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Markets climb fresh highs as bulls rejoice GDP boost
Mar-02-2024

Indian equity benchmarks ended the passing week on fresh record highs as higher than expected gross domestic product (GDP) numbers and the better-than-expected US inflation data buoyed sentiment. Markets started the week on a pessimistic note as traders were anxious with data released by the Reserve Bank of India (RBI) showing that India's foreign exchange reserves declined to $616.10 billion as on February 16. Some concern also came as Ministry of Statistics and Programme Implementation (Mospi) stated that as many as 431 infrastructure projects, each entailing an investment of Rs 150 crore or above, were hit by cost overrun of more than Rs 4.80 trillion in January 2024. However, key gauges managed to keep their head above water as traders took support with Prime Minister Narendra Modi’s statement that the world no longer feels surprised at India's achievements as it has become a new normal now and they today realise the benefit of walking alongside the country. Markets once again lost momentum and started moving southward amid a private report stating that while it seems increasingly unlikely the US economy is headed for recession, small businesses still face headwinds like higher costs and difficulty retaining qualified workers. Traders shrugged off Union Minister of Commerce and Industry Piyush Goyal’s statement that with the triple track of strong macroeconomic fundamentals, huge thrust in infrastructure creation and social welfare push India has been at the forefront of global growth for the past decade. Some concern also came with a report by SBI Research stating that the Indian economy is likely to grow at 6.7-6.9 per cent in December quarter FY24 as compared to 7.6 per cent growth in the second quarter on poor performance in the farm sector. Traders also remained worried as Department for Promotion of Industry and Internal Trade (DPIIT) in its latest data showed that foreign direct investment (FDI) inflows in India declined 13 per cent to $32.03 billion in April-December 2023, dragged down by lower infusion in computer hardware and software, telecom, auto, and pharma sectors. FDI inflows stood at $36.74 billion during the corresponding nine months of the preceding fiscal. But key gauges witnessed sharp rally on penultimate day of the week and indices hit fresh all-time highs supported by impressive GDP data. The GDP data showed the economy grew at 8.4 per cent in the December quarter amid robust manufacturing and construction. Growth in September-December was the highest in six quarters and more than the 6.6 per cent predicted by the street. The growth estimate for this financial year was revised to 7.6 per cent from 7.3 per cent. Sentiments also remained buoyant as India's manufacturing sector continued growth momentum in the month of February, aided by growth in factory production and sales coupled with strongest expansion in new export orders. According to the report, the seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose to 56.9 in February as against 56.5 in January, pointing the strongest improvement in the health of the sector since September 2023. Markets eke out slender gains on Saturday special trading session taking support with report that as GST collections rose by 12.5 per cent to Rs 1.68 lakh crore in February 2024 compared to the year-ago period buoyed by an increase in domestic sales as well as imports.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 663.35 points or 0.91% to 73,806.15 during the week ended March 02, 2024. The BSE Midcap index gained 28.38 points or 0.07% to 39,962.59, while Smallcap index slipped 180.99 points or 0.39% to 45,852.48. On the sectoral front, S&P BSE Capital Goods was up by 2,422.90 points or 4.27% to 59,155.01, S&P BSE Metal was up by 902.60 points or 3.29% to 28,299.21, S&P BSE Consumer Durables was up by 1,420.69 points or 2.76% to 52,858.24, S&P BSE Power was up by 91.61 points or 1.39% to 6,704.59 and S&P BSE Auto was up by 557.35 points or 1.17% to 48,008.70 were the top gainers, while S&P BSE Healthcare was down by 791.93 points or 2.22% to 34,960.51, S&P BSE Information Technology was down by 339.70 points or 0.88% to 38,288.61, S&P BSE TECK was down by 124.30 points or 0.73% to 16,926.23 and S&P BSE Oil & Gas was down by 11.62 points or 0.04% to 28,348.64 were the few losers on the BSE.

NSE movement for the week

The Nifty surged 165.70 points or 0.75% to 22,378.40. On the National Stock Exchange (NSE), Bank Nifty was up by 485.75 points or 1.04% to 47,297.50 and Nifty Next 50 gained 629.95 points or 1.06% to 59,783.70, while Nifty IT was down by 439.85 points or 1.16% to 37,605.80 and Nifty Mid Cap 100 decreased 126.50 points or 0.26% to 49,153.05.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in equity segment in the week, with gross purchases of Rs 115,247.91 crore and gross sales of Rs 109,083.88 crore, leading to a net inflow of Rs 6,164.03 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 8,373.30 crore against gross sales of Rs 4,677.11 crore, resulting in a net inflow of Rs 3,696.19 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 458.86 crore and gross sales of Rs 350.57 crore, leading to a net inflow of Rs 108.29 crore.

Industry and Economy

The National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI), in its Second Advance Estimates (SAE) of National Income, 2023-24; Quarterly Estimates of Gross Domestic Product (GDP) for October-December quarter (Q3) of 2023-24, has showed that India’s economy grew by better-than-expected 8.4 per cent in the October-December quarter of this fiscal (Q3FY24) - the fastest pace in one-and-half years. The GDP growth was 4.3 per cent in the October-December 2022 quarter. The growth rate in October-December was higher than 7.6 per cent in the previous three years.

Outlook for the coming week

Indian markets ended the passing week with healthy gains amid strong domestic macroeconomic data. India's Q3 GDP registered a higher-than-expected 8.4 per cent growth on the back of good performance by the sectors such as construction, mining & quarrying and manufacturing. 

The coming week will be holiday shortened as markets will remain close on March 08 on the occasion of Mahashivratri. Marketmen will be looking for the HSBC Services PMI data for the month of February to be out on March 05 for more directional cues. Investors will also be eyeing Foreign Exchange Reserves data. Foreign Exchange Reserves in India increased to $619070 million in February 23 from $616100 million in the previous week. Besides, bank loan growth data and deposit growth data will be going to be out in the coming week. The value of loans in India increased 20.30 percent year-on-year in the fortnight to February 9, 2024. 

On the global front, investors would be eyeing some important economic data from world’s largest economy, United States (US), starting with Fed Harker Speech on March 04 followed by Redbook, S&P Global Composite PMI Final, S&P Global Services PMI Final, ISM Services PMI, Factory Orders, RCM/TIPP Economic Optimism Index on March 05, Fed Chair Powell Testimony, JOLTs Job Openings on March 06, Balance of Trade, Initial Jobless Claims, Fed Chair Powell Testimony on March 07, Fed Williams Speech, Non Farm Payrolls, Unemployment Rate, Baker Hughes Oil Rig Count on March 08.

Top Gainers

  • Larsen & Toubro (L&T) up by 7.89% was the top gainer on Nifty for the week - L&T gained traction on securing major contract from The Ministry of Defence, Government of India, for the supply of High Power Radars to the Indian Air Force. In separate development, the company’s construction arm -- L&T construction has secured an order for its Railways Strategic Business Group to construct the Jakarta Mass Rapid Transit (MRT) Project (Phase 2A) (Contract Package CP205) for MRT Jakarta through L&T’s long-term Japanese partner, Sojitz Corporation. Meanwhile, the company has commissioned first indigenously manufactured electrolyser at the Green Hydrogen Plant in Hazira, Gujarat. 
  • Tata Steel up by 6.74% was another top gainer on Nifty for the week - Tata Steel came under buyers’ radar after the company’s Vice President (Corporate Services) Chanakya Chaudhary underscored its unwavering commitment towards sustainable development. He said notably, the company is poised to double its production capacity to meet the surging demand for steel while prioritizing environmentally conscious practices. Chaudhary detailed the ongoing initiatives of the company, highlighting the incorporation of scrap in blast furnace operations, the utilization of hydrogen, and adoption of carbon capture methods. These measures align seamlessly with Tata Steel’s overarching vision for responsible production.
Top Losers

  • Apollo Hospital Enterprise down by 9.46% was the top loser of the week on Nifty - Shares of hospital operators came under pressure after reports that the Supreme Court cautioned the government on its failure to implement a decade-old law to standardise hospital treatment charges. The top court warned the Central Government that it will directly implement standardised rates for treatments as prescribed under Central Government Health Services (CGHS) across the country after the next court hearing if the government fails to come up with a concrete proposal for CGHS law implementation. 
  • Bajaj Auto down by 4.69% was another top loser of the week on Nifty - Bajaj Auto witnessed profit booking after recent gains. Recently, shares of Bajaj Auto rose to a fresh life high after its shareholders approved a buyback of 1.41% equity shares for an aggregate amount of Rs 4,000 crore through a postal ballot. Meanwhile, Bajaj Auto has reported rise of 24% in total sales to 3,46,662 units in February 2024 as against 2,80,226 in the same month last year. Total domestic (2-WH + CV) sales increased by 35% to 2,06,894 units in February 2024 as compared to 1,53,291 units in February 2023.
Technical viewpoints

During the week, CNX Nifty touched the highest level of 22,419.55 on March 2 and lowest level of 21,860.65 on February 29. On the last trading day, the Nifty closed at 22,378.40 with weekly gain of 165.70 points or 0.75 percent. For the coming week, 22,019.52 followed by 21,660.63 are likely to be good support levels for the Nifty, while the index may face resistance at 22,578.42 and further at 22,778.43 levels.

US Market

US markets ended mostly in green during the passing week positive following the release of a highly anticipated Commerce Department report showing consumer prices in the U.S. increased in line with streets estimates in the month of January. The Commerce Department said consumer prices rose by 0.3 percent in January after inching up by a revised 0.1 percent in December. The street had expected consumer prices to rise by 0.3 percent compared to the 0.2 percent uptick originally reported for the previous month. Excluding food and energy prices, core consumer prices climbed by 0.4 percent in January after edging up by a revised 0.1 percent in December. The increase in core prices also matched estimates.

Meanwhile, the report said the annual rate of consumer price growth slowed to 2.4 percent in January from 2.6 percent in December. The slowdown matched expectations. The annual rate of core consumer price growth also slowed to 2.8 percent in January from 2.9 percent in December, in line with estimates. The readings on inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department's report on personal income and spending in the month of January. The slowdown in consumer price growth may generate optimism about the outlook for interest rates, as Fed officials have said they need greater confidence is slowing before they consider cutting rates. A separate report released by the Labor Department showing first-time claims for U.S. unemployment benefits rose by more than expected in the week ended February 24th may also lead to interest rate optimism.

Sentiments also remained upbeat following the release of a report from the Institute for Supply Management showing manufacturing activity in the U.S. unexpectedly contracted at an accelerated rate in the month of February. The ISM said its manufacturing PMI dipped to 47.8 in February from 49.1 in January, with a reading below 50 indicating contraction. The street had expected the index to inch up to 49.5. The University of Michigan also released revised data showing consumer sentiment in the U.S. unexpectedly deteriorated in the month of February. The report said the consumer sentiment index for February was downwardly revised to 76.9 from the previously reported 79.6. The street had expected the reading to be unrevised. With the unexpected downward revision, the consumer sentiment index is now below the January reading of 79.0. The data has contributed to a downturn by treasury yields, which has likely added to optimism about the outlook for interest rates.

European Market

European markets ended passing week on a muted note. Indices stated the week on a lackluster note, as Euro area economic confidence weakened unexpectedly to a three-month low in February, suggesting that the currency bloc remains close to recession. The monthly survey data from the European Commission showed that the economic sentiment index fell to 95.4 from revised 96.1 in the previous month. The score was forecast to rise to 96.7. At -9.5, the industrial confidence indicator hit the lowest in six months. The reading was expected to rise to -9.2 from -9.3 in January. Also, France's consumer confidence unexpectedly weakened in February. The monthly survey results from the statistical office INSEE showed that the consumer sentiment index fell to 89 from 91 in the previous month. The score was forecast to improve to 92. Consumers' outlook regarding their financial situation deteriorated with the index dropping three points to -11 and the index measuring past financial situation was stable at -28.

Indices witnessed volatility during the week, as the euro area manufacturing activity continued to shrink in February but the pace of contraction was moderate. The final data from the purchasing managers' survey by S&P Global showed that the HCOB manufacturing Purchasing Managers' Index, or PMI, fell slightly to 46.5 from January's 10-month high of 46.6. The score was above the flash 46.1. The reading suggested the second-slowest deterioration in manufacturing conditions since March 2023. Besides, British factory activity deteriorated further in February as production was dampened by weak demand and the impact of the Red Sea crisis. The survey results from S&P Global revealed that the seasonally adjusted Manufacturing Purchasing Managers' Index, or PMI, rose to a 10-month high of 47.5 in February from 47.0 in January. The flash score was 47.1. However, any reading below 50 indicates contraction in the sector.

On the inflation front, Eurozone inflation softened to a three-month low in February, while underlying price pressures remained high, strengthening the chances of the European Central Bank delaying its first interest rate cut. The flash data from Eurostat showed that the harmonized index of consumer prices, or HICP, rose 2.6 percent annually after rising 2.8 percent in January. Further, Italy's consumer price inflation remained stable in February, after rising in the previous month. The preliminary data from the statistical office, ISTAT, showed that the consumer price index rose 0.8 percent year-over-year in February, the same as in the previous month. The annual price growth for unprocessed food products eased to 4.5 percent from 7.5 percent. Core inflation, which excludes energy and fresh food, slowed to 2.4 percent from 2.7 percent in the previous month. 

Asian Market

Asian markets ended mostly in red during the passing week as Japanese inflation topped estimates in January, adding to pressure on the Bank of Japan to make a significant policy shift in the coming months. Besides, China reported mixed data, increasing pressure on policymakers to unveil more stimulus. However, slightly easing concerns about inflation and hopes that the US Fed will announce an interest-rate cut in the second quarter supported sentiment.

Chinese Shanghai ended higher by over half percent, after the country's securities regulator said it would tighten scrutiny of derivative businesses in the stock market. Traders took support with an official factory survey showing China's non-manufacturing activity expanded at a faster pace in February. The official non-manufacturing purchasing managers' index (PMI), which includes services and construction, rose to 51.4 from 50.7 in January, the highest since September. However, gains remain capped as an official survey showed China's manufacturing activity in February shrank for a fifth straight month. The official manufacturing purchasing managers' index (PMI), compiled by the National Bureau of Statistics (NBS), fell to 49.1 in February from 49.2 in January.

Japanese Nikkei surged by over two percent, as the total value of retail sales in Japan was up 2.3 percent on year in January - coming in at 13.141 trillion yen. That beat forecasts for an increase of 2.0 percent following the upwardly revised 2.4 percent gain in December. Some support came as the unemployment rate in Japan came in at a seasonally adjusted 2.4 percent in January. That was in line with expectations and unchanged from the December reading. The jobs-to-applicant ratio was 1.27 - also matching forecasts and steady from the previous month. Traders overlooked the latest survey from Jibun Bank revealed the manufacturing sector in Japan continued to contract in February, and at a faster pace, with a manufacturing PMI score of 47.2. That's down from 48.0 in January and it moves further beneath the boom-or-bust line of 50 that separates expansion from contraction.
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