Markets sees selling pressure; Derivative expiry to dictate trend in coming week
Nifty took a pause last week after four weeks of consecutive gains as selling pressure was observed at higher levels on the back of profit booking. Nifty Bank however still managed to close higher in the week gone by. Volatility was also observed during the week as the tug-of-war between bulls and bears kept Indian markets on shaky ground.
Global stock markets remained cautious as hawkish comments from a U.S. Federal Reserve official and data showing the labor market remained tight led some investors to worry about more interest rate hikes. The U.K. Budget set out a package of around £30 billion in spending cuts and £24 billion in tax rises over the next five years.
For the week, the Nifty ended down by 0.2% to 18,308 levels while the Nifty Midcap 100 and Nifty Smallcap 100 underperformed and were down 1.5% and 1% respectively. On the sectoral front, the Nifty Bank index gained 0.7% and Nifty It gained 0.3%. Nifty Auto was down 2%, and Nifty Energy & Nifty FMCG was down 1.7% each.
FIIs were net buyers to the tune of Rs 3.49 bn and DIIs were net buyers to the tune of Rs 22.74 bn. Crude oil prices are headed for a weekly loss of 8.4% to USD 87.88 a bbl as geopolitical tensions in Eastern Europe eased. Gold continued to be supported by rising recession risks, the still-evolving Ukraine war, and the peaking of the U.S. dollar.
Stocks/Sector in Spotlight
- Shares of One97 Communications, Paytm’s parent firm fell by 13.5% after SoftBank divested a 4.5% stake in the firm for Rs 1,631 crore through an open market transaction. Expiry of the lock-in period for pre-IPO investors is another reason for Paytm coming under intense selling pressure. 85.76% of the outstanding shares are now free to trade.
- Hindustan Zinc gained 9% after announcing a second interim dividend for FY23 for its shareholders. At the current market price of Rs 323, that translates into a dividend yield of 4.8%.
- Tata Motors was in the limelight after Thierry Bolloré resigned as the CEO of Jaguar due to personal reasons, with effect from 31 December 2022. Adrian Mardell was named as the Interim CEO.
- Metal stocks were in focus after the government reintroduced import duty of 2.5% and 5% on coking coal and coke respectively which was annulled at May-end this year.
- Banking stocks were in the limelight after the RBI Governor Shaktikanta Das held a meeting with the MD and CEOs of public sector banks and certain private sector banks and told them to be watchful of the evolving macroeconomic situation, including global spillovers, and take mitigating measures proactively.
Economy
- India’s Consumer price inflation slowed to 6.77 percent in October from 7.41 percent in September. Prices were forecast to rise 6.73 percent. In the same month of 2021, consumer prices had increased by 4.48 percent.
- India’s wholesale price index climbed 8.39 percent year-over-year in October, slower than the 10.70 rise in September. Economists had expected inflation to ease to 8.70 percent.
- India’s Industrial production rose 3.1 percent year-on-year in September, reversing a 0.7 percent fall in August. That was above the 2.0 percent increase expected by economists.
- India’s October merchandise trade deficit widened to $26.91 billion from $25.71 billion in September. India’s merchandise exports fell to $29.78 billion from $35.45 billion in September. Exports in October 2021 stood at $35.73 billion. Merchandise imports declined to $56.69 billion from $61.16 billion in the same period, the data showed. Imports in October 2021 stood at $53.64 billion.
International News
- US housing starts tumbled by 4.2% to an annual rate of 1.425 million in October after falling by 1.3% to an upwardly revised rate of 1.488 million in September. Economists had expected housing starts to slump by 2.0% to an annual rate of 1.410 million from the 1.439 million originally reported for the previous month.
- US initial jobless claims dipped to 222,000, a decrease of 4,000 from the previous week’s revised level of 226,000. Economists had expected jobless claims to come in unchanged compared to the 225,000 originally reported for the previous week.
- US Euro area inflation accelerated further in October, albeit at a slightly slower than initially estimated pace. Annual inflation rose to 10.6% in October from 9.9% in September. In the same month last year, prices had advanced only 4.1%.
- Eurozone construction output expanded slightly after falling in the previous month. Construction output rose 0.1% month-over-month in September, reversing a revised 1.0% fall in August.
- UK Budget set out a package of around £30 billion in spending cuts and £24 billion in tax rises over the next five years. The UK is facing elevated inflation as energy prices soared following Russia’s invasion of Ukraine. Between July and September, the UK’s gross domestic product (GDP) contracted by 0.2 percent, the latest data show.
Mutual Funds Industry Update
ICICI Prudential MF launches Nifty Financial Services Ex-Bank ETF
ICICI Prudential Mutual Fund has launched ICICI Prudential Nifty Financial Services Ex-Bank ETF, an open-ended exchange-traded fund tracking the Nifty Financial Services Ex-Bank Index. The scheme will invest in the top 30 companies of the financial services sector except for banks, based on free-float market capitalization from the Nifty 500 Index.
The New Fund Offer opens on November 16 and closes on November 25. According to a press release, Nifty Financial Services Ex-Bank Index is relatively less volatile than Nifty Bank Index across all time frames. The index has outperformed both the Nifty 50 index and the Nifty Bank index over the last 10 years.
IDFC Mutual Fund launches two target maturity funds
IDFC Mutual Fund has launched IDFC CRISIL IBX 90:10 SDL Plus Gilt– November 2026 Index Fund and IDFC CRISIL IBX 90:10 SDL Plus Gilt– April 2032 Index Fund, open-ended Target Maturity Index Funds that will invest in constituents of CRISIL IBX 90:10 SDL plus Gilt Index– November 2026 and CRISIL IBX 90:10 SDL plus Gilt Index– April 2032 respectively. IDFC CRISIL IBX 90:10 SDL Plus Gilt– November 2026 Index Fund opens on November 14 and closes on November 16.
HDFC Mutual Fund launches HDFC Business Cycle Fund
HDFC Asset Management Company has launched HDFC Business Cycle Fund which aims to invest in businesses likely on the cusp or amid a favorable business cycle. The NFO opens on November 11 and closes on November 25. According to the fund house, the fund will manage risks by being adequately diversified across sectors/sub-sectors / market cap, and across a number of stocks. The business cycle investing may gain from the dual benefits of earnings growth and improvement in valuations.
SIP AUM hits a new high of Rs 6.6 lakh crore in October amid the sustained retail flow
An unwavering retail inflow complemented by capital appreciation continues to benefit the funds linked to the systematic investment plans (SIP). The assets under management (AUM) of SIP funds reached a record Rs 6.6 lakh crore in October 2022 according to the data from the Association of Mutual Funds in India (AMFI). The cumulative twelve-month rolling SIP inflow was also at a new high of Rs 1.4 lakh crore with an average monthly inflow above Rs 13,000 crore.
Industry estimates show that nearly 90% of the SIP monthly inflows are deployed in equity funds. The share of SIP AUM in the total mutual fund AUM touched 16.8% in October, the highest since AMFI started reporting the data on its website, compared with the long-term average proportion of 11.4%. The AUM of the SIP-linked funds grew by 28.8% annually in the past five years, faster than the 13% growth in the industry AUM at Rs 39.1 lakh crore in the same period.
Outlook Week Ahead
In the past few days due to selling in B-group stocks the Nifty 50 Index has managed to show sharp outperformance compared to the Nifty 500 Index forcing the spread of the Nifty 50- Nifty 500 index to approach the weekly resistance mark. This along with a fall in the ratio of BSE Sensex to Gold BEES indicates the market has entered a crucial zone from where a 20-22% fall is not ruled out in the coming days. We would advocate extreme caution as long Nifty 50 trades below 18513 with a potential downside risk of 14700 remains quite active.
For this week, the trading is expected to be volatile on account of the derivative contract expiry on Thursday. Trends in global stock markets, the movement of the rupee against the dollar, and crude oil price movement will dictate the trend. FII and DII activity will be monitored closely. Gujarat Assembly Elections which will be held in two phases on December 1 and 5 will be closely watched closely. The results will be declared on December 8.
USDINR for the week confirmed a major reversal with the formation of the ‘Bullish Piercing Line’ pattern on the weekly chart and closing above the key hurdle above the 81.50 mark. The recent rebound from 80.50 confirms the end of the consolidation phase and the next leg of an up move should immediately extend USDINR towards 84.15. Overall, the USDINR and the rest of other rupee pairs like GBPINR, EURINR, and JPYINR are indicating a 5-6% upside in the next few days which may trigger major volatility for equity and the Indian bond market.
Disclaimer: The views expressed in the blog are purely based on our research and personal opinion. Although we do not condone misinformation, we do not intend to be regarded as a source of advice or guarantee. Kindly consult an expert before making any decision based on the insights we have provided.
