Continuing their downward trend for the third consecutive week, Indian stock market gauges concluded the previous week with a decrease of approximately 0.5%, following the decision of the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) to keep policy rates and stance unchanged.

Traders took some support with the report that the number of income tax returns filed between April-June 2023-24 nearly doubled to over 1.36 crore over the previous year. As per the comparative statistics of ITR filing available on the I-T e-filing portal, over 70.34 lakh tax returns were filed in April-June 2022-23.

Markets traded with caution afterwards, as traders got anxious after a private report forecasted a steeply higher retail inflation print for July, pegging it at 6.7 per cent, up 190 basis points from the previous month, citing the sharp rise in food prices.

Moody’s cut credit ratings of several small to mid-sized U.S. banks and said it may downgrade some of the nation’s biggest lenders, warning that the sector’s credit strength will likely be tested by funding risks and weaker profitability.

The selling on the last two days dragged markets lower for the week as the central bank maintained the status quo and kept the repo rate steady at 6.5% for the third time in a row as it maintains heightened vigil on inflation. The rate increase cycle was paused in April after six consecutive rate hikes aggregating to 250 basis points since May 2022.

The Central Bank also directed banks to maintain an incremental cash reserve ratio (ICRR) at 10 cents, from August 12 onwards, to reduce liquidity from the system. Besides, it increased the FY24 inflation forecast to 5.4 per cent from 5.1 per cent, discounting near-term risks.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex slipped 398.60 points or 0.61% to 65,322.65 during the week ended August 11, 2023.

The BSE Midcap index gained 266.90 points or 0.88% to 30,429.56 and Smallcap index surged 219.96 points or 0.63% to 35,290.61.

On the sectoral front, S&P BSE Consumer Durables was up by 985.07 points or 2.33% to 43,196.43, S&P BSE Metal was up by 227.36 points or 1.05% to 21,877.78, S&P BSE PSU was up by 109.17 points or 0.96% to 11,448.17 were the top gainers.

S&P BSE BANKEX was down by 820.31 points or 1.63% to 49,608.24, S&P BSE Realty was down by 61.27 points or 1.42% to 4,253.09, S&P BSE Fast Moving Consumer Goods was down by 238.15 points or 1.27% to 18,539.62 were the top losers.

NSE movement for the week

Nifty slipped 88.70 points or 0.45% to 19,428.30.

On the National Stock Exchange (NSE), Nifty IT increased by 383.05 points or 1.26% to 30,819.15 and Nifty Mid Cap 100 increased by 205.55 points or 0.55% to 37,836.15.

Bank Nifty was down by 680.40 points or 1.52% to 44,199.10 and Nifty Next 50 was down 198.30 points or 0.44% to 44,566.70.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net buyers in the equity segment in the week, with gross purchases of Rs 52,082.31 crore and gross sales of Rs 46,776.81 crore, leading to a net inflow of Rs 5,305.50 crore.

They also stood as net buyers in the debt segment with gross purchases of Rs 3,144.79 crore against gross sales of Rs 1,436.08 crore, resulting in a net inflow of Rs 1,708.71 crore.

In the hybrid segment, FIIs stood as net sellers, with gross purchases of Rs 95.32 crore and gross sales of Rs 158.75 crore, leading to a net outflow of Rs 63.43 crore.

Outlook for the coming week

The Wholesale Price Index (WPI), which was scheduled to be released on August 14, 2023, dropped by 1.36% year on year in July 2023 compared with a market estimate of 2.7 per cent decline, following a 4.12 per cent fall in the prior month. On a monthly basis, wholesale prices rose 1.95% in July, the first increase in 3 months.

Breaching the Reserve Bank of India’s (RBI’s) comfort zone, the retail inflation measured in Consumer Price Index (CPI) spiked to a 15-month high of 7.44 per cent in July 2023, much higher than 4.87 per cent in June 2023, as tomatoes, vegetables and other food items turned costlier. The inflation overshoots the RBI’s comfort level for the first time in the current fiscal. The RBI has the mandate to keep retail inflation in the range of 2 to 6 per cent and after remaining above the upper limit for most of the 2022-23 financial year. Retail inflation stood at 6.71 per cent in July 2022 and the previous high was recorded at 7.79 per cent in April 2022.

Imports & Exports data too would be tracked during the week. India’s merchandise trade deficit narrowed to $20.13 billion in June 2023 from $22.07 billion in the same month of the previous year, broadly in line with the market consensus of a $20.10 billion gap.

 Though earnings season will come to an end but still lots of companies will be announcing their numbers during the week. BCPL Railway Infrastructure, Divi’s Laboratories, Gensol Engineering, GMR Airports Infrastructure, Indiabulls Housing Finance, Vodafone Idea, ITC, Uflex, Wockhardt etc.

On the global front, investors would be eyeing few economic data from world’s largest economy, United States (US), starting with Consumer Inflation Expectations on August 14, Retail Sales, Imports and Exports, Redbook on August 15, Building Permits Prel, Housing Starts, Industrial Production, Manufacturing Production, FOMC Minutes on August 16, Philadelphia Fed Manufacturing Index, Initial Jobless Claims on August 17 and Baker Hughes Total Rig Count on August 18.