HDFC Securities Weekly Bulletin

Markets in the week gone by

India's benchmark equity indices closed higher on Friday. Still, they logged a second consecutive weekly loss, weighed by various global and Indian macro cues, including the unwinding of yen carry trade, US recession fears, and the RBI governor's hawkish commentary during the policy. The benchmarks were lower weekly for the three out of five trading sessions. BSE Sensex shed 1.58% and the Nifty 50 index declined 1.42% over the week?

In the broader markets BSE Midcap index fell 1.01% and the BSE Smallcap index fell 1.86%. Market breadth was evenly distributed among gainers and losers.

The average cash turnover on NSE was 9% lower as compared to the previous week. Sectoral indices were mostly negative with Metals falling 3.0%, Consumer Durables losing 2.8%, PSU Bank down 2.8%, Power fell 2.7% and IT fell 1.9%. Pharma gained 1.4%, Healthcare and FMCG were up 0.7%.

Among Nifty 100 stocks, ABB surged 4.8%, PI Industries was up 4.2%; Torrent Pharma gained 3.3%; Colgate added 3.0%; and United Spirits rose 2.7%. On the downside, Adani Energy fell 12.7%; Shree Cement slipped 11.5%; Tata Power was down 9.2%; Bosch fell 6.1% and Grasim declined 6.0%.

As per provisional figures, FIIs were net sellers of Rs 19140 crore in the equity markets during the week and DIIs were net buyers of Rs 20871 crore.

This week marked the most volatile week of 2024 for the market. The Dow on Monday tumbled 1,000 points, while the S&P 500 lost 3% for its worst day since 2022. Disappointing U.S. payrolls data from the prior week and concerns the Federal Reserve was too late with rate cuts were the main triggers for the selling pressure, along with the unwinding of a popular yen currency trade by hedge funds. However, the major averages mounted a comeback, with Thursday’s encouraging weekly jobless claims number helping alleviate investors’ concerns about the U.S. economy. As fears over a weakening labor market appeared to wane, the yield on the benchmark 10-year Treasury increased over the week by 15 bps. For the week, the S&P 500 was just 0.04% lower. Meanwhile, the blue-chip Dow and tech-heavy Nasdaq were down on the week by 0.6% and 0.18%, respectively.

Oil prices rose by 0.8% on Friday, recording a gain of over 4% for the week, the first weekly rise in five. This uptick was driven by positive economic data and indications from Federal Reserve officials that they might cut interest rates as soon as September, which alleviated some concerns about demand. Additionally, fears of an escalating Middle East conflict contributed to supply risks, further supporting the price rise. For the week, the US oil benchmark was up 4.5% at $76.8/barrel. Gold prices closed lower for the week as positive U.S. labor data sparked a recovery in risk appetite and sapped some safe haven demand. Recession fears eased as some strong readings on the labor market suggested that a drastic slowdown may not be on the cards. Gold prices were down 0.5% for the week at $2430.6/ounce.

The Indian 10yr G-Sec yield fell 2 bps to 7.00%. The Indian rupee depreciated by 16 paise against the US dollar to Rs 83.90 per USD.

Other economic data

India

·?????? The HSBC India Services PMI was revised lower to 60.3 in July 2024 from 61.1 in preliminary estimates and after a final 60.5 in June. It marked the 36th consecutive month of expansion in services activity.

·?????? The Reserve Bank of India maintained its benchmark policy repo at 6.5% for the ninth consecutive meeting in August 2024 to ensure inflation is down towards its 4% medium-term target while supporting growth.

US

·?????? The S&P Global US Services PMI was revised lower to 55 in July 2024 from a preliminary of 56, compared to 55.3 in June.

·?????? The ISM Services PMI in the US rose to 51.4 in July of 2024 from the April 2020-low of 48.8 in the previous month, to indicate a moderate rebound in US services activity.

·?????? The trade deficit in the US narrowed to $73.1 billion in June of 2024 from the revised 20-month high of $75 billion in the previous month. Exports rose by 1.5% from the previous month to $265.9 billion. In the meantime, imports rose by a softer 0.6% to $339 billion.

·?????? US jobless claims data showed fewer people applied for unemployment benefits than expected. The number of Americans filing new applications for?unemployment benefits?came in at 233,000 for the week ended Aug. 3. This was below the 241,000 expected, and a reduction from the revised 250,000 the prior week.

·?????? JPMorgan Chase analysts now see a greater chance that the U.S. economy will enter a recession by the end of the year. In a Wednesday analyst note, JPMorgan economists raised the odds of an economic downturn this year to?35%, up from their previous 25% estimate, citing easing labor market pressures.

·?????? Three-quarters of the global carry trade has now been removed, with a recent selloff erasing this year’s gains, according to JPMorgan Chase & Co.

UK/Eurozone/Germany

·?????? The S&P Global UK Services PMI edged higher to 52.5 in July of 2024 from 52.1 in the previous month.

·?????? The HCOB Eurozone Services PMI fell to 51.9 in July of 2024 from 52.8 in June, firmly below the earlier market expectations of 53 to mark the slowest pace of expansion in the Eurozone services activity since March.

·?????? Producer prices in the Euro Area declined 3.2% year-on-year in June 2024, following a 4.1% drop in May.

·?????? Retail sales in the Euro Area fell 0.3% month-over-month in June 2024, after a 0.1% increase in May. Year-on-year, retail sales declined 0.3%, down from a 0.5% advance in May.

·?????? Factory orders in Germany rose by 3.9% month-over-month in June 2024, from a marginally revised 1.7% fall in the previous month.

·?????? Germany's trade surplus declined to EUR 20.4 billion in June 2024 from an upwardly revised EUR 25.3 billion in June. Exports fell 3.4% mom to a six-month low. Meanwhile, imports were up 0.3%.

·?????? The annual inflation rate in Germany edged up to 2.3% in July 2024, from 2.2% the previous month.?

Japan/China

·?????? The au Jibun Bank Japan Services PMI was revised lower to 53.7 in July 2024 from preliminary estimates of 53.9, after registering a contraction in June of 49.4.

·?????? Household spending in Japan shrank in real terms by 1.4% yoy in June 2024, after a 1.8% decline in the prior month.

·?????? The Caixin China General Services PMI rose to 52.1 in July 2024 from June’s 8-month low of 51.2.

·?????? China's trade surplus widened to USD 84.65 billion in July 2024 from USD 80.22 billion in the same period a year earlier. Exports rose 7.0% year-on-year. Meanwhile, imports rose 7.2%.

·?????? China's annual inflation rate climbed to 0.5% in July 2024 from 0.2% in June, pointing to the highest figure since February.

·?????? China's producer prices dropped by 0.8% yoy in July 2024, the same pace as in the prior month.

Q1 results of key companies out of NSE 500 in the coming week

·?????? 12-Aug – AIA Engineering, Balrampur Chini, Cera Sanitary., H U D C O, Hindustan Copper, Natco Pharma, Natl. Aluminium, NMDC, R C F, Vodafone Idea

·?????? 13-Aug – Apollo Hospitals, Endurance Tech.,? G N F C, Godrej Industries, HEG, Hero Motocorp, Hindalco Inds., Ipca Labs., Muthoot Finance, SKF India

·?????? 14-Aug – EID Parry, Glenmark Pharma., Hind.Aeronautics, Mazagon Dock, Voltas

Key events in the coming week

·?????? 12-Aug – India – CPI, Industrial Production;

·?????? 13-Aug – US – PPI;

·?????? 14-Aug – India – WPI, Passenger Vehicle Sales, Trade Balance; US – CPI;

·?????? 15-Aug –China – Industrial Production, Retail Sales, Unemployment Rate; US – Retail Sales, Industrial Production

Outlook

Nifty logged a second consecutive week of losses on the back of negative cues including unwinding of yen's carry trade, US recession fears along with the RBI governor's hawkish commentary. Nifty fell 1.42% over the week; however, it made a bullish hammer like pattern on weekly charts though with a downgap. On daily charts, Nifty made a small bullish doji like pattern rising above the highs of the previous 4 sessions. It managed to enter the downgap area of 24383-24687. It can now rise towards the 24582-24687 band.? 24080 could be a support in the near term.

The coming week will bring CPI numbers from US on Wednesday and from India on Monday and the balance corporate earnings in the US and India.