Nifty slips near the bear market range; Macroeconomic data in focus
Markets continued to reel under pressure on weak domestic and international cues as Nifty dipped below the crucial long-term support of the 200-Day EMA of 17,569 levels. Markets were worried that the US Federal Reserve might raise interest rates further to curb inflation along with fresh foreign fund outflows also dented investor sentiments. Markets also reacted to hawkish comments from the Reserve Bank of India’s Monetary Policy Committee where the RBI Governor highlighted that there is considerable uncertainty on the trajectory of inflation in the country due to geopolitical tensions, global market volatility, rising non-oil commodity rates, swings in crude oil prices and weather-related events.
The Nifty ended the week down 2.7 pct to 17,466 levels and the Nifty Midcap 100 and Nifty Smallcap 100 indices fell 1.8 pct and 2.1 pct respectively. Nifty Bank remained weak and was down 3 pct and is trading below its 200-day EMA now. On the institutional activity front, FIIs were net sellers to the tune of Rs 31 bn and DIIs were net buyers to the tune of Rs 32 bn.
Crude oil prices witnessed selling throughout the week as investors became more concerned that recent data will prompt more aggressive interest rate increases by central banks. Brent crude ended flat at USD 83 a bbl on a week-on-week basis. Gold prices posted negative returns in the week on expectations that the Federal Reserve’s interest rates would have to go higher to control inflation. Prices fell from USD 1,840 an oz to USD 1,817 an oz on weekly basis.
Some concerns on the weather front have emerged as climate experts have predicted that this year we may see a monsoon deficit as there is a possibility of an El Nino Phenomenon. El Niño has an inverse relationship with monsoons, which means rainfall is usually subdued during such a year. Forecasts of an El Nino that could result in a rainfall deficit this summer are likely to hit consumption in rural India. A more reliable picture of what the phenomenon could entail would emerge only closer to April-May.
Stocks/Sector in Spotlight
- Shares of LIC Ltd. witnessed weakness and dipped to an all-time low as reports indicated that the institution has witnessed a notional loss of Rs 497.28 bn on its investments in the Adani group stocks. The combined market value of LIC’s investments in seven Adani stocks plunged to Rs 332.42 bn as on 23 Feb’23 from Rs 829.70 bn as on December 31, 2022.
- Divi’s Lab witnessed buying interest- gained 3 pct and was the top index gainer on defensive buying. ITC too extended gains on defensive buying and is trading at Rs 385. The stock has gained over 16 pct YTD as compared to about 2.7 pct fall in benchmark indices, on the back of healthy Q3 earnings as well as brokerages remaining bullish on the all-round performance.
- Tata Motors has signed an agreement with ride-hailing company Uber to supply 25,000 electric vehicles (EVs). The agreement is the largest EV commitment between an automotive manufacturer and a ride-sharing platform in India.
- Infosys will expand its collaboration with Microsoft, to help accelerate enterprise cloud transformation journeys worldwide. According to the Infosys Cloud Radar, enterprises can add up to USD 414 bn in net new profits, annually, through effective cloud adoption. The report also calculated that adopting the cloud improved speed to market and the ability to discover new revenue streams and resulted in increased profit growth by up to 11.2 pct YoY.
- Bharat Electronics (BEL) has signed an MoU with Aeronautical Development Agency (ADA), DRDO, for the Advanced Medium Combat Aircraft (AMCA) programme. The MoU was announced on the sidelines of the “Bandhan” event held at Aero India 2023.
International News
- US real gross domestic product jumped by 2.7 pct in the fourth quarter compared to the previously reported 2.9 pct surges. Economists had expected GDP growth to be unrevised.
- US initial jobless claims edged down to 192,000, a decrease of 3,000 from the previous week’s revised level of 195,000. The dip surprised economists, who had expected jobless claims to inch up to 200,000 from the 194,000 originally reported for the previous week.
- US existing home sales slid 0.7 pct to an annual rate of 4.00 million in January after tumbling by 2.2 pct to a revised rate of 4.12 million in December. The continued decline surprised economists, who had expected existing home sales to inch up by 0.1 pct compared to the 1.5 pct slumps originally reported for the previous month.
- Eurozone inflation slowed less than estimated in January and remained at an elevated level. The harmonized index of consumer prices gained 8.6 pct on a yearly basis in January, following December’s 9.2 pct increase.
- Hong Kong’s consumer price index, or CPI, climbed 2.4 pct year-over-year in January, faster than the 2.0 pct rise in December. Further, this was the strongest inflation since September 2022, when prices had risen 4.4 pct.
Mutual Funds Industry Update
SBI Mutual Fund launches SBI Dividend Yield Fund
SBI Mutual Fund announced the launch of the SBI Dividend Yield Fund, an open-ended equity scheme that will invest predominantly in a well-diversified portfolio of equity and equity-related instruments of dividend-yielding companies. The new fund offer (NFO) is open, and it will close for subscription on March 6. The first-tier benchmark of the fund is the NIFTY 500 TRI. The Fund will invest in businesses across market capitalization, be style agnostic with no sector bias, with attractive dividend yields plus potential growth in dividends, and aim to achieve an aggregate dividend yield that is at least 50% higher than that of the Nifty 50 Index. The scheme will consider dividend-paying stocks that have paid dividends or repurchased shares in at least one of the previous three fiscal years, the fund house added.
Navi Mutual Fund launches Navi ELSS Tax Saver Nifty 50 Index Fund
Navi Mutual Fund has announced the launch of the Navi ELSS Tax Saver Nifty 50 Index Fund, a passive ELSS tax-saver fund. The New Fund Offer will commence on February 14 and conclude on February 28. With an expense ratio of 0.12% under the direct plan, it will be the lowest-cost tax-saving ELSS fund in India. Being a tax-saving mutual fund scheme, it will have a mandatory lock-in period of three years. There will be no exit load on withdrawal post the expiry of the lock-in period. Investors can start investing for as low as Rs 500. Recently, SEBI issued guidelines that enabled mutual fund houses in India with an existing active tax saver ELSS scheme to launch a passive ELSS scheme post restricting inflows in the active scheme. With the launch of the Navi ELSS Tax Saver Nifty 50 Index Fund, Navi will be the first mutual fund in India to take advantage of these guidelines.
Outlook Week Ahead
For this week, markets will track closely the macroeconomic data that is slated to be released. The Q4 Gross Domestic Product (GDP) will be released on Tuesday, February 28. On the same day, the core sector data for the month of January will be released. Investors will also keep track of the S&P Global Manufacturing PMI data for the month of February, scheduled to be released on March 1. The manufacturing PMI fell to a three-month low of 55.4 in January of 2023 from 57.8 in December. On March 3, the S&P Global Services PMI data for the month of February will be released. The services PMI declined to 57.2 in January 2023 from December’s six-month high of 58.5. On the same day, India’s foreign exchange reserves data will also be released. Also, the G20 Foreign Ministers’ meeting will be held in Delhi on March 1 and 2.
On the international front, in the U.S. Durable Goods Orders, Pending Home Sales, and Dallas Fed Manufacturing Index will be on February 27. Wholesale Inventories, Goods Trade Balance is scheduled on February 28, API Crude Oil Stock Change, S&P Global Manufacturing PMI, ISM Manufacturing PMI on March 1 while initial Jobless Claims on March 2, S&P Global Services PMI and Baker Hughes Total Rig Count on March 3. On March 4, investors will be looking at Fed Barkin’s Speech.
Technically, with the Nifty 50 forming a lower low for six consecutive trading sessions, the short-term oscillators have entered into an oversold terrain and the last two day of negative closing in India VIX warrants caution for the continuation of a negative trend. In fact, after Friday’s decline, the Dollex 30 i.e. Sensex in USD has formed a bullish falling wedge setup which has an implication of 10 pct gains in the near term. Hence Nifty 50 is likely to witness a major trend reversal on a close above 17,534.
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.
