HDFC Securities Weekly Bulletin

Markets in the week gone by

Domestic Indian indices clocked strong gains, hitting fresh record highs during the week. The positive sentiment in the Indian market was likely influenced by the upbeat global market mood, fueled by expectations of interest rate cuts by major central banks. BSE Sensex gained 2.10% and the Nifty 50 index added 2.03% 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 gained 1.52% and the BSE Smallcap index rose 2.05%. Market breadth was in favour of gainers with 6 shares advancing for every 5 declines.

Average cash turnover on NSE was lower by 5% as compared to the previous week. Sectoral indices were largely positive with Consumer Durables leading the pack with 4.5% gains. Telecom added 3.1%, Bankex was up 2.8%, Media up 2.8%, IT up 2.7%, FMCG up 2.6% and Capital Goods up 2.1%. Oil & Gas fell 3.2%.

Among Nifty 100 stocks, Bajaj Auto surged 8.4%, Varun Beverages rose 8.3%, Jindal Steel was up 8.1%; Divis Lab gained 7.0% and Bharti Airtel added 6.2%. On the downside, ICICI General Insurance fell 6.7%; ONGC slipped 5.6%; Tata Motors was down 5.5%; HDFC Life fell 4.5% and Adani Green declined 4.0%.

As per provisional figures, FIIs were net buyers of Rs 15200 crore in the equity markets during the week and DIIs were net buyers of Rs 2444 crore.

US Stocks managed to post solid gains and largely recovered from the previous week’s steep losses, which saw the S&P 500 Index suffer its worst weekly decline since March 2023. S&P 500 and Nasdaq Composite each posted its biggest weekly jump since November. Expectations for a jumbo interest rate cut by the US Fed shot up suddenly, post the inflation print at 2.5%. Traders are now pricing in a 49% chance of a 50 basis point move next week, compared with 15% earlier. The Cboe Volatility index plunged more than 26% this week to 16.50 on Friday afternoon. For the week, the Nasdaq gained 5.95%, posting its best week of the year. The S&P 500 rose 4% and the Dow gained 2.60%.

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US crude futures recorded its first weekly gain in 5 weeks as official data showed that nearly 42% of oil production, amounting to over 730,000 barrels per day, remained shut due to the storm. The IEA warned of slowing global oil demand growth, particularly driven by China's weakening economy, and projected a potential supply surplus in 2024, even with continued OPEC+ production cuts. For the week, the US oil benchmark was up 1.4% at $68.70/barrel. Gold prices surged setting a new record high amid a weaker dollar and lower bond yields. This increase followed new economic data that heightened expectations of more aggressive Federal Reserve action when interest rates may be cut next week. Gold prices were up 3.7% for the week at $2578.5/ounce.

The Indian 10yr G-Sec yield fell 7 bps to 6.90%. The Indian rupee appreciated by 1ps against the US dollar at Rs 83.92 per USD.

Other economic data

India

·??????? Annual inflation rate in India increased to 3.65% in August 2024 from an upwardly revised 3.56% in July, which was the lowest since August 2019.

·??????? Industrial output in India rose by 4.8% on an annual basis in July 2024, following a 4.2% growth in the previous month. Manufacturing output which accounts for nearly 78% of total industrial production, expanded by 4.6%.

·??????? In the month of August, 3,52,921 units of passenger vehicles were sold, as compared to 3,59,228 in the year-ago period, registering a de-growth of 1.8 per cent. Within two-wheelers, 6,06,250 units were sold last month, as against 5,49,290 in the year-ago period, registering a growth of 10.4 per cent.

·??????? The domestic air traffic in August gained 5.7% compared to the same month last year to 1.31 crore passengers.

·??????? India's foreign exchange reserves surged $5.25 bn to a new record high of USD 689.24 billion in the week ended September 6, driven by an increase in foreign currency assets and gold reserves.

US

·??????? U.S. vehicle sales fell 4.5% month-on-month (m/m) to 15.1 million (annualized) units in August. Unadjusted sales volumes were 1.42 million units or 7.6% above year-ago levels.

·??????? The annual inflation rate in the US slowed for a fifth consecutive month to 2.5% in August 2024, the lowest since February 2021, from 2.9% in July.

·??????? Producer prices in the United States increased 1.7% year-on-year in August 2024, the lowest in six months, easing from a downwardly revised 2.1% gain in July.

·??????? The University of Michigan's consumer sentiment index ticked up to 69 in its preliminary reading, its highest level since May and up from 67.9 in August.

UK/Eurozone/Germany

·??????? The United Kingdom's unemployment rate fell to 4.1% from May to July 2024, down from 4.2% in the previous three-month period.

·??????? The UK's trade deficit increased to ￡7.51 billion in July 2024 from ￡5.32 billion in June. It was the largest trade gap since April, with imports shrinking by 1.5% mom to a four-month low of ￡77.12 billion while exports fell by 4.7% to a 25-month low of ￡69.60 billion.

·??????? Industrial production in the UK dropped 0.8% month-over-month in July 2024, following a 0.8% rise in June. On a yearly basis, industrial activity dipped by 1.2% in July, slightly cooling from a 1.4% decline in the preceding period.

·??????? The British economy stalled once again in July 2024, mirroring June's performance. Considering the three months to July, the British GDP increased 0.5% amid widespread growth in the services sector.

·??????? The ECB cut the deposit facility rate by 25 bps to 3.5% to ease monetary policy restrictions, reflecting an updated inflation outlook and better transmission of policy.

·??????? Industrial production in the Euro Area declined by 0.3% month-over-month in July 2024, following a revised flat performance in June. On an annual basis, industrial output contracted by 2.2% in July, following an upwardly revised 4.1% decline in June.

·??????? The annual inflation rate in Germany was confirmed at 1.9% in August 2024, easing from 2.3% in the previous month.

Japan/China

·??????? Japan's GDP grew by 0.7% qoq in Q2 of 2024, compared with flash data and market estimates of a 0.8% rise and after a marginally revised 0.6% fall in Q1.

·??????? Producer prices in Japan increased by 2.5% yoy in August 2024, slower than a 3.0% growth in the prior month. Monthly, producer prices fell by 0.2%, the first decline in ten months.

·??????? Industrial production growth in Japan was revised upward to 3.1% month-over-month in July 2024 from flash data of a 2.8% increase. Yearly, industrial output grew by 2.9% in July, a reversal from a 7.9% slump in June and the strongest rise since January 2023.

·??????? China's annual inflation rate edged up to 0.6% in August 2024 from 0.5% in July, marking the 7th straight month of consumer inflation amid supply issues due to flaming heat and pouring rains. Monthly, the CPI rose 0.4%, the second month of gain but lower than consensus of 0.5%.

·??????? China's producer prices shrank by 1.8% yoy in August 2024, steeper than a 0.8% drop in the previous month. Monthly, producer prices were down by 0.7%, the fastest pace in 14 months.

·??????? China's trade surplus surged to USD 91.02 billion in August 2024 from USD 67.81 billion in the same period a year earlier. Sales grew 8.7% yoy to a 23-month high of USD 308.65 billion. Meanwhile, imports rose 0.5%, slowing sharply from a 7.2% jump in July.

·??????? Chinese banks extended CNY 260 billion in new yuan loans in July of 2024, the least since October of 2009, at a sharp contraction from the CNY 345 billion in the corresponding period of the previous year.

·??????? China’s retail sales rose by 2.1% in August from a year ago, missing expectations of 2.5% growth among economists polled by Reuters. That was also slower than the 2.7% increase in July.

·??????? China’s industrial production rose by 4.5% in August from a year ago, lagging the 4.8% growth forecast by Reuters. That also marked a slowdown from a 5.1% rise in July.

·??????? China’s fixed asset investment rose by 3.4% for the January to August period, slower than the forecast of 3.5% growth.

·??????? China's new home prices fell at the fastest pace (down 5.3% YoY) in more than nine years in August.

·??????? China is poised to cut interest rates on more than $5 trillion of outstanding mortgages as early as this month, according to people familiar with the matter, as it accelerates a move to reduce the borrowing costs for millions of families to spur consumption.?

Events in the coming week

·??????? 16-Sep – India – Trade Balance; Eurozone – Trade Balance

·??????? 17-Sep – India – WPI; US – Retail Sales, Industrial Production

·??????? 18-Sep –US Fed Monetary Policy

·??????? 19-Sep – UK – BoE Monetary Policy

·??????? 20-Sep – Japan –BoJ Monetary Policy; China – Prime Lending Rate;

Outlook:

The US Federal Reserve is in focus next week, as uncertainty swirls over how much the U.S. central bank will cut interest rates at its monetary policy meeting on Sept 18 and the pace at which it will reduce borrowing costs in coming months. Short term trend of the Nifty remains bullish. Resistance for the Nifty is now seen at 25527, which is derived from Fibonacci extension levels. On the lower side, 24885 is expected to act as a support for Nifty. The coming week could see the Nifty picking a sustainable trend after the outcome of the US Fed meet.

UK/Eurozone/Germany

·??????? The United Kingdom's unemployment rate fell to 4.1% from May to July 2024, down from 4.2% in the previous three-month period.

·??????? The UK's trade deficit increased to ￡7.51 billion in July 2024 from ￡5.32 billion in June. It was the largest trade gap since April, with imports shrinking by 1.5% mom to a four-month low of ￡77.12 billion while exports fell by 4.7% to a 25-month low of ￡69.60 billion.

·??????? Industrial production in the UK dropped 0.8% month-over-month in July 2024, following a 0.8% rise in June. On a yearly basis, industrial activity dipped by 1.2% in July, slightly cooling from a 1.4% decline in the preceding period.

·??????? The British economy stalled once again in July 2024, mirroring June's performance. Considering the three months to July, the British GDP increased 0.5% amid widespread growth in the services sector.

·??????? The ECB cut the deposit facility rate by 25 bps to 3.5% to ease monetary policy restrictions, reflecting an updated inflation outlook and better transmission of policy.

·??????? Industrial production in the Euro Area declined by 0.3% month-over-month in July 2024, following a revised flat performance in June. On an annual basis, industrial output contracted by 2.2% in July, following an upwardly revised 4.1% decline in June.

·??????? The annual inflation rate in Germany was confirmed at 1.9% in August 2024, easing from 2.3% in the previous month.

Japan/China

·??????? Japan's GDP grew by 0.7% qoq in Q2 of 2024, compared with flash data and market estimates of a 0.8% rise and after a marginally revised 0.6% fall in Q1.

·??????? Producer prices in Japan increased by 2.5% yoy in August 2024, slower than a 3.0% growth in the prior month. Monthly, producer prices fell by 0.2%, the first decline in ten months.

·??????? Industrial production growth in Japan was revised upward to 3.1% month-over-month in July 2024 from flash data of a 2.8% increase. Yearly, industrial output grew by 2.9% in July, a reversal from a 7.9% slump in June and the strongest rise since January 2023.

·??????? China's annual inflation rate edged up to 0.6% in August 2024 from 0.5% in July, marking the 7th straight month of consumer inflation amid supply issues due to flaming heat and pouring rains. Monthly, the CPI rose 0.4%, the second month of gain but lower than consensus of 0.5%.

·??????? China's producer prices shrank by 1.8% yoy in August 2024, steeper than a 0.8% drop in the previous month. Monthly, producer prices were down by 0.7%, the fastest pace in 14 months.

·??????? China's trade surplus surged to USD 91.02 billion in August 2024 from USD 67.81 billion in the same period a year earlier. Sales grew 8.7% yoy to a 23-month high of USD 308.65 billion. Meanwhile, imports rose 0.5%, slowing sharply from a 7.2% jump in July.

·??????? Chinese banks extended CNY 260 billion in new yuan loans in July of 2024, the least since October of 2009, at a sharp contraction from the CNY 345 billion in the corresponding period of the previous year.

·??????? China’s retail sales rose by 2.1% in August from a year ago, missing expectations of 2.5% growth among economists polled by Reuters. That was also slower than the 2.7% increase in July.

·??????? China’s industrial production rose by 4.5% in August from a year ago, lagging the 4.8% growth forecast by Reuters. That also marked a slowdown from a 5.1% rise in July.

·??????? China’s fixed asset investment rose by 3.4% for the January to August period, slower than the forecast of 3.5% growth.

·??????? China's new home prices fell at the fastest pace (down 5.3% YoY) in more than nine years in August.

·??????? China is poised to cut interest rates on more than $5 trillion of outstanding mortgages as early as this month, according to people familiar with the matter, as it accelerates a move to reduce the borrowing costs for millions of families to spur consumption.?

Events in the coming week

·??????? 16-Sep – India – Trade Balance; Eurozone – Trade Balance

·??????? 17-Sep – India – WPI; US – Retail Sales, Industrial Production

·??????? 18-Sep –US Fed Monetary Policy

·??????? 19-Sep – UK – BoE Monetary Policy

·??????? 20-Sep – Japan –BoJ Monetary Policy; China – Prime Lending Rate;

Outlook:

The US Federal Reserve is in focus next week, as uncertainty swirls over how much the U.S. central bank will cut interest rates at its monetary policy meeting on Sept 18 and the pace at which it will reduce borrowing costs in coming months. Short term trend of the Nifty remains bullish. Resistance for the Nifty is now seen at 25527, which is derived from Fibonacci extension levels. On the lower side, 24885 is expected to act as a support for Nifty. The coming week could see the Nifty picking a sustainable trend after the outcome of the US Fed meet.