 702 points during the current week; making it one of the star performers during the week.

NIFTY FMCG INDEX – LOSSES AFTER A WEEK OF SUPER GAINS

The table captures the movement of Nifty FMCG index in the week to June 14, 2024.

Date	Open	High	Low	Close
14-Jun-24	57,162.05	57,401.25	57,051.45	57,225.85
13-Jun-24	57,676.25	57,679.25	57,059.25	57,117.00
12-Jun-24	57,886.25	57,945.40	57,446.75	57,495.55
11-Jun-24	58,081.15	58,233.65	57,725.15	57,792.85
10-Jun-24	58,038.15	58,266.05	57,769.20	57,991.75
07-Jun-24	57,282.60	58,075.45	57,201.55	57,953.35
		Weekly Returns		-1.26%

Data Source: NSE

It is not often you get to see the FMCG index rallying 7.11%; as it did in the previous week. Hence the -1.26% correction this week should be seen in that context. The FMCG story, at a secular level, is supported by hopes of revival in rural demand and lower crude prices helping margins. During the week, the FMCG index touched a high of 58,266 and a low of 57,117. Like in the case of IT, even FMCG faced the lull after the storm.