Fed met expectations by hiking rates but the hawkish stance spooked markets in general. Lower than expected CPI & WPI inflation print was a positive, markets to be a bit disinterested and lack lustre next week as the holiday season closes in.
Fed hiked rates by 25bps in its FOMC meet that ended on the 14th of December and signalled more rate hikes in the year 2017.Policymakers said that the labour market has continued to strengthen and that economic activity has been expanding at a moderate pace since mid-year. Inflation in the US is expected to rise to 2% over the medium term.
GDP of the US expanded 1.60% (Y-o-Y) in the third quarter of 2016. The FOMC raised its GDP growth forecasts for 2016 to 1.9% from 1.8% in the September projection and for 2017 to 2.1% from 2% previously estimated.
Consumer prices in the Euro Area increased by 0.6% year-on-year in November 2016, following a 0.5% growth in the month of October 2016. It was the highest inflation rate since April 2014, driven by higher cost of restaurants and cafés and rents and tobacco. Core inflation rate, which excludes prices of energy, food, alcohol and tobacco, was unchanged for the third straight month at 0.8%.
The Bank of Korea (South Korea) left its base rate steady for the sixth straight month at record low of 1.25% at its December 2016 meeting. While saying the improvements in domestic demand have been weak, policymakers judged the downside risks to the future growth path had expanded a bit, owing mainly to the high degrees of uncertainty in recent domestic and external political conditions. On a weekly basis KOSPI index rose by 0.89%.
US stocks closed lower on 14th December 2016 after the Federal Reserve raised rates for the second time in a decade and forecast a faster pace of tightening in 2017, post announcement of rate hike US major indices, Dow jones fell by 0.60%, S&P 500 fell by 0.80% and Nasdaq fell by 0.50%. On weekly basis, Dow rose by 0.44%, S&P 500 rose by 0.5% and Nasdaq fell by 0.13%.
The Sensex and the Nifty fell by 1.48% and 0.96% respectively in the last week.
India WPI printed at 3.15% (Y-o-Y) in November 2016, following a 3.39% gain in October 2016 while markets expected a 3.10% rise. It was the eighth straight month of increase but the lowest figure since June. CPI printed at 3.63% (Y-o-Y) in November 2016, following 4.2% rise in October 2016 and well below market expectations of 3.9%. It was the lowest inflation rate since November 2014.
The Government of India reported a current account deficit of USD 3.4 billion, or 0.6% of GDP, in the second quarter of 2016 compared to a USD 8.5 billion, or 1.7% of GDP, in the same period a year ago. The balance of payments was at surplus of USD 8.5 billion for the second quarter compared with a deficit of USD 900 million a year ago.
Tata Motors rose 1.82% to Rs 472.50. Tata Motors Group global wholesales including Jaguar Land Rover (JLR) rose 1% to 91,832 units in November 2016 over November 2015. Global wholesales of all passenger vehicles rose 5% to 64,862 units in November 2016 over November 2015. Global wholesales of all Tata Motors’ commercial vehicles and Tata Daewoo range fell 7% to 26,970 units in November 2016 over November 2015.
NTPC fell 2.53% to Rs 159.95. NTPC raised Rs 39.25 billion through private placement of secured non-convertible debentures at a coupon of 7.37% per annum with a door to door maturity of 15 years. The proceeds will be utilized to finance capital expenditure/refinancing the debt requirement in on-going projects and other general corporate requirements.
Our model Twelve Stock Retirement Portfolio has given a one-year return of 19.66% and has outperformed the benchmark Sensex by 17.01%.
On a weekly basis, Twelve Stock Portfolio has gained 0.93% in value and the Benchmark BSE Sensex has declined 0.96%. The Portfolio outperformed the benchmark by 1.89%.
The Nineteen Stock Portfolio has given a one-year return of 16.1% and has outperformed the benchmark BSE 500 by 7%.
On a weekly basis, the Nineteen Stock Portfolio has gained 0.4% in value and the Benchmark BSE 500 has declined 1.8%. The Portfolio outperformed the benchmark by 2.2%.
Our Global Ten Stock Model Retirement Portfolio has given one-year return of -1.53% and has underperformed the benchmark S&P 500 index by 14.12%.
On a weekly basis, Global Ten Stock Model Retirement Portfolio has declined 0.12% in value and the Benchmark S&P 500 has declined by 0.04%. The Portfolio underperformed the benchmark by 0.08%.
Industry and Stock Specific trends
The sectoral indices closed mostly in the negative territory last week. The S&P Bankex, Auto, PSU and Oil & Gas indices have declined by 1.99%, 1.11%, 2.81% and 1.94% respectively.
The Nifty Index futures saw fall in open interest by 13% for the December series. There was a rise in open interest by 35% for January series and February series by 29% in the last week. Implied volatility (IV) fell for put and rose for call options in the last week. Rise in IV for call option shows marginal support for Nifty at present levels.
Tata Motors has witnessed rise in turnover in the stock futures segment. Tata Motors share price rose by 1.82% in last week. Tata Motors Group global wholesales including Jaguar Land Rover (JLR) rose 1% to 91,832 units in November 2016 over November 2015. Global wholesales of all passenger vehicles rose 5% to 64,862 units in November 2016 over November 2015. Global wholesales of all Tata Motors’ commercial vehicles and Tata Daewoo range fell 7% to 26,970 units in November 2016 over November 2015.
Foreign Institutional Investors (FIIs) Derivative Statistics have shown rise in the open interest across Index Options, Stock Options and Stock Futures and a fall in open interest across Index Futures on a week on week basis.
Indian rupee depreciated by 0.28% against USD, USD/INR pair is trading at 67.77.