Italy voted for no constitutional change leading to the resignation of the Prime Minister Matteo Renzi. The vote against reforms will weigh on Italy’s banks that are saddled with bad loans. Euro fell post the vote and equity markets globally are opening weak.
RBI is expected to cut rates in its meet this week. Read our note on “50bps Rate Cut” .
The Sensex and Nifty will stay ranged as the indices get pulled and pushed by Italian vote and RBI policy.
US unemployment rate fell to 4.6 percent in November 2016 from 4.9 percent in the previous month and well below market expectations of 4.9 percent. It was the lowest jobless rate since August 2007, as the number of unemployed persons declined by 387 thousand to 7.4 million.
Non-Farm Payrolls in the United States increased by 178,000 in November of 2016, higher than 142,000 in October and above market expectation of 175,000. The November2016, average hourly earnings in the United States declined by 0.1% to USD 25.89 from October 2016 levels.It is the first fall in wages since December 2014 and didn’t meet market expectations of a 0.2% gain.
OPEC countries agreed to cut the oil production by 1.2 million barrels per day, it is the first oil production cut since 2008 in a bid to tackle the over-production and prop up oil prices. Post -announcement of the deal crude oil price rose by 10% and is trading at a 52-week high at USD 54.43 per barrel. Indonesia has withdrawn its OPEC license as it did not agree to cut the production of oil.
Stock of crude oil in the United States fell by 0.884 million barrels in the week ended 25th November 2016. It is the second consecutive drop in five weeks, compared to market expectations of a 0.636 million rise. In contrast, gasoline stock rose by 2.097 million, much higher than expectations of a 1.156 million increase.
The central bank of Brazil lowered its benchmark Selic rate to 13.75% on 30th November 2016 meeting. Policymakers have mentioned that this move is implemented as aim to achieve inflation target.
The Caixin Manufacturing PMI in China fell to 50.9 in November 2016 from 51.2 in October 2016 but marginally higher than market expectation of 50.8.
Major U.S. indices closed on a mixed note on 2nd December 2016 after the November job report showed the economy added jobs more than the expected. On weekly basis, Dow rose by 1%, S&P 500 fell by 0.82% and Nasdaq fell by 2.65%.
European equities closed on a negative note on 02nd December as investors were cautious ahead of Italy’s constitutional referendum and Austrian presidential election which is on 04th December 2016. On 2nd December 2016 FTSE fell by 0.3% and DAX fell by 0.2%. On weekly basis, FTSE fell by 1.6% and DAX fell by 1.74%..
The management of Volkswagen has requested banks to extend a USD 21 billion worth credit line until June 2017 to strengthen its financial position as the company had paid billions of dollars as a penalty for its emission scandals. The share price of Volkswagen fell by 5% in last week.
The Sensex and the Nifty fell by 0.33% and 0.35% in the last week.
India’s GDP expanded by 7.3% (Y-o-Y) in the second quarter of FY17, following 7.1% expansion in the previous period and missing market expectations of 7.5% growth. Private consumption expanded at a faster pace while government spending slowed down and fixed investment dropped further.
India’s fiscal gap for April-October 2016 reached INR 4235 billion, 79.3% of the budgeted target for theFY17, fiscal gap for the same period was at 74% of the budgeted target a year earlier. Manufacturing PMI in India fell to 52.3 in November 2016 from 54.4 in October 2016, mainly driven by a soft expansion in new business investment capital inflows.
India’s trade deficit with China for the period April-September is at USD 25.22 billion, for FY16 trade deficit with China stood at USD 52.69 billion.
The management of Ashok Leyland reported that the company has completed the acquisition of Nissan Motor’s stake in each of the three joint ventures (JV) formed between them. Under the new agreement i.e. post-acquisition Ashok Leyland will continue to manufacture the commercial vehicle designed by Nissan Motors during their JV. Post-acquisition announcement share price of Ashok Leyland rose by 3.20%.
Idea Cellular is planning to sell 100% stake i.e. 11,000 telecom towers which would be close to a value of USD 1 billion. The Malaysian company Axiata is planning to sell 20% stake in Idea Cellular due to low valuations of the company and strong competition in the Indian Telecom sector post launch of Jio. Share price of Idea Cellular fell by 1.40% in the last week.
The Vedanta group has lined up RS 300 billion investments in Cairn India to increase its capacity.With this investment the production capacity of Cairn India would shoot up to 0.35 million barrels per day.
Our model Twelve Stock Retirement Portfolio has given a one-year return of 14.43% and has outperformed the benchmark Sensex by 13.10%.
On a weekly basis, Twelve Stock Portfolio has lost 1.10% in value and the Benchmark BSE Sensex has lost 0.33%. The Portfolio underperformed the benchmark by 0.77%.
The Nineteen Stock Portfolio has given a one-year return of 9.42% and has outperformed the benchmark BSE 500 by 5.7%.
On a weekly basis, the Nineteen Stock Portfolio has lost 0.67% in value and the Benchmark BSE 500 has lost 0.15%. The Portfolio underperformed the benchmark by 0.42%.
Our Global Ten Stock Model Retirement Portfolio has given one-year return of -10.38% and has underperformed the benchmark S&P 500 index by 15.18%.
On a weekly basis, Global Ten Stock Model Retirement Portfolio has lost 3.21% in value and the Benchmark S&P 500 has lost by 0.97%. The Portfolio underperformed the benchmark by 2.24%.
Industry and Stock Specific trends
The sectoral indices closed in the mixed territory last week. The S&P Bankex, IT,PSU and Oil & Gas indices have lost by 1.50%, 1.74%, 0.21% and 0.21% respectively. S&P Auto index rose by 1.14% in last week.
The Nifty Index futures saw rise in open interest by 11% for the December series. There was a rise in open interest by 16% for January series and February series by 418% in the last week. Implied volatility (IV) fell for put option and call option witnessed rise IV in the last week. Rise in IV for call option shows unsteady support for Nifty at present levels. SBI has witnessed rise in turnover and open interest in the stock futures segment. SBI share price rose by 0.22% in last week.
The management of SBI has announced its stake sale of 5% in SBI Life insurance, this process is likely to end by December 2016. As of now, SBI Life insurance is a joint venture of SBI (74%) and BNP Paribas Cardiff (26%).
Foreign Institutional Investors (FIIs) Derivative Statistics have shown rise in the open interest across Index Options, Index Futures, Stock Options and Stock Futures on a week on week basis.
Indian Rupee appreciated by 0.14% against USD in last week.