The Friday terrorist attack on the people of Paris will weigh on the Sensex and Nifty as risk aversion increases globally. Global investors will worry about more such attacks and will choose to play it safe going into the end of the calender year 2015. Sensex and Nifty are likely to see volatility until the Paris attack news flows subside.
The Sensex and the Nifty declined 2.49% and 2.41% respectively in the last week, as increased chances of Federal Reserve committing to an interest-rate increase in the month of December 2015 and domestic data showing acceleration of consumer price inflation in October 2015 and deceleration in industrial production growth in September 2015, dampened sentiment.
A stronger-than-expected US employment report for October 2015 has increased the odds of a Federal Reserve rate increase in December 2015. Initial jobless claims for the US economy held unchanged at 276,000 for the highest 2-week run in two months.
Emerging markets are witnessing fall in the levels of the equity benchmark indices as investors are worried that once the Fed starts raising interest rates, it will drain liquidity from global emerging markets and redirect it to developed economies. The Fed has held its benchmark short-term interest rate near zero since December 2008. The ultra-loose monetary policy in the US has encouraged heavy investment in higher-yielding emerging markets. The next monetary policy review from the Fed is scheduled on 15-16 December 2015.
Inflation based on the consumer price index (CPI) accelerated to four-month high of 5% in October 2015, compared with 4.4% reading in September 2015. Among the CPI components, inflation of food and beverages increased to 5.3% in October 2015 from 4.3% in September 2015 mainly contributing to the rise in CPI inflation. The increase in prices of pulses was the key driver of food price inflation.
The index of industrial production as indicated by the IIP moderated to 3.6% in September 2015 from a revised growth of 6.3% in August 2015. Industrial production growth for August 2015 was scaled down to 6.3% in the first revision compared with 6.4% reported provisionally. The growth for June 2015 was reduced to 4.2% at the final revision against the first revision from 4.4%, while it remained above 3.8% reported provisionally.
Portfolio and Sector Performance
Our model Twelve Stock Retirement Portfolio has given one-year returns of 15.63% and has outperformed the benchmark Sensex by 24.27%.
On a weekly basis, twelve stock portfolio has declined 0.23% in value and the Benchmark BSE Sensex has declined by 2.49%. The Portfolio has outperformed the benchmark by 2.26%.
The Nineteen Stock Portfolio has given one-year returns of 8.53% and has outperformed the benchmark BSE 500 by 12.53%.
On a weekly basis, nineteen stock portfolio has declined 0.37% in value and the Benchmark BSE 500 has declined 1.8%. The Portfolio has outperformed the benchmark by 1.43%.
The Global Ten Stock Model Retirement Portfolio has given a return of 15.61% and has outperformed the benchmark S&P 500 index by 18.44% since inception on 8th April 2015.
On a weekly basis, Global Ten Stock Model Retirement Portfolio has declined 5.59% in value and the Benchmark S&P 500 has declined by 3.63%. The Portfolio has underperformed the benchmark by 1.96%.
Industry and Stock Specific trends
The sectoral indices closed in negative territory last week. The S&P BSE Bankex, IT, PSU and Oil and Gas indices declined 0.69%, 3.16%, 2.37% and 3.58% respectively in the last week.
Stock Gainers and Losers
Axis Bank stock rose 4% in the last week. The government in the last week announced that it has decided to introduce full fungibility of foreign investment in private sector banks. Foreign institutional investors can now invest up to sectoral limit of 74% in private sector banks, provided that there is no change of control and management of the concerned bank. The decision to introduce full fungibility of foreign investment in private sector banks is among a slew of reforms and liberalisation announced by the government early this week for attracting foreign direct investment in the country.
Tata Motors stock rose 2% in the last week. The Company reported a consolidated net loss of Rs.4.2976 billion for Q2 September 2015 compared with net profit of Rs.32.9086 billion in Q2 September 2014. Total revenue rose 1.15% to Rs.615.6345 billion in Q2 September 2015 over Q2 September 2014. Loss was on account of charges taken on JLR vehicles destroyed in a fire in China. Improved volumes of JLR globally led to price rise for Tata Motors.
Sun Pharma stock declined 8% in the last week. The consolidated net profit fell 46.02% to Rs.11.0666 billion with a 12.23% decline in total revenues to Rs.70.2893 billion in Q2 September 2015 over Q2 September 2014.
Dr Reddy’s Labs declined 7% in the last week. The company’s management reportedly revealed in a conference call in the last week that the US Food and Drug Administration (USFDA) has ordered a third-party audit across the manufacturing network of the company. The conference call was held in the wake of a warning from the USFDA on possible violations of manufacturing standards at three pharmaceutical plants of the company. US district court has issued an order directing the company to temporarily stop sales of generic esomeprazole capsules in the US market with immediate effect. The order came about as a result of a motion moved by Astra Zeneca objecting to the usage of the colour purple in the generic product. The order has been passed pending further hearing or trial.
ONGC stock declined 9% in the last week. The Company’s net profit declined 11% to Rs.48.4202 billion with a 0.03% increase in the total income to Rs.218.1726 billion in Q2 September 2015 over Q2 September 2014. Slide in crude oil prices by 6% in the last week also adversely impacted the stock. Lower crude oil prices would result in lower realizations from crude sales for oil exploration firms like ONGC.
Derivatives
The derivative market saw fall in open interest in Nifty futures by 6%. Nifty at the money call and put option volatility declined last week.
Market Update
The Rupee depreciated in the last week against the USD. FIIs were net equity sellers to the tune of USD 350 million in the second week of November 2015.
