The issues facing private sector and co=operative banks coupled with distress in the real estate sector that could add to bank NPAs will keep equity markets on the edge.
FIIs/FPIs have bought Indian equity shares worth Rs. 75 billion in September 2019 and sold shares worth Rs. 29 billion in October 2019 (till 4th October 2019).
The Nifty Index futures witnessed rise in open interest by 6% for the October series and rose by 15% for the November series. Implied volatility (IV) rose for put option and call option in the last week. Rise in IV for put option and call option shows unsteady support for Nifty at present levels.
Global Economy
Nonfarm payrolls in the US increased by 136,000 in September 2019, following an upwardly revised 168,000 rise in August 2019 and missing market expectations of 145,000. US unemployment rate decreased to 3.5% in September 2019 from 3.7% in the previous month and above below market expectations of 3.75%.
The US trade deficit widened to USD 55 billion in August 2019 from USD 54 billion in the previous month and compared to market expectations of USD 54.5 billion. Exports rose 0.2% and imports increased at a faster 0.5%.
The ISM Non-Manufacturing PMI for the US slumped to 52.6 levels in September 2019 from 56.4 levels in the previous month and well below market consensus of 55 levels. It was the lowest reading since August 2016, with firms mostly concerned about tariffs, labor resources and the direction of the economy.
The IHS Markit Eurozone Services PMI dropped to 51.6 levels in September 2019 from 53.5 levels in the previous month and below preliminary estimates of 52 levels, final data showed. The latest reading pointed to the weakest pace of expansion in the service sector since January 2019, as new orders rose at a slower pace, especially from foreign clients and services exports declined.
The Bank Japan Services PMI was confirmed at 52.8 levels in September 2019, down from August’s 22-month peak of 53.3 levels. New orders climbed, boosted by the fastest increase in new export sales since July 2018.
The number of Americans filling for unemployment benefits increased by 4,000 to 219,000 in the week ended 28th September 2019 from the previous week’s revised level of 215,000 and compared with market expectations of 215,000 . Jobless claims hit the highest level since the week ended 31st August 2019.
Stocks of crude oil in the United States increased by 3.104 million barrels in the week ended 27th September 2019, following a 2.412 million gain in the previous week and compared with market expectations of a 1.567 million gain, according to EIA Petroleum Status Report.
Global Market
Wall Street closed deeply in green on Friday, after modest job gains and a decline in the unemployment rate to a 50-year low eased concerns over the state of the economy while leaving the door open for a rate cut in the Fed’s next meeting. During the week, Dow Jones declined by 1%, Nasdaq rose by 0.60% and S&P 500 down by 0.52%.
European stock markets closed in green on Friday, tracking gains on Wall Street, as fears of a US recession eased amid rising bets that the Fed will boost growth by lowering rates following the latest jobs report. During the week, Dax declined by 3% and FTSE slumped by 3.65%.
Oil prices edged higher on Friday, after slumping by more than 2% on Thursday, pressured by persistent worries about global oil demand and increased fears that an unresolved trade dispute between the world´s two biggest economies could drag the global economy into a recession. During the week, Brent Crude Oil prices fell by 5.72%.
Indian Market
Sensex and Nifty declined by 3% each during last week.
Reserve Bank of India lowered its benchmark repo rate by 25 bps to 5.15% during its October 2019 policy- meeting, as widely expected. This was the fifth straight rate cut so far this year to boost slowing economic growth. Also, the RBI lowered its GDP forecast to 6.1% for 2019-20 from 6.9% previously estimated; while inflation outlook was revised upwards to 3.4% from 3.15.
Click here to read our RBI Policy Review Analysis.
The IHS Markit India Services PMI plunged to 48.7 levels in September 2019 from 52.4 levels in the prior month and well below market expectations of 52.1 levels. The latest reading pointed to steepest pace of contraction since February 2018, as new orders fell for the first time in one-and-a-half years and employment growth softened to the slowest since June, while backlogs fell for the first time in 40 months.
Ebix has acquired the corporate travel business from Cox & Kings for an undisclosed sum. Ebix announced the transaction on Friday. This is the firm’s second acquisition in recent months, after its purchase of Yatra.com. The firm said it has signed a deal with Cox & Kings to transfer its business travel agreements to the EbixCash’s Mercury Travel division. Share price of Cox & Kings declined by 18% during last week.
Nestle India, predominantly an urban-focused company for more than a century, has set its eyes on the country’s vast rural market for growth in coming decades. The food and beverages major, which till recently used to market the bulk of its products targeting urban and slightly premium consumers, is aggressively expanding the rural business amid a consumption slowdown.
Sectoral Indices Trends:
The sectoral indices mostly closed in negative territory during last week. The S&P BSE Bankex, Auto and PSU had declined by 7.32%, 2% and 2.56% respectively. S&P BSE IT and Oil & Gas indices gained by 1.11% and 1.76%.
SBI 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 declined by 12% during last week. Whole banking sector stocks were on selling spree during last week, BSE banking index declined by 7.3%. Bank stocks lost up to 42% of their market value and over Rs 1 trillion in market capital capitalisation. PMC bank crisis which allegedly diverted large amounts of money to the bankrupt HDIL promoters has spooked investors. Also, investors are expecting second wave of NPAs in banking sector in Q2Fy20.
Foreign Institutional Investors (FIIs) Derivative Statistics have shown rise in the open interest across Stock Options, Index Futures, Index options and Stock futures on a week on week basis.
Currency
Indian rupee depreciated by 0.448% against USD, USD/INR pair closed at Rs. 70.825 in the last week.
