Weekly Market Analysis 20-08-2021

Indian benchmark indices closed with small losses on a weekly basis after both the indices touched new peaks during the week. Nifty 50 touched a peak of 16,701.9 and Sensex touched 56,118.6. For the week, Nifty closed 0.5% lower to 16,450.5 and Sensex closed 0.2% down at 55,329.32.

On a weekly basis, only Nifty FMCG (4.8%) and Nifty IT (2.1%) ended in the green. Rest of the sectors were losers with Nifty Metal (-8.6%) and Nifty PSU Bank (-6%) were the biggest losers. Even Nifty Auto dropped 2.7% and Pharma fell 2.41%.

Among Nifty stocks, Hindalco (-8.7%) was the biggest loser for the week, followed by JSW Steel (-8.6%), Tata Motors (-7.9%), UPL Ltd (-6.5%) and Tata Steel (-5.9%).

Top gainers were Hindustan Unilever (8.9%), Britannia (8.8%), Baja Finance (8.2%), Nestle India (7.1%) and Tata Consumer (4.9%).

Metal stocks came under heavy selling pressure due to a couple of global events. Firstly, US central bank’s minutes of their July monetary policy decision was released. The minutes hinted at Fed is likely to decrease its monthly bond buying exercise by the end of this calendar year. However, the minutes noted that a few members of the monetary policy committee would rather wait till the end of 2022 to start tapering. This led to investors seeking safe haven assets and commodities related stocks plunged.

Secondly, BHP Group, one of the world’s biggest mining company, said it expects China to cut production of steel this year. According to a commodities outlook report prepared by the company, the output cut is likely to weigh on the commodities futures market. This has a negative impact on iron ore futures market and on metal stocks in India.  

Vedanta, which plunged 18% on a weekly basis, was the biggest loser in the Metal index. Other top losers who lost in double-digits were NMDC (-12.1%), Jindal Steel & Power (-11.2%), SAIL (-11.2%).

Chip shortage continued to weigh on Indian auto stocks and the companies have started to cut down on parts which are dependent on semi-conductors.

Trading data from NSE showed FIIs were net sellers and DIIs we net buyers in cash segment during the week. FII sold on all days of the week and it amounted to Rs 4314.3 crore. DIIs’ net buying amount stood at Rs 162.4 crore for the week.

In other company news, shareholders of Eicher Motors rejected Siddharth Lal’s re-appointment as Managing Director of the company and they were also against his 10% salary hike. 

Ujjivan Small Finance Bank said its CEO Nitin Chugh will step down from his position with effect from close of business hours on September 30, 2021, citing personal reasons. There were also news reports on deterioration of asset quality and attrition at the bank. Shares of the company plunged 18.76% to Rs 19.7 on Friday. For the week, it fell 23.35%.

Economic Data

India’s wholesale price Index (WPI) eased to 11.16% year-on-year in July 2021, from 12.07% in the previous month and it was 13.11% in May 2021. The high inflation rate in July is primarily due to low base effect and price rise in crude oil and manufacturing goods. Manufacturing products based on WPI rose 11.20% in July 2021, from the year-ago period. Food index rose 4.46%, Fuel and Power jumped 26.02%.

Global Markets

The US stock indices ended in the green on Friday, but for the week it ended down. For the week, the Dow fell 1.12%, Nasdaq dropped 0.73% and S&P was down 0.6%. On the economic front, the country’s July retail sales fell 1.1%, which was more than expected. This was due to poor sales numbers in auto sales and it declined 3.9% in July. The country’s industrial production edged up 0.9% in July. Weekly jobless claims fell to 348,000.

In Asian markets, Japan’s Nikkei 225 index fell 3.45% on a weekly basis. The broader TOPIX index also fell 3.03% as news reports emerged that Toyota was planning a production cut in the coming months dampening investor optimism of a quick economic recovery. Japan’s GDP rose 1.3% in the second quarter on an annualized basis.

Chinese stocks dropped as investors were worried about the country’s regulatory crackdown on technology sector and its rub off effect on other sectors. Stocks related to the liquor industry fell after state media reported that the government was mulling a new regulation for the sector. For the week, the Shanghai Composite Index fell 2.5%, while the CSI 300 Index of large-cap stocks dropped 3.6%.