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Late rally help markets to eke out slender gains during the week
Mar-22-2024

Rally on final two sessions of the week helped markets to eke out slender gains. Indian equity benchmarks made quiet start to the week as traders seemed reluctant to make significant moves and look ahead to the U.S. central bank's monetary policy meeting. Some anxiety came as former chief economic adviser Arvind Subramanian said India's latest GDP numbers are 'absolutely mystifying' and difficult to comprehend. On the very next day markets witnessed steep fall amid a private report stating that India is unlikely to achieve the 8%-10% economic growth rates that China pulled off over the long term. It said economic progress in India is being hamstrung by a lack of infrastructure, and a low skilled workforce. Sentiments remained under pressure, even as data showed that India’s outward FDI commitments rose substantially to $3.47 billion in February 2024, compared to over $2.82 billion in February 2023. Sequentially, FDI commitments were also up from $2.18 billion in January 2024. Traders overlooked reports that the Secretary of the Department for Promotion of Industry and Internal Trade (DPIIT) Rajesh Kumar Singh revealed that the Government of India’s plans to introduce a dedicated policy aimed at fostering deep-tech startups. Singh disclosed that the government is currently in the advanced stages of crafting a specialized policy framework specifically tailored to support deep-tech startups. Key gauges witnessed consolidation near week’s low points as some support came with the Central Board of Direct Taxes (CBDT) stating that the provisional figures of net direct tax collections registered a growth of 19.88 per cent to Rs 18,90,259 crore for the financial year 2023-24 (as of March 17, 2024) as compared to Rs 15,76,776 crore in the corresponding period of the previous financial year (FY 2022–23), on higher advance tax mop-up. But, buying on final two day of the week mainly helped markets to end above neutral lines as traders took support with CareEdge Ratings’ report that India’s economic activity likely hit a nine-month high in February, despite rural demand remaining weak and unemployment rising, thanks to a sharp expansion in exports, imports and corporate bond issuances. The CareEdge Economic Meter, a composite index covering 18 high-frequency economic indicators to track the state of the economy, suggested a 10.3% year-on-year uptick in activity levels. Traders took note of India's executive director at International Monetary Fund (IMF) Krishnamurthy Venkata Subramanian’s statement that India needs to grow at 8 per cent on sustained basis to create sufficient jobs to reduce poverty and inequality. Traders took encouragement with report showing that India's business activity ended this fiscal year on a high note, expanding at the fastest rate in eight months in March. According to the report, the headline HSBC Flash India Composite PMI Output Index - a seasonally adjusted index that measures the month-on-month change in the combined output of India's manufacturing and service sectors -- rose to 61.3 in March. Moreover, rising from 60.6 in February, the latest figure indicated a sharp rate of expansion that was the strongest since July 2023. Sentiments were positive as a survey conducted by industry body FICCI and banking association Indian Banks’ Association (IBA) has showed that the health of the Indian banking sector continues to improve with better asset quality and high credit growth. The eighteenth round of the survey was carried out for the period July to December 2023. 

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex gained 188.51 points or 0.26% to 72,831.94 during the week ended March 22, 2024. The BSE Midcap index gained 550.79 points or 1.44% to 38,801.23 and Smallcap index surged 758.52 points or 1.81% to 42,771.27. On the sectoral front, S&P BSE Realty was up by 345.74 points or 5.27% to 6,906.32, S&P BSE Metal was up by 1,303.68 points or 4.91% to 27,839.38, S&P BSE Auto was up by 1,930.16 points or 4.17% to 48,249.98, S&P BSE Capital Goods was up by 1,906.30 points or 3.35% to 58,726.35 and S&P BSE Consumer Discretionary Goods & Services was up by 235.93 points or 2.87% to 8,462.25were the top gainers, while S&P BSE Information Technology was down by 2,102.03 points or 5.54% to 35,824.73, S&P BSE TECK was down by 818.96 points or 4.81% to 16,207.21 and S&P BSE Fast Moving Consumer Goods was down by 91.81 points or 0.47% to 19,292.61 were the few losers on the BSE.

NSE movement for the week

The Nifty gained 73.40 points or 0.33% to 22,096.75. On the National Stock Exchange (NSE), Bank Nifty was up by 269.65 points or 0.58% to 46,863.75, Nifty Mid Cap 100 was up 627.25 points or 1.34% to 47,312.85 and Nifty Next 50 was up 1130.10 points or 1.95% to 59,188.90, while Nifty IT was down by 2312.30 points or 6.17% to 35,188.40.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 104,569.20 crore and gross sales of Rs 107,181.43 crore, leading to a net outflow of Rs 2,612.23 crore. They also stood as net buyers in the debt segment with gross purchases of Rs 12,101.75 crore against gross sales of Rs 9,261.32 crore, resulting in a net inflow of Rs 2,840.43 crore. In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 462.32 crore and gross sales of Rs 459.89 crore, leading to a net inflow of Rs 2.43 crore.

Industry and Economy

Expressing optimism over India’s growth prospects, India’s executive director at International Monetary Fund (IMF) Krishnamurthy Venkata Subramanian has said that the country needs to grow at 8 per cent on sustained basis to create sufficient jobs to reduce poverty and inequality. He said ‘We should be impatient even if we grow at 7 per cent. We should be looking to grow at 8 per cent and above, as the country needs to create a lot of infrastructure’. He added ‘By growing at 8 per cent, we have the potential to create a lot of jobs, thereby reducing poverty and inequality’.  

Outlook for the coming week

Indian markets ended the passing week in green amid optimistic India's HSBC Flash India Composite PMI Output Index data. HSBC Flash India Composite PMI Output Index - a seasonally adjusted index that measures the month-on-month change in the combined output of India's manufacturing and service sectors -- rose to 61.3 in March. 

In the coming holiday truncated week, Indian markets will remain close on March 25 and March 29 on account of Holi and Good Friday respectively. The upcoming week is likely to remain volatile as the march F&O series will expire on March 28 and traders will be adjusting their positions ahead of the new series. On the economy data front, investors will be eyeing Current Account and External Debt data to be out on March 28. Government Budget Value, Foreign Exchange Reserves and Infrastructure Output data going to be released during the week. Infrastructure output in India increased 3.6% year-on-year in January 2024, the smallest gain since October 2022, following an upwardly revised 4.9% rise in the previous month. 

On the global front, investors will be eyeing macro-economic reports from world’s largest economy, United States, starting with Chicago Fed National Activity Index, Dallas Fed Manufacturing Index, Building Permits Final on March 25, Redbook, CB Consumer Confidence, Richmond Fed Manufacturing Index, Dallas Fed Services Index on March 26, Initial Jobless Claims, Chicago PMI, Michigan Consumer Sentiment Final, Kansas Fed Composite Index, Baker Hughes Oil Rig Count on March 28, Core PCE Price Index, Personal Income, Personal Spending, Goods Trade Balance on March 29.

Top Gainers

  • Maruti Suzuki up by 8.18% was the top gainer on Nifty for the week - The auto stocks traded higher after the government unveiled Electric Mobility Promotion Scheme or EMPS. This is a fund limited scheme with a total outlay of Rs 500 crore for the period of 4 months. There are expectations that this would promote the nascent electric vehicle industry including acceleration in adoption and manufacturing in line with Atmanirbhar Bharat. Meanwhile, Maruti Suzuki is reportedly planning to bring in strong-hybrid technology across multiple models, including new cars for Indian market. 
  • Bajaj Auto up by 6.70% was another top gainer on Nifty for the week - Select automobile industry stocks traded higher after the government unveiled a new initiative to encourage the sale of electric two- and three-wheelers. The minister of heavy industries has announced that Rs 500 crore will be set aside for the EMPS Scheme for the year 2024. This program will run for four months starting on April 1. Meanwhile, Bajaj Auto Managing Director Rajiv Bajaj said the company is developing a portfolio of clean fuel CNG motorcycles, and the first such bike will hit the market in June.
Top Losers

  • Infosys down by 8.74% was the top loser of the week on Nifty - Information Technology (IT) sector stocks came under pressure after Accenture cut its 2024 revenue forecast, as an uncertain economy prompts clients to curtail spending on its consulting services. Accenture now expects full-year revenue growth in the range of 1% to 3%, from its prior forecast of 2% to 5%. Accenture has been grappling with sluggish demand for its IT and consulting services as high interest rates slam the brakes on an industry that benefited from breakneck growth during the Covid pandemic. The latest results hint at the economic uncertainty in global markets that is affecting consultancies and lead to layoffs or a freeze on hiring. 
  • HCL Technologies down by 7.23% was another top loser of the week on Nifty - IT companies witnessed selling pressure after Accenture lowered its revenue forecast for fiscal year 2024 due to global uncertainty and weak client spending on consulting services. Meanwhile, HCL Technologies has received two new Microsoft Azure specializations for its portfolio of artificial intelligence (AI) and machine learning (ML) solutions. Also, the company has been recognized with the Amazon Web Services (AWS) Generative AI Competency Partner status for its expertise in building generative AI (GenAI) applications on AWS and delivering transformative outcomes to enterprises.
Technical viewpoints

During the week, CNX Nifty touched the highest level of 22,180.70 on March 22 and lowest level of 21,710.20 on March 20. On the last trading day, the Nifty closed at 22,096.75 with weekly gain of 73.40 points or 0.33 percent. For the coming week, 21,811.07 followed by 21,525.38 are likely to be good support levels for the Nifty, while the index may face resistance at 22,281.57 and further at 22,466.38 levels.

US Market

The U.S. markets ended higher during the passing week after the Federal Reserve announced its widely expected decision to leave interest rates unchanged, although the central bank's forecasts suggests rate cuts are still likely later this year. In support of its dual goals of maximum employment and inflation at a rate of 2 percent over the longer run, the Fed said it once again decided to maintain the target range for the federal funds rate at 5.25 to 5.50 percent. The target range for the federal funds rate has remained unchanged since the Fed raised rates by a quarter point last July. The Fed's accompanying statement acknowledged inflation has eased over the past year but reiterated officials do not expect it will be appropriate to lower rates until they have gained greater confidence inflation is moving sustainably toward 2 percent. Along with announcing the interest rate decision, Fed officials also provided updated projections for the economy and interest rates.

The latest projections suggest Fed officials expect rates to be lowered to a range of 4.50 to 4.75 percent by the end of 2024. The interest rate forecast is unchanged from December and points to three quarter point rate cuts over the next nine months. At the same time, Fed officials raised their forecast for rates at the end of 2025 to a range of 3.75 to 4.0 percent from the range of 3.50 to 3.75 percent forecast in December. Fed officials also increased their forecast for GDP growth in 2024 to 2.1 percent from 1.4 percent in December, while the forecast for core consumer price growth was raised to 2.6 percent from 2.4 percent. Further, support also came in after reporting a notable increase in U.S. existing home sales in the previous month, the National Association of Realtors (NAR) released on report showing existing home sales unexpectedly continued to soar in the month of February.

NAR said existing home sale index spiked by 9.5 percent to an annual rate of 4.38 million in February after jumping by 3.1 percent to a rate of 4.00 million in January. The continued surge came as a surprise to participants, who had expected existing home sales to pull back by 1.5 percent to a rate of 3.94 million. With the unexpected increase, existing home sales reached their highest level since hitting an annual rate of 4.530 million in February 2023. Meanwhile, a report released by the Labor Department unexpectedly showed a slight drop by first-time claims for U.S. unemployment benefits in the week ended March 16th. The Labor Department said initial jobless claims edged down to 210,000, a decrease of 2,000 from the previous week's revised level of 212,000. The dip surprised participants, who had expected jobless claims to rise to 215,000 from the 209,000 originally reported for the previous week. 

European Market

European markets ended passing week with gains, as investors cheered dovish comments from the Federal Reserve and the Bank of England, and a surprise interest rate cut by Swiss National Bank. The Fed, which held rates unchanged on Wednesday, projected three rate cuts this year. The Bank of England maintained its key policy rate for the fifth straight session on Thursday, with no members seeking a hike as inflation is expected to ease faster than expected. The start of the week was on muted note, as Switzerland's foreign trade surplus decreased in February from a month earlier as imports rose faster than exports. The data from the Federal Customs Administration showed that the trade surplus dropped to CHF 2.2 billion in February from CHF 2.7 billion in January. In real terms, exports rose 0.2 percent over the month, reversing a 0.5 percent decline in January. Imports also rebounded 3.8 percent after falling 3.9 percent in the prior month.

However, markets staged recovery towards end of the week, after pessimism among consumers in the euro area lessened for a second straight month to its highest level in over two years in March and the improvement was better than expected. The preliminary survey data from the European Commission showed that the flash consumer confidence index climbed to -14.9 from -15.5 in February. The latest reading was the highest since February 2022 when the score was -9.4. Further, French manufacturers' confidence improved in March to the highest level in a year, largely driven by increases in production expectations and order books. The monthly data from the statistical office INSEE revealed that the manufacturing sentiment index rose to 102.0 in March from a revised 101.0 in the previous month. In addition, the index remained above its long-term average of 100.0 for the second straight month. The latest score was the highest since March last year, when it was 103.

On the inflation front, Eurozone inflation softened as estimated in February largely reflecting the decline in energy prices. The final data from Eurostat showed that the harmonized index of consumer prices, or HICP posted an annual increase of 2.6 percent after rising 2.8 percent in January. The rate matched the flash estimate published on March 1. Core inflation that excludes energy, food, alcohol and tobacco slowed to 3.1 percent, as estimated, from 3.3 percent a month ago. On a monthly basis, the HICP gained 0.6 percent in February, in line with the initial estimate. Besides, UK consumer price inflation weakened to the lowest in nearly two-and-a-half years in February on easing food price inflation. The consumer price index registered an annual growth of 3.4 percent, slower than the 4.0 percent rise in January. The rate was the lowest since September 2021. Core inflation that excludes energy, food, alcohol and tobacco weakened to 4.5 percent from 5.1 percent in the previous month. The rate was seen at 4.6 percent.

Asian Market

Asian markets, barring KLSE composite index, ended in green during the passing week as the US Federal Reserve left interest rates unchanged for a fifth straight meeting and maintained its forecast for three rate cuts this year, despite signs that inflation might stay elevated longer.

Japanese Nikkei remained the top gainer in the region, higher by around five and half percent, as data showed the country's exports grew for a third consecutive month amid increased demand in key markets. Exports jumped 7.8 percent on year, topping expectations for an increase of 5.3 percent following the 11.9 percent gain in the previous month. Traders also took note of the latest survey from Jibun Bank revealed that the manufacturing sector in Japan continued to contract in March, albeit at a slower pace, with a manufacturing PMI score of 48.2. That's up from 47.2 in February, although it remains beneath the boom-or-bust line of 50 that separates expansion from contraction. The survey also showed that the services PMI improved to 54.9 in March from 52.9 in February. Meanwhile, the Bank of Japan maintained a dovish stance, vowing to continue purchasing government bonds at a steady pace amid persistent concerns over the economic recovery.

Chinese Shanghai too edged higher by over half percent as encouraging factory output and retail sales data offset investor worries over the country's deepening property market crisis. Industrial output rose 7.0% in the first two months of the year, faster than the 6.8% growth seen in December. Retail sales, which serve as a barometer of consumption levels, increased by 5.5 per cent in the first two months of the year, compared to a 7.4 per cent rise in December. Some support also came as the People's Bank of China held its one-year and five-year loan prime rates steady at 3.45 percent and 3.95 percent, respectively, after cutting the over-five-year rate by 25 basis points last month.
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