Fed guiding for gradual pace of rate hikes has lent support to risk assets leading to strong FII flows into Indian equities. INR appreciated to levels last seen in September 2015 on the back of FII flows. Sensex will cross 30,000 levels on higher pace of FII flows. In last week FIIs are net buyers of Rs 14 billion. (Read our analysis Why FIIs are Pouring Money Into India and Will they Continue?)
Indian equity indices touched record highs last week, Nifty rose by 2.53% and Sensex rose by 2.43%. On 17th March 2017, consumer goods stocks gained after the GST (Goods and Services Tax) council cleared all pending draft bills, clearing the way for a faster rollout of the national sales tax.
Implied volatility(IV) fell for put and call option fell in the last week. Fall in IV for put and call options shows steady support for Nifty at present levels.
The Federal Reserve raised the target range for its federal funds rate by 25bps to 0.75% to 1% in its March 2017 policy meeting. The decision came in line with market expectations as the labor market strengthened and economic activity continued to expand at a moderate pace in the US. Interest rate forecasts are showing another two rate hikes this year, the same as in the December 2016 projection.
The Bank of Japan left its key short-term interest rate unchanged at -0.1% at its March 2017 policy meeting, hours after the Federal Reserve raised its benchmark rate. Policymakers also decided to kept its 10-year government bond yield target around 0% and maintained its bullish economic view.
The Hong Kong Monetary Authority raised the base rate by 25 basis points to 1.25% in its March 2017 policy meeting, tracking a similar move by the US Federal Reserve as its currency is pegged to the US dollar. The central bank sets its base rate through a formula that is 50 basis points above the prevailing US Fed Funds or the average of the five-day moving averages of the overnight and one-month HIBORS (Hong Kong Interbank Offered Rate) whichever is higher.
Manufacturing production in the US increased 1.2%(Y-o-Y) and 0.5%(M-o-M) in February 2017, following an upwardly revised 0.6% rise in January. It is the biggest gain since April of 2015.
Wall Street major indices closed on a higher (Weekly Basis) note. All major indices rose after Federal Reserve policy meeting outcome and upbeat jobs data. On weekly basis, Dow Jones rose by 0.06%, S&P 500 rose by 0.24% and Nasdaq rose by 0.68%.
FTSE 100 touched new record highs of 7425 on 17th March 2017. Gains were seen in energy, telecom, and consumer goods sectors.
The Sensex and the Nifty gained by 2.53% and 2.43% respectively in the last week.
Industrial production (IIP) in India increased 2.7% (Y-o-Y) in January 2017, following a downwardly revised 0.1% drop in the previous month and beating market expectations of a 0.5% gain.
The trade deficit widened to USD 8.9 billion in February 2017 from a USD 6.5 billion gap a year earlier and slightly higher than market expectations of a USD 8.8 billion shortfall. Exports jumped 17.5% to USD 24.5 billion. Sales of non-petroleum and non-gems & jewellery rose 20.2%. Imports surged 21.8% to USD 33.4 billion.
Consumer prices inflation increased 3.65% (Y-o-Y) in February 2017, following a record low rise of 3.17% in January 2017 and higher than market expectations of 3.58%.
Central pollution control board has ordered Tata Chemicals to shut down its Haldia plant, which is located in West Bengal for alleged non-compliance of norms on liquid effluent discharge. Share price of Tata Chemicals fell by 2% post announcement of plant shutdown.
Manpasand Beverages is planning to invest Rs. 1500 million to set up a new manufacturing facility in Sri City, in order to meet the demands of the south India market. In Tamil Nadu Pepsi and Coke ban will help this company gain significant market share. Share price of Manpasand Beverages rose by 2% last week.
Bharti Airtel was planning to sell controlling stake in its mobile tower arm Bharti Infratel but has decided to instead monetise 21.63% equity in the company. The company has decided to sell or transfer 400 million shares to its wholly-owned subsidiary Nettle Infrastructure Investments Limited or to any potential investor. Share price of Bharti Airtel fell by 5% in last week.
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Industry and Stock Specific trends
The sectoral indices closed in positive territory last week. The S&P Bankex, PSU, Auto, Oil & Gas and IT indices have gained by 2.23%, 1.10%, 2.15%, 1.05% and 1.23% respectively.
Reliance Capital witnesses highest rise in turnover in Stock Derivatives
The Nifty Index futures saw rise in open interest by 7% for the March series. There was a rise in open interest by 25% and 6% for April series and May series respectively in the last week. Implied volatility(IV) fell for put and call option in the last week. Fall in IV for put and call option shows steady support for Nifty at present levels.
Reliance Capital Inclusion witnesses rise in turnover in Stock Derivatives
Reliance Capital has witnessed rise in open interest in the stock future segment in the last week. Share price of Reliance Capital rose by 11% in last week. Open Interest for Reliance Capital rose by 19% on weekly basis.
Reliance Capital has announced its plans to demerge its retail health insurance business from its subsidiary Reliance General Insurance Company. This decision is made by the management to increase company’s stake in health insurance industry. IRDA approval is required to complete the process of demerging the health insurance business of Reliance Capital.
Foreign Institutional Investors (FIIs) Derivative Statistics have shown rise in the open interest across Index Options, Stock Options, Index Futures and Stock Futures on a week on week basis.
Indian rupee appreciated by 1.720% against USD, USD/INR pair is trading at 65.5411.
The Mexican peso appreciated against the USD on 10th March 2017 to the highest level since November 8th amid President Trump and German Chancellor Merkel meeting and after the German economy minister said the EU could sue the US at the WTO (World Trade Organization) if a border car tax with Mexico is imposed and German car manufacturers are affected. USD/MXN pair is trading at 19.0706.