Nifty extends rally; Will Nifty Sustain the 20k mark?
Benchmark indices gained for the second week in a row and the Nifty settled above the key levels of 19,800 on the back of strong economic data. Markets have reacted positively to various announcements at the G-20 Summit. Globally, markets witnessed a volatile session with the biggest drag from Apple and a sell-off in chip stocks over concerns about China’s iPhone curbs, while a fall in weekly U.S. jobless claims led to worries about interest rates and sticky inflation. For the week, the Nifty ended higher by 2 pct to 19,820 levels while the Nifty Midcap and the Nifty Smallcap index gained 3.9 pct and 3.4 pct respectively. On the institutional activity front, FIIs were net sellers to the tune of Rs 92.19 bn and DIIs were net buyers to the tune of Rs 45.71 bn.
At the G-20 Summit, all members of the G20 agreed to act as one in the interests of peace, security and conflict resolution around the world. Among the announcements beneficial for corporate India are- the US said it plans to sign a joint infrastructure plan with India, Middle Eastern countries and the European Union aimed at connecting them via a network of railways and sea routes. On e-mobility, the U.S. and India welcomed progress to expand electric mobility in which will accelerate the procurement of 10,000 made-in-India electric buses. PM Modi has proposed to take an initiative at a global level to take ethanol blending in petrol up to 20 pct.
Crude oil prices surged to their highest levels since November as Saudi Arabia and Russia extended their voluntary production cuts until year-end, sparking concerns of winter supply shortages. Brent traded at USD 90 a bbl. Gold prices saw a weekly decline driven by the sustained strength of the U.S. dollar and stable Treasury yields. Gold ended the week at USD 1,942 an oz.
On the macro front, RBI announced the discontinuation of the Incremental Cash Reserve Ratio (I-CRR) in a phased manner to manage system liquidity without disrupting the money markets. India’s external debt as a proportion of GDP declined to 18.9 pct by the end of March 2023 from 20 pct at the end of March 2022, according to the MoF’s annual status report.
Stocks/Sector in Spotlight
- BHEL- The Electro-Mechanical (E&M) works of the country’s largest capacity hydropower project, the 2,880 MW Dibang Multipurpose Project in Arunachal Pradesh, have been awarded to BHEL. NHPC has given the business the order for the 12×240 MW project in Roing, Arunachal Pradesh’s Lower Dibang Valley area.
- Mazagaon Dock Limited (MDL) has signed a Master Ship Repair Agreement (MSRA) with the United States Government, which is represented by NAVSUP Fleet Logistics Center (FLC) Yokosuka. This is a non-monetary agreement. Only two shipyards in the country, including MDL, have signed the MSRA. The agreement is anticipated to allow MDL to perform voyage maintenance on US Navy ships.
- TCS bagged an order from JLR worth 800 mn pounds after it announced a strategic partnership with JLR’s Digital unit to reform, simplify, and help manage its Digital estate, as well as construct a new future-ready, strategic technological architecture to support the latter’s Reimagine agenda. This partnership will deliver substantial savings for JLR over the next five years, unlocking free cash flow to reinvest in the future.
- L&T has been issued a letter of intent in the Middle East for two packages worth a total of USD 4 bn. Aramco is the developer of the Jafurah field, which is the first unconventional gas field of Saudi Arabia with 2 trn cubic feet of reserves. It has awarded the contract for phase 1 worth USD 10 bn. The total estimated cost of the field is USD 100 bn over the life of the field.
- PVR Inox- After a robust July and a record August, September is beginning on a very positive note. Jawan’s advance bookings have surpassed Pathaan’s to create a record in presales. PVRINOX achieved its highest-ever monthly admissions and box office in the month of August 2023 led by ‘Gadar 2’ after a robust June.
International Updates
- US services PMI rose to 54.5 in August from 52.7 in July, with a reading above 50 indicating growth in the sector. The increase surprised economists, who had expected the index to edge down to 52.5.
- US trade deficit increased to $65.0 billion in July from a revised $63.7 billion in June. Economists had expected the trade deficit to rise to $65.8 billion from the $65.5 billion originally reported for the previous month.
- US factory orders tumbled by 2.1 pct in July after surging by 2.3 pct in June. Economists had expected factory orders to plunge by 2.6 pct.
- Euro area retail sales fell for the first time in four months and at a slightly faster-than-expected pace in July, led by a slump in sales of auto fuel. Retail sales decreased 0.2 pct month-on-month in July, which was slightly faster than the 0.1 pct fall economists had expected.
- China’s exports continued to fall in August but the pace of decline slowed more than expected. Exports slid 8.8 pct on a yearly basis in August but slower than the 14.5 pct decline in July, the General Administration of Customs reported. Moreover, the pace of decline was slower than the economists’ forecast of 9.2 pct.
- The monetary base in Japan climbed 1.2 pct on year in August, coming in at 667.447 trillion yen. That was well above forecasts for a decline of 0.7 pct following the upwardly revised 1.3 pct contraction in July (originally -1.4 pct).
Mutual Funds Industry Update
- Quantum Mutual Fund has filed a draft for a small-cap fund. Quantum Small Cap Fund will be an open-ended equity scheme predominantly investing in small-cap stocks. The scheme will be benchmarked against S&P BSE 250 Smallcap TRI. Chirag Mehta and Abhilasha Satale will manage the scheme. According to the scheme information document, the investment objective of the scheme is to generate capital appreciation by investing predominantly in small-cap stocks. The scheme will have direct and regular plans. It will have only the growth option.
- DSP Mutual Fund announced the launch of DSP Multi Asset Allocation Fund (DSP MAAF), an open-ended scheme that aims to offer investors long-term returns like what equities may offer but with added resilience against market falls. DSP MAAF aims to benefit investors by diversifying their investments between asset classes like domestic equities, international stocks, debt instruments, gold ETFs, other commodities and ETF and exchange Traded Commodity Derivatives (ETCDs), aiming to reduce overall risk.
- Old Bridge Capital Management (OBCM), a portfolio management firm, has received the final nod from markets regulator Sebi to commence its mutual fund business. Its asset management business has been named Old Bridge Mutual Fund.
- Zerodha Asset Management Ltd, one of India’s newest fund houses, is getting to ready to launch mutual fund schemes, nearly a month after it got its final license by the Securities and Exchange Board of India (SEBI). In keeping with its mandate to launch a passive scheme, Zerodha has filed draft offer documents with the market regulator to launch two schemes — Zerodha Tax Saver (ELSS) Nifty Large Midcap 250 Index Fund and Zerodha Nifty Large Midcap 250 Index Fund (ZN250). Both the schemes would be benchmarked against the Nifty Large Midcap 250 Index Fund.
Outlook for the Week
Trends in global markets, the movement of the rupee against the dollar and crude oil price movement will dictate the trend in the bourses in the coming week. A special Session of the Parliament called by the government for five days between 18-22 September will be watched closely by the markets. Globally, the ECB will announce its interest rate decision on 14 September. Investors are expecting the ECB to end its nine consecutive rate increase streak in this meeting.
With the recent sharp rally in the broader markets, the valuations for most mid and small-cap shares have become stretched. We advise investors to be selective in stock picking and avoid speculative bets at this point in time.
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