FIIs/FPIs have bought Indian equity shares worth Rs. 18 billion in February 2020 and sold shares worth Rs. 89 billion in March 2020.
SBI buying a 49% stake in Ye Bank will be viewed negatively by the minority shareholders of SBI, as the bank is seen as bailing out an insolvent bank. Markets will now lower valuations of all PSU entities given that the government is using them to bailout other institutions at the cost of minority shareholders. Broader equity markets can fall if there is fear in markets on the health of lenders and on the health of the overall economy, which is compounded by the corona virus issue and an already weak domestic demand condition.
The Nifty Index futures witnessed rise in open interest by 14% for the March series and 56% for the April series. Implied volatility (IV) rose for call option and for put option in the last week. Rise in IV for call option and for put option shows unsteady support for Nifty at present levels.
The Federal Reserve lowered the target range for its federal funds rate by 50bps to 1%-1.25% during an emergency move on 3rd March 2020, saying the coronavirus poses evolving risks to economic activity. The Fed reiterated is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.
The US economy added 273,000 jobs in February 2020, the most since May 2018, compared to an upwardly revised 273,000 in January 2020 and market expectations of 175,000. The US unemployment rate decreased to 3.5% in February 2020 from 3.6% in the previous month while markets had expected it to be unchanged at 3.6%.
The US trade deficit narrowed to USD 45.3 billion in January 2020 from a revised USD 48.6 billion in the previous month and compared to market expectations of a USD 46.1 billion gap.
The ECB will act if needed to support the Euro Area economy as the coronavirus outbreak creates risks for the economic outlook and the functioning of financial markets, ECB President Christine Lagarde said in the statement issued on 2nd March 2020.
China unexpectedly reported a trade deficit of USD 7.09 billion in January-February 2020 combined, missing market expectations of a surplus of USD 24.6 billion and swinging from a surplus of USD 47.21 billion in the previous period. This was the first trade gap since March 2018, reflecting the severe impact of the rapid spread of COVID-19 outbreak.
The number of Americans filing for unemployment benefits decreased by 3,000 to 216,000 in the week ended 29th February 2020 from the previous week’s unrevised level of 219,000 and compared to market expectations of 215,000.
Stocks of crude oil in the United States increased by 0.785 million barrels in the week ended February 29th of 2020, following a 0.452 million gain in the previous week and compared with market expectations of a 2.644 million gain, according to EIA Petroleum Status Report.
Wallstreet stocks plunged on Friday, extending the steep sell-off from the previous session, as fears of fast-spreading coronavirus will disrupt global supply chains and hurt earnings growth mounted. Stocks fell despite February’s strong jobs report and expectations that the Federal Reserve will be slashing interest rates by 50 bps for the second time this month. During the week, Dow Jones gained by 1.80%, Nasdaq rose marginally by 0.09% and S&P 500 remained flat.
Oil prices declined by 5% on Friday after Reuters reported that Russia will not comply with deeper production cuts to support the market. OPEC, led by Saudi Arabia, has agreed on Thursday to cut production by 1.5 million barrels per day to offset a slump in demand caused by the coronavirus outbreak. However, Russia agrees only to an extension of existing cuts. The COVID-19 outbreak already led major consultancies to slash their projection for global demand growth to the weakest level since the financial crisis. Brent crude fell by 10% during last week.
S&P BSE Sensex & Nifty declined by 1.85% & 1.90% respectively during last week.
The Reserve Bank of India (RBI) followed other central bankers around the world by issuing a statement aiming to calm investors nerves. RBI mentioned that it’s closely monitoring global and domestic developments and stands ready to take appropriate actions to ensure orderly functioning of financial markets, maintain market confidence and preserve financial stability. RBI held its repo rate at5.15% during its February 2020 meeting.
The IHS Markit India Services PMI increased to 57.5 levels in February 2020 from 55.5 levels in the previous month, easily beating market expectations of 52.9 levels. The latest reading pointed to the strongest pace of expansion in the sector since January 2013, as new orders rose at the second-fastest rate in over seven years boosted by a rebound in exports.
Sectoral Indices Trends:
The sectoral indices closed on a negative note during last week. The S&P BSE Bankex, Oil & Gas, Auto, and PSU had declined by 4.27%, 3%, 0.24%, and 4% respectively. BSEIT index gained by 2.65%.
SBI witnessed rise in turnover in Stock Derivatives
SBI witnessed a rise in open interest, the share price of SBI declined by 12% on Friday. SBI announced to pick up up to 49% at not less than Rs 10 per share in YES Bank. To hold at least 26% stake in YES Bank for at least three years. RBI has authorized 24 billion shares of YES Bank for face value of Rs 2 each, which brings the authorized capital to 48 billion. SBI would be infusing Rs. 24.5 billion at Rs 10 per share for 49% stake.
Click here to read our analysis on “The True Cost of Yes Bank Reconstruction Scheme “.
Prior to last week, SBI gained momentum after government had created telecom fund in order to save Vodafone Idea from bankruptcy. SBI management reported 41% (Y-o-Y) rise in net profit as the asset quality showed good improvement. Gross bad loan declined to 6.9% from 7.53% a year ago. Net Interest income increased by 22% (Y-o-Y). Net NPAs stood at 2.65% compared with 3.95% during last year.
Foreign Institutional Investors (FIIs) Derivative Statistics have shown a rise in the open interest across Stock Options, , Index Options, Stock Futures, Index Futures, and Index Option on a week on week basis.
Indian rupee depreciated by 2% against USD, USD/INR pair closed at Rs. 74.004 in the last week.