Nifty hits 21K mark; Fed, BoE, ECB meetings in focus
Benchmark indices gained for sixth straight week on back of strong macroeconomic data, optimism surrounding U.S. rate cut in March, and the ruling BJP’s win in three key state elections. Global markets were firm buoyed by improved sentiments worldwide regarding the end of the rate hike cycle. The Nifty ended up 3.5 pct to 20,969 levels and the Nifty Midcap 100 and Nifty Smallcap 100 index gained 2.3 pct and 1.2 pct respectively during the week. FIIs bought equities of Rs 92.85 bn and DIIs were net buyers to the tune of Rs 43.27 bn.
Crude oil sustained its seventh consecutive weekly decline, driven by concerns surrounding a global supply surplus and weakened Chinese demand. Brent crude declined 4 pct for the week to USD 75.84 a bbl. Gold experienced its first weekly decline in four weeks as the dollar strengthened. Gold prices ended the week at USD 1,998 an oz.
The Reserve Bank kept its key interest rate unchanged i.e., 6.5 pct for the fifth meeting in a row, signalling that price stability remained its top goal. The MPC agreed unanimously to maintain the policy repo rate at 6.5 pct. All members decided to keep the focus on withdrawal of accommodation, while five out of six voted to keep the stance. The RBI raised its GDP growth prediction for FY24 to 7 pct from 6.5 pct. In addition, the central bank increased the UPI limit for hospitals and educational institutions from Rs 0.1 mn to Rs 0.5 mn. e-Mandates for recurring online transactions, an additional factor of authentication (AFA) is currently required for recurring transactions exceeding Rs.15,000. RBI proposed to enhance this limit to Rs 0.1 mn per transaction for recurring payments of mutual fund subscriptions, insurance premium subscriptions and credit card repayments.
SEBI is planning to implement same-day settlement of trades on the bourses, known as T plus zero (T+0) settlement trade, by the end of the current FY2023-24. According to SEBI’s chairperson Sebi wants the T+0 settlement norm in place by the end of March 2024, and T plus instantaneous settlement 12 months later.” Earlier in January 2023, the Indian stock market switched to T+1 settlement, in which trades are settled the following business day. Previously, the system was T+2.
Minister of State for Finance, said that India is on track to reach the USD 5 trillion economy milestone in the early phases of the Amrit Kaal, as part of its bigger goal of becoming an advanced economy by 2047. According to the IMF, India is on track to become a USD 5 trillion economy with the third-largest GDP by 2027-28. Chaudhary underlined that attaining USD 5 trillion will be aided by a strong rupee, resulting from macroeconomic stability.
According to S&P Global, India’s services Purchasing Managers’ Index (PMI) in November fell to 56.9 as compared to 58.4 in October. This is the lowest figure in 2023 so far. Before this, services PMI was recorded at 57.2 in January. India’s gross foreign direct investment (FDI) inflows dropped almost 16 pct in the first six months of FY24 from a year before to USD 33.12 bn, the second straight fall in the first half of a fiscal.
Stocks/Sector in Spotlight
- Adani Group stocks gained after reports said that the US agency concluded accusations against the Gautam Adani-led conglomerate weren’t relevant. According to a report, a senior US official stated that the US government deemed Hindenburg Research’s accusations of corporate fraud against Indian billionaire Gautam Adani irrelevant. Adani Total Gas gained 65 pct, Adani Green gained 51 pct and Adani Energy Solutions gained 32 pct.
- Adani Ports & Special Economic Zone recorded strong cargo volumes of around 36 MMT, a robust 42 pct YoY increase in November 2023. Growth witnessed across all three broad cargo categories – dry bulk (over 60 pct YoY), containers (over 26 pct) and liquids and gas (over 23 pct). In the initial eight months of FY 24 (April-November 2023), the company handled around 275 MMT of cargo, a healthy 21 pct YoY growth.
- HDFC Life Insurance fell by 2.82 pct and was the top loser of the week on Nifty. Its premium collection declined by 20.70 pct to Rs 21.59 bn in the month of November 2023 as compared to Rs 27.23 bn for November 2022. The company’s individual Annual Premium Equivalent (APE) was down 4 pct YoY. Life Insurance Corporation reported a 33 pct drop in premiums in November. Individual Annual Premium Equivalent (APE) for LIC was down 9 pct YoY. In November 2023, LIC collected a total premium of Rs 161,345 mn. In November, SBI Life recorded a 10 pct decrease in premiums compared to the same time the previous year. Individual APE for the company was down by 3 pct YoY basis. In November 2023, HDFC collected a total premium of Rs 23,817 mn.
- Sugar stocks corrected after central government directed all sugar mills not to use sugarcane juice or syrup for making ethanol this year and has allowed the production of ethanol from B-heavy molasses as it is. This will help augment the demand-supply balance and avoid an undesired sharp rally in domestic sugar prices, especially during the election season. The direction came as negative news for the sugar companies, as ethanol has a higher margin than sugar.
- Force Motors produced 2,216 units in comparison to 2,073 units the previous year. While total production climbed YoY, while it decreased MoM. Production in the preceding month was 2,852 units. Similarly, overall domestic sales climbed by 6.7 pct YoY to 1,732 units from 1,623 units but fell by 23.2 pct MoM from 2,254 units in October. Meanwhile, the company’s overall sales exports in November were 339 units, up from 329 units the previous year. According to the filing, the total number of shipped units in October was 450.
- Bharat Electronics Limited received an order of Rs 5.8 bn from Indian Army for AMC of Radars. This project will have participation of Indian electronics and associated industries, including MSMEs, which are sub-vendors of BEL. The Company has also received additional orders worth Rs 33.35 bn. The said orders pertain to AMC for AEW&C system (Airborne Early Warning & control), Uncooled TI sights, Software Defined Radios, SWIR pay load, AMC for IACCS, Passive Night Vision Binoculars etc. cumulatively BEL has received orders worth Rs 182.98 bn in the current FY23-24.
- Hero MotoCorp and Ather Energy have entered into a partnership for an interoperable fast-charging network in India. Through this collaboration, EV users will be able to seamlessly use both VIDA and Ather Grids across the country. The combined network will cover 100 cities with over 1900 fast-charging points. The interoperable network will accelerate EV adoption by strengthening the overall segment and promoting a convenient ownership experience.
- Lupin Limited announced that it has received approval from U.S. FDA for its Abbreviated New Drug Application for Varenicline Tablets, 0.5 mg and 1 mg, to market a generic equivalent of Chantix Tablets, 0.5 mg and 1 mg, of PF Prism C.V. The product will be manufactured at Lupin’s Pithampur facility in India. Varenicline Tablets, 0.5 mg and 1 mg are indicated for use as an aid to smoking cessation treatment. Varenicline Tablets RLD Chantix had estimated annual sales of USD 430 mn in the U.S.
International Updates
- US initial jobless claims ticked up to 220,000, an increase of 1,000 from the previous week’s revised level of 219,000. Economist had expected jobless claims to rise to 222,000 from the 218,000 originally reported for the previous week.
- US wholesale inventories declined by 0.4 pct in October after coming in unchanged in September. Economists had expected wholesale inventories to dip by 0.2 pct.
- US factory orders plunged by 3.6 pct in October after jumping by a downwardly revised 2.3 pct in September. Economists had expected factory orders to tumble by 2.6 pct compared to the 2.8 pct surge originally reported for the previous month.
- The euro area Gross domestic product shrunk 0.1 pct quarterly, offsetting the 0.1 pct expansion in the second quarter. The statistical office revised down the second quarter growth from 0.2 pct.
- Japan’s gross domestic product contracted a seasonally adjusted 0.7 pct on quarter in the third quarter of 2023. That missed expectations for a decline of 0.5 pct following the 1.2 pct expansion in the previous three months.
Outlook For the Week
Markets will keenly watch the major central banks policy meeting which is scheduled for this week- namely U.S Fed, Bank of England and European Central Bank. The central banks are expected to leave their policy rates unchanged.
On the macroeconomic front, IIP data for October will be released on 12 December and inflation rate will be declared on the same day. WPI inflation data is due on 14 December. Globally, China will announce its inflation data on 09 December and IIP data on 15 December. The U.S will announce inflation data on 12 December and retail sales data on 14 December.
At present, Sensex on weekly chart has posted third degree negative divergence as Sensex approaches weekly resistance line of 70,400. We expect significant gains to emerge from Nifty Service Sector related stocks in near term with maximum upside potential seen at 15% in Nifty Service Index as a whole. On the downside, for Sensex 68,400 should act as crucial support on weekly basis to confirm trend reversal.
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