Week ahead, the most important events include November jobs report in the US and GDP growth data of Japan & Europe. In domestic markets, investors will be looking for RBIs policy meeting outcome and Nikkei services PMI data. Volatility index (VIX) witnessed a jump of 4% last week due to domestic macro-economic data.
Wall Street closed at record highs on 30th November 2017, as investors were optimistic of a Senate vote on tax reforms later in the day, with key Republican John McCain endorsing the Senate tax bill in a statement, an hour ahead of the vote. This statement has boosted investors confidence and resulted in indices closing at record highs.
FIIs/FPIs have bought Indian equity shares worth Rs. 197 billion in the month of November 2017.
The Nifty Index futures witnessed rise in open interest by 231% for the December series. There was a rise in open interest by 146% for January series in the last week. Implied volatility(IV) fell for call option and rose for put option in the last week. Fall in IV for call and rise in IV for put option shows investor hedging activity.
The US economy expanded an annualized 3.3% in Q3Fy17, above a preliminary 3% reading and higher than market expectations of 3.2%.
The Bank of Korea raised its base rate by 25 basis points, from a record-low of 1.25% to 1.5% on 30th November 2017 policy-meeting, which was in-line with market expectations.
Corporate profits in the US increased by USD 95 billion or 6% to USD 1,738 billion in Q3Fy17, following a 0.1% gain in the previous period.
Consumer prices in Japan rose 0.2% (Y-o-Y) in October 2017, following a 0.7 percent increase in the prior two months and matching market consensus. It was the lowest inflation rate since March, as cost of transport was flat while prices of food fell for the first time since June 2013 and cost of housing continued to decline.
The Brazilian economy expanded 1.4% (Y-o-Y) in Q3Fy17, following an upwardly revised 0.4% rise in the previous quarter and better than forecasts of 1.3%. It is the fastest growth rate since Q1Fy14, boosted by a jump in household spending and exports.
The IHS Markit UK Manufacturing PMI rose to 58.2 in November 2017 from an upwardly revised 56.6 in October 2017, beating market expectations of 56.5 .
The IHS Markit Eurozone Manufacturing PMI rose to 60.1 in November 2017, above a preliminary level of 60 and 58.5 level seen in October 2017. Production and new orders rose faster than expected and new export business and job creation were the highest on record.
The number of Americans filing for unemployment benefits decreased by 2,000 to 238,000 in the week ended 25th November 2017 from the previous week’s revised level of 240,000 and below market expectations of 240,000.
Stocks of crude oil in the US fell by 3.429 million barrels in the week ended 24th November 2017, following a 1.855 million drop in the previous period and compared with market expectations of a 2.301 million decline.
Wall Street closed modestly in the red on Friday after Michael Flynn, Donald Trump’s former national security adviser, pleaded guilty to lying to FBI agents about conversations with Russian officials while news showed Flynn was ready to testify about President Trump. During the week, Dow Jones gained by 2.86%, Nasdaq declined by 0.61% and S&P 500 gained by 1.53%.
Crude oil touched 2 years high on Friday after OPEC and Non-OPEC nations agreed to limit their output till 2018 end. Currently crude oil is trading at USD 63.73 per barrel.
The Sensex and Nifty declined by 2.51% and 2.58% respectively in the last week.
The Indian economy expanded 6.3% (Y-o-Y) in Q3Fy17, above 5.7% growth seen in the previous quarter, which was the lowest in three years, but below market expectations of 6.4% growth. Investment and inventories growth rebounded, offsetting a slowdown in both private and public spending.
Click here to read our analysis on “RBI Neutral Policy Stance to Continue- India second Qtr 2017-18 GDP Growth”.
India’s fiscal gap for the April-October 2017 period widened to Rs. 5.25 trillion from Rs. 4.24 trillion in the same period a year earlier. The shortfall was equivalent to 96% of the government’s target for the whole financial year, compared with 79.3% in the same period last year. The government aims to reduce the fiscal deficit to 3.2% of GDP in the current fiscal year that ends in March 2018, compared with 3.5% in the previous fiscal year.
Infrastructure output in India increased 4.7% (Y-o-Y) in October 2017, following a downwardly revised 4.7% rise in the previous month. From April to October 2017, infrastructure output went up 3.5% compared with the same period in last fiscal year.
Mahindra & Mahindra (M&M) last week opened a new USD 230 million plant in Detroit, which got its first automotive production facility in 25 years. The entry into the US car market is likely to be through the South Korean SsangYong Motor which is a subsidiary of M&M. Company is focussing to sell electric based SUV cars. Share price of M&M fell by 2% last week.
ITC management mentioned that company would be investing around Rs 100 billion in the coming years to strengthen its business in the food processing sector. Share price of ITC fell by 2%.
Infosys management has announced Mr. Salil Parekh as CEO & MD of the company, UB Pravin Rao will step down as the interim CEO & MD effective January 2, 2018. Share price of Infosys fell by 4% last week.
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Industry and Stock Specific trends
The sectoral indices closed in negative territory last week. The S&P Auto, Bankex, Oil & Gas, PSU and IT index rose by 1.48%, 2.69%, 2.65%, 3.20% and 3.15% in last week.
Reliance Industries witnesses highest rise in turnover in Stock Derivatives
The Nifty Index futures witnessed rise in open interest by 231% for the December series. There was a rise in open interest by 146% for January series in the last week. Implied volatility(IV) fell for call option and rose for put option in the last week. Fall in IV for call and rise in IV for put option shows unsteady support for Nifty at present levels.
Reliance Industries witnesses rise in turnover in Stock Derivatives
Reliance Industries has witnessed rise in open interest in the stock future segment in the last week. Share price of Reliance Industries fell by 4% in last week. Reliance Industries Chairman & MD Mukesh Ambani mentioned that the Reliance group might venture into Agriculture, Education & Healthcare sectors in the next investment cycle.
Reliance Industries management has announced, Reliance Marcellus which is subsidiary of Reliance Holding USA and Reliance Industries has sold its Reliance Marcellus upstream shale gas business assets for USD 126 million. Additionally, under the definitive documents a contingent amount of USD 12 million may be paid to Reliance Industries during Fy19 to Fy21 based on gas price thresholds achieved.
Currently asset utilisation in Argentina, Mexico, Brazil and Venezuela are underutilised at 76%, 40%, 75% and 40% levels respectively. This underutilisation levels would boost GRM (gross refining margins) upwards. Rise in GRMs will increase the profitability for Reliance Industries. Singapore GRM levels are at USD 7.18 per barrel (Source-Reuters) as on 24th November 2017.
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 0.46% against USD, USD/INR pair closed at 64.43.