Indian Equities reacted positively to the budget announcements last week. Post the Budget Policy announcement by the finance Minister, Sensex and Nifty rose by 3.6% each. Market Participants are now looking ahead for RBI policy meet which is scheduled on the 8th February 2016. We believe that if RBI cuts rates and gives a benign outlook, it will spur markets further.
Implied volatility (IV) fell for put and call options in the last week. Fall in IV for call and put option show steady support for Nifty at present levels and there are chances of increase in volatility in markets post RBI policy meet.
The Central bank of China hiked the cost of 7-day, 14-day and 28-day repo rates by 10 basis points each to 2.35%, 2.5% and 2.65% respectively during its policy meeting on 3rd February 2017. It is the first increase since 2013 for the two shorter tenors, and the first move since 2015 for the 28-day contracts. The benchmark lending rate was left unchanged at 4.35%.
The Central Bank of Russia kept its benchmark one-week repo rate unchanged at 10% during its policy meeting on 3rd February 2017, as widely expected, and also policy makers signalled the possibility of further cuts in the first half of 2017 has diminished. Policymakers said that inflation performance has been in line with the forecast, inflation expectations were going down gradually, and the economy was recovering faster than previously expected.
The Mexican economy expanded 2.2% year-on-year in the Q4Fy16, higher than 2% in the previous period but slightly below forecasts of 2.3%.
The seasonally adjusted Markit/CIPS Services PMI Business Activity Index in UK declined to 54.5 in January 2017 from 56.2 in December, missing market expectations of 55.8. It was the first fall since September 2016, signalling the weakest expansion in three months as new business and employment increased at slower rates and outstanding work fell slightly. FTSE rose by 0.06% in last week.
The Markit Eurozone PMI Services Business Activity Index in Euro came in at 53.7 in January 2017, unchanged from the previous month and slightly above the estimate of 53.6. Strong output expansions were seen in Ireland (PMI at 61.0), Spain (PMI at 54.2), France (PMI at 54.1), Germany (PMI at 53.4) and Italy (PMI at 52.4). Higher confidence combined with the ongoing upturn in the sector led to further job creation.
The Non-Farm Payrolls in the US increased by 227,000 in January 2017, higher than upwardly revised 157,000 in December 2016 and above market expectation of 175,000. Employment increased in retail trade, construction, and financial activities sectors.
Wall Street indices closed on a positive note on 03rd February 2017 after the jobs report and on the news, that President Donald Trump signed an executive order to scale back the 2010 Dodd- Frank Act to ease regulations. On weekly basis, Dow Jones gained by 0.64%, Nasdaq gained by 0.11%, S&P gained by 0.12%.
Apple has reported Q1Fy17 results, revenue increased by 3.30% (Y-o-Y) to USD 78.35 billion, net income decreased by 2.56% (Y-o-Y) to USD 17.89 billion and earnings per share was reported at USD 3.4. Share price of Apple rose by 6.8% in last week.
The Sensex and the Nifty gained by 1.28% and 1.15% respectively in the last week.
The Nikkei Manufacturing PMI (India) rose to 50.4 in January 2017 from 49.6 in December 2016 and beating market consensus of 50.2. While output and new orders went up, buying activity increased amid improving business confidence. The Nikkei Services PMI (India) rose to 48.7 in January 2017, up from 46.8 in December 2016.
Budget 2017-2018 highlights:
The Union Budget 2017-18 presented by the FM to the parliament on the 1st of February 2017 is pragmatic though the question of how the government will achieve lower fiscal deficit target remains.
Key highlights as follows:
- Tax on income from Rs. 0.25 million to Rs.0.5 million reduced from 10% to 5%
- Basic customs duty on LNG to be reduced from 5% to 2.5%
- Tax rate for companies with an annual turnover up to Rs. 500 million to be reduced to 25%, to strengthen MSME sector
- Fiscal deficit pegged at 3.2% of GDP
- Total allocation for infrastructure in Budget for Better India stands at a record level Rs 3,96,1.35 billion in 2017-18
- State run companies like IRCON and IRCTC to be listed on bourses
- Defence allocation of Rs 2.74 trillion
Click here to read our analysis on “Budget 2017-18 – Largely Positive for markets but Fed Policy will determine trends”
Click here to read our analysis on “Sectors to Pick Stocks Post Budget 2017-18”
Balrampur Chini Mills signed an agreement with Ganesh Explosives to sell its entire 54% stake in its subsidiary Indo Gulf Industries. Balrampur Chini share price rose by 6% in last week.
On 30th January 2016,Vodafone India confirmed a potential merger discussion with Aditya Birla Group for an all share merger of Vodafone India (excluding Vodafone India 42% stake in Indus Towers) and Idea Cellular. Idea cellular is also planning to raise Rs. 5000 million through NCD’s with a tenure of five years and coupon of 8.03%. Idea cellulars stock price surged by 40% in last week.
Click here to read our analysis on Idea Cellular & Vodafone merger.
Divis Laboratories reported Q3Fy17 results on 4th February 2017, income from operation increased by 13% (Y-o-Y) and net profit increased by 8.74% (Y-o-Y) to Rs.2683 million. Share price of Divis Laboratories rose by 7% in last week.
Dr. Reddy’s Laboratories reported Q3Fy17 results on 4th February 2017, revenue decreased by 6.4% (Y-o-Y) to Rs. 37232 million but it increased by 3% (Q-o-Q), net profit declined by 15.85% (Y-o-Y) to Rs. 4923 million. Share price of Dr. Reddy’s Laboratories rose by 4.61% in last week.
Our model Twelve Stock Retirement Portfolio has given a one-year return of 40.09% and has outperformed the benchmark Sensex by 25.37%.
On a weekly basis, Twelve Stock Portfolio has gained 1.75% in value and the Benchmark BSE Sensex has gained by 1.40%. The Portfolio outperformed the benchmark by 0.35%.
The Nineteen Stock Portfolio has given a one-year return of 32.11% and has outperformed the benchmark BSE 500 by 9.34%.
On a weekly basis, the Nineteen Stock Portfolio has gained 1.40% in value and the Benchmark BSE 500 has gained 1.49%. The Portfolio underperformed the benchmark by 0.09%.
Our Global Ten Stock Model Retirement Portfolio has given one-year return of 36.35% and has outperformed the benchmark S&P 500 index by 12.40%.
On a weekly basis, Global Ten Stock Model Retirement Portfolio has lost 0.83% in value and the Benchmark S&P 500 has gained by 0.12%. The Portfolio underperformed the benchmark by 0.95%.
Industry and Stock Specific trends
The sectoral indices closed in the mixed territory last week. The S&P Bankex and PSU indices have gained by 2.53% and 1.6% respectively. Whereas, S&P Auto, Oil & Gas and IT indices have lost by 0.24%, 0.02% and 1.88% respectively.
SunTv witnesses rise in turnover and Open Interest in Stock Derivatives
The Nifty Index futures saw rise in open interest by 11% for the February series. There was a rise in open interest by 21% and 626% for March and April series in the last week. Implied volatility(IV) fell for put and call options in the last week. Fall in IV for Call and Put option shows steady support for Nifty at present levels.
Sun Tv witnesses rise in turnover and Open Interest in Stock Derivatives
Sun TV has witnessed significant rise in open interest in the stock future segment in the last week. Share price of Sun Tv rose by 26% in last week. Special CBI court dropped all charges brought by both the CBI and ED against Maran brothers in the Aircel-Maxis Case. On the basis of lower legal and political issues, Sun TV shares rallied 26% in last week.
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 1.205% against USD, USD/INR pair is trading at 67.3825.