Extending the previous week’s losses, Indian equity benchmarks ended the holiday-shortened week with a cut of one percentage point.
Selling by FIIs due to reasons like high valuation and mixed results for the earnings season so far, along with recent escalations in tensions in the Middle East and the Red Sea, prompted the investors to book profit.
Markets made a negative start to the week as Fitch Group said South Asian economies would be most affected, amid rising hostilities in the Red Sea due to Houthi attacks. They will experience the largest relative increase in maritime trade distance, shipping time, and costs as the crucial trade route remains inaccessible. It added that India’s economic forecast faces a significant risk in the event of a prolonged spell of disruptions.
Traders shrugged off reports that the commerce ministry data showed that India’s exports of goods and services rose marginally by 0.4 per cent to $765.6 billion in 2023 despite global economic uncertainties. The street paid no heed towards a private report stating that the Indian stock market has pipped Hong Kong to become the fourth-highest equity market globally.<
On the very next day, markets witnessed recovery as traders took encouragement from Union Petroleum Minister Hardeep Puri’s statement that the Indian economy is poised to touch $5 trillion next financial year – 2024-25 – and capitalise to double to $10 trillion by the end of this decade.
Some optimism also came in as data released by the Central Board of Direct Taxes showed that the government’s direct tax-to-GDP ratio stood at a 23-year high of 6.11% in FY23. The Centre’s direct tax collections rose 17.8% year-on-year at Rs 16.6 trillion in FY23.
Market participants also took support from a private report stating that India will remain the fastest-growing major economy this year and next, boosted by continued strong government spending. It said inflation was unlikely to surge again. Some support also came as India’s business activity expanded faster in four months in January on stronger demand.
However, the sell-off on the final day of trade ensured that key gauges went home with a cut of 1 per cent as foreign fund outflows dented sentiments. News that is worrying FIIs, as SEBI has drafted a paper to impose tightened ultimate beneficial ownership norms for overseas investors with effect from February 1.
This was despite pressure from foreign banks and a few offshore fund managers to ease the rules ahead of the deadline. If this stands true domestic markets may see more selling in the range of Rs 1.5 lakh crore to Rs 2 lakh crore over the next six months by funds unable to comply with the norms
Traders overlooked India Meteorological Department’s (IMD) statement that it expects the persisting El Nino conditions to turn ‘neutral’ before the start of monsoon season in June. Neutral El Nino conditions imply that it would not harm the monsoon rains next season.
BSE movement for the week
The Bombay Stock Exchange (BSE) Sensex slipped 722.98 points or 1.01% to 70,700.67 during the week ended January 25, 2024.
The BSE Midcap index lost 634.69 points or 1.65% to 37,746.29, while the small-cap index slipped 260.37 points or 0.58% to 44,363.74.
On the sectoral front, S&P BSE Realty was down by 302.79 points or 4.45% to 6,507.50, S&P BSE Bankex was down by 1,488.23 points or 2.85% to 50,744.82, S&P BSE Oil & Gas was down by 605.02 points or 2.39% to 24,668.33, S&P BSE Finance was down by 215.15 points or 2.11% to 9,986.59 were the top losers.
S&P BSE Healthcare was up by 332.47 points or 1.02% to 32977.70 and S&P BSE Power was up by 91.90 points or 1.52% to 6130.33 were the few gainers on the BSE.
NSE movement for the week
The Nifty decreased 219.20 points or 1.02% to 21,352.60.
On the National Stock Exchange (NSE), Bank Nifty was down by 1192.05 points or 2.59% to 44,866.15, Nifty IT was down by 201.30 points or 0.55% to 36,496.20, Nifty Mid Cap 100 decreased 854.15 points or 1.78% to 47,208.65 and Nifty Next 50 decreased 435.45 points or 0.80% to 54,291.75.
FII transactions during the week
Foreign Institutional Investors (FIIs) were net sellers in the equity segment in the week, with gross purchases of Rs 67,991.90 crore and gross sales of Rs 79,679.40 crore, leading to a net outflow of Rs 11,687.50 crore.
They also stood as net buyers in the debt segment with gross purchases of Rs 5,009.07 crore against gross sales of Rs 3,536.38 crore, resulting in a net inflow of Rs 1,472.69 crore.
In the hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 121.56 crore and gross sales of Rs 112.59 crore, leading to a net inflow of Rs 8.97 crore.
Outlook for the coming week
Indian markets ended the passing week with a cut of one per cent each ahead of Fed interest rate decision and Interim budget 2024-25.
The coming week will have the mega event of the Interim Budget which will keep the markets buzzing through the week and there will be sector-specific moves based on the budget announcements, with lots of hopes hinging with the Finance Minister.
Parliament’s Budget session will begin on January 31, 2024. Union Finance Minister Nirmala Sitharaman will present the Interim Budget in the Lok Sabha on February 1.
The week will also mark the start of the new month and lots of economic data will be released along with the auto sales numbers which will show the real state of the auto sector.
In other economic data, Government Budget Value and Infrastructure output data will be released on January 31. Also, market participants will be eyeing HSBC Manufacturing PMI on February 01. Foreign Exchange Reserves will be released on February 02.
As a result, heavy season lots of major companies like Adani Green Energy, Bajaj Finance, Bharat Petroleum Corporation, Gail (India), Vodafone Idea, ITC, Marico, NTPC, Piramal Enterprises, Bajaj Finserv, Bajaj Holdings and Investment, Dr Reddy’s Laboratories, Larsen and Toubro, Tata Motors and State Bank of India are likely to release their results during the week.
On the global front from the US, traders will first be eyeing the Dallas Fed Manufacturing Index on January 29, Redbook, JOLTs Job Openings, CB Consumer Confidence, Dallas Fed Services Index, Dallas Fed Services Revenues on January 30, Chicago PMI on January 31.
Fed Interest Rate Decision, Fed Press Conference, Initial Jobless Claims, Nonfarm Productivity, S&P Global Manufacturing PMI, ISM Manufacturing PMI, ISM Manufacturing Employment on February 01, Non-Farm Payrolls, Unemployment Rate, Government Payrolls, Manufacturing Payrolls, Michigan Consumer Sentiment, Baker Hughes Oil Rig Count on February 02.