HDFC Securities Weekly Bulletin

Markets in the week gone by

Indian equity markets managed to end the week with decent gains setting new record highs for the third week in a row, driven by strong flows – both foreign and local. The Nifty snapped its six-day winning streak on Friday, while the Sensex ended lower amid concerns over increasing foreign portfolio investor (FPI) flows to China. BSE Sensex gained 1.22% and the Nifty 50 index added 1.50% over the week. The domestic equity market edged higher in three out of five trading sessions during this week.

In the broader markets BSE Midcap index rose 0.67% and the BSE Smallcap index remained flat over the week. Market breadth was equally distributed among gainers and losers.

Average cash turnover on NSE was marginally lower as compared to the previous week. Except for FMCG and Private Bank, all other indices ended in the green. Metal gained 7.1%, Oil & Gas was up 5.9%, Auto up 4.3%, PSU Bank up 3.4% and Power up 2.2%. Private Bank ended down 0.4% and FMCG was down 0.2%.

Among Nifty 100 stocks, Vedanta surged 14.0%, GAIL rose 11.7%, BPCL was up 10.9%; Tata Steel gained 9.6% and Tata Power added 9.3%. On the downside, Varun Beverages fell 7.0%; Bajaj Holding slipped 5.6%; Dabur was down 5.2%; Godrej Consumer fell 4.7% and Zomato declined 4.3%.

As per provisional figures, FIIs were net sellers of Rs 3933 crore in the equity markets during the week and DIIs were net buyers of Rs 15962 crore.

The blue-chip Dow Jones Industrial Average closed at a record high as a subdued inflation report stoked hopes for more Federal Reserve rate cuts, which enabled Wall Street's three main indexes to post weekly gains. US stocks gained for a third consecutive week — despite languishing on Friday — as investors were repeatedly reassured that the economy is cooling without falling off a cliff. Traders are currently pricing in a 56.7% chance of a 50-basis-point cut in November and a 43.3% likelihood of a 25-bp cut, according to the CME FedWatch Tool. Investors appeared to celebrate new stimulus measures in China. Chemicals and materials stocks were particularly strong on hopes for a rebound in Chinese demand. The Dow and the S&P added about 0.6% for the week, while the Nasdaq rose 0.95%.

US crude futures rose on Friday recovering some of the previous session's losses as Hurricane Helene forced Gulf of Mexico producers to cut output. Prices plunged earlier on reports that Saudi Arabia plans to increase production later this year and OPEC+ is scheduled to raise output by 180,000 barrels per day in December. For the week, the US oil benchmark was down 4.0% at $68.2/barrel. The dovish outlook for global central banks has supported gold's record performance and marked a third consecutive week of gains for the metal. The yellow metal experienced consecutive record highs, before retreating towards the end of the week as investors took profits. Gold prices were up 1.4% for the week at $2658.4/ounce.

The Indian 10yr G-Sec yield fell 1 bps to 6.87%. The Indian rupee depreciated by 18ps against the US dollar at Rs 83.67 per USD. Swiss National Bank cut borrowing costs by a quarter point at a third straight meeting. Mexico also cut interest rates, joining easing steps by Hungary and the Czech Republic earlier this week.

Other economic data

India

• The HSBC India Manufacturing flash PMI declined to 56.7 in September 2024 from 57.5 in the previous month, preliminary estimates showed. Services PMI fell to 58.9 in September 2024, down from 60.9 in the previous month.
• India's forex reserves hit all-time high of $692.3 billion, up $2.8 billion as of Sept 20.

US

• The S&P Global US Manufacturing flash PMI fell to 47 in September of 2024 – a 15 month low - from 47.9 in the previous month, marking the third consecutive month of contraction in the US factory activity. Services PMI eased to 55.4 in September 2024, down from 55.7 in August.
• Consumer sentiment in the United States (US) deteriorated in September, with the Conference Board's (CB) Consumer Confidence Index falling to 98.7 in September after printing at 105.6 in August.
• Pending home sales in the United States edged higher by 0.6% from the previous month in August of 2024, trimming the 5.5% drop in the previous month.
• Personal spending in the United States went up by 0.2% over a month in August 2024, following a 0.5% increase in the prior month.
• The University of Michigan consumer sentiment for the US was revised higher to 70.1 in September 2024, the highest in five months, from a preliminary reading of 69 and a final August Index of 67.9.
• The US economy grew at an annualized rate of 3% in the second quarter of 2024, unchanged from the second estimate and above an upwardly revised 1.6% expansion in the first quarter.
• August’s personal consumption expenditures price index — the Federal Reserve’s favored measure of inflation — increased 0.1%, matching expectations from economists polled by Dow Jones.
• Adjusted for inflation, US consumer spending rose 0.1% in August after climbing 0.4% in July.

UK/Eurozone/Germany

• The S&P Global Flash UK Manufacturing PMI fell to 51.5 in September 2024 from 52.5 in August. Services PMI fell to 52.8 in September of 2024 from 53.7 in the month before, according to a flash estimate.

• The HCOB Eurozone Manufacturing flash PMI fell to 44.8 in September of 2024 from 45.8 in the previous month, to mark over two years of monthly contractions in the currency bloc’s factory activity. Services PMI fell to 50.5 in September 2024 from 52.9 in August, preliminary estimates showed.
• The HCOB Flash Germany Manufacturing PMI fell for a fourth straight month to 40.3 in September 2024, the lowest in a year, below 42.4 in August. Services PMI eased to 50.6 in September 2024, down from 51.2 in the prior month.

Japan/China

• The au Jibun Bank Japan Manufacturing PMI declined to 49.6 in September 2024 from a final 49.8 in the previous month, pointing to the third straight month of contraction in the factory activity. Services PMI rose to 53.9 in September 2024 from a final 53.7 in the prior month, flash data showed.
• The People's Bank of China (PBoC) lowered the reserve requirement ratio (RRR) for banks by 50bps, the second reduction this year aimed at bolstering a stuttering economy.
• China’s industrial profits plunged by 17.8% in August from a year ago. That followed a 4.1% year-on-year increase in July.
• China’s central bank cut its 7-day reverse repurchase rate to 1.5% from 1.7%.
• The People’s Bank of China cut the one-year medium-term lending facility rate to 2% from 2.3%.

Key Economic Events in the coming week

• 30-Sep – India – Fiscal Deficit, Infrastructure Output, Current Account Deficit; China – Official Manufacturing/Non-manufacturing PMI;
• 1-Oct – India/Japan/China/Germany/Eurozone/UK/US Manufacturing PMI;
• 3-Oct – Japan/China/Germany/Eurozone/UK/US Services PMI; US – Factory Orders, Total Vehicle Sales
• 4-Oct – India – Services PMI; US – Unemployment Rate

Outlook:

Investor hopes for a soft landing for the U.S. economy will be put to the test next week, as the government releases closely watched Sept labor market data following a series of disappointing jobs reports. Investors will also watch an address from Fed Chairman Jerome Powell, set to speak on the economic outlook before the National Association for Business Economics on Monday.

Nifty stayed in a 126 point range on Sept 27 and formed a small negative candle. After a series of upticks, Nifty seems to have taken a breather. Nifty could now face resistance from the 26250-26475 band on the upside, while 25849 could offer support in the near term.