HDFC Securities Weekly Bulletin

Markets in the week gone by

Key equity benchmarks witnessed modest losses during the week, snapping a three-week rising streak, as investors remained cautious ahead of a crucial US jobs report that could determine the size and speed of the Federal Reserve's interest rate cuts. BSE Sensex declined 1.43% and the Nifty 50 index fell 1.52% over the week. The benchmarks ended higher in 2 out of 5 trading sessions.

In the broader markets, BSE Midcap index fell 1.14% and the BSE Smallcap index fell 0.08%. Market breadth was in favour of losers with 9 shares advances for every 10 declines.

Average cash turnover on NSE was lower by 16% as compared to the previous week due to expiry of monthly derivatives contracts and index rebalancing volumes in the previous week. Most sectoral indices ended in the negative with Telecom falling 4.8%, PSU Banks declining 4.7%, Oil & Gas down 3.9%, Metals down 3.5%, Capital Goods down 2.8% and Auto down 2.3%. Consumer Durables gained 0.4% and FMCG was up 0.3%.

Among Nifty 100 stocks, SBI Card surged 10.0%, DMart was up 7.6%; Bajaj Holding gained 6.3%; ICICI General Insurance added 5.6%; and Hero Motocorp increased 5.3%. On the downside, Canara Bank fell 7.3%; Coal India slipped 6.9%; ONGC was down 6.6%; GAIL fell 6.3% and Bank of Baroda declined 5.7%.

As per provisional figures, FIIs were net buyers of Rs 1401 crore in the equity markets during the week and DIIs were net buyers of Rs 5546 crore.

US stocks closed in a sea of red on Friday to cap off a volatile trading week as investors digested a crucial jobs report that provided clues to the size of this month's expected interest rate cut. A highly anticipated update on the U.S. job market came in weak enough to add to worries about the US economy. It was the worst week for the Nasdaq since June of 2022 while the S&P experienced its worst week since March of 2023. The Dow Jones Industrial Average ended 2.9% lower for the week, the S&P 500 fell 4.2%. Nasdaq Composite fell 5.8%.

US crude futures fell 2.1% to settle at $67.70 per barrel on Friday, marking their lowest level since June 2023, as OPEC+ struggled to ease market concerns about global supply and demand. OPEC+ postponed its planned production increase of 180,000 barrels per day until November. Additionally, potential increases in oil supply from Libya, due to political factions nearing an agreement, added downward pressure. For the week, the US oil benchmark was down 8.1% at $67.70/barrel. Gold prices eased below $2,500 per ounce on Friday, pulling back from near its record high after mixed U.S. jobs data raised doubts about the size of the Federal Reserve's upcoming interest rate cuts. Gold prices were down 0.6% for the week at $2487.0/ounce.

The Indian 10yr G-Sec yield fell 1 bps to 6.97%. The Indian rupee depreciated by 6ps against the US dollar at Rs 83.93 per USD. US Bond yields jumped around, but the 2-year yield finished Friday below the 10-year yield for the first time since July 2022, meaning the yield curve is no longer inverted.

Other economic data

India

·?????? The seasonally adjusted HSBC India Manufacturing PMI stood at 57.5 in August, below July's reading of 58.1, but above its long-run average of 54.0, signalling a substantial improvement in operating conditions.

·?????? India’s goods and services tax (GST) collections were a tad lower at Rs 1.75 lakh crore in August compared?with Rs 1.82 lakh crore in the previous month. The pace of growth of GST remained around 10 percent in August, as the country had recorded Rs 1.59 lakh crore in GST revenue in August 2023.

·?????? The HSBC India Services PMI was revised to a five-month high of 60.9 in August 2024 from 60.4 in the preliminary estimates, as the growth of incoming new business ticked higher. The composite index came in at 60.7 matching July’s reading.

·?????? India's foreign exchange reserves rose for the third straight week to a fresh record of USD 683.99 billion for the week ending August 30, 2024.

US

·?????? The S&P Global US Manufacturing PMI was revised slightly down to 47.9 in August 2024 from a preliminary of 48, and continued to point to the most marked deterioration in the health of the manufacturing sector so far this year.

·?????? The trade deficit in the US widened to $78.8 billion in July 2024, the biggest gap since June 2022, compared to a $73 billion shortfall in June. Exports increased 0.5% to a record high of $266.6 billion. Meanwhile, imports soared 2.1% to $345.4 billion.

·?????? New orders for US manufactured goods rose by 5% from the previous month to $592.1 billion in July of 2024, rebounding from the 3.3% drop in the previous month.

·?????? Sales of new cars and trucks in the US fell 4.4% in August, unable to overcome high interest rates and a somewhat slower economy. U.S. automobile sales rose at an annual rate of 15.1 million last month, down from about 15.8 million in July, according to Ward’s Intelligence.

·?????? The S&P Global US Services PMI was revised higher to 55.7 in August 2024 from a preliminary of 55.2, pointing to the strongest growth in the services sector since March 2022.

·?????? Non-farm business sector labor productivity jumped by 2.5% in the second quarter of 2024, revised higher from the preliminary estimate of 2.3% and expanding on the 0.4% rise in the first quarter, marking the fifth consecutive period of growth in productivity.

·?????? The unemployment rate in the United States eased to 4.2% in August of 2024 from the October 2021 high of 4.3% in the prior month. The US economy created a soft 142,000 new jobs in August (vs 1.61 lakhs forecast), adding to evidence of a rapidly cooling labor market and keeping the Federal Reserve on track to cut interest rates later this month.

·?????? The ADP National Employment Report showed 99,000 jobs added in the private sector in August, falling significantly below the expected 145,000. This was?the lowest level since 2021, indicating more of a cooling scenario?than normalization in the labor market.

·?????? Traders' bets for a 25-basis point rate cut in September stood at 73%, according to the CME Group's FedWatch Tool, while those for a 50-bps reduction in rates were at 27%, down from a brief rise to 51% after the report.

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, in line with preliminary estimates.

·?????? The S&P Global UK Services PMI rose to 53.7 in August of 2024 from 52.5 in the previous month, revised higher from preliminary estimate of 53.3.

·?????? The HCOB Eurozone Services PMI rose to 52.9 in August of 2024 from 51.9 in the prior month, firmly above the initial market expectations of 51.9, but revised downwards from the flash estimate of 53.3.

·?????? Producer prices in the Euro Area increased 0.8% month-over-month in July 2024, the most since December 2022, following an upwardly revised 0.6% rise in June. Year-on-year, the PPI declined 2.1%, following a 3.3% fall in June.

·?????? Retail sales in the Eurozone edged up by a modest 0.1% in July 2024, bouncing back from a 0.4% decline in June.

·?????? The GDP in the Euro Area expanded 0.2% on quarter in the three months to June 2024, slightly lower than initial estimates of a 0.3% growth, and compared to a 0.3% rise in the first quarter. Compared with the same quarter last year, the Eurozone economy expanded 0.6%, in line with the first estimates.

·?????? The HCOB Germany Manufacturing PMI was revised slightly higher to 42.4 in August 2024 from a preliminary of 42.1. Still, this is a decrease from July's 43.2, signaling a continued deepening of the recession in the manufacturing sector.

·?????? German industrial production shrank by 2.4% month-over-month in July 2024, after an upwardly revised 1.7% growth in the prior month. It was the third time of decline year to date. Yearly, industrial output declined by 5.3% in July, much steeper than a 3.7% fall in June.

·?????? Germany's trade surplus narrowed to EUR 16.8 billion in July 2024 from EUR 20.4 billion in June. Exports rose 1.7% mom to EUR 130 billion. Meanwhile, imports grew 5.4% to a three-month high of EUR 113.2 billion.?

Japan/China

·?????? The au Jibun Bank Japan Manufacturing PMI was revised upward to 49.8 in August 2024 from flash data of 49.5.

·?????? Household spending in Japan rose in real terms by 0.1% yoy in July 2024, shifting from a 1.4% decline in the prior month. Monthly, personal expenditure fell by 1.7% in July, the steepest drop in six months, after a 0.1% gain in June.

·?????? The Caixin China General Manufacturing PMI rose to 50.4 in August 2024 from 49.8 in July, above market forecasts of 50.0.

·?????? The Caixin China General Services PMI declined to 51.6 in August 2024 from 52.1 in the previous month, below market forecasts of 52.2.

·?????? China’s foreign exchange reserves - the world's largest - grew by $31.8 billion to $3.288 trillion last month, booking the second straight monthly expansion and hitting the highest since December 2015 thanks largely to a broadly weaker US dollar.

Events in the coming week

·?????? 9-Sep – Japan – Q2 GDP Growth; China – CPI, PPI; US – Total Vehicle Sales

·?????? 10-Sep – China – Trade Balance;

·?????? 11-Sep – China – New Yuan Loans; US - CPI

·?????? 12-Sep – India – CPI, Industrial Production, Passenger Vehicle Sales; Eurozone – ECB Monetary Policy; US - PPI

·?????? 13-Sep -- US – Consumer Sentiment

Outlook:

Nifty formed a long bearish candle on daily charts on Sept 06.? On weekly charts, Nifty fell 1.52% forming a bearish engulfing pattern that could lead to some more weakness in the coming week. 24472 could be the next support on the downside while 25084 could prove tough to cross the upside in the near term. Weakness in the US markets on Friday does not help matters for the Indian markets on Monday.