FIIs/FPIs have bought Indian equity shares worth Rs. 123 billion in October 2019 and shares worth Rs. 20 billion in November 2019 (till 01st November 2019).
The US economy grew by an annualized 1.9% in Q3Fy19, beating market expectations of 1.6% and following a 2% expansion in the previous three-month period.
The Fed lowered the overnight lending rate for the third time this year to a target range of 1.5% to 1.75%, driving a broad equity market rally and the USD lower against other major currencies on Wednesday, Fed also signalled that the central bank will pause from here.
Click here to read our note on Risk Appetite to Drive UST Yields and USD.
The US unemployment rate increased to 3.6% in October 2019 from 3.5% in the previous month and in line with market expectations. Nonfarm payrolls in the US rose by 128,000 in October 2019, following an upwardly revised 180,000 increase in September 2019 and easily beating market expectations of 89,000. Wage growth was seen at 0.2%.
The ISM Manufacturing PMI in the US rose to 48.3 levels in October 2019 from a decade-low of 47.8 levels in the previous month, missing market expectations of 48.9 levels. The latest reading pointed to the third straight month of contraction in the manufacturing sector, as output fell faster while new orders and employment declined at a softer pace.
The annual inflation rate in the Euro Area is expected to slow to 0.7% in October 2019 from 0.8% in the previous month and matching market expectations, a preliminary estimate showed. It was the lowest inflation rate since November 2016, as cost of energy dropped further.
Industrial Production in Japan rebounded by 1.4% (M-o-M)in September 2019, after a 1.2% decline in the previous month to beat market expectations of 0.4% growth.
China General Manufacturing PMI rose unexpectedly to 51.7 levels in October 2019 from 51.4 levels in September 2019, beating market expectations of 51 levels.
The number of Americans filling for unemployment benefits increased by 5,000 to 218,000 in the week ended 26th October 2019 from the previous week’s revised level of 213,000 and compared with market expectations of 215,000.
Stocks of crude oil in the United States increased by 5.702 million barrels in the week ended 25th October 2019, after a 1.699 million drop in the previous week and against market expectations of a 0.494 million increase, according to EIA Petroleum Report.
Wall Street closed deeply in green on Friday with S&P 500 and Nasdaq booking fresh highs, as October 2019 employment numbers topped expectations with 128,000 jobs added in the month and 75,000 gained in revisions.
European stock markets closed in green on Friday, boosted by better-than-expected US jobs report and stronger-than-expected Chinese manufacturing PMI.
The Shanghai Composite Index closed 1% higher on Friday despite renewed uncertainty over whether Beijing and Washington can reach a trade deal, after a private business survey showed factory activity grew the most in nearly 3 years in October 2019.
Sensex and Nifty gained by 2.5% each during last week.
The corporate tax rate cut boosted market sentiments and improved earnings for most of the highly profitable corporates in Q2Fy20. (Click here to read our Result Tracker) However, the guidance for Q3Fy20 is weak as most of the corporates have acknowledged festive season has been subdued in terms of top-line. Largcap, Midcap and Smallcap funds have underperformed in the month of October 2019 by 0.80%, 1% and 2% respectively. Such underperformance is mainly due to weak Q2Fy20 earnings and strong inflows into particular index stocks despite their higher valuations.
In October 2019, Sensex & Nifty gained in value by 4.56% and 4.30% respectively. Substantial cut in the corporate tax rate and removal of surcharge on capital gains have reversed the course of outflows from domestic markets. The change in market sentiment cannot be sustained without significant improvement in macro-economic data and corporate earnings. Consumer businesses are desperately hoping for revival in consumption during festive season. Going ahead, markets would turn volatile as the incoming macro-economic data is weak and showing mixed trends in consumption across urban & rural areas. Key data points that have shown weakness in economy include:
- IHS Markit India Manufacturing PMI unexpectedly fell to 50.6 levels in October 2019, the lowest since October 2017, from 51.4 levels in the prior month. Both output and new orders expanded at the slowest rate in two years.
- Infrastructure output declined 5.2% from a year earlier to September 2019, the first month of contraction since April 2015. Cement production declined by 2.1% in September 2019.
- Crude oil production declined by 5.45%, Natural gas production declined by 4.9% and Coal production declined by 20.5% in September 2019. Such steep decline in major energy commodity products shows weakness across energy products as well as other derivative products of Oil, Gas & Coal.
- India’s fiscal deficit widened to Rs 6.52 trillion in April-September 2019-20 from Rs 5.95 trillion in the corresponding period of the previous fiscal year.
- Credit market conditions are extremely poor with markets virtually frozen for most except a few issuers. Credit spreads have ballooned to alarming heights and this is affecting borrowers as well as lenders, a virtuous self fulfilling cycle that caused the 2008 global credit crisis.
Sectoral Indices Trends:
The sectoral indices closed in positive territory during last week. The S&P BSE Bankex, Oil & Gas, Auto, IT and PSU had gained by 2.38%, 2.50%, 3.52%, 4.18% and 4.57% respectively.
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 Reliance Industries gained by 11% during last week. SBI management reported Q2Fy20 results, net profit zoomed by 3-fold to Rs. 30 billion and slippages halved to Rs. 88 billion. The asset quality improved with gross NPA ratio coming in at 7.1% , down 276 bps (Y-o-Y). Net NPA ratio was at 2.79%, down 205 bps (Y-o-Y).
Indian rupee appreciated by 0.085% against USD, USD/INR pair closed at Rs. 70.76 in the last week.