Nifty bounces from support; Global cues, Brent prices to be watched
Nifty closed in the green after 5 consecutive losses on the weekly chart. Buying interest was seen in metal stocks followed by auto and consumer durable stocks last week. Conversely, there was a trend of profit-taking in oil & gas, FMCG and pharmaceutical stocks. Healthy macroeconomic data, including the June quarter GDP numbers and August GST revenue figures, were positive factors that boosted the sentiments.
The global stock market remained in the uptrend as investors bet that the Federal Reserve will refrain from further raising interest rates this year post data showed signs of a slowdown in the labour market. For the week, the Nifty ended up 0.9 pct to 19,435 levels while the Nifty Midcap 100 and Nifty Smallcap 100 gained 2.5 pct and 4.4 pct respectively. FIIs were net sellers to the tune of Rs 43.15 bn and DIIs were net buyers to the tune of Rs 95.68 bn.
On the commodity side, Gold posted its second consecutive weekly gain, up 1.4 pct to USD 1,967 an oz benefitting from reduced prospects of U.S. interest rate hikes this year. Brent crude gained 4.6 pct to USD 88.55 a bbl and witnessed a significant surge.
On the macro front, India has been witnessing deficient rainfall in the month of August and it stands at 32 pct below LPA compared with a 13 pct (above LPA) surplus rainfall received back in July.
Gross domestic product grew 7.8 pct YoY in the April to June quarter, which was a tad faster than the 7.7 pct expansion economists had forecast. In the same quarter last year, growth was 13.1 pct. The Indian economy had grown 6.1 pct in the March quarter. The Goods and Services Tax (GST) revenues for August 2023 have shown a growth of 11 pct YoY to around Rs 1.60 trillion due to increased compliance and less evasion.
Stocks/Sector in Spotlight
- Bharat Electronics has received defence and non-defence orders worth Rs 3,289 crore during July and August 2023 (till date). These orders also include the Rs 1,075-crore contract received from Hindustan Shipyards for the supply of CMS, communication systems, EW systems and other sensors for fleet support ships. With these orders, BEL has received orders of Rs 11,380 crore in current financial year.
- Garden Reach Shipbuilders & Engineers has signed a contract with the DEMPO Group, the business house of Goa, to launch a collaboration model to build commercial vessels in three premier shipyards of DEMPO at Goa and Bhavnagar. This is Garden Reach’s maiden attempt to diversify in commercial shipbuilding to capture a large market share in the construction of commercial vessels, both domestic as well as international.
- Chairman Mukesh Ambani made several significant announcements during the 46th Annual General Meeting (AGM) of Reliance Industries (RIL). The key announcements ranged from Jio True 5G to Jio Smart Home Services, as well as revisions to the company’s board structure. Nita Ambani stepped down from the RIL board and Anant, Akash and Isha were appointed as non-executive directors of the RIL board. The newly listed demerged arm of Reliance, Jio Financial Services, is set to enter the life, general, and health insurance segment. However, the AGM was missing the key details regarding the IPO timelines for its telecom and retail businesses.
- Maruti Suzuki revealed plans to double production capacity over 8 years. It plans to tap into its existing cash reserves of Rs 45,000 crore to achieve a cumulative production of 4 million cars by FY2030-31. The company also said it plans to invest Rs 45,000 crore to double its production capacity.
- The Adani Group stocks remained weak after an investigation by the Organized Crime and Corruption Reporting Project (OCCRP) stated that funds were routed into shares of the Adani Group through covert Mauritius funds, concealing alleged relationships with family members.
- L&T shareholders have approved Rs 100 bn buyback. The Company has fixed September 12 as the record date for its buyback, which will be done through the tender route.
- MTAR Technologies gained 20 pct during the week after it was granted a Defense Industrial License to manufacture various mechanical and electrical subsystems for the defence industry. This will help the Company to do business with foreign MNCs on numerous defense projects.
- Shares of BHEL Ltd. gained about 30 pct during the week to Rs 136 after winning an order from NTPC to build the 2×800 MW supercritical thermal power project Stage-II at Lara in Chhattisgarh. The Company expects Unit 1’s contract to be fulfilled within 48 months, and Unit 2’s contract is expected to be fulfilled within 52 months.
International Updates
- US initial jobless claims edged down to 228,000, a decrease of 4,000 from the previous week’s revised level of 232,000. Economists had expected jobless claims to inch up to 235,000 from the 230,000 originally reported for the previous week.
- US gross domestic product in the second quarter was downwardly revised to 2.1 pct from the previously reported 2.4 pct. Economists had expected the pace of GDP growth to be unrevised.
- China’s factory activity in August shrank for a fifth straight month, while non-manufacturing activity hit a new low for the year signs that the economy may not yet have bottomed out.
- The official manufacturing purchasing managers’ index came in at 49.7 in August, according to data from the National Bureau of Statistics. Official data also showed China’s official non-manufacturing PMI falling to 51.0 in August — compared with 51.5 in July and 53.2 in June.
Mutual Funds Industry Update
- Kotak Mutual Fund has launched Kotak Multi Asset Allocation Fund, an open-ended scheme investing in equity, debt and money market instruments, commodity ETFs and exchange-traded commodity derivatives. The new fund offer or NFO of the scheme is open for subscription, and it will close on 14 September 2023.
Outlook for the Week
Global cues, USDINR movement, variation in crude oil prices and institutional flows will be in focus this week. On the macro data front, the S&P Global Services PMI for August will be declared on 5 September. Globally, China will declare the Balance of Trade data for August 2023 on 7 September. The US ISM Services PMI data for August will be announced on 6 September.
The government has convened a special session of Parliament for five between 18-22 September. The exact agenda of the sessions is unknown. The G-20 Summit is scheduled between September 9 and 10 in New Delhi.
Friday’s rebound was mainly on the back of retail euphoria which suddenly pumped an additional Rs 32,000 crore into the system compared to the previous day and this may be termed as unusual buying to protect weekly closing. Friday’s up move has the maximum potential to extend towards 19,520 which turns out to be a 38.2% retracement of the entire down move and is likely to be followed by a severe down leg towards to 17,500. The key trigger that may cause a sharp decline in Indian markets is Brent crude crossing the USD 90 a bbl mark after a recent upsurge beyond 38-week highs. overall outlook for the market remains highly cautious as US bond yields especially 2-yr and 10-yr have already shown an inverted curve. Short positions can be added on moves below 65,174 in Sensex.
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