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Markets garner marginal gains; late selloff wipes out major profit
May-03-2024

Indian equity benchmarks ended the volatile week of trade with marginal gains, supported by decent macro-economic data. Key gauges started the holiday truncated week on an optimistic note after economic think-tank National Institute of Public Finance and Policy (NIPFP) said it has estimated India's GDP growth at 7.1 per cent for the current fiscal, using high-frequency models. NIPFP said the Centre is on a fiscal consolidation path through buoyancy in taxes and revenue expenditure compression. Some optimism also came as S&P Global Ratings in the Asia-Pacific 2Q 2024 Banking Update stated that Indian banks' credit growth, profitability and asset quality would remain robust in current fiscal reflecting strong economic growth, but they may be compelled to slow down their loan growth as deposits are not growing at a similar pace. Sentiments also remained upbeat with private report estimating India's GDP growth at 6.6 per cent in the current fiscal helped by consumption expenditure, exports rebound and capital flows. It said the rapid growth of the middle-income class has led to rising purchasing power and even created demand for premium luxury products and services. On very next day, domestic bourses witnessed profit booking after Crisil in its report stated that India Inc is likely to log 4-6 per cent revenue growth in the January-March quarter of 2023-24, marking the slowest quarterly growth since recovery from the Covid-19 pandemic which began in September 2021. But, decent macroeconomic data helped markets to maintain gains as India's Goods and Services Tax (GST) collections in gross terms hit a record high in April 2024 at Rs 2.1 lakh crore. The government had collected Rs 1.87 lakh crore as GST in the same period last year. Traders took note of report that the output of eight core industries posted a growth of 5.2 percent in March 2024 as the production of cement, coal, electricity, natural gas, steel and crude oil recorded positive growth in the same month. The output of core sectors had grown by 7.1 per cent in February 2024 and 4.1 per cent in January 2024, while it stood 4.2 per cent in March 2023.  Meanwhile, India's manufacturing sector slowed marginally in April but remained robust thanks to strong demand, prompting firms to ramp up purchases of raw materials at a near-record pace. The HSBC final India Manufacturing Purchasing Managers' Index, compiled by S&P Global, dipped to 58.8 in April from a 16-year high of 59.1 in March, below a preliminary estimate for no change from the previous month. Despite softening, it was above its long-run average and in expansionary territory for a 34th month. The 50-mark separates growth from contraction. Selloff on final day of the week mainly ate most of the weekly gains as traders turned cautious with Reserve Bank data showing that India's services exports declined 1.3 per cent in March to $30 billion while imports fell by 2.1 per cent to $16.61 billion. As per RBI's data on India's international trade in services, the trade surplus during March 2024 was $13.4 billion.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex increased 147.99 points or 0.20% to 73,878.15 during the week ended May 03, 2024. The BSE Midcap index gained 826.76 points or 1.99% to 42,414.53, while Smallcap index slipped 47.88 points or 0.10% to 47,191.41.  On the sectoral front, S&P BSE Power was up by 235.83 points or 3.33% to 7,317.33, S&P BSE PSU was up by 612.24 points or 3.09% to 20,421.06, S&P BSE Auto was up by 1,211.03 points or 2.42% to 51,341.01, S&P BSE Finance was up by 174.25 points or 1.64% to 10,792.58 and S&P BSE BANKEX was up by 802.80 points or 1.47% to 55,409.09 were the top gainers, S&P BSE TECK was down by 339.71 points or 2.13% to 15,615.24, S&P BSE Information Technology was down by 519.11 points or 1.51% to 33,901.70, S&P BSE Capital Goods was down by 498.31 points or 0.79% to 62,616.74, S&P BSE Realty was down by 53.98 points or 0.71% to 7,554.33 and S&P BSE Consumer Durables was down by 185.06 points or 0.34% to 54,810.88 were the top losers on the BSE.

NSE movement for the week

The Nifty gained 55.90 points or 0.25% to 22,475.85. On the National Stock Exchange (NSE), Bank Nifty was up by 722.50 points or 1.50% to 48,923.55, Nifty Mid Cap 100 was up 311.05 points or 0.61% to 50,935.15 and Nifty Next 50 was up 1635.95 points or 2.55% to 65,770.50, while Nifty IT was down by 757.80 points or 2.25% to 32,908.40.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in equity segment in the week, with gross purchases of Rs 67,953.67 crore and gross sales of Rs 69,164.96 crore, leading to a net outflow of Rs 1,211.29 crore. They also stood as net sellers in the debt segment with gross purchases of Rs 3,619.73 crore against gross sales of Rs 5,656.00 crore, resulting in a net outflow of Rs 2,036.27 crore. In hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 38.31 crore and gross sales of Rs 67.05 crore, leading to a net outflow of Rs 28.74 crore.

Industry and Economy

The Organisation for Economic Co-operation and Development (OECD) in its latest Economic Outlook report has projected India’s Gross Domestic Product (GDP) to grow at 7.8 per cent in the just-concluded financial year 2023-24 and the forecast is for around 6.6 per cent in each of the following two fiscal years (FY25 and FY26). However, global near-term developments pose obstacles to higher growth. It has said India’s domestic demand will be driven by gross capital formation, particularly in the public sector, with private consumption growth remaining sluggish. OECD is a group of 37 member countries that discuss and develop economic and social policy. 

Outlook for the coming week

In the passing week, Indian equity markets ended in green amid positive India's manufacturing sector data. India's manufacturing sector growth eased slightly in the month of April but signaled the second-best improvement in the health of the sector for three-and-a-half years, supported by buoyant demand.

On the economy front, market-participants would be eyeing the data of HSBC Composite PMI Final, HSBC Services PMI Final, which scheduled to be released on May 06, India's Industrial output and Manufacturing production going to be out on May 10. Industrial output in India rose by 5.7% on an annual basis in February of 2024, missing market expectations of a 6% expansion, but still pointing to the sharpest increase since October 2023.

In the ongoing result season, traders will be eyeing earnings of prominent companies, including Godrej Consumer Products, Lupin, Dr Reddy's Laboratories, JSW Energy, Pidilite Industries, SRF, Voltas, Hero Motocorp, Larsen and Toubro, Piramal Enterprises, Tata Power Company, TVS Motor Company, Asian Paints, Bharat Petroleum Corporation, Escorts Kubota, Hindustan Petroleum Corporation, State Bank of India, Cipla, Tata Motors, Union Bank of India etc. 

On the global front, investors would be eyeing few economic data from Redbook, Fed Kashkari Speech on May 07 followed by Initial Jobless Claims on May 09, Michigan Consumer Sentiment Prel, Fed Goolsbee Speech, Baker Hughes Oil Rig Count on May 10.

Top Gainers

  • Power Grid Corp up by 5.98% was the top gainer on Nifty for the week - Power Grid Corporation recently inked a pact to infuse funds and take a 50 per cent stake in crisis-hit National High Power Test Laboratory (NHPTL). NHPTL is a joint venture of NTPC, NHPC, POWERGRID, DVC & CPRI. The revival plan comprises equity transactions between shareholders with an outcome of revised equity holding of POWERGRID in NHPTL as 50 per cent and the remaining 50 per cent of equity to be held equally, that is, 12.5 per cent each by the other four JV partners.
  • Tech Mahindra up by 5.05% was another top gainer on Nifty for the week - Tech Mahindra has entered into a strategic partnership with Atento, a leading customer relationship management (CRM) and business transformation outsourcing (BTO) company in Latin America. The partnership will deliver end-to-end business transformation solutions and services that leverage Generative AI-powered technologies, as well as customer experience consulting for customers in the United States, Europe, the Middle East, and Africa and Latin American regions. 
Top Losers

  • HCL Technologies down by 10.38% was the top loser of the week on Nifty - HCL Technologies came under pressure after it reported lower-than-expected numbers for Q4FY24. The company reported marginal rise of 0.35% in its consolidated net profit at Rs 3,995 crore for Q4FY24 as compared to Rs 3,981 crore for Q4FY23. Total income increased by 6.86% at Rs 28,915 crore for Q4FY24 as compared Rs 27,059 crore for Q4FY23. On standalone basis, the company reported 2.85% fall in its net profit at Rs 2,763 crore for Q4FY24 as compared to Rs 2,844 crore for Q4FY23. 
  • Apollo Hospital Enterprise down by 5.87% was another top loser of the week on Nifty - Apollo Hospital tumbled after Advent deal. Recently, Apollo HealthCo or Apollo 24/7, a subsidiary of Apollo Hospitals Enterprise, announced plans to raise Rs 2,475 crore ($339 million) in equity capital from Advent International, one of the world's largest private equity investors. Apollo 24/7 also plans to integrate Keimed over the next two years. The deal grants Advent a 12.1% stake in the merged entity, with the remainder split between Apollo HealthCo (59.2%) and Keimed (25.7%).
Technical viewpoints

During the week, CNX Nifty touched the highest level of 22,794.70 on May 3 and lowest level of 22,348.05 on May 3. On the last trading day, the Nifty closed at 22,475.85 with weekly gain of 55.90 points or 0.25 percent. For the coming week, 22,284.37 followed by 22,092.88 are likely to be good support levels for the Nifty, while the index may face resistance at 22,731.02 and further at 22,986.18 levels.

US Market

The U.S. markets traded lower during the passing week after citing a lack of further progress toward its 2 percent inflation objective in recent months, the Federal Reserve announced its widely expected decision to leave interest rates unchanged. The Fed said it decided to maintain the target range for the federal funds rate at 5.25 to 5.50 percent in supports of its dual goals of maximum employment and inflation at the rate of 2 percent over the longer run. Members of the Fed also reiterated they need greater confidence inflation is moving sustainably toward 2 percent before they consider cutting interest rates. Meanwhile, the Fed said it would continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities but revealed plans to slow the pace of decline. The central bank said would slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.

Cautiousness also prevailed in the markets after a report released by the Labor Department showed labor productivity in the U.S. increased by less than expected in the first quarter of 2024. The Labor Department said labor productivity rose by 0.3 percent in the first quarter after spiking by a revised 3.5 percent in the fourth quarter. Street had expected productivity to climb by 0.8 percent compared to the 3.2 percent surge that had been reported for the previous quarter. Further, reflecting a decrease in spending on private construction, the Commerce Department released a report showing U.S. construction spending unexpectedly edged slightly lower in the month of March. The report said construction spending dipped by 0.2 percent to an annual rate of $2.084 trillion in March, while street had expected construction spending to rise by 0.3 percent.

Meanwhile, revised data showed construction spending came in unchanged in February compared to the previously reported 0.3 percent drop. The Commerce Department said spending on private construction spending fell by 0.5 percent to an annual rate of $1.601 trillion in March. However, traders were getting some support during the week as new orders for U.S. manufactured goods surged in line with street estimates in the month of March, according to a report released by the Commerce Department. The Commerce Department said factory orders shot up by 1.6 percent in March after jumping by a downwardly revised 1.2 percent in February. Street had expected factory orders to spike by 1.6 percent compared to the 1.4 percent surge originally reported for the previous month. The sharp increase in factory orders came as durable goods orders soared by 2.6 percent in March after climbing by 0.7 percent in February. Orders for transportation equipment led the way higher, skyrocketing by 7.8 percent.

European Market

European markets witnessed a lackluster trade during the passing week, as investors reacted to corporate earnings updates and the Federal Reserve's monetary policy announcement that indicated interest rate in the U.S. will remain higher for a longer period. Markets made a negative start of the week, as Euro area economic sentiment deteriorated further in April largely reflecting the difficulties in the industrial sector. The survey data revealed that the economic confidence index dropped to 95.6 in April from 96.2 in the previous month. The expected reading was 96.9. The economic sentiment index deteriorated notably in industry, and services, retail trade and construction experienced moderate falls. Only consumer confidence improved from March. Reflecting the deterioration in the assessment of the current order book, the industrial confidence index fell to -10.5 from -8.9 in the previous month. The services confidence indicator posted 6.0 in April, down from 6.4 a month ago.

Indices added losses towards end of the week, after Italy's manufacturing sector returned to contraction territory in April after a slight expansion in the previous month. The survey results from S&P Global showed that the seasonally adjusted HSBC Manufacturing Purchasing Managers' Index dropped to 47.3 in April from 50.4 in March. Any score above below indicates contraction. New orders fell at a solid pace in April amid weak demand conditions across the sector. Meanwhile, new export orders dropped markedly due to falling demand from European markets. Besides, the UK manufacturing activity slid into contraction at the start of the second quarter as improvement in output and new orders were short-lived amid uncertain market conditions, client destocking and supply chain disruptions. The S&P Global final manufacturing Purchasing Managers' Index fell to 49.1 in April from a 20-month high of 50.3 in March. The score was above the flash estimate of 48.7. Four out of the five components of the PMI contracted in April. Only supplier delivery times bucked the negative trend.

On the inflation front, Switzerland's consumer price inflation increased more-than-expected in April to the highest level in four months. The Federal Statistical Office reported that the consumer price index, or CPI, climbed 1.4 percent year-over-year in April, after a 1.0 percent gain in March. However, inflation remained within the central bank's target range of 0-2 percent. Further, Italy's producer prices continued to decline sharply in March. The data from the statistical office ISTAT showed that producer prices posted an annual decrease of 9.6 percent after a 10.8 percent drop in February. Producer prices have been falling since April 2023. The annual decline in March was largely driven by a 28.1 percent plunge in energy costs. Prices for intermediate goods were 5.6 percent lower. Prices in the domestic market were down 12.7 percent, and those in the foreign market decreased by 1.2 percent. On a monthly basis, producer prices dropped 0.2 percent after a 1.0 percent decline in the previous month. This was the fifth successive monthly fall. 

Asian Market

Asian markets traded in green during the passing week despite US Fed's decision to hold interest rates steady, while also ruling out a rate hike in the near future. Meanwhile, traders pulled forward expectations for the Federal Reserve’s first full interest-rate cut by a month to November ahead of a key US jobs data report later in the day. Seoul stocks ended higher amid a private survey revealed that South Korea's factory activity contracted again in April, but manufacturers' optimism climbed to the highest level in nearly two years as output and orders managed to post marginal growth.

Japanese Nikkei rose by over half percent as the Ministry of Economy, Trade and Industry (METI) stated that industrial production in Japan was up a seasonally adjusted 3.8 percent on month in March. That beat forecasts for an increase of 3.4 percent following the 0.6 percent decline in February.  Besides, the Bank of Japan said the monetary base in Japan was up 2.1 percent on year in April, coming in at 689.896 trillion yen. That's up from 1.6 percent in March. Traders overlooked the latest survey from Jibun Bank revealed that manufacturing sector in Japan continued to contract in April, albeit at a slower pace, with a manufacturing PMI score of 49.6. That's up from 48.2 in March, although it remains beneath the boom-or-bust line of 50 that separates expansion from contraction. Latest data showed that output was down again in April, extending the current period of contraction to 11 months.

Chinese Shanghai ended higher by over half percent as China stepped up efforts to spur an economic rebound. Property developers surged on expectations of more stimulus measures. However, gains remain capped as official surveys showed growth slowed in China's manufacturing and services sectors in April, suggesting a loss of momentum for the world's second-biggest economy at the start of the second quarter. The National Bureau of Statistics (NBS) manufacturing purchasing managers' index (PMI) dropped to 50.4 in April from 50.8 in March, above the 50-mark separating growth from contraction.
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