Weekly Musings – Index performance for week ended May 31, 2024

4 Jun 2024 , 10:20 AM

A TALE OF TWO MARKETS THIS WEEK

It was a week in which the markets widely diverged. Sectors like IT fell more than 4%, oil & gas more than 3% and auto and FMCG were also sharply down. Had it not been for the banking sector holding on, the damage to the indices could have been much steeper. Despite the banking sector ending flat for the week, the Nifty and the Sensex closed nearly 1.9% lower. In sectors other than banking, it was the uncertainty factor that was leading the markets lower. For instance, till Friday, there were fears that GDP could disappoint on the downside and the fiscal deficit could shock on the upside. The reverse happened in both the cases. However, the impact of persistent FPI selling and high VIX levels did take a toll on the markets overall. To add to it, was the persistent shorting of Nifty futures by the FPIs.

However, the one sector that stood firm in the week was the banking sector, which closed flat for the week. What was the trigger for the banking sector? There were actually 3 triggers for banking stocks. The first trigger is that in the March 2024 quarter, banks continued to be the biggest contributor to top line growth of India Inc. In fact, if you remove banks, the rest of the industries gave tepid growth. Banking margins are under pressure, but that was expected after strong last few quarters. Secondly, the latest macro data has raised hopes that the RBI may opt for pre-emptive rate cuts going ahead. Last, but not the least, the big boost came last week from the RBI declaring a record dividend distribution to the government of ₹2.11 Trillion, which is likely to change the face of revenue management. Lower fiscal deficit is obviously positive for the banking stocks.

EXIT POLLS, GDP GROWTH AND FISCAL DEFICIT

If there were three factors over the weekend that could set the tone for the coming week, it is the exit poll outcome, GDP growth for Q4FY24 & FY24, and the lower fiscal deficit.

• Let us talk about the exit polls first. The exit poll pegged the ruling NDA to get close to 400 seats in the Lok Sabha, which is much better than expected. Also, the ruling NDA has made a big foray into states like West Bengal, Odisha, and Andhra Pradesh; where the ruling party was a very marginal figure in the past. The winds are surely changing.
• The second big event was the GDP number update for Q4 and for FY24. The Q4 GDP update came in at 7.8% against the street estimate of 6.5% while the full year GDP growth came in at 8.2% against the government estimate at 7.6%. That reinforces India’s position as the fastest growing large economy for three years in a row.
• Above all, there as the fiscal deficit story that came in sharply lower than expected at 5.6%, which is 30 bps lower than the original estimate and 20 bps lower than the revised estimate. It paves the way for aggressive fiscal prudence by the government, with the fiscal deficit even reaching below 4.5% by FY26. We have to wait and watch.

If the RBI bumper dividend changed the undertone of the markets in the previous week, the current week was all about robust GDP and high fiscal prudence demonstrated by the Indian government, even in a tough year.

BSE SENSEX 30 INDEX – POLITICS GETS THE BETTER OF ECONOMICS

The table captures the movement of the BSE SENSEX 30 for the week to May 31, 2024.

Date	Open	High	Low	Close
31-May-24	74,208.53	74,478.89	73,765.15	73,961.31
30-May-24	74,365.88	74,493.55	73,668.73	73,885.60
29-May-24	74,826.94	74,986.22	74,454.55	74,502.90
28-May-24	75,585.40	75,585.40	75,083.22	75,170.45
27-May-24	75,655.46	76,009.68	75,175.27	75,390.50
24-May-24	75,335.45	75,636.50	75,244.22	75,410.39
		Weekly Returns		-1.92%

Data Source: BSE

The Sensex has struggled at the 75,000 mark for the last few weeks and had closed the previous week above the 75,000 mark. However, this week, the Sensex once again corrected to close below 74,000. The political uncertainty, high VIX and the tepid results outweighed the benefits of the record RBI dividend. The Sensex lost -1.92% in the week; reversing the gains of the previous week. During the week, the Sensex touched a high of 76,010 and a low of 73,669. The Sensex closed the week 1,449 points lower. It remains to be seen how the Sensex reacts to the weekend data.

NIFTY 50 INDEX – FPI SELLING AGAIN TAKES ITS TOLL

The table captures the movement of Nifty 50 index in the week to May 31, 2024.

Date	Open	High	Low	Close
31-May-24	22,568.10	22,653.75	22,465.10	22,530.70
30-May-24	22,617.45	22,705.75	22,417.00	22,488.65
29-May-24	22,762.75	22,825.50	22,685.45	22,704.70
28-May-24	22,977.15	22,998.55	22,858.50	22,888.15
27-May-24	23,038.95	23,110.80	22,871.20	22,932.45
24-May-24	22,930.75	23,026.40	22,908.00	22,957.10
		Weekly Returns		-1.86%

Data Source: NSE

During the week, FPI outflows from equities were to the tune of $424 Million. In the 5 weeks prior to that, FPIs had sold Indian equities to the tune of $6 Billion. Through the week, the VIX stayed above 24, closing at 24.6 for the week even as the Nifty lost -1.86%, after two weeks of gains. Nifty lost a total of 426 points in the week. During the week, the Nifty touched a high of 23,111 and a low of 22,417, eventually closing the week just above the 22,500 levels. Only banking was in the green; with others in the red.

NIFTY NEXT 50 INDEX – FAILS TO DEFY GRAVITY THIS TIME

The table captures the movement of Nifty Next 50 for the week to May 31, 2024.

Date	Open	High	Low	Close
31-May-24	67,799.10	67,926.10	66,816.30	67,527.65
30-May-24	68,000.70	68,161.35	67,162.30	67,358.20
29-May-24	68,191.00	68,535.45	67,899.85	68,070.50
28-May-24	69,343.65	69,453.80	68,032.20	68,545.60
27-May-24	69,427.45	69,599.65	68,564.65	69,136.30
24-May-24	68,949.10	69,458.95	68,671.50	69,033.25
		Weekly Returns		-2.18%

Data Source: NSE

In the last few weeks, it did look like the Nifty Next 50 index was defying gravity. This time, the Nifty Next 50 index also came under pressure. The Nifty Next 50 is the residual list after Nifty 50 stocks are removed from Nifty 100. Nifty Next-50 offers a palatable mid-point between the boring beta of large caps and the risky alpha of smaller stocks. This week, the index lost -2.18%. During the week, Nifty Next-50 touched a high of 69,600 level and a low of 66,816, before closing the week at  67,528. The pressure was more macro than index specific. The Next 50 lost -1,506 points during the week.

NIFTY MID-CAP 100 INDEX – AFTER SUBDUED GAINS, IT IS LOSSES

The table captures the movement of Nifty Mid-Cap 100 in the week to May 31, 2024.

Date	Open	High	Low	Close
31-May-24	51,717.00	51,844.50	51,186.35	51,705.70
30-May-24	52,109.15	52,133.25	51,331.10	51,426.85
29-May-24	52,128.60	52,323.95	51,856.20	52,125.75
28-May-24	52,870.75	52,994.40	52,066.35	52,294.80
27-May-24	52,661.05	53,043.60	52,405.80	52,761.75
24-May-24	52,464.55	52,731.30	52,324.40	52,424.45
		Weekly Returns		-1.37%

Data Source: NSE

Mid cap has been tepid for some time now and this week the mid-caps also came under pressure, losing -1.37% in the process. During the week, the advance / decline ratio also turned sharply negative for the overall market. During the week, the Mid-Cap 100 index touched a high of 52,994 and a low of 51,186. After breaking above the 50,000 levels, the Nifty Mid-Cap index has surely held that level.

NIFTY SMALL-CAP 100 INDEX – FAILS TO HOLD ABOVE 17,000

The table captures movement of Nifty Small Cap 100 in the week to May 31, 2024.

Date	Open	High	Low	Close
31-May-24	16,692.20	16,774.35	16,520.85	16,696.70
30-May-24	16,843.30	16,877.25	16,582.55	16,612.85
29-May-24	16,827.80	16,954.75	16,723.45	16,886.00
28-May-24	17,100.60	17,116.65	16,796.45	16,875.60
27-May-24	17,000.55	17,087.35	16,880.15	17,019.65
24-May-24	16,933.70	17,035.20	16,865.05	16,883.00
		Weekly Returns		-1.10%

Data Source: NSE

After gaining 5.3% in the last two weeks, the small cap index closed with losses, although the extent of losses were lower than in large caps. The spike in the VIX to above 24 levels has made investors cautious on mid-caps and small caps. For the week, the Nifty Small Cap index gained lost 12 points. During the week, the index touched a high of 17,117 levels and a low of 16,521; and lost 185 points at close.

BANK NIFTY INDEX – RBI DIVIDEND HOLDS BANKS IN TOUGH WEEK

The table below captures the movement of BANKNIFTY in the week to May 31, 2024.

Date	Open	High	Low	Close
31-May-24	48,895.15	49,122.55	48,569.05	48,983.95
30-May-24	48,313.60	49,044.60	48,313.60	48,682.35
29-May-24	48,786.70	49,022.60	48,401.55	48,501.35
28-May-24	49,390.90	49,511.15	49,043.65	49,142.15
27-May-24	49,105.90	49,688.85	49,051.25	49,281.80
24-May-24	48,668.00	49,052.95	48,644.80	48,971.65
		Weekly Returns		+0.03%

Data Source: NSE

Bank Nifty gained a mere 12 points this week, gaining 0.03%, on top of 1.64% gains in the previous week. Bank Nifty rallied in the last 10 days, after the RBI announced a bumper dividend of ₹2.11 Trillion to the government. This is expected to subdue fiscal deficit and interest rates, which helped banking stocks. During the week, the Bank Nifty touched a high of 49,689 and a low of 48,313.

NIFTY IT INDEX – WORST PERFORMER OF THE WEEK

The table captures the movement of Nifty IT index in the week to May 31, 2024.

Date	Open	High	Low	Close
31-May-24	32,732.80	32,816.85	32,280.80	32,386.10
30-May-24	33,363.90	33,433.25	32,685.35	32,806.75
29-May-24	33,888.90	33,888.90	33,515.15	33,542.70
28-May-24	34,095.65	34,136.25	33,802.05	33,880.85
27-May-24	33,914.45	34,227.05	33,769.90	33,995.25
24-May-24	34,024.65	34,088.20	33,761.70	33,824.30
		Weekly Returns		-4.25%

Data Source: NSE

After falling -7.2% in four weeks, the IT index gained 2.9% in the last two weeks. However, this week, the Nifty IT index fell by -4.25%. The IT index may be a dollar defensive, but it is rarely spared the sell-off blushes. For the week, the Nifty IT index touched a high of 34,227 and a low of 32,281. However, the importance of the IT sector stems from the fact that it can be a good dollar defensive when the greenback is hardening.

NIFTY OIL & GAS INDEX – TAKES SHARP CUTS DURING THE WEEK

The table captures the Nifty Oil & Gas index for the week to May 31, 2024.

Date	Open	High	Low	Close
31-May-24	11,608.05	11,671.45	11,506.20	11,625.00
30-May-24	11,684.35	11,716.00	11,509.45	11,539.05
29-May-24	11,736.55	11,791.40	11,669.50	11,684.85
28-May-24	11,957.85	11,972.05	11,778.65	11,804.65
27-May-24	12,031.75	12,046.40	11,843.85	11,926.15
24-May-24	11,931.65	12,062.30	11,885.15	11,992.15
		Weekly Returns		-3.06%

Data Source: NSE

Reliance Industries led the fall in the market with BPCL, the only company to show signs of holding up. For the week, the Oil & Gas index was lower by 367 points or -3.06% as the pressure builds up. For the week, the Oil & Gas index touched a high of 12,046 and a low of 11,509 levels. The subdued Brent prices may be positive, but the oil price uncertainty continues to be a major challenge for the investors in the oil & gas sector.

NIFTY AUTO INDEX – NOT SO POSITIVE THIS WEEK

The table captures the movement of Nifty Auto index in the week to May 31, 2024.

Date	Open	High	Low	Close
31-May-24	23,613.40	23,733.65	23,314.05	23,419.60
30-May-24	23,690.50	23,767.25	23,392.15	23,471.00
29-May-24	23,670.55	23,805.45	23,566.05	23,757.95
28-May-24	23,894.65	23,978.45	23,763.40	23,814.25
27-May-24	23,972.40	23,996.70	23,696.35	23,877.15
24-May-24	23,774.15	24,038.60	23,692.15	23,891.45
		Weekly Returns		-1.97%

Data Source: NSE

The one thing you just cannot beat in this market is the Auto index; or at least it looked like that till the previous week. After gaining 20% in the last 9 weeks, Auto index lost -1.97% or 487 points during the week. For the week, the Auto Index made a high of 23,997 and a low of 23,314; 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.

NIFTY FMCG INDEX – DEEP CUTS IN DEFENSIVE FMCG SECTOR

The table captures the movement of Nifty FMCG index in the week to May 31, 2024.

Date	Open	High	Low	Close
31-May-24	54,510.80	54,588.70	53,897.70	54,107.35
30-May-24	54,776.50	54,933.05	54,095.25	54,280.10
29-May-24	54,920.70	55,254.70	54,918.25	54,974.25
28-May-24	55,328.70	55,461.30	55,136.55	55,271.95
27-May-24	55,649.60	55,708.70	55,194.55	55,260.50
24-May-24	55,847.25	55,894.55	55,369.55	55,449.15
		Weekly Returns		-2.42%

Data Source: NSE

After gaining 70 bps last week, the FMCG index fells sharply by -2.42%, although it looks more like a macro story than specific to FMCG sector. During the week, the FMCG index touched a high of 55,895 and a low of 53,898. Q4 results have demonstrated that rural sales may actually be showing green-shoots of revival.