Weekly Market Wrap: Indian markets ended the first week of 2023 in red terrain amid sustained selling by FIIs

Bears took control over Dalal Street and key gauges ended the first week of 2023 on a dismal note as traders remained pessimistic after US data indicated the US Federal Reserve will keep hiking interest rates to curb inflation. Consistent selling by foreign investors too spooked domestic sentiments. Markets started moving southward as traders opted to book profit in risky assets. 
Losses extended as sentiments remain dampened with rating agency ICRA’s report stating that the evolving global macroeconomic headwinds could moderate growth for the Indian IT services industry over the medium term. It cited that given the Indian IT services industry generates about 60-65 per cent of revenues from the US market and 20-25 per cent from the European market, it remains susceptible to macroeconomic uncertainties and adverse regulatory changes in these key operating markets.

Selling on the final day of trade dragged key gauges below their crucial 60,000 (Sensex) and 17,900 (Nifty) levels as traders as traders were concerned ahead of first advance estimates of economic growth for 2022-23 to be released later in the day by National Statistical Office. These signals led the BSE Sensex to decline 940.4 points, or 1.5 per cent, at 59,900.37 during the week ended January 06, while the Nifty slipped 245.9 points, or 1.4 per cent, to 17,859.45.

Dr.V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said: “FPIs have turned sustained sellers in the market. They sold for eleven consecutive days taking the cumulative selling to Rs 14,300 crore. And, the money taken out is being invested in the underperformers of last year like China and Europe, which are doing well now. Clearly, FII money is chasing lower valuations by selling in overvalued markets like India. This is an important trend in near-term FPI activity. If this trend continues it might weaken the Indian market further.  However, the selling will not be indiscriminate.”

“In December 2022, FPIs bought capital goods, FMCG, and financial services. Selling was mainly in IT. If the FPI selling continues, it will open up opportunities for investors. FIIs will sell stocks in which they are sitting on profits, like the banking segment. And this segment continues to be strong. Last year, too, selling by FIIs in banks turned out to be an opportunity for domestic investors. Globally, the phenomenon of good economic news becoming bad news for markets might continue in the near term. The latest data from the US show increasing job creation and declining jobless claims” he added.

As many as 22 stocks in the Nifty 50 index delivered a positive return to investors in the week ending January 06, 2023. With a gain of (8 per cent), HDFC Life Insurance Co emerged as the top gainer in the index. It was followed by Bharat Petroleum Corporation (up 4.3 per cent), SBI Life Insurance Company (up 3.1 per cent), Tata Steel (up 2.6 per cent) and Shree Cement (up 2.2 per cent). On the other hand, Bajaj Finance, Bajaj Finserv and JSW Steel declined 9.0 per cent, 7.7 per cent and 5.1 per cent, respectively.

Sector-wise, the BSE Oil & Gas index gained 0.5 per cent during the week gone by. BSE Fast Moving Consumer Goods and BSE Auto indices have also given positive returns. While BSE Teck declined the most, 2.4 per cent, and the BSE Information Technology index declined 2.3 per cent during the week. BSE Bankex and BSE Power indices also slipped more than 1.5 per cent.
Amol Athawale, Deputy Vice President-Technical Research at Kotak Securities Ltd, said: “Worries of global economic slowdown and higher interest rates prevailing going ahead triggered frenzied selling amongst the investors that saw Sensex end below the psychological level of 60,000. Also, the market is not comfortable with the current valuations given several headwinds, and hence investors resorted to profit-taking in banking, IT, and metals stocks.”

“Technically, on daily and intraday charts the Nifty has formed a lower top formation and it is consistently trading below the 50 and 20-day SMA (Simple Moving Averages) which is broadly negative. However, the market is now in oversold territory, there is a strong possibility of a quick pullback rally. For bulls, 18,000 would be the immediate hurdle and below the same, the index could slip to 17750. Further correction may drag down the index to 17650. On the other side, if the index moves above 18,000 it could move up to 18,100-18,175 levels.” Athawale added.
 

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