The Election Commission of India on 11th March 2017 announced key State election results. The Modi led government party BJP,won with clear majority in Uttar Pradesh and Uttarakhand states. Market participants believe the victory will encourage Prime Minister Modi to embark on more reforms, including the launch of GST in July, to boost economic growth.
Markets may rally further on the back of positive sentiments and the possibility of stable government at the centre for a long time.
Last week Indian markets closed on a tepid note ahead of state election results and Fed meeting, which is scheduled on 15th – 16th March 2017. Upbeat jobs data in the US cleared the way for Fed to hike rates this week.
Implied volatility(IV) rose for put and call options in the last week. Rise in IV for put and call option shows unsteady support for Nifty at present levels.
Non – Farm Payrolls in the US increased by 235,000 in February 2017, lower than upwardly revised 238,000 in January 2017 but above market expectations of 190,000. Employment gains occurred in construction, private educational services, manufacturing, health care, and mining sectors. US unemployment rate fell to 4.7% in February 2017 from 4.8% in the previous month, in line with market expectations.
The European Central Bank (ECB) held its benchmark refinancing rate at 0% for the ninth consecutive meeting and left the pace of its bond-purchases unchanged in its policy meeting on 9th March 2017. Policymakers confirmed the monthly asset purchases will continue at the current monthly pace of Euro 80 billion until March 2017, and from April 2017, asset purchases will continue at a monthly pace of Euro 60 billion until the end of the year. Both the deposit rate and the lending rate were also left steady at -0.4% and 0.25% respectively.
The US government posted a USD 192 billion budget deficit in February 2017, marginally changed from a USD 192.6 billion gap a year earlier but above market expectations of USD 150 billion.
The Japanese GDP advanced 0.3% in Q4 of 2016, above preliminary estimates of 0.2% expansion. It was the fourth consecutive quarter of growth, boosted by exports and government spending. Japan’s current account surplus fell to JPY 66 billion in January 2017 from JPY 590 billion a year ago and below market estimates of a JPY 239 billion surplus. On weekly basis, Nikkei index rose by 0.69%.
China unexpectedly reported a USD 9.15 billion trade deficit in February 2017, compared to a USD 28.2 billion surplus a year earlier and missing market expectations of a USD 25.75 billion surplus. It was the first monthly trade gap since February 2014, as imports surged while exports fell. In February 2017, exports declined by 1.3%(Y-o-Y), following a 7.9% rise in January 2017 while markets expected a 12.3% growth. Imports jumped 38.1% (Y-o-Y), after growing 16.7% in January 2017 and way above market expectation of a 20.3% rise. On weekly basis, Shanghai Composite index fell by 0.16%.
Wall Street major indices closed modestly higher on 10th March 2017 ahead of this week’s Fed meeting. All major indices rose after upbeat jobs data . On weekly basis, Dow Jones fell by 0.50%, S&P 500 rose by 0.44% and Nasdaq rose by 0.17%.
BASF Group is planning to invest around Euro 3 billion in Asia-Pacific countries between the years 2017 to 2021 and a share of the amount will be invested in India.
The Sensex and the Nifty gained by 0.40% each 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.
Bharti Airtel and Millicom International Cellular S.A announced that both the companies have through their respective subsidiaries (Tigo Ghana Limited and Airtel Ghana Limited) entered into an agreement to combine their operations in Ghana. Share price of Bharti Airtel rose by 2.46% last week.
Foreign investors are permitted further purchases of equity shares in South Indian Bank as the prescribed 49% threshold caution limit stipulated under the FDI policy has come down. Post this announcement by RBI, share price of South indian Bank rose by 4.69%.
Tech Mahindra will acquire CJS Solutions Group, a US-based health care provider, for Rs 7320 million (USD 110 million). CJS Solutions Group provides electronic health and medical record services and allied software training and support. Tech Mahindra will make an upfront payment of USD 89.5 million to take an 84.7% stake in the company. Share price of Tech Mahindra fell by 4.53% in last week.
USFDA has issued a warning letter to Wockhardt for its Morton Grove facility in the US, which summarizes significant violations by Wockhardt. The manufacturing sites were reportedly found not to have complied with the agency’s current good manufacturing practices. Post this announcement by USFDA, share price of Wockhardt fell by 2.70% last week.
Dr Reddy’s Laboratories received 13 observations from the USFDA for its Duvvada oncology formulation facility. The site manufactures cytotoxic and hormonal injectables and is an important plant given DRL’s focus on complex generic filings. Share price of Dr Reddy’s Laboratories fell by 5.71% in last week.
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Industry and Stock Specific trends
The sectoral indices closed in mixed territory last week. The S&P Bankex, PSU, Oil & Gas and IT indices have lost by 1.89%, 0.38%,0.72% and 0.48% respectively. S&P Auto index had gained by 1.08% in last week.
Bharat Financial Inclusion witnesses highest rise in turnover in Stock Derivatives
The Nifty Index futures saw rise in open interest by 8% for the March series. There was a rise in open interest by 179% and 648% for April series in the last week. Implied volatility(IV) rose for put and call option in the last week. Rise in IV for put and call option shows unsteady support for Nifty at present levels.
Bharat Financial Inclusion witnesses rise in turnover in Stock Derivatives
Bharat Financial Inclusion has witnessed rise in open interest in the stock future segment in the last week. Share price of Bharat Financial Inclusion rose by 0.11% last week. Open Interest of Bharat Financial Inclusion rose by 32% on weekly basis.
IndusInd Bank management on 09th March 2017 announced that the bank is in acquisition talks with Bharat Financial Inclusion. The bank also added that the management has been authorised to evaluate strategic opportunities for business expansion. If the merger talks are successful then it will be the third deal for IndusInd Bank, after Deutsche Bank’s credit card portfolio in 2011 and RBS’ diamond financing book in 2015.
Foreign Institutional Investors (FIIs) Derivative Statistics have shown rise in the open interest across Index Options, Stock Options and Stock Futures on a week on week basis. Index Futures have witnessed fall in open interest on weekly basis.
Indian rupee appreciated by 0.168% against USD, USD/INR pair is trading at 66.688.