Week ahead, the most important events in US include Fed monetary policy decision, nonfarm payrolls, ISM Manufacturing PMI, personal spending and factory orders. Market participants will also be watching for Eurozone GDP growth and inflation. In domestic market, market participants will watch for Union Budget and Q3Fy18 earning figures of Tech Mahindra, HDFC, JSW Steel, L&T and ICICI Bank. Sensex & Nifty would witness spurt in volatility in this week.
FIIs/FPIs have bought Indian equity shares worth Rs. 512 billion in the month of December 2017 and bought shares worth Rs. 117 billion till now in this month.
The Nifty Index futures witnessed fall in open interest by 57% for the January series during expiry week. There was a rise in open interest by 687% and 153% for February and March series respectively in the last week. Implied volatility(IV) rose for put option and call option in the last week. Rise in IV for put and call option shows higher volatility for Nifty at present levels. Markets would be volatile this week on Budget, expiry and data.
The ECB held its benchmark refinancing rate at 0% on 25th January 2018, as expected, and confirmed that the net asset purchases are intended to run at a monthly pace of 30 billion Euros until the end of September 2018, or beyond, if necessary. Policymakers voiced concerns over weak inflation and a surging euro.
The US economy expanded an annualized 2.6%(Y-o-Y) in Q4Fy17, below 3.2% in the previous period and market expectations of 3%. The deceleration in real GDP growth in Q4 reflected a downturn in private inventory investment that was partly offset by accelerations in PCE, exports, non-residential fixed investment, state and local government spending, and federal government spending, and an upturn in residential fixed investment.
The British economy expanded by 1.5% (Y-o-Y) in Q4Fy17, beating market expectations of 1.4%. It was the weakest pace of expansion since Q1Fy13, as output rose at a slower pace for both manufacturing and construction. In 2017 as a whole, the GDP grew by 1.8%, compared to 1.9% in 2016, the slowest since 2012.
Consumer prices in Japan rose 1% (Y-o-Y) in December 2017, up from a 0.6% climb in the prior month and slightly below expectations of a 1.1% increase. It was the highest rate since March 2015, and was mainly explained by a 5.2% surge in fuel, light & water charges and a 1.8% increase in food prices.
Moody’s has upgraded credit rating of Russia. The country’s sovereign credit rating outlook on 25th January 2018 was upgraded to positive from stable and affirmed the issuer’s debt at ‘Ba1’, citing as the two main drivers behind the revision 1) growing evidence of institutional strength and 2) increased evidence of economic and fiscal balance in turn reducing vulnerability to further external shocks arising from geopolitical tensions. Standard & Poor’s credit rating for Russia stands at BB+ with positive outlook. Fitch’s credit rating for Russia was last reported at BBB- with positive outlook.
The IHS Markit Eurozone Manufacturing PMI fell to 59.6 levels in January 2018 from a record high levels of 60.6 in December 2017 and below market expectations of 60.6 levels, preliminary figures showed.
Japan’s trade surplus narrowed 43.5% to 359 billion Yen in December 2017, missing market expectations of a 530 billion Yen surplus. Imports jumped 15% on higher fuels purchases, and exports rose at a softer 9.3%.
Mexico recorded a USD 157 million trade deficit in December 2017 from a USD 10 million in the corresponding month of the previous year. Figures came worse than market consensus of a USD 260 million surplus, as exports grew slower than imports.
The number of Americans filing for unemployment benefits rose by 17,000 to 233,000 in the week ended 20th January 2018 and below market expectations of 236,000.
Stocks of crude oil in the US fell by 1.071 million barrels in the week ended 19th January 2018, following a 6.861million drop in the previous period and compared with market expectations of a 1 million decline. It marks the tenth consecutive week of falls, the longest losing streak since 1982.
Wall Street closed in green on Friday, as advance estimates showed that the US economy expanded at an annualized 2.6% in Q4, below 3.2% in Q3 and forecasts of 3%, but mainly explained by a downturn in private inventory investment, with personal consumption expenditure contributing 2.58% to growth (1.49% in Q3). All three major indices reached new records. During the week, Dow Jones gained by 2.09%, Nasdaq jumped by 2.32% and S&P 500 advanced by 2.23%.
Hong Kong’s Hang Seng index gained 500 points and closed at a new record high of 33,154, amid optimism towards global economic recovery and accelerated money inflows from China. Hang Seng gained by 2.80% during last week.
The Sensex and Nifty gained by 1.52% and 1.61% respectively in the last week. The IMF forecasted India to grow 7.4% in FY19 against 6.7% this year, gaining pace to 7.8% in FY20.
The Indian government will present its budget for FY19 (April 2018 – March 2019) on 1st February 2018. This will be the final full year budget under the current term of the BJP-led central government before general elections in April/May 2019. There are four key state elections this year, which will continue to be seen by the market as a referendum on BJP-led government and a forerunner to the general elections.
Click here to read our analysis on “Sensex 40k, Budget Purview”.
A federal court in the US imposed a USD 5 million civil penalty on the North America subsidiary of Dr Reddy Labs for distributing prescription drugs in blister packs that were not child resistant.
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Industry and Stock Specific trends
The sectoral indices closed in mixed territory last week. The S&P IT, PSU, Oil & Gas index and Bankex indices gained by 3.63%, 1.23%, 2.25% and 2% respectively in last week. S&P Auto declined by 1.32% in last week.
SBI witnesses highest rise in turnover in Stock Derivatives
The Nifty Index futures witnessed fall in open interest by 57% for the January series during expiry week. There was a rise in open interest by 687% and 153% for February and March series respectively in the last week. Implied volatility(IV) rose for put option and call option in the last week. Rise in IV for put and call option shows steady support for Nifty at present levels. But markets would be volatile in this week due Budget session which is on 01st February 2018.
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 SBI fell by 6% on Thursday. The government on Wednesday announced that it will inject Rs. 881 billion through recapitalisation bonds and budgetary support in this financial year, this would strengthen the banks lending capacity and thereby pulling the country out of a three-year low credit growth slump. But the allocation of capital to the PSU healthy banks is not up to the markets expectations. A total of Rs 358 billion will be injected into nine banks that haven’t triggered prompt corrective action (PCA), including SBI, Punjab National Bank and Bank of Baroda, among others, while Rs 523 billion will be pumped into 11 banks that have triggered PCA, including IDBI, Central Bank of India, UCO Bank and others.
Foreign Institutional Investors (FIIs) Derivative Statistics have shown fall in the open interest across Index Options, Stock futures, Index futures and Stock Options on a week on week basis.
Indian rupee appreciated by 0.34% against USD, USD/INR pair closed at 63.49.