Weekly Market Outlook

Indian benchmark indices ended the passing week in red terrain ahead of the final phase of the Lok Sabha elections. Local bourses edged lower in 4 out of five sessions during the week.

The recent decline was partly due to investors starting booking profit at higher levels to avoid any knee-jerk reaction in the market ahead of the results of the Lok Sabha polls announcement.

Key gauges started the week on a quiet note as traders remain concerned after the data showed that India had recorded a trade deficit, the difference between imports and exports, with nine of its top 10 trading partners, including China, Russia, Singapore, and Korea, in 2023-24.

Sentiments remained weak amid a private report stating that India’s economy likely grew at its slowest pace in a year in the January-March quarter due to weak demand. Some cautiousness also came with domestic rating agency Crisil stating that the banking system’s credit growth will drop by 2 percentage points to 14 per cent in the financial year 2024-25.

Markets extended losses as traders remained cautious as data released by the government showed the ratio of cost overruns in central government projects rose to a 12-month high of 20.09% in April compared with 18.65% in the previous month. It said the anticipated cost of 1,838 projects with a value of Rs 150 crore and above, at Rs 33.2 lakh crore, was Rs 5.6 lakh crore higher than the original cost, with the ratio of delayed projects also rising compared with the previous few months.

Traders overlooked a report by SBI Research in which it anticipates India’s GDP growth could touch 8 per cent in FY24, with strong performance across various economic indicators and favourable monsoon conditions. The report also highlights the potential impact of global economic resilience on India’s growth trajectory.

Sentiments remained down-beat in late afternoon deals even as S&P Global Ratings revised the outlook for the Indian economy to positive from stable and has affirmed the overall rating at BBB- citing robust growth and improved quality of government expenditure.

Traders overlooked Finance Minister Nirmala Sitharaman’s statement that S&P Global Ratings’ revision of its outlook on India from ‘stable’ to ‘positive’ is a welcome development. She said this reflects India’s solid growth performance and a promising economic outlook for the coming years.

However, domestic indices found some support on the final day of the week and cut marginal losses as weaker U.S. growth data sent the dollar and bond yields tumbling and revived hopes for rate cuts by the Federal Reserve later this year. Some support also came as the Reserve Bank of India (RBI), in its annual report, projected the Indian economy to grow at 7 per cent in the current financial year with risks evenly balanced. 

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex slipped 1449.08 points or 1.92% to 73,961.31 during the week ended May 31, 2024.

The BSE Midcap index lost 666.75 points or 1.53% to 42,852.69, while the Small cap index slipped 732.79 points or 1.53% to 47,263.66.

On the sectoral front, S&P BSE Information Technology was down by 1,318.48 points or 3.82% to 33,198.71, S&P BSE TECK was down by 520.83 points or 3.22% to 15,674.18, S&P BSE Oil & Gas was down by 922.75 points or 3.12% to 28,639.87, S&P BSE Auto was down by 1,224.66 points or 2.26% to 53,026.17 and S&P BSE Metal was down by 753.15 points or 2.25% to 32,713.24 were the top losers, while there were no gainers on the BSE.

NSE movement for the week

The Nifty slipped 426.40 points or 1.86% to 22,530.70.

On the National Stock Exchange (NSE), Nifty IT was down by 1438.20 points or 4.25% to 32,386.10, Nifty Mid Cap 100 decreased 718.75 points or 1.37% to 51,705.70 and Nifty Next 50 decreased 1505.60 points or 2.18% to 67,527.65, while Bank Nifty was up by 12.30 points or 0.03% to 48,983.95.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in the equity segment in the week, with gross purchases of Rs 56,529.43 crore and gross sales of Rs 58,947.22 crore, leading to a net outflow of Rs 2,417.79 crore.

They also stood as net buyers in the debt segment with gross purchases of Rs 9,788.38 crore against gross sales of Rs 4,447.79 crore, resulting in a net inflow of Rs 5,340.59 crore.

In the hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 109.04 crore and gross sales of Rs 223.25 crore, leading to a net outflow of Rs 114.21 crore.

Outlook for the coming week

In the passing week, Indian markets ended in red terrain with the cut of over one and half a per cent each with Sensex and Nifty settling below their crucial 74,000 and 22,550 levels, respectively. The coming week would be very crucial for the local markets, as this would set the tone for Dalal Street since the results of the long elections will be unveiled on June 04. 

On the economy front, market participants would be eyeing the data of HSBC Manufacturing PMI Final, which is scheduled to be released on June 03, General Elections Results going to be out on June 04. 

Traders will also be looking forward to the HSBC Composite PMI Final, HSBC Services PMI Final scheduled to be released on June 05. Further, RBI Interest Rate Decision, Cash Reserve Ratio, and Foreign Exchange Reserves data on June 07. 

On the global front, investors would be eyeing few economic data from the world’s largest economy, starting with S&P Global Manufacturing PMI Final, ISM Manufacturing PMI, ISM Manufacturing Employment, ISM Manufacturing New Orders on June 03, Redbook, JOLTs Job Openings on June 04.

S&P Global Composite PMI Final, S&P Global Services PMI Final, ISM Services PMI, ISM Services Business Activity on June 05, Balance of Trade, Initial Jobless Claims on June 06, Non-Farm Payrolls, Unemployment Rate, Government Payrolls, Baker Hughes Total Rigs Count on June 07.

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