Last week, US consumer prices rose 1.7% (Y-o-Y) in July 2017, missing expectations of 1.8% and following a 1.6% gain in June 2017, reducing the chance that the Fed will tighten interest rates in the next monetary policy meeting. Indian shares fell for a fifth trading session and ended their worst week in one-and-a-half years after SBI sank following weak Q1Fy18 results, further weakening sentiment in a market reeling under North Korea tensions.
FIIs/FPIs have bought Indian equity shares worth Rs. 51.6 billion in the month of July 2017 and have sold shares worth Rs.20.64 billion till now in this month. This week, market participants will be tracking macroeconomic data of India closely.
The Nifty Index futures witnessed rise in open interest by 9% for the August series. There was a rise in open interest by 14% and 94% for September and October series in the last week. Implied volatility(IV) rose for call option and put option in the last week. Rise in IV for put and call option shows steady support for Nifty at present levels.
Global Economy
US consumer prices increased by 1.7% (Y-o-Y) in July 2017, missing market expectations of 1.8% and following a 1.6% gain in June 2017. Prices rose at a faster pace for energy, food, medical care commodities and transportation services. On a monthly basis, consumer prices edged up 0.1%, also missing estimation of 0.2%.
US government posted a USD 43 billion budget deficit in July 2017, smaller than a USD 113 billion gap in the same month of the previous year and below market expectations of a USD 73 billion deficit.
The Banco de Mexico (central bank of Mexico) held its benchmark rate at 7% on 10th August 2017 policy meeting as widely expected, bankers mentioned that previous rate hikes were already beginning to slow the pace of inflation while the balance of risks to growth has improved.
Consumer prices in Mexico jumped 6.44% 9Y-o-Y) in July 2017, following a 6.31(%) rise in June 2017 and above market expectations of 6.37%, mainly driven by higher prices of food and energy.
Industrial production in Mexico dropped 0.3% (Y-o-Y) in June 2017, following a 1% increase in May 2017 and worse than market expectations of a 0.3% gain. Output contracted for mining, quarrying and electricity. Considering the first half of the year, industry output shrank 0.3%.
The UK’s deficit on trade in goods and services widened by 2.0 billion Pounds to 4.56 billion Pounds in June 2017 from a revised 2.52 billion Pounds in May 2017. It was the biggest trade gap since September 2016, as imports rose in the month by 3.3% to an all-time high of 53.95 billion Pounds, due to an increase in purchases of both goods and services. Exports dropped 0.7% to 49.39 billion Pounds.
China’s current account surplus narrowed sharply to USD 52.9 billion in the Q2 of 2017 from USD 65.1 billion in the same period of the previous year. China’s foreign exchange reserves increased by USD 24 billion to USD 3.08 trillion at the end of July 2017.
The number of Americans filing for unemployment benefits increased by 3,000 to 244,000 in the week ended 05th August 2017 from the previous week’s revised level of 241,000 and above market expectations of 240,000.
Stocks of crude oil in the US fell by 6.451 million barrels in the week ended 04th April 2017, following a 1.527 million drop in the previous period and above market expectations of a 2.72 million decline.
Global Market
Wall Street closed modestly in the green on Friday, as markets stabilized a day after North Korea tensions escalated. US consumer prices rose 1.7% (Y-o-Y) in July 2017, missing expectations of 1.8% and following a 1.6% gain in June 2017, reducing the chance that the Fed will tighten interest rates in the next monetary meeting. On weekly basis, Dow Jones fell by 1%, Nasdaq fell by 1.50%, S&P 500 fell by 1.4% in last week.
The FTSE 100 finished down by 1.1%, at 7309 on Friday, with miners among the worst performers, as concerns over relations between the US and North Korea continued to weigh. On weekly basis, FTSE fell by 2.70%.
Oil prices fell further on Friday after the International Energy Agency (IEA) raised doubts about OPEC countries commitment to the production reduction agreement started in January to re-balance markets. OPEC’s rate of compliance with the cutbacks slipped to 75% in July, the lowest in seven months. On weekly basis, Brent Crude fell by 0.61% to USD 52.10 per barrel.
Indian Market
The Sensex and Nifty lost by 3.44% and 3.54% respectively in the last week.
India’s industrial production decreased 0.1% (Y-o-Y) in June 2017, following an upwardly revised 2.8% rise in the previous month and missing market expectations of a 0.6% gain. It was the first fall in industrial production since June 2013.
Britannia Industries Ltd is coming up with its largest plant ever in Maharashtra with an investment of Rs. 10 billion over a 2-year period will be made, which will make the company less dependent on outsourced manufacturing of its products. This investment will help the company to improve EBITDA and Net Profit margins. Share price of Britannia Industries rose by 5% in last week.
Portfolio Performance
Our model Twelve Stock Retirement Portfolio has given a one-year return of 38% and has outperformed the benchmark Sensex by 27%.
On a weekly basis, Twelve Stock Portfolio has lost by 2.35% in value and the Benchmark BSE Sensex has lost by 3.4%. The Portfolio outperformed the benchmark by 1.09%.
The Nineteen Stock Portfolio has given a one-year return of 40% and has outperformed the benchmark BSE 500 by 24%.
On a weekly basis, the Nineteen Stock Portfolio has lost 3.7% in value and the Benchmark BSE 500 has lost 4.26%. The Portfolio outperformed the benchmark by 0.57%.
Our Shariah Twelve Stock Model Retirement Portfolio has given one-year return of 47% and has outperformed the benchmark by 35%.
On a weekly basis, Shariah Twelve Stock Model Retirement Portfolio has lost 2.28% in value and the Benchmark Sensex has lost by 3.4%. The Portfolio outperformed the benchmark by 1.16%.
On a weekly basis, Ten Stock Growth Portfolio has lost 1.42% in value and the Benchmark Sensex has lost by 3.4%. The Portfolio outperformed the benchmark by 2.02%.
Our Global Ten Stock Model Retirement Portfolio has given one-year return of 27% and has outperformed the benchmark S&P 500 index by 16%.
On a weekly basis, Global Ten Stock Model Retirement Portfolio has declined 0.59% in value and the Benchmark S&P 500 has declined by 1.43%. The Portfolio outperformed the benchmark by 0.84%.
Industry and Stock Specific trends
The sectoral indices closed in negative territory last week. The S&P Bankex, Auto, IT, PSU and Oil & Gas indices fell by 3.48%, 6.10%, 1%, 5.30% and 3% respectively in last week.
There are various factors that are cited for the recent correction in the market but it has to be understood that markets were anyways looking for an excuse to correct for quite sometime now. Geopolitical factors such as tensions between North Korea and the US and the recent crackdown by SEBI on the suspected list of shell companies has given good enough reasons for the Sensex and the Nifty to correct.
Click here to read our analysis on “5 Reasons to Buy into this Market Correction”
SBI witnesses highest rise in turnover in Stock Derivatives
The Nifty Index futures witnessed rise in open interest by 9% for the August series. There was a rise in open interest by 14% and 94% for September and October series in the last week. Implied volatility(IV) rose for call option and put option in the last week. Rise in IV for put and call option shows steady support for Nifty at present levels.
SBI witnesses rise in turnover in Stock Derivatives
SBI has witnessed rise in open interest in the stock future segment in the last week. Share price of Ceat fell by 8% in last week. SBI management has reported Q1Fy18 results, net profit fell by 20% (Y-o-Y) to Rs. 200060 million, net interest income rose by 22% (Y-o-Y) to Rs. 176060 million. Loan loss provisions almost doubled to Rs. 122150 million. On consolidated basis, bank reported a net profit of Rs. 31050 million. Post announcement of results share price of SBI fell by 5.3%.
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.
Currency
Indian rupee appreciated by 0.722% against USD, USD/INR pair closed at 64.16.
The Mexican peso gained 0.90% to 17.8068 per on Friday. Abroad, the dollar dropped against most currencies after tensions with North Korea escalated.
