Weekly Market Wrap For 9th To 13th January

Table of Contents

Nifty still in a range; Q3 results to set cues for the week

Equity markets remained highly volatile in the week gone by as tug-of-war between bulls and bears continued near the key Nifty levels. Nifty closed above its key support levels of 17800 while Nifty Bank witnessed late buying to close above the 42300 mark during the week. Foreign investors continued to remain on the sell side. The dollar index was on track for the worst week since Nov. 11, 2022.

For the week, the Nifty ended higher by 0.5 pct to 17,957 and the Nifty Midcap 100 and Smallcap 100 indices stayed flattish. On the sectoral front, the Nifty IT index gained 3.5 pct and the Nifty Metal index was up 2.6 pct. Nifty Bank gained 0.4 pct. The nifty FMCG index fell 1 pct and was the only sectoral loser. FIIs continued their selling and were net sellers to the tune of Rs 96.04 bn and DIIs were net buyers to the tune of Rs 100.39 bn.

On the commodities front, gold prices saw a fourth straight weekly gain supported by a weaker dollar and expectations of slower interest rate hikes by the U.S. Gold in the past three months has been trending higher by 15% in USD terms despite the hawkish stance by US Fed as Gold as emerged as a safe haven when Nasdaq Composite has slumped towards 52 weeks low.

The main trigger for the rise in Gold comes from a sharp selloff in the Dollar index which slumped from 115 to 104 and is poised for another 10% decline in the near term. The Dollar index is inversely correlated to commodities. Hence, we should see gold prices in USD terms rally another 20% in the near term as Dollar weakens against a basket of developed currencies.

In INR terms, we expect gold prices to soon test Rs 60,000 before we see global central banks coming into action to raise interest rates aggressively to curb currency liquidity. Crude oil prices too gained 8.5 pct for the week amid the expectation of a rebound in China demand. For the week, Brent ended at USD 85.28 a bbl against USD 78.57 a bbl last week.

USDINR for the week ended with losses of more than 1 pct on the back of aggressive intervention by RBI in the forex market to protect the Rupee at a time when the Dollar Index triggers heavy sell-off. The sharp drop in USDJPY below 130 has triggered major volatility in global currencies and Rupee has faced significant weakness against JPY and EUR. For USDINR, 81 is seen as strong support from where the rebound is expected with a potential target of 85. The rising base metals and crude oil prices are likely to put major pressure on the rupee with a surge in gold prices seen as a ‘flight to safety’.

Stocks/Sector in Spotlight

IT Sector

Some of the key IT companies reported their Q3FY23 numbers. Infosys Q3FY23 results were healthy leading to an upward revision in its revenue guidance to 16-16.5 pct from earlier guidance of 15 pct-16 pct. Margin is expected to be at the lower end of the earlier guided range of 21 pct-22 pct. Seasonally weak Q3 quarter led to revenue growth of 2.4 pct/13.7 pct QoQ/YoY in CC terms. Dollar revenue increased by 2.3 pct/9.6 pct QoQ/YoY (v/s 2.5 pct/13.9 pct QoQ/YoY in prev quarter). Growth was broad-based across all the geos and verticals. The company is seeing challenges in mortgage and investment banking, retail, and Hi-tech.
TCS reported a decent set of numbers though lower than analysts’ expectations. Rupee & Dollar revenue grew 5.3 pct/2.9 pct QoQ respectively (v/s 4.8 pct/1.4 pct in the previous quarter). Revenue in CC terms expanded by 13.5 pct YoY (v/s 15.4 pct in the previous quarter). Order book mix – BFSI at $2.5 bn, Retail at $1.2 bn, and North America at $4.2 bn. Employee headcount at 613,974; QoQ reduction of 2,197 (v/s addition of 9,840 in Q2FY23). The reduction in headcount is due to higher intake during the past few quarters & management’s focus on improving utilization according to the management.
HCL Technologies’ revenue came in at USD 3,244 mn in 3QFY23 (up 5 pct QoQ and up 9 pct YoY), 1.4 pct, above expectation. The sequential constant currency growth stood at 5 pct. The Company guided for 13.5-14 pct (from 13.5-14.5 pct earlier) CC FY23 revenue growth on the back of continued traction in the services business, healthy deal intake, and deal pipeline. However, it revised its FY23 EBIT margin guidance to 18-18.5 pct from 18-19 pct earlier (with the probability of meeting a lower range of guidance).
Wipro guided for an 11.5-12.0 pct growth in IT Services revenues in CC terms. This translated into -0.6-1 pct growth sequentially in constant CC terms for Q4FY23. The guidance was lower than the nil-2 pct guidance that analysts anticipated ahead of the quarterly earnings. Total order bookings stood at USD 4.3 bn at the end of the December quarter, up 26 pct YoY.
The Auto Expo 2023 was eventful as most companies displayed their prowess within concept vehicles (EV/Hydrogen Fuel Cell/Flex Fuel options). Leading 2W OEMs saw limited participation in showcasing their preparedness with flex-fuel engines. PV and CV segments were in limelight with new product introductions. Leading OEMs (MSIL, TaMo, Hyundai, Kia, Ashok Leyland, MG, BYD, etc.) displayed their R&D prowess with EVs, PHEVs, and FCEVs. MSIL unveiled two new SUVs at the Auto Expo – Baleno-based SUV coupe Fronx and 5-door SUV Jimny. TaMo showcased new EVs. The company unveiled Sierra EV, AWD Harrier EV, the born-electric Avinya EV concept, and Curvv SUV. All these models are expected to be launched over the next 2-3 years. It expects the share of EVs in its portfolio to increase to 25 pct over the next 5 years and 50 pct by 2030. Except for MSIL’s SUVs and TaMo Curvv, none of the OEMs are planning any major ICE model launch (barring facelifts).
MCX gained sharply and was up 11 pct for the week after SEBI allowed exchanges to reintroduce multiple contracts (especially mini contracts) in non-precious metals (other than gold and silver) such as base metals (Aluminium, Copper, Lead, Nickel, and Zinc) and crude.
Tata Motors gained about 8 pct and was the top Nifty gainer after its global wholesales in the Q3, including that of Jaguar Land Rover (JLR), stood at 3,22,556 units, up 13 pct on a YoY basis reflecting gradual improvement in chip supplies.
Dmart reported a 6.7 pct YoY rise in consolidated net profit to Rs 5.9 bn for Q3 which was sharply below estimates. Consolidated revenue grew 25.5 pct YoY to Rs 115.69 bn, in line with expectations and a provisional update shared by the Company earlier. During the quarter, the company added just 4 stores. This is half of what it had in the September quarter. The total store count as of December 31 stood at 306.
HDFC Bank net profit rose 18.5 pct to Rs 122.59 bn in Q3FY23. Its asset quality remained stable during the quarter as GNPAs came in at 1.23 pct versus 1.23 pct in Q2 and as against 1.26 pct during the same period last year. Net NPAs as a pct of total advances remained unchanged sequentially at 0.33 pct. The bank’s provisions during the quarter fell 13.38 pct to Rs 28.06 bn from Rs 32.40 bn in the previous quarter.
Reliance Industries, an arm of Reliance Jio Infocomm, has invested Rs 40,446 crore as it expanded its footprint in Tamil Nadu with the unveiling of True 5G services in five cities. The company on Wednesday rolled out 5G services in Coimbatore, Madurai, Tiruchirappalli, Salem, Hosur, and Vellore in addition to the facility already being available in Chennai.
L&T Technology Services has agreed to acquire the Smart World & Communication (SWC) Business of L&T, enabling LTTS to combine synergies and take offerings in Next-Gen Communications, Sustainable Spaces, and Cybersecurity to the global market.

Macro updates

India’s Industrial production advanced 7.1 pct on yearly basis, reversing a revised 4.2 pct fall in October. This was also much bigger than the 2.6 pct increase expected by economists.
India’s consumer prices advanced 5.72 pct on a yearly basis in December, slower than the 5.88 pct increase seen in November. In the same period last year, inflation was 5.66 pct.

International News

US initial jobless claims slipped to 205,000, a decrease of 1,000 from the previous week’s revised level of 206,000. The dip surprised economists, who had expected jobless claims to rise to 215,000 from the 204,000 originally reported for the previous week.
The US consumer price index edged down by 0.1 pct in December after inching up by 0.1 pct in November. Economists had expected consumer prices to come in unchanged.
China’s exports and imports declined at the end of the year. Exports posted an annual fall of 9.9 pct in December, almost in line with economists’ forecast of -10.0 pct. At the same time, imports decreased by 7.5 pct from the last year, compared to the expected fall of 9.8 pct.
China’s consumer price index, or CPI, rose 1.8 pct YoY in December, as expected, after a 1.6 pct increase in November.

Mutual Funds Industry Update

Aditya Birla Sun Life launches Multi Asset Allocation Fund

Aditya Birla Sun Life Mutual Fund has announced the launch of Aditya Birla Sun Life Multi Asset Allocation Fund, an open-ended scheme investing in equity, debt, and commodities. The fund will focus on diversifying its investments across a variety of asset classes. The NFO will be open for subscription from January 11 to January 25.

According to the press release, the equity portion of the portfolio will follow a Flexi cap approach with a large cap bias and can invest across sectors/themes. The fixed-income portfolio will largely use the Accrual strategy. The fund house will maintain a 65-80 pct allocation to equity, 10-25 pct to fixed income, and a 10-25 pct allocation to commodities.

HSBC Mutual Fund launches multi-cap fund NFO

HSBC Mutual Fund has launched HSBC Multi Cap Fund, an open-ended equity scheme investing across large-cap, mid-cap, and small-cap stocks. The new fund offer (NFO) opens on January 10. It will close for subscription on January 24. This will be the first NFO post the acquisition of L&T AMC and schemes of L&T Mutual Fund by HSBC Asset Management.

HDFC Mutual Fund launches Long Duration Debt Fund

HDFC Mutual Fund has announced the launch of the HDFC Long Duration Debt Fund that will invest in long-dated government securities with roll-down strategy. HDFC Long Duration Debt Fund is an open-ended debt scheme that aims to invest in debt instruments such that the Macaulay Duration of the portfolio is greater than 7 years.

The NFO opens on January 06 and closes on January 17. The fund house also says that the Fund aims to provide a hedge against long-term expected inflation and offer tax-efficient regular cash flows through a Systematic Withdrawal Plan. With the recent rise in interest rates, HDFC Long Duration Debt Fund also offers investors an opportunity to invest in the longer end of the yield curve and earn prevailing yields, says the fund house.

Outlook Week Ahead

For this week, investors will track domestic as well as global factors for the market trend. Some of the key results that are expected this week are IndusInd Bank, Asian Paints, HUL, Hindustan Zinc, and L&T Technology Services. Union Budget is another important trigger for the markets in the coming weeks. Markets have already started discounting the budget expectations in the key sectors.

On the global front, the Fed is expected to raise rates again at its next meeting, which concludes Feb. 1, although it is expected that it could be a smaller increase than December’s half percentage-point hike. As declines in Indian markets are taking place on lower volumes, this implies that the retail money which was holding up markets at higher levels is facing a liquidity crunch and hence is unable to initiate follow-up buying at lower levels.

The sharp drop in USDJPY below 130 also indicates major turmoil for Indian markets in the coming days with maximum selling expected in Service Sector stocks. For Sensex key levels to watch on a closing basis would be 59952 below which may see an immediate hit towards 17222 in the Nifty 50 Index.

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.