Benchmark indices hit new highs; global cues, macro data to dictate trend in coming week
Nifty spot touched an all-time high last week and was able to close above its previous all-time high peak whereas Bank nifty already had been trading above its previous all-time peak. Federal Reserve Chairman Jerome Powell said the central bank was considering a smaller rate hike this month following four consecutive raises of three-quarter points each.
This boosted the risk-on sentiments and the markets rallied. However, the rising number of cases of Covid in China and citizens retaliating against the Zero-Covid policy kept Chinese markets under pressure. For the week, the Nifty was up 1% while the Nifty Midcap 100 and Nifty Smallcap 100 index outperformed and were up 3.1% and 2.3% respectively. Among the sectoral pack, Realty & Media index was up 4.2% each. The metal index gained 3.7% while the FMCG and IT index gained 2.4% each.
FIIs were net buyers to the tune of Rs 98.35 bn. Inflows were high given MSCI India semi-annual review became effective from November 30 which led to an inflow of Rs 90.1 bn which was the third-highest single-day net inflow into Indian equities. DIIs on the other hand sold equities worth Rs 13.37 bn during the week while they offloaded shares worth Rs 40.56 bn on November 30, the seventh-highest-ever outflow.
The Rupee ended the month of November with monthly gains for the first time this year after the dollar softened on the hope that Federal Reserve may slow down the rate hike prospects. The rupee touched as high as 81.08 last week followed by Powell’s dovish comments in a forum before the FOMC meeting on 14 December. The current decline in USDINR is temporary and we expect an immediate target towards 84.15.
A fall in the value of the Dollar Index may act negatively on Indian bond market which only has USD as an fx reserve. On the commodity front, Brent crude ended the volatile week at USD 85.4 a bbl as dollar weakness and hopes for improved fuel demand in China after COVID-19 curbs were eased in two major Chinese cities.
Gold prices were set for their best week in the last three weeks as the dollar weakened on prospects of slower U.S. Federal Reserve rate hikes and signs of cooling inflation. Gold prices have risen about 3% in the week in what would be their second straight weekly gain. For the week, Gold ended near USD 1809.6 an oz.
Stocks/Sector in Spotlight
- Automobile stocks- Wholesales in the 2W segment continued to witness inventory destocking amidst strong retail demand while PV segment retails were largely in line with wholesales. Chip shortage continued to hurt the scale of production of premium 2Ws, thus resulting in Nov’22 wholesale numbers.
- Hero Motocorp reported wholesale volumes of ~390k units, down 14% MoM (up 12% YoY). Bajaj Auto sales were down 22% MoM at ~306k units. TVS Motor reported a 23% MoM decline at ~277k units, up 2% YoY. Royal Enfield volumes contracted by 14% MoM to ~71k units (up 37% YoY) and exports at 5k units were 12% lower MoM.
- Maruti Suzuki’s domestic despatches fell 6% MoM to ~132k units (up 21% YoY). Exports too declined 3% MoM (down 8% YoY) at ~20k units. Mahindra & Mahindra (M&M) reported a 6% MoM decline in PV volumes at ~30k units with a 6% decline in UVs although still maintaining 30k UV volumes in Nov’22. Tata Motors’ despatches sustained at >45k levels for the seventh consecutive month reporting 46k units in Nov’22 with EV despatches at 4.45k units, up 2.5x YoY (up 4% MoM).
- In the CV space, Eicher Motors’ CV segment volumes were down ~19% MoM at ~5k units. Mahindra & Mahindra (M&M) witnessed a 7% MoM decline in CV volumes (up 31% YoY) to 20k units. In the tractor segment, M&M tractor volumes declined 5% MoM. Tata Motors’ domestic CV segment volumes fell ~12% MoM to ~27.4k units. Ashok Leyland reported M&HCV volumes at ~9.5k units, up 5% MoM, while LCV volumes were down 12% MoM
- The government announced a revision in windfall tax on energy companies as crude oil prices have fallen from its highs. Windfall tax on crude production has been revised to Rs 4,900 per tonne, from the existing Rs 10,200 per tonne. The government cut the rate on the export of diesel to Rs 8 per litre from Rs 10.5 per litre. The levy includes Rs 1.5 per litre as road infrastructure cess. The special additional excise duty on petrol continues to remain nil and that on aviation fuel ATF at Rs 5 a litre.
- City Gas Distribution companies (Indraprastha Gas, Gujarat, Mahanagar Gas)- Reports say that the Draft recommendations of the Kirit Parikh Committee are likely to provide respite to the natural gas sector. The panel may suggest a ceiling price of USD 6.5-7 per mmbtu for domestic gas, which could be increased by USD 0.5 per mmbtu every year and could eventually be market linked by the end of the 4th year.
Economy
- Reserve Bank of India launches the first pilot for the retail digital rupee. The e₹-R would be in the form of a digital token representing legal tender. It would be issued in the same denominations that paper currency and coins are issued.
- India’s GDP growth was reported at 6.3% during Q3 (Jul-Sep) of FY 2022-23 against 8.4% of FY 2021-22 for the corresponding quarter according to data released by the National Statistical Office (NSO)
- The gross GST revenue collection for the month of November accounted for Rs 1,45,867 crore, stated a press release on Thursday. The revenue collection has witnessed a surge of 11% on an annual basis
- According to survey data published by S&P Global showed, India’s manufacturing activity expanded at the fastest pace in three months, as output and new orders grew at sharper rates amid easing price pressures. The manufacturing Purchasing Managers’ Index rose to 55.7 in November from 55.3 in September. A reading above 50 indicates expansion in the sector.
- According to the National Statistical Office, India’s consumer price inflation softened in October from a five-month high. 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.
International News
- US construction spending fell by 0.3 percent to an annual rate of $1.795 trillion in October after inching up by 0.1 percent to a revised rate of $1.800 trillion in September. Economists had expected construction spending to dip by 0.3 percent compared to the 0.2 percent uptick originally reported for the previous month.
- US manufacturing PMI slipped to 49.0 in November from 50.2 in October, with a reading below 50 indicating a contraction. Economists had expected the index to edge down to 49.8.
- US initial jobless claims fell to 225,000, a decrease of 16,000 from the previous week’s revised level of 241,000. Economists had expected jobless claims to edge down to 235,000 from the 240,000 originally reported for the previous week.
- US real gross domestic product spiked by 2.9 percent in the third quarter compared to the previously reported 2.6 percent surge. Economists had expected the pace of GDP growth to be unrevised.
- Eurozone unemployment rate dropped marginally in October. The unemployment rate for October was 6.5 percent, down from 6.6 percent in September. In the same month last year, the jobless rate stood at 7.3 percent. Economists had forecast the jobless rate to remain unchanged at 6.6 percent in October.
Mutual Funds Industry Update
IIFL Mutual Fund launches India’s first passive tax saver scheme
IIFL Mutual Fund has launched the new fund offer (NFO) of IIFL ELSS Nifty 50 Tax Saver Index Fund, India’s first Tax Saver Index Fund. The NFO opens on December 1 and closes on December 21. The scheme will re-open for subscription and redemption on an ongoing basis from January 02. The scheme will provide the dual advantage of tax saving under Section 80C and the potential to benefit from diversified exposure to the equity markets. This is a passive fund that is relatively low cost, compared to actively managed schemes that tend to have a higher expense ratio.
IDFC Mutual Fund to be renamed Bandhan Mutual Fund
SEBI cleared the Bandhan-led consortium’s proposed acquisition of IDFC Asset Management Company. Earlier this year, a consortium of Bandhan Financial Holdings GIC and ChrysCapital signed an agreement to buy IDFC AMC and IDFC AMC Trustee Company from parent IDFC, for Rs 4,500 crore. After the transaction, BFHL will own about 60% and GIC and ChrysCapital will hold 20% each in IDFC AMC.
Edelweiss Mutual Fund launches fourth tranche of ‘BHARAT Bond ETF’
Edelweiss Mutual Fund has launched the fourth tranche of BHARAT Bond ETF. The BHARAT Bond ETF is India’s first corporate bond ETF and it is an initiative of the Government of India, from the Department of Investment and Public Asset Management the latter has given the mandate to Edelweiss Mutual Fund to design, launch and manage the product.
This new BHARAT Bond ETF and BHARAT Bond Fund of Fund (FOF) series will mature in April 2033. The NFO will start on December 2 and end on December 8. Through the launch of this new series in the fourth tranche, Edelweiss Mutual Fund proposes to raise an initial amount of Rs. 1,000 cr. with a green shoe option of Rs. 4,000 cr. So far, five maturities of Bharat Bond ETFs have been launched – 2023, 2025, 2030, 2031, & 2032.
“’BHARAT Bond ETF program has received an enthusiastic response from all categories of investors since its launch. BHARAT Bond has created a unique opportunity for all Indian investors to invest in PSU Bonds and fuel India’s growth story. Crossing a landmark Rs. 50,000 cr. AUM is a testament that BHARAT Bond has emerged as a trusted investment avenue with better tax efficiency for many Indian investors,” says Tuhin Kanta Pandey, Secretary, DIPAM, Ministry of Finance.
BSE StAR MF clocks record 2.32 cr transactions in Nov
Online mutual funds distribution platform BSE StAR MF has surpassed its previous high to process a record 2.32 crore transactions in November, clocking a growth of 10% month-on-month and 38% year-on-year. The previous high was in October 2022 when 2.1 crore transactions were processed. Overall, the transactions during the second quarter of FY23 recorded a growth of 36% at 5.91 crores, compared with 4.26 crore in the same period last year.
Outlook Week Ahead
For the coming week, RBI Policy Meet between December 5 and 7 will be keenly watched. The MPC is expected to increase the repo rate by 25-35 bps. It is widely expected that The RBI will signal a slower pace of tightening at its upcoming review, as downside risks to growth outweigh the upside risks to inflation. The US Federal Open Market Committee (FOMC) meeting will be on December 14.
The Gujarat Assembly elections results that will be declared on December 8 will be an important pointer ahead of the 2024 general elections. Last week, the Nifty has managed to post weekly closing above the key resistance of 18580 despite selling pressure on Friday. The breakout above 18580 can help Nifty 50 to scale towards 19867.
In the immediate terms, we expect India VIX to decline towards 9%, and then Nifty 50 may resume its upward journey. In the short term, any decline should be seen as a buying opportunity with stop loss for a long position placed at 18100.
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.
