Prime Minister Narendra Modi commented at an inauguration that at present gains from stock and financial markets are taxed at a lower rate. Those who profit from stock markets should contribute to nation building. The comments hints at a possibility of tax structure being tweaked to increase short term capital gains from trading in stocks and imposition of a tax on long term capital gains.
With a month to go for the budget to be announced the above statements will scare markets and next week should open on a weak note.
Global markets have closed on a tepid note due to less FII activity in last week, Dow Jones Industrial Average touched all time high 19974 on 20th December 2016 close to 20K milestone. Indian markets closed on a negative note, open interest for Nifty current month contract fell by 3%. Implied volatility(IV) fell for put and call options in the last week.
The Bank of Japan left the interest rate unchanged at -0.1% at its December 2016 policy meeting, as expected. Policymakers also decided to maintain its 10-years government bond yield target around 0% and they are expecting a moderate recovery trend in the economy, while exports had picked up. About the amount of JGBs to be purchased, the Bank will conduct buying at an annual pace of about JPY 80 trillion. Nikkei index fell by 0.1% in last week.
Japan reported a JPY 153 billion trade surplus in November 2016, compared to JPY 387 billion deficit a year earlier but lower than market expectations of JPY 227.4 billion surplus. Imports to Japan went down 8.8% (Y-o-Y) to JPY 5.804 trillion in November 2016, compared to expectations of a 12.6% fall. Exports from Japan decreased 0.4% (Y-o-Y) to JPY 5.956 trillion in November 2016. It is the 14th consecutive drop but less than market expectations of a 2% fall.
The US economy expanded at an annualized 3.5% in third quarter which ended as of September 2016, up from 1.4% growth in the previous period and better than a 3.2% expansion in the second estimate. It is the highest growth rate in two years as personal consumption, investment in structures and intellectual property products and government expenditure rose faster than expected.
Stocks of crude oil in the US rose by 2.256 million barrels in the week ended 16th December 2016. It is the first increase in five weeks and compared to market expectations of 2.5 million barrels fall. Brent crude oil fell by 0.25% in last week.
Manufacturing production in Singapore jumped 11.9% (Y-o-Y) in November 2016, following an upwardly revised 1.3% increase in October and beating market estimates of a 1.6% growth.
US stocks closed on a tepid note for the week ended on 23rd December 2016, on weekly basis, Dow rose by 0.45%, S&P 500 rose by 0.40% and Nasdaq fell by 0.46%.
Fairfax Financial Holding agreed to buy insurer Allied World Assurance company for USD 4.9 billion in cash and stock. Fairfax will pay USD 54 per share, which is 18% premium to previous closing price of Allied World Assurance.
FINRA (The Financial Industry Regulatory Authority) said it fined several Wells Fargo & Co entities, RBC Capital Markets and others a combined fine of USD 14.40 million for record keeping issues.
The Sensex and the Nifty fell by 1.70% and 1.89% respectively in the last week.
Retirement fund body EPFO decided to lower the interest on EPF deposits for the current fiscal to 8.65% from 8.80% provided in 2015-16.
The management of CEAT ltd announced an investment of Rs.28000 million for next 5 years to increase capacity of truck radial tyres by 1 million, 2- wheeler tyres by 17 million and passenger car tyres by 6 million. Share price of CEAT rose by 30% in last three months and fell by 9% in last week.
NMDC invests Rs. 12220 million to set up at 3 million tons (per annum) integrated steel plant in Chhattisgarh and it is expected to start production by mid of 2017. Share price of NMDC fell by 4% in last week.
Glenmark ltd plans a capex of USD 300 million for next three years, the management of the company is expecting to file 20-25 ANDAs (Abbreviated New Drug Application) and launch of 20 generic products annually in the US and they are also expecting a top-line growth of 15%-20% CAGR over the next five years.
The Suzlon Group announced a joint venture with AMP solar for development and construction of a 15-MW solar project at Telangana.
Our model Twelve Stock Retirement Portfolio has given a one-year return of 13% and has outperformed the benchmark Sensex by 12.15%.
On a weekly basis, Twelve Stock Portfolio has declined 4.67% in value and the Benchmark BSE Sensex has declined by 1.69%. The Portfolio underperformed the benchmark by 2.98%.
The Nineteen Stock Portfolio has given a one-year return of 16% and has outperformed the benchmark BSE 500 by 13.5%.
On a weekly basis, the Nineteen Stock Portfolio has declined 5% in value and the Benchmark BSE 500 has declined 2%. The Portfolio underperformed the benchmark by 3%.
Our Global Ten Stock Model Retirement Portfolio has given one-year return of -2.27% and has underperformed the benchmark S&P 500 index by 12.35%.
On a weekly basis, Global Ten Stock Model Retirement Portfolio has gained 0.31% in value and the Benchmark S&P 500 has gained by 0.25%. The Portfolio outperformed the benchmark by 0.06%.
Industry and Stock Specific trends
The sectoral indices closed in the negative territory last week. The S&P Bankex, Auto, IT, PSU and Oil & Gas indices have declined by 2.66%, 1.73%, 1.32%, 2.01% and 0.25% respectively.
Divi’s Labs witnesses rise in turnover and Open Interest in Stock Derivatives
The Nifty Index futures saw fall in open interest by 3% for the December series. There was a rise in open interest by 229% for January series and February series by 39% in the last week. Implied volatility(IV) fell for put and call options in the last week. Fall in IV for call option shows steady support for Nifty at present levels.
Divi’s Labs has witnessed rise in turnover and open interest in the stock futures segment. Divi’s Labs share price fell by 24% in last week. On 7th December 7 2016, the US Food and Drug Administration (USFDA) had issued form 483 with five observations against Divi’s Laboratories’ unit which is in Visakhapatnam of Andhra Pradesh. On 23rd December 2016, CNBC Network channel has posted news through its sources on form 483 observations which were given by USFDA to Divi’s Labs.
The observation includes proper control not being exercised over computer system, facility equipment’s not maintained to ensure purity quality strength and documentation and records not maintained or inaccurate falsified. On 23rd December 2017 during intraday share price of Divi’s Lab fell by 20%.
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 depreciated by 0.21% against USD, USD/INR pair is trading at 67.9117.