HDFC Securities Weekly Bulletin

Markets in the week gone by

Domestic equity indices continued their upward trajectory for the second consecutive week. Expectations of a forthcoming interest rate cut by the U.S. Federal Reserve kept the global sentiments positive. Positive developments on the ceasefire deal between Israel and Gaza also buoyed sentiments. BSE Sensex gained 0.81% and the Nifty 50 index rose 1.15% over the week. The benchmarks were higher in four out of five trading sessions.

In the broader markets BSE Midcap index rose 1.96% and the BSE Smallcap index rose by 3.39%. Market breadth was in favor of gainers with 8 shares advancing for every 5 declines.

The average cash turnover on NSE was in line with previous week. Sectoral indices were mixed. Barring Realty, all sectoral indices were in the green led by Metals gaining 4.4%, Consumer Durables up 4%, Telecom up 3.5%, Healthcare up 2.3% and FMCG up 2.2%. Realty was down 2.9%.

Among Nifty 100 stocks, Varun Beverages surged 11.3%, Indigo was up 10.1%; Hindalco gained 8.0%; Trent added 6.9%; and Motherson increased 6.5%. On the downside, ONGC fell 3.2%; M&M slipped 2.9%; Dmart was down 2.4%; Siemens fell 2.3% and DLF declined 2.0%.

As per provisional figures, FIIs were net sellers of Rs 1609 crore in the equity markets during the week and DIIs were net buyers of Rs 13020 crore.

It was a relatively quieter week in the US markets compared to the volatility of the past 2 weeks, but stocks nevertheless managed to close in the green for the third week in a row. The Dow Jones Industrial Average and S&P 500 Index moved back toward record highs, as investors appeared to celebrate US Fed Chair Jerome Powell’s announcement that interest rate cuts would soon be coming. Longer-term yields fell and Treasuries rallied after annual job growth estimates were revised downward by 818,000 jobs. The Dow Jones Industrial Average finished up 1.3% for the week while the S&P 500 and Nasdaq Composite both increased 1.4%.

Oil prices advanced 2.5% to settle at $74.8 per barrel on Friday, following remarks by Federal Reserve Chair Jerome Powell, suggesting the central bank is ready to cut interest rates. However, despite Friday's gains, oil prices declined for the week due to concerns about slowing energy demand. For the week, the US oil benchmark was down 2.4% at $74.80/barrel. Gold prices remained close to record high levels above the $2500/ounce mark as confirmation of a dovish Fed raised demand for non-interest-bearing bullion assets. Gold prices were up 0.1% for the week at $2509.6/ounce?

The Indian 10yr G-Sec yield fell 1 bps to 6.97%. The Indian rupee appreciated by 8 paise against the US dollar to Rs 83.87 per USD.

Other economic data

India

·?????? The HSBC India Manufacturing PMI fell to 57.9 in August 2024, down from 58.1 the previous month, preliminary estimates showed. Services PMI inched up to 60.4 in August 2024 from 60.3 in the previous month.

·?????? India's benchmark indices will rise modestly by the end of 2024, according to a Reuters poll of equity strategists who said a correction from already elevated levels in the coming month was unlikely.

US

·?????? The S&P Global US Manufacturing PMI fell to 48 in August of 2024 from 49.6 in the previous month, to mark the second consecutive contraction in the US factory activity. Services PMI edged up to 55.2 in August 2024, from 55 in July.

·?????? Data released Thursday showed that the number of Americans filing?new applications for unemployment benefits?rose 4,000 to a seasonally adjusted 232,000 in the latest week, adding to concerns of a cooling of the U.S. labor market.

·?????? Minutes from the latest US Fed policy meeting showed several officials acknowledged a conceivable case for cutting rates, before the central bank voted to keep them steady.

·?????? Goldman Sachs has cut its probability forecast for a U.S. recession to 20% shortly after raising it, as fresh labor market data sparked a reassessment of market views on the economy. Economists at Goldman earlier this month raised their 12-month U.S. recession probability from 15% to 25% after the U.S. July jobs report of Aug. 2 showed nonfarm payrolls grew by a less-than-expected 114,000.

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UK/Eurozone/Germany

·?????? The S&P Global UK Manufacturing PMI rose to 52.5 in August of 2024 from 52.1 in the previous month, to record the fourth consecutive expansion for the UK factory activity. Services PMI rose to 53.3 in August of 2024 from 52.5 in the month before.

·?????? The annual inflation rate in the Euro Area rose to 2.6% in July of 2024 from 2.5% in the previous month.

·?????? The HCOB Eurozone Manufacturing PMI dropped to 45.6 in August 2024, the lowest in 8 months. Services PMI rose to 53.3 in August of 2024 from 51.9 in the prior month, to mark the strongest pace of expansion in the bloc's services activity since April.

·?????? Producer prices in Germany dropped by 0.8% yoy in July 2024, slowing from a 1.6% decrease in the prior month. Monthly, producer prices edged up 0.2%, the same as in June.

·?????? The HCOB Flash Germany Manufacturing PMI dropped to 42.1 in August 2024 from 43.2 in July. Services PMI fell to 51.4 in August 2024, down from 52.5 in the previous month

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Japan/China

·?????? Japan's trade deficit jumped to JPY 621.84 billion in July 2024 from JPY 61.33 billion in the same month a year earlier. Purchases rose by 16.6% yoy, the most since January 2023, to a 19-month high. Meanwhile, exports increased by 10.3%, the eighth straight month of growth, to a seven-month peak.

·?????? The annual inflation rate in Japan was at 2.8% in July 2024, holding steady for the third straight month.

·?????? The au Jibun Bank Japan Manufacturing PMI increased to 49.5 in August 2024 from a four-month low of 49.1 in the previous month. Services PMI increased to 54.0 in August 2024 from a final 53.7 in the prior month.

·?????? The People's Bank of China left key lending rates unchanged at the August fixing. The one-year loan prime rate (LPR), the benchmark for most corporate and household loans, was maintained at 3.45%. Meanwhile, the five-year rate, a reference for property mortgages, was retained at 3.85%.

Events in the coming week

·?????? 26-Aug – US – Durable Goods Orders

·?????? 27-Aug – US – Consumer Confidence

·?????? 29-Aug – US – Q2 GDP Growth, Goods Trade Balance, Pending Home Sales

·?????? 30-Aug – India – Fiscal Deficit, Infrastructure Output, Q2 GDP Growth; US – Personal Spending, Consumer Sentiment;

·?????? 31-Aug – China – Official Manufacturing/Services PMI

Outlook:

While rising for the seventh consecutive session, Nifty made a small negative candle on August 23 after a rise suggesting consolidation. On weekly charts, however, it rose 1.15% making a positive candle for the second consecutive week, and in the process filling the downgap made on Aug 05, thus nullifying part of the weakness. Nifty could now head towards 25078 on the upside in the near term while 24650 could provide support.

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