FIIs/FPIs have sold Indian equity shares worth Rs. 175 billion in August 2019 and shares worth Rs. 56 billion in September 2019 (till 20th September 2019).
The big bang tax rate cuts and expectations of RBI rate cuts in October will keep Sensex & Nifty at higher levels. Read our note on RBI Rate Cut Very Much on Cards for details.
The Nifty Index futures witnessed fall in open interest by 4% for the September series and rose by 183% for the October series. Implied volatility (IV) rose for put option and call option in the last week. Rise in IV for call option and put option shows unsteady support for Nifty at present levels.
The Federal Reserve lowered the target range for the federal funds rate to 1.75-2% during its September 2019 monetary policy-meeting, the second rate cut since the financial crisis, as inflation remains subdued amid heightened concerns about the economic outlook and ongoing trade tensions with China.
The Bank of England’s Monetary Policy Committee voted unanimously to hold the Bank Rate at 0.75% during its September 2019 monetary policy-meeting and reaffirmed its pledge to gradual and limited rate rises under the assumption of a smooth Brexit and some recovery in global growth.
The Hong Kong Monetary Authority lowered its base rate by 25 basis points to 2.25% during September 2019 monetary policy-meeting. It was the second rate cut this year, tracking a similar move by the US Federal Reserve as Hong Kong’s currency is pegged to the USD.
Japan’s trade deficit narrowed to JPY 136.3 billion in August 2019 from JPY 448.1 billion in the same month a year earlier and compared to market expectations of a JPY 356 billion gap. Exports declined 8.2%, the ninth straight month of decline, while imports plunged 12%, as trade policy uncertainty continues to drag activity.
The Bank of Japan left its key short-term interest rate unchanged at -0.1% at its September 2019 monetary policy-meeting, as widely expected. Policymakers also kept the target for the 10-year Japanese government bond yield at around 0% but said they would review economic and price developments more thoroughly at the next policy meeting, heightening the chance of expanding stimulus as early as October 2019.
Japan’s consumer price inflation fell to 0.3% (Y-o-Y) in August 2019 from 0.5% in the previous month and well below market expectations of 0.6%. It was the lowest inflation rate in six months, raising the chances of further stimulus.
The number of Americans filling for unemployment benefits increased by 1,000 to 217,000 in the week ended 31st August 2019 from the previous week’s revised level of 216,000 and compared with market expectations of 215,000.
Stocks of crude oil in the United States increased by 1.058 million barrels in the week ended 13th September 2019 after a 6.912 million drop in the previous week and against market expectations of a 2.496 million decline.
Wall Street indices closed in red on Friday, as investors are still unclear about US & China trade negotiations. During the week, Dow Jones declined by 1%, Nasdaq fell by 0.71% and S&P 500 down by 0.2%.
Stocks in the Asia-Pacific region finished higher on Friday, after preliminary trade talks resumed between Washington and Beijing while China cut its new one-year benchmark lending rate to support the economy. On weekly basis, Nikkei 225 rose by 0.41%, Hangseng declined by 3.36% and Kospi gained by 2%.
S&P BSE SENSEX and Nifty index jumped by 5% on Friday, its highest since July after the minister of finance Nirmala Sitharaman announced cutting the corporate tax rate for domestic firms and new domestic manufacturing companies. Key highlights are:
- Corporate tax rate slashed to 25.2% (effective tax rate).
- Tax on share buybacks withdrawn (announced before 5th July 2019).
- 15% MAT for companies seeking exemptions.
- Tax relief for FPIs on capital gains.
- 15% tax for manufacturing companies set up after 1st October 2019 and commences production before 2023.
Reliance Industries and UK’s BP plc have taken over the 10% shareholding of their partner Niko Resources in the eastern offshore KG-D6 block after the Canadian firm defaulted on paying for its share of gas field development cost. Share price of Reliance Industries gained by 4% during last week.
Reliance Infrastructure pledged 150 million additional shares in Reliance Power according to a regulatory filing by the company, reason for pledge was invocation of pledge against NCDs issued by Reliance Infrastructure Ltd. Share price of Reliance Infrastructure declined by 10%.
Morgan Credits Pvt. Ltd owned by Yes Bank Ltd co-founder Rana Kapoor’s family, said it has sold a 2.3% stake in the bank to an undisclosed buyer. Share price of YES Bank declined by 19% during last week.
Sectoral Indices Trends:
The sectoral indices mostly closed in positive territory during last week. The S&P BSE Bankex, Oil & Gas, PSU and Auto indices had gained by 3%, 2%, 0.65% and 3.26% respectively. S&P BSE IT declined by -2.45%.
Axis Witnesses rise in turnover in Stock Derivatives
Axis Bank has witnessed rise in open interest in the stock future segment in the last week. Share price of Axis Bank gained by 1% during last week. Axis Bank has fixed floor price for QIP worth USD 1.5 -2 billion through an issue of equity shares, depository receipts, or convertible securities. During earnings call in July 2019, the management had said the bank’s CET1 ratio at the end of June 2019 was 11.68%, with tier-I capital adequacy ratio of 12.9%.
Foreign Institutional Investors (FIIs) Derivative Statistics have shown rise in the open interest across Stock Options, Index options and Stock futures on a week on week basis. However, Index Futures witnessed fall in open interest.
Indian rupee depreciated by 0.127% against USD, USD/INR pair closed at Rs. 71.075 in the last week.