Last week, US Labor Department released non-farm pay rolls data. US employers hired 209,000 workers in the month of July 2017 and above market expectations of 183,000, signs of labor market tightness that likely clears the way for the Fed to announce a plan to start shrinking its massive bond portfolio.
The Indian pharmaceutical industry is facing regulatory sanctions and warnings over quality control to inadequate standards. Last week, Nifty Pharma index fell by 2.5%. Shares of Biocon fell as much as 7.6%, posting their biggest intraday fall in five months, after the U.S. FDA issued 10 observations on its plant in Bengaluru. FIIs/FPIs have bought Indian equity shares worth Rs. 51.6 billion in the month of July 2017 and have sold shares worth Rs.15.14 billion in the first week of August 2017.
The Nifty Index futures witnessed rise in open interest by 11% for the August series. There was a rise in open interest by 46% and 699% for September and October series in the last week. Implied volatility(IV) rose for call options and fell for put options in the last week. Fall in IV for put and rise in IV for call option shows unsteady support for Nifty at present levels.
The goods and services deficit in the US narrowed to USD 43 billion in June 2017 from USD 46 billion a month earlier and compared to market expectations of a USD 45 billion gap. It was the smallest trade deficit since October 2016, as exports increased to their highest level in 2 years.
Non-farm payrolls in the US increased by 209,000 in July 2017, below an upwardly revised 231,000 in June 2017 and above market expectations of 183,000. Employment increased in food services, business services and health care. US unemployment rate fell by 0.1% to 4.3% in July 2017.
The Mexican economy advanced 0.6% during quarter June 2017, slowing slightly from a 0.7% rise in the previous quarter but beating market expectations of a 0.7% contraction.
The UK economy grew 1.7% (Y-o-Y) in Q2Fy17, in line with market expectations and easing from a 2% expansion in the previous period. It was the lowest annual growth rate since the Q2Fy16, as production sector contracted while services and construction continued to grow.
The Bank of England held its bank Rate at a record low of 0.25% on 3rd August 2017 policy meeting as widely expected. Bankers have mentioned that GDP growth is expected to remain sluggish in the near term as the squeeze on household’s real incomes continues to weigh on consumption. The Committee voted unanimously for UK government bond purchases at 435 billion Pounds and the stock of sterling non-financial investment-grade corporate bond purchases at 10 billion Pounds. The central bank cut its UK growth forecast for this year to 1.7% from an earlier estimate of 1.9%, while next year it predicts 1.6% growth compared to its previous 1.7% forecast.
South Korea’s trade surplus increased by 42% (Y-o-Y) to USD 10.65 billion in July 2017 from USD 7.51 billion in the same month a year earlier, mainly supported by double-digit growth of exports. Exports surged by 19.5% (Y-o-Y) to USD 48.85 billion and imports increased by 14.5% (Y-o-Y) to USD 38 billion.
The Markit US Services PMI rose to 54.7 in July 2017 from a reading of 54.2 in June 2017. It is the highest reading since January 2017 as business activity increased markedly, new orders rose the most in two years and payrolls increased at the fastest pace so far, in this year.
The number of Americans filing for unemployment benefits fell by 5,000 to 240,000 in the week ended 29th July 2017 and slightly below market expectations of 242,000.
Stocks of crude oil in the US fell by 1.527 million barrels in the week ended 28th July 2017, following a 7.208 million drop in the previous period and lower than market expectations of a 2.957 million decline.
Wall Street closed modestly in the green on Friday August 4th of 2017, as non-farm payrolls in the US increased by 209K in July of 2017, below an upwardly revised 231K in June but above market expectations of 183 thousand. The Dow Jones touched 22k mark for the first time during the week. On weekly basis, Dow Jones rose by 1.20%, S&P 500 gained by 0.20% and Nasdaq fell by 0.36%.
The Sensex and Nifty gained by 0.05% and 0.52% respectively in the last week.
The Reserve Bank of India (RBI) lowered its benchmark interest rate by 25bps to 6% on 2nd August 2017, in line with market expectations. RBI cited lower June 2017 headline inflation than projected, fall in core inflation to 4% levels and smooth implementation of GST and normal monsoons for its rate cut. RBI did not change its policy stance from neutral and is adopting a wait and watch policy on inflation trajectory till its next policy review in October 2017.
Click here to read our analysis on “RBI August 2017 Policy Review- Low Rates, High Liquidity to Drive Down Credit Spreads”.
The Nikkei Services PMI in India plunged to 45.9 in July 2017 from 53.1 in June 2017. It was the first contraction in services activity since January 2017 and the sharpest since September 2013 due to the implementation of the goods and services tax (GST).
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Industry and Stock Specific trends
The sectoral indices closed in positive territory last week. The S&P Bankex, Auto, IT, PSU and Oil & Gas indices rose by 0.19%, 1.88%, 0.10%, 3.30% and 5.33% respectively in last week.
Shares of Indian oil refiners and marketers rose throughout the week on several macro factors. S&P Oil & Gas index gained by 5.33% last week.
- Deregulation of Kerosene: Government has asked oil marketing companies to increase kerosene prices and gradually planning to end subsidy for kerosene. This move by the government would not impact earnings due to gradual increase of prices (25 paise every fortnight).
- Singapore GRM: Singapore gross refining margins, the Asian benchmark, rose above USD 8 per barrel after a fire explosion which lead to shutdown of Europe’s largest refinery (Shell Oil Refinery at Rotterdam). GRM is the difference between the total value of petroleum products coming out of an oil refinery and the cost of crude.
- USD/INR: The INR appreciated to Rs 63.70 against the USD during the week, touching its two-year high. A stronger rupee reduces the costs for oil marketing companies as they shell out fewer dollars to buy crude.
Ceat Ltd witnesses highest rise in turnover in Stock Derivatives
The Nifty Index futures witnessed rise in open interest by 11% for the August series. There was a rise in open interest by 46% and 699% for September and October series in the last week. Implied volatility(IV) rose for call option and fell for put option in the last week. Fall in IV for put and rise in IV for call option shows unsteady support for Nifty at present levels.
Ceat Ltd witnesses rise in turnover in Stock Derivatives
Ceat Ltd has witnessed rise in open interest in the stock future segment in the last week. Share price of Ceat fell by 4.35% in last week. Ceat Ltd management has reported Q1Fy18 results, income fell by 1.1% (Y-o-Y) to Rs. 16.28 billion and net profit fell by 99% (Y-o-Y) to Rs. 0.01 billion. EBITDA for the quarter fell by 56.3% (Y-o-Y) to Rs. 0.9 billion with a corresponding margin contraction of 731 bps. GST roll out and peak raw material prices have affected the company during the quarter.
Foreign Institutional Investors (FIIs) Derivative Statistics have shown fall in the open interest across Index Options, Index futures and Stock Futures on a week on week basis. Stock Options witnessed rise in open interest on weekly basis.
Indian rupee appreciated by 0.686% against USD, USD/INR pair closed at 63.70.