Weekly Musings – Index performance for week ended June 21, 2024

24 Jun 2024 , 09:23 AM

A WEEK OF CONTRASTING SECTORAL TRENDS

In a week when the Nifty and the Sensex ended just marginally higher, the real story was in the contrasting sectoral  trends. For instance,  banking and IT did very well while traditional favourites like oil & gas, auto and FMCG saw deeply negative returns. What explains this contrasting trend in the week?

• Let us start with banking first. The Bank Nifty was up 3.32% during the week and it is a long time since the banking index has displayed such returns. The sentiments changed in favour of banking stocks after the Fed statement earlier this month indicated that while there would be only one rate cut in 2024, the rate cuts would be back-ended in 2025. The markets took that news positively; especially the banks, that stand to gain the most from a relatively dovish interest rate environment.
• For the second time in the last 3 weeks, IT was the big gainer. The returns at 1.74% were nowhere close to the 8.60% returns 2 weeks back. However, the reason was the same. The IT stocks appear to be gaining from a strong dollar and a weak rupee. That is understandable after the Euro cracked against the dollar leading to weakness in the dollar in tandem with the sharp spike in the dollar index. IT stocks gain in such phases, since most of their revenues are dollar denominated.
• On the downside, the oil stocks were on the losing side, giving up nearly -1.74 during the week. What started off as oil price volatility ended up being a rally in oil prices. For the week, Brent Crude closed above the $85/bbl mark and that has put some pressure on refining margins as well as the marketing margins of downstream companies.
• One of the worst performers this week was the auto sector. The sector lost -2.45% in the week and it is not often that you get to see the auto stocks so much on the downside. Auto stocks were also hit by the spike in crude oil costs as well as concerns that the monsoon had once again been delayed this year. That is not great news for rural demand and the auto sector still depends heavily on rural demand traction.
• The generally defensive FMCG sector also lost -2.16% during the week. Here again, the problem was on rural demand, after it became clear that it could be another year of rural stress if the monsoons got delayed. In addition, the FMCG sector also felt the pressure of weak guidance on sales growth for the coming quarters.

The moral of the story this week was that the market was largely two-faced. On the one h and, banks and IT pulled up the indices while on the other hand the sectors like oil & gas, autos and FMCG pulled the index down. The net result was marginal gains in the Nifty and Sensex. Here is the story of the key market components in the week to June 21, 2024.

BSE SENSEX 30 INDEX – HOLDS ABOVE THE 77,000 MARK

The table captures the movement of the BSE SENSEX 30 for the week to June 21, 2024.

Date	Open	High	Low	Close
21-Jun-24	77,729.48	77,808.45	76,802.00	77,209.90
20-Jun-24	77,554.83	77,643.09	77,100.36	77,478.93
19-Jun-24	77,543.22	77,851.63	76,954.87	77,337.59
18-Jun-24	77,235.31	77,366.77	77,071.44	77,301.14
17-Jun-24	76,912.38	77,081.30	76,549.05	76,992.77
14-Jun-24	76,912.38	77,081.30	76,549.05	76,992.77
		Weekly Returns		+0.28%

Data Source: BSE

The Sensex had a modest rally this week and closed higher despite contrasting trends in the week. While IT and banking stocks ended higher, the auto, oil & gas and FMCG stocks were under pressure. Sensex closed the week above 77,000 despite intermittent volatility. The Sensex gained 0.28% in the week; adding to the gains of the previous week. During the week, the Sensex touched a high of 77,852 and a low of 76,549. The Sensex closed the week 217 points higher. Now, 81,000 looks to be the next big resistance for the Sensex.

NIFTY 50 INDEX – FPIS NET BUYERS FOR SECOND WEEK IN A ROW

The table captures the movement of Nifty 50 index in the week to June 21, 2024.

Date	Open	High	Low	Close
21-Jun-24	23,661.15	23,667.10	23,398.20	23,501.10
20-Jun-24	23,586.15	23,624.00	23,442.60	23,567.00
19-Jun-24	23,629.85	23,664.00	23,412.90	23,516.00
18-Jun-24	23,570.80	23,579.05	23,499.70	23,557.90
17-Jun-24	23,464.95	23,490.40	23,334.25	23,465.60
14-Jun-24	23,464.95	23,490.40	23,334.25	23,465.60
		Weekly Returns		+0.15%

Data Source: NSE

In the last 2 weeks, the FPI flows have been supportive of the Nifty with total flows of $3.24 Billion coming into equities in just the last 2 weeks. For the week, the Nifty closed with marginal 0.15% gains as the gains of banking and IT sector were neutralized by the losses of the oil, auto, and FMCG sectors. VIX also tapered to around 13.18 levels. For the week, the Nifty gained a total of just 36 points. For the week, the Nifty touched a high of 23,667 and a low of 23,334, eventually closing the week just above the 23,500 mark. Overall, the Nifty was in a narrow range this week. Interestingly, the index movements have been modest in the last 2 weeks, despite strong FPI flows.

NIFTY NEXT 50 INDEX – CLOSES LOWER FOR THE WEEK

The table captures the movement of Nifty Next 50 for the week to June 21, 2024.

Date	Open	High	Low	Close
21-Jun-24	71,847.40	71,878.25	70,970.80	71,111.80
20-Jun-24	71,649.85	71,843.60	71,025.75	71,632.20
19-Jun-24	72,596.40	72,614.60	71,303.95	71,536.70
18-Jun-24	72,333.85	72,414.35	72,051.20	72,345.70
17-Jun-24	71,215.55	71,970.25	71,078.05	71,892.15
14-Jun-24	71,215.55	71,970.25	71,078.05	71,892.15
		Weekly Returns		-1.09%

Data Source: NSE

If the Nifty Next 50 index and the Sensex closed the week with gains; the Nifty Next 50 index closed the week with losses; largely as defence stocks came under pressure in the week. The Nifty Next 50 index closed the week with -1.09% losses, underperforming the frontline indices for the week. This week, the Nifty Next 50 touched a high of 72,615 level and a low of 70,971, before closing the week at  71,112. It was the only generic index to close the week with losses; but it was largely about the pressure on defence stocks in the week.

NIFTY MID-CAP 100 INDEX – MODEST GAINS FOR THE WEEK

The table captures the movement of Nifty Mid-Cap 100 in the week to June 21, 2024.

Date	Open	High	Low	Close
21-Jun-24	55,748.00	55,854.75	55,322.95	55,429.15
20-Jun-24	55,121.35	55,514.60	54,832.00	55,473.80
19-Jun-24	55,679.15	55,679.60	54,671.90	54,951.70
18-Jun-24	55,421.20	55,523.20	55,201.55	55,490.05
17-Jun-24	54,834.45	55,270.95	54,612.70	55,225.95
14-Jun-24	54,834.45	55,270.95	54,612.70	55,225.95
		Weekly Returns		+0.37%

Data Source: NSE

After gaining nearly 6.8% in the last two weeks, the mid-cap index closed with gains of just 37 bps in the current week. During the week, the advance / decline ratio came under pressure in the second half of the week. During the week, the Mid-Cap 100 index touched a high of 55,854 and a low of 54,613. The index is already hovering close to its lifetime highs.

NIFTY SMALL-CAP 100 INDEX – BEST GAINER IN THE GENERIC INDICES

The table captures movement of Nifty Small Cap 100 in the week to June 21, 2024.

Date	Open	High	Low	Close
21-Jun-24	18,329.05	18,400.25	18,208.80	18,235.05
20-Jun-24	18,209.75	18,307.75	18,105.10	18,266.45
19-Jun-24	18,326.20	18,347.05	17,967.80	18,155.50
18-Jun-24	18,149.90	18,263.35	18,103.25	18,238.55
17-Jun-24	17,978.55	18,089.15	17,883.65	18,043.60
14-Jun-24	17,978.55	18,089.15	17,883.65	18,043.60
		Weekly Returns		+1.06%

Data Source: NSE

If the rally of 8.1% in the last 2 weeks in the small cap index was any indication, it added another 1.06% during the current week to June 21, 2024. For the week, the Nifty Small Cap index gained 191 points. During the week, the index touched a high of 18,400 levels and a low of 17,884, but ended the week with some pressure in the final trading session. The mutual fund data also shows consistent buying in small cap stocks by mutual funds.

BANK NIFTY INDEX – EMERGES THE STAR SECTOR OF THE WEEK

The table below captures the movement of BANKNIFTY in the week to June 21, 2024.

Date	Open	High	Low	Close
21-Jun-24	51,927.30	51,934.35	51,224.95	51,661.45
20-Jun-24	51,712.90	51,842.20	51,281.50	51,783.25
19-Jun-24	50,607.90	51,957.00	50,441.75	51,398.05
18-Jun-24	50,194.35	50,562.15	49,900.20	50,440.90
17-Jun-24	49,993.95	50,102.60	49,693.35	50,002.00
14-Jun-24	49,993.95	50,102.60	49,693.35	50,002.00
		Weekly Returns		+3.32%

Data Source: NSE

Bank Nifty added 1,659 points this week, gaining 3.32%; which is not something you get to see too often. Bank Nifty gained from hopes that the Fed would cut rates more aggressively in year 2025. Recent reports have hinted at fundamental challenges to banks like slowing growth in NII and lower NIMs. However, CLSA has made a case for preferring private banks over PSU banks at this juncture and that has helped the banking index. During the week, the Bank Nifty touched a high of 51,934 and a low of 49,693. The close for the week was decisively above 51,000.

NIFTY IT INDEX – IT WAS THE LULL AFTER THE STORM

The table captures the movement of Nifty IT index in the week to June 21, 2024.

Date	Open	High	Low	Close
21-Jun-24	35,474.35	35,875.30	35,061.00	35,200.30
20-Jun-24	35,002.50	35,002.50	34,728.60	34,936.45
19-Jun-24	34,904.90	35,036.65	34,604.05	34,927.10
18-Jun-24	34,696.00	34,917.65	34,655.90	34,802.90
17-Jun-24	35,035.70	35,035.70	34,568.85	34,598.55
14-Jun-24	35,035.70	35,035.70	34,568.85	34,598.55
		Weekly Returns		1.74%

Data Source: NSE

Just in the previous week, the Nifty IT index had lost -1.62%, after gaining a whopping 8.60% in the week before that. This week, the Nifty was back in the reckoning with a sharp 1.74% bounce, largely supported by a strong dollar and the rupee touching all-time lows. The dollar strength comes largely from the weakness in the Euro, after the French crisis. The Nifty IT index closed with weekly gains of 1.74%. For the week, the Nifty IT index touched a high of 35,875 and a low of 34,569. During the week, the rupee also touched its lifetime lows; which gave a further boost to the IT index.

NIFTY OIL & GAS INDEX – CRUDE SPIKE HITS THE OIL STOCKS

The table captures the Nifty Oil & Gas index for the week to June 21, 2024.

Date	Open	High	Low	Close
21-Jun-24	12,022.60	12,028.05	11,821.05	11,860.45
20-Jun-24	11,908.70	12,041.15	11,827.30	11,989.10
19-Jun-24	12,126.70	12,130.95	11,869.35	11,879.30
18-Jun-24	12,194.50	12,194.50	12,041.80	12,089.20
17-Jun-24	12,056.05	12,133.20	11,993.40	12,095.25
14-Jun-24	12,056.05	12,133.20	11,993.40	12,095.25
		Weekly Returns		-1.94%

Data Source: NSE

Refining and oil marketing companies fell during the week as global crude prices crossed the $85/bbl mark. The surge in the crude prices was despite an increase in inventory levels int eh US. It indicated confidence in the markets that demand for oil would remain robust despite the OPEC increasing supply later this year. The robust demand is likely to keep the oil markets undersupplied. For the week, the Oil & Gas index was down 235 points or -1.94% as aggressive selling was seen in oil & gas stocks. The Oil & Gas index touched a high of 12,195 and a low of 11,821 levels in the week to June 21, 2024.

NIFTY AUTO INDEX – RURAL DEMAND DOUBTS ARE BACK

The table captures the movement of Nifty Auto index in the week to June 21, 2024.

Date	Open	High	Low	Close
21-Jun-24	25,344.80	25,437.35	25,016.90	25,092.30
20-Jun-24	25,432.10	25,498.40	25,201.25	25,267.85
19-Jun-24	25,809.85	25,824.35	25,344.40	25,381.70
18-Jun-24	25,844.70	25,991.45	25,690.35	25,715.30
17-Jun-24	25,437.80	25,774.70	25,347.35	25,722.10
14-Jun-24	25,437.80	25,774.70	25,347.35	25,722.10
		Weekly Returns		-2.45%

Data Source: NSE

After gaining 9.8% in the last 2 weeks, the auto index fell sharply by -2.45% during the week. The auto selling was on the back of higher crude prices and concerns that a delayed monsoon could hit entry level auto demand this year. For the week, the Auto Index made a high of 25,991 and a low of 25,017; closing near to the low point of the week. The auto index lost 630 points during the current week; a surprising shift in trend from recent weeks.

NIFTY FMCG INDEX – HIGHER CRUDE AND RURAL CONCERNS

The table captures the movement of Nifty FMCG index in the week to June 21, 2024.

Date	Open	High	Low	Close
21-Jun-24	56,737.55	56,761.30	55,906.65	55,990.10
20-Jun-24	56,705.10	56,895.20	56,352.20	56,669.65
19-Jun-24	57,373.30	57,409.80	56,555.85	56,646.55
18-Jun-24	57,370.85	57,490.65	57,039.00	57,167.40
17-Jun-24	57,162.05	57,401.25	57,051.45	57,225.85
14-Jun-24	57,162.05	57,401.25	57,051.45	57,225.85
		Weekly Returns		-2.16%

Data Source: NSE

After the 7.11% rally two weeks back, the FMCG index has been under pressure. After falling -1.26% last week, the index fell by another -2.16% in the week to June 21, 2024. The FMCG story, at a secular level, is supported by hopes of revival in rural demand and lower crude prices helping margins. However, this week, monsoons got delayed and crude prices spiked; raising doubts over the FMCG story. During the week, the FMCG index touched a high of 57,410 and a low of 55,907.