Weekly Market Outlook

Indian equity benchmarks ended the passing week in red terrain as higher US inflation numbers dented investors’ sentiments of rate cut hopes. Sentiments also dampened as stress test results trickled in.

Markets started the week on a pessimistic note amid uncertainty about the outlook for interest rates. Traders paid no heed towards the report that Moody’s Ratings raised India’s GDP growth forecast for FY24 to around 8 per cent from 6.6 per cent on the back of strong domestic consumption and capital expenditure.

Market participants also overlooked data from the Reserve Bank of India (RBI) showing that foreign exchange reserves rose $6.6 billion to a two-year high of $625.6 billion in the week ended March 1. In the previous week, reserves had risen $3 billion to $619.1 billion.

Key gauges witnessed consolidation as traders took note of CEO of Crisil Amish Mehta’s statement that the Indian economy is expected to show resilience on the back of sustained domestic demand and consumption.

Local indices once again witnessed a steep fall during the week as sentiments dented after a report that market regulator Securities and Exchange Board of India (Sebi) has been scrutinising flows into mid, and small-cap stocks amid a massive rally in the segment.

On the economic front, the Index of Industrial Production (IIP), slowed to 3.8 per cent in January 2024, mainly due to poor performance of manufacturing, mining, and power sectors. It was 5.8 in January 2023.

Meanwhile, India’s retail inflation eased to a four-month low of 5.09 per cent in February 2024. The inflation based on the Consumer Price Index (CPI) was almost unchanged compared to the January number of 5.10 per cent, though prices of certain items in the food basket firmed up.

Some support also came as inflation based on the wholesale price index (WPI) eased in February 2024 to 0.20% from 0.27% in January, aided by a decline in prices of non-food articles, coal, basic metals, other non-metallic mineral products, fabricated metal products (except machinery & equipment), rubber & plastic products and printing & reproduction of recorded media etc.

Sentiments also remain dampened after several fund houses that invest in small and midcap stocks, on the instructions of the mutual fund regulatory body, the Association of Mutual Funds in India, released stress tests of their schemes.

Some cautiousness also crept in with a report by global rating agency Moody’s asserting that the large of number scheduled elections in various countries in 2024 increases risks of shifts in policy and policy effectiveness.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex slipped 1475.96 points or 1.99% to 72,643.43 during the week ended March 15, 2024.

The BSE Midcap index lost 1602.41 points or 4.02% to 38,250.44, while the small cap index slipped 2640.82 points or 5.91% to 42,012.75.

On the sectoral front, S&P BSE Realty was down by 675.26 points or 9.33% to 6,560.58, S&P BSE PSU was down by 1,628.66 points or 8.49% to 17,555.34, S&P BSE Metal was down by 2,201.51 points or 7.66% to 26,535.70, S&P BSE Power was down by 456.41 points or 6.68% to 6,373.04 and S&P BSE Oil & Gas was down by 1,579.87 points or 5.55% to 26,886.33 were the top losers.

S&P BSE TECK was up by 133.46 points or 0.79% to 17,026.17 and S&P BSE Information Technology was up by 182.52 points or 0.48% to 37,926.76 was the only gainers on the BSE.

NSE movement for the week

The Nifty slipped 470.20 points or 2.09% to 22,023.35.

On the National Stock Exchange (NSE), Bank Nifty was down by 1241.70 points or 2.60% to 46,594.10, Nifty Mid Cap 100 was down 2280.55 points or 4.66% to 46,685.60 and Nifty Next 50 lost 2265.10 points or 3.75% to 58,058.80, while Nifty IT was up by 400.80 points or 1.08% to 37,500.70.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in the equity segment in the week, with gross purchases of Rs 120,799.40 crore and gross sales of Rs 91,912.77 crore, leading to a net inflow of Rs 28,886.63 crore.

They also stood as net buyers in the debt segment with gross purchases of Rs 14,666.38 crore against gross sales of Rs 7,599.97 crore, resulting in a net inflow of Rs 7,066.41 crore.

In the hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 379.55 crore and gross sales of Rs 287.89 crore, leading to a net inflow of Rs 91.66 crore.

Outlook for the coming week

In the passing week, Indian equity markets ended with hefty losses amid weak Index of Industrial Production (IIP) data. Growth in factory output, based on the IIP, slowed to 3.8 per cent in January 2024, mainly due to poor performance of manufacturing, mining, and power sectors. 

In the coming week, traders will be looking for the HSBC Composite PMI Flash, HSBC Manufacturing PMI Flash and HSBC Services PMI Flash data, which will be released on March 21.

Foreign Exchange Reserves, Deposit Growth and Bank Loan Growth data to be out on March 22. Foreign Exchange Reserves in India increased to $625630 million on March 1 from $619070 million in the previous week.

On the global front from the US, traders will first be eyeing NAHB Housing Market Index on March 18 followed by Building Permits Prel, Redbook on March 19, Fed Interest Rate Decision, and FOMC Economic Projections on March 20.

Fed Press Conference, Initial Jobless Claims, Philadelphia Fed Manufacturing Index, S&P Global Composite PMI Flash, S&P Global Manufacturing PMI Flash, S&P Global Services PMI Flash on March 21, and Baker Hughes Oil Rig Count on March 22.

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