HDFC Sky Weekly Bulletin

Markets in the week gone by

A global equity selloff, primarily fuelled by disappointing US economic data that reignited recession fears, brought an end to a five-day, and eight-week winning streak for the Indian markets on Friday. The benchmark indices, Sensex and Nifty 50, suffered their most significant decline since the Lok Sabha election result day on June 4, with both tumbling over 1 per cent to end the week around half a percent lower. The markets edged higher in 4 out of 5 trading sessions during the week?

In the broader markets BSE Midcap index ended marginally lower and the BSE Smallcap index rose 0.62%. Market breadth was evenly distributed among gainers and losers.

Average cash turnover on NSE was 1% lower as compared to previous week. Sectoral indices were mostly negative with Realty losing 3.7%, IT down 2.9%, Auto fell 2.2% and FMCG down 1.1%. Power gained 4.1%, Healthcare was up 1.6% and Oil & Gas was up 1.4%.

Among Nifty 100 stocks, Adani Energy surged 19.9%, Adani Wilmar was up 17.8%; Zomato gained 16.8%; Colgate added 6.3%; and NTPC rose 5.9%. On the downside, Varun Beverages fell 6.2%; Eicher Motors slipped 5.7%; Ambuja Cement was down 4.9%; LTI Mindtree fell 4.8% and Grasim declined 4.8%?

As per provisional figures, FIIs were net sellers of Rs 12756 crore in the equity markets during the week and DIIs were net buyers of Rs 17226 crore.

US stocks closed lower for the third week in a row as a lacklustre U.S. July jobs report triggered heavy selling to end the worst week in months amid fears of economic slowing. While the US Fed left short-term interest rates unchanged, as expected, following its midweek policy meeting, expectations for further cuts also jumped considerably and yields hit 7-month lows. Markets were rattled by downbeat earnings updates from Amazon and Intel. The yield on benchmark U.S. 10-year notes fell 18 basis points to 3.798% on Friday. The S&P 500 and Dow slipped 2.1% each while the Nasdaq tanked 3.4% over the week. Wall Street’s “fear gauge” — the VIX — hit the highest since March 2023.

Crude oil prices fell by more than 3% to below $74 per barrel on Friday, the lowest in 2 months, and extending the losses from the previous session, as global oil demand concerns outweighed supply risks from rising geopolitical tensions in the Middle East. For the week, the US oil benchmark was down 4.7% at $73.5/barrel. An OPEC+ meeting on Thursday had left the group's oil output policy unchanged, including a plan to start unwinding one layer of production cuts from October. Gold prices soared to a new record high, after a weak jobs report in the United States added to the magnitude of the dovish pivot expected by the US Fed. The decline in borrowing costs supports bullion demand. Gold prices were up 2.4% for the week at $2442.8/ounce.

The Indian 10yr G-Sec yield fell 4 bps to 6.90%. The Indian rupee depreciated by 1 paise against the US dollar to Rs 83.74 per USD.?

Other economic data

India

·?????? India’s fiscal deficit ?in Apr-June 2024 expanded to 8.1% of the budgetary target for the financial year ending March 2025. In actual terms, the fiscal deficit is Rs 1.36 lakh crore of the total limit set at Rs 16.85 lakh crore

·?????? India’s infrastructure output increased by four per cent year-on-year in June (a 20 month? low), down from a revised growth of 6.4 per cent in May.

·?????? The HSBC India Manufacturing PMI edged down to 58.1 in July 2024 from 58.3 in June, revised from the initial estimate of 58.5.

·?????? GST collection in July rose 10.3 per cent to over Rs 1.82 trillion, mainly driven by domestic transactions in goods and services.

·?????? India July rain recorded at 9% above normal? with significant rainfall deficits in some areas despite an overall surplus in precipitation. Rainfall over the country in August and September is likely to be above normal

US

·?????? The US Federal Reserve maintained the federal funds rate at a 23-year high of 5.25%-5.50% for the 8th consecutive meeting in July 2024. During the regular press conference, Chair Powell said a September cut could be on the table if inflation moves down in line with expectations.

·?????? The ISM Manufacturing PMI fell to 46.6 in July of 2024 from 48.5 in the previous month, reflecting the sharpest contraction in US factory activity since November 2023. It was the 20th decline in activity during the last 21 periods.

·?????? Nonfarm business sector labor productivity rose by 2.3% in the second quarter of 2024, accelerating from the upwardly revised 0.4% increase in the previous period. Output grew by 3.3% in the period, while hours worked were only 1% higher.

·?????? The unemployment rate in the United States rose to 4.3% in July of 2024 from 4.1% in the previous month, the highest since October of 2021. Nonfarm payrolls rose by 114,000 (vs 179,000 in June and 175,000 expected)— one of the weakest prints since the pandemic.

·?????? New orders for US manufactured goods fell by 3.3% month on month from ?June 2024, to mark the sharpest decline since January.

·?????? U.S. vehicle sales rose 4.2% month-on-month (m/m) to 15.8 million (annualized) units in July. Unadjusted sales volumes were 1.273 million units or 2.0% below year-ago levels.

·?????? U.S. factory orders fell 3.3% in June mostly because of weaker demand for passenger plans and military aircraft, but an ongoing slump in manufacturing showed no sign of ending. Economists surveyed by the Wall Street Journal had forecast a 3.2% decline in new orders.

UK/Eurozone/Germany

·?????? The S&P Global UK Manufacturing PMI was revised higher to 52.1 in July 2024, from a preliminary of 51.8 and compared to 50.9 in June.

·?????? The Bank of England lowered its Bank Rate by 25bps to 5% in its August meeting, aligning with expectations of a small majority of the market, but noted that it will move cautiously in loosening monetary policy further until officials are more certain that inflation will remain subdued.

·?????? The economic output in the Eurozone rose by 0.3 percent in the second quarter on a quarterly basis, indicating that the economy has continued its recovery at a moderate pace. On a year-on-year basis, the euro area GDP grew by 0.6 percent.

·?????? Annual inflation rate in the Euro Area unexpectedly edged up to 2.6% in July 2024 from 2.5% in June, preliminary estimates showed.

·?????? Unemployment Rate in the Euro Area increased to 6.50 percent in June from 6.40 percent in May of 2024.

·?????? The German economy unexpectedly contracted 0.1% on quarter in the second quarter of 2024, reversing from a 0.2% growth in the first three months of the year. Year-on-year, the economy also shrank 0.1%, following a downwardly revised 0.1% fall in the previous period.

·?????? Annual inflation rate in Germany unexpectedly edged up to 2.3% in July 2024 from 2.2% in June, preliminary estimates showed.

·?????? Germany's seasonally adjusted jobless rate stood at 6% in July 2024, the highest since May 2021.

·?????? German retail sales fell by 0.1 percent on the month in June. On the year, annual retail sales in Europe's largest economy climbed by 2.7 percent in real terms.

·?????? The HCOB Germany Manufacturing PMI was revised higher to 43.2 in July 2024 from a preliminary of 42.6, compared to 43.5 in June.

Japan/China

·?????? Japan’s unemployment rate was at 2.5% in June 2024, compared to 2.6% in the previous four months.

·?????? Retail sales in Japan increased by 3.7% year-on-year in June 2024, posting the highest reading in four months.?On a monthly basis, retail sales rose 0.6% in June, slowing from a 1.7% gain in May.

·?????? Industrial production growth in Japan was revised upward to 3.6% month-over-month in May 2024 from flash data of a 2.8% increase. Yearly, industrial output rose by 1.1% in May, indicating the first expansion in seven months and swinging from a 1.8% decline in April.

·?????? The Bank of Japan (BoJ) raised its key short-term interest rate at its July 2024 meeting to around 0.25% from the prior range of 0 to 0.1% it set in March. The central bank added it would reduce the monthly bond-buying to JPY 3 trillion in January-March 2026 from the current pace of around JPY 6 trillion to pursue a more normal monetary policy.

·?????? The official NBS Manufacturing PMI in China declined to 49.4 in July 2024 from 49.5 in the previous month.

·?????? The official NBS Non-Manufacturing PMI in China was down to 50.2 in July 2024 from 50.5 in the previous month.

·?????? The Caixin China General Manufacturing PMI slipped to 49.8 in July 2024 from 51.8 in June, missing market forecasts of 51.5. It was the first fall in factory activity since last October.

Q1 results of key companies out of NSE 500

·?????? 5-Aug –BEML Ltd, Bharti Airtel, Deepak Nitrite, G S F C, Marico, O N G C, Tata Chemicals

·?????? 6-Aug – 3M India, Bata India, Blue Star, Bosch, Cummins India, EIH, Fortis Health., Gujarat Gas, IIFL Finance, Lupin, NCC, P I Industries, Power Fin.Corpn., Raymond, Shree Cement, Solar Industries, Tata Power Co., TVS Motor Co., Vedanta

·?????? 7-Aug – Abbott India, Apollo Tyres, BSE, Coromandel Inter, FDC, Godrej Consumer, NLC India, Pidilite Inds., Radico Khaitan

·?????? 8-Aug – A B B, Alembic Pharma, Astral, Bharat Forge, Birla Corpn., Container Corpn., Eicher Motors, Garden Reach Sh., Life Insurance, MRF, New India Assura, Oil India, Page Industries, S A I L,

·?????? 9-Aug –CESC, Chola Financial, General Insuranc, Grasim Inds, Jubilant Food., Sun TV Network, Trent

·?????? 10-Aug –Aurobindo Pharma, Finolex Cables,?

Events in the coming week

·?????? 5-Aug – India/Japan/China/Germany/Eurozone/UK/US Services PMI;

·?????? 8-Aug – India – RBI Monetary Policy; China Trade Balance

·?????? 9-Aug – China – CPI, PPI;

Outlook

Nifty fell on Aug 02 with a downgap and closed near the intraday low. This gap has been formed near the psychological level of 25000. Nifty and Sensex reversed an eight-week winning streak on Friday?falling 0.47% over the week. Some downward momentum can continue towards 24210-24461 band. Investors may look to lighten their positions and take partial profits. In case markets stabilise after a couple of sessions, then they may want to consider coming back in a small way. On upmoves, 24857-24956 band could provide resistance.

Globally geo political developments in the Israel Hamas conflict can impact risk appetite. A weak jobs report fuelled worries that the Federal Reserve’s decision to hold rates at a two-decade high is risking a deeper economic slowdown.

Falling commodity prices and fears of slowdown in growth can? weigh on equity indices.