Weekly Market Wrap: Nifty regains 22K amid strong macros. What lies ahead? 

Indian equity markets ended the last week on a high note with the frontline indices garnering over a percent amid strong macro-economic data. The market got support with a report that retail inflation based on the Consumer Price Index (CPI) eased to a three-month low of 5.1 per cent in January 2024. Meanwhile, inflation based on the wholesale price index (WPI) eased in the month of January 2024 to 0.27% from a nine-month high of 0.73% in December 2023, amid lower prices of crude petroleum and natural gas.

Besides India's industrial output edged up to 3.8 percent in December 2023 as compared to 2.4 percent in November 2023. These signals led the BSE Sensex to surge 831 points, or 1.16%, at 72,426.64 during the week ended on February 16, 2024. While the Nifty jumped 258 points, or 1.19%, to 22,040.7.   

 Sector-wise, the BSE Auto index surged the most (5%) during the week gone by. While BSE Oil & Gas index registered a gain of 3.1% followed by BSE Bankex jumped 1.7%. On the other hand, the BSE FMCG index fall 0.7 percent.  

As many as 34 stocks in the Nifty 50 index delivered a positive return for investors in the week. With a weekly gain of 11.5 percent, Mahindra & Mahindra emerged as the top gainer in the index. It was followed by Wipro (10.8%), UPL (7.4%), Bajaj Auto Industries (7%), and Bharat Petroleum Corporation (6.6%). Maruti Suzuki India and Coal India also advanced by over 5%.  

On the other hand, Hindalco Industries, Shree Cement, and Grasim Industries declined 12.9%, 4.7%, and 3%, respectively. 

Market Macros

Vinod Nair, Head of Research at Geojit Financial Services, said heavy buying in the banking sector helped broader indices inch towards new heights, countering the subdued beginning of the week characterised by concerns over elevated valuations and higher exchange margin requirements. The Indices continued their resilient rally, unlike other Asian peers, buoyed by weaker-than-expected inflation data from the US.

Nair added that investor expectations of a rate cut from the Fed were bolstered as US retail sales data declined. Moreover, a disinflation trend in the eurozone and expectations of increased consumption demand in China after the New Year holidays provided further support. The Indian auto sector had a strong week, lifted by anticipated high demand and a favourable earnings outlook. PSU Banks, benefiting from improved asset quality and the government’s focus on fiscal prudence, are attracting investors. Large caps gained traction, with mid and small caps seeing profit booking, driven by valuation gaps.

"Looking ahead, a correction in PSU banks seems likely due to higher valuation risks. Meanwhile, sectors such as metals, FMCG, and capital goods are anticipated to gain momentum driven by robust construction demand, an order backlog, rural revival prospects, and India's narrowing trade deficit. This is boosted by softer commodity prices and government-led manufacturing initiatives,” Nair said.

Nifty outlook

Rupak De, Senior Technical Analyst at LKP Securities said, "A surge in buying interest for large-cap stocks propelled the Nifty back above the recent consolidation level, leading to highest ever closing on the weekly timeframe. The Nifty has consistently closed above the 21 EMA for the last few days, indicating a positive trend. The momentum indicator RSI has experienced a bullish crossover following a base formation. In the short term, the index might move towards 22,200; furthermore, a move above 22,200 could potentially take the Nifty towards 22,600. Support on the lower end is placed at 22,750,” De said. 

Also read: HDFC Bank shares down 17% from December high: Price targets, technicals, outlook and more