Weekly Market Outlook

Indian equity benchmarks ended the passing week on an optimistic note with frontline gauges garnering over a per cent as firm macro-economic data buoyed traders’ sentiments.

Markets started the week on a pessimistic note as India Ratings and Research (Ind-Ra) in its latest report stated that sustained disruptions in the Red Sea route are likely to raise the freight and forwarding (F&F) cost by 25-30 per cent for corporates largely dealing in international trade.

Traders took note of Piyush Goyal’s statement that India may not get the same amount of foreign direct investment (FDI) in the current financial year as compared to FY23, but I don’t see it as a material factor.

Muted Q3 earnings by ONGC and Tata Power Company also dented sentiment. On the very next day, markets took a U-turn and started moving northward throughout the week as traders got support with a report that retail inflation based on the Consumer Price Index (CPI) eased to a three-month low of 5.1 per cent in January 2024.

Inflation was at 5.69 per cent in December 2023. It was 6.52 per cent in January 2023. Meanwhile, inflation based on the wholesale price index (WPI) eased in January 2024 to 0.27% from a nine-month high of 0.73% in December 2023, amid lower prices of crude petroleum & natural gas, non-food articles and food articles.

Sentiments also remained jubilant after growth in India’s industrial output edged up to 3.8 per cent in December 2023 as compared to 2.4 per cent in November 2023. In December 2022, India’s industrial output had grown by 5.1 per cent. Meanwhile, for April-December 2023, industrial growth stood at 6.1 per cent as against 5.5 percent in April-December 2022.

Markets extended gains as Prime Minister Narendra Modi asserted that the country would emerge as the third-largest economy in the world in coming years. Besides, foreign fund inflows aided sentiments.

Traders took support with the RBI’s data stating that India’s services trade surplus shot up to a record $44.9 billion in the October-December quarter (third quarter, or Q3) of 2023-24 (FY24), growing 16 per cent year-on-year, showing resilience amid strong global headwinds. This is likely to reduce the current account deficit (CAD) in Q3.

Sentiments remained jubilant on the final day of the week, taking support from the report that India’s merchandise trade deficit narrowed to $17.49 billion in January as exports edged up by 3.1 per cent year-on-year despite the ongoing crisis in the Red Sea disrupting trade as commercial vessels traversing through the Suez Canal face attacks from Yemen-backed Houthi rebels.

Moreover, India’s exports rose to a three-month high of 3.12 per cent to $36.92 billion in January despite global uncertainties including the Red Sea crisis. After recording negative growth for two months in a row, imports grew by about 3 per cent to $54.41 billion in January.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex surged 831.15 points or 1.16% to 72,426.64 during the week ended February 16, 2024.

The BSE Midcap index gained 360.51 points or 0.91% to 39,930.08 and the small-cap index surged 9 points or 0.02% to 45,659.30.

On the sectoral front, S&P BSE Auto was up by 2,226.69 points or 4.97% to 46,992.86, S&P BSE Oil & Gas was up by 882.79 points or 3.15% to 28,914.89, S&P BSE Consumer Discretionary Goods & Services was up by 210.88 points or 2.56% to 8,462.60, S&P BSE PSU was up by 461.76 points or 2.51% to 18,842.09 and S&P BSE BANKEX was up by 895.61 points or 1.73% to 52,628.29 were the top gainers.

S&P BSE Fast Moving Consumer Goods was down by 141.15 points or 0.73% to 19,308.00 and S&P BSE Metal was down by 132.25 points or 0.48% to 27,621.23 were the only losers on the BSE.

NSE movement for the week

The Nifty surged 258.20 points or 1.19% to 22,040.70.

On the National Stock Exchange (NSE), Bank Nifty was up by 750.30 points or 1.64% to 46,384.85, Nifty IT was up by 777.80 points or 2.06% to 38,477.05, Nifty Mid Cap 100 was up 242.90 points or 0.50% to 49,131.95 and Nifty Next 50 was up 1153.25 points or 2.01% to 58,586.15.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in the equity segment in the week, with gross purchases of Rs 63,779.87 crore and gross sales of Rs 64,480.78 crore, leading to a net outflow of Rs 700.91 crore.

They also stood as net buyers in the debt segment with gross purchases of Rs 7,217.08 crore against gross sales of Rs 5,751.68 crore, resulting in a net inflow of Rs 1,465.40 crore.

In hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 5,942.54 crore and gross sales of Rs 90.79 crore, leading to a net inflow of Rs 5,851.75 crore.

Outlook for the coming week

In the passing week, Indian equity benchmarks posted healthy gains amid positive macroeconomic data.

The country’s retail inflation, measured by the Consumer Price Index, decreased to 5.10 per cent in the month of January 2024 as compared to 5.69 per cent in December 2023.

In the coming week, market participants will be eyeing HSBC Composite PMI Flash, HSBC Manufacturing PMI Flash, HSBC Services PMI Flash, which are scheduled to be released on February 22.

On the same day, monetary policy meeting minutes are going to be released. Traders will be looking for the Foreign Exchange Reserves, deposit growth and bank loan growth data to be out on February 23. Foreign Exchange Reserves in India increased to $622470 million on February 2 from $616730 million in the previous week. 

Finance Minister Nirmala Sitharaman is scheduled to review the state of the economy amid global challenges at a meeting of the Financial Stability and Development Council (FSDC) on February 21. The 28th meeting of the high-level panel to be held here will be attended by all financial sector regulators.

On the global front, the coming week will be holiday-shortened as the US markets will remain closed on February 19 on account of Washington’s Birthday.

On the economic data front, investors will be eyeing Redbook on February 21, FOMC Minutes, Chicago Fed National Activity Index, Initial Jobless Claims, S&P Global Composite PMI Flash, S&P Global Manufacturing PMI Flash, S&P Global Services PMI Flash, Existing Home Sales on February 22, Baker Hughes Oil Rig Count on February 23.

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