Sensex & Nifty traded cautiously last week on the back of events such as Trump inauguration, Yellen speak and on forthcoming events such as Fed policy meet, Union Budget 2017-18 and RBI policy all of which are coming up on 1st of Feb and 8th of Feb respectively.
Donald Trump as US president aims at 4% growth in US GDP and this is highly positive for equities across the globe. However it remains to be seen how the growth target will be achieved.
S&P BSE IT index fell by 1.21% last week due to President Donald Trump’s views on US H1B visa issuances, IT stocks dragged Indian equity indices on 20th January 2016. Sensex and Nifty fell by 1% & 1.02% respective on 20th January 2016.
Supreme Court announced on 20th January 2016 that the court has deferred the hearing on a plea seeking postponement of Union Budget presentation to 23rd January 2016 due to scheduled assembly polls in five states. Implied Volatility (IV) for Nifty rose in last week showing unsteady support for Nifty at current levels.
Global Economy
UK jobless rate remained at 4.8% in the three months to November of 2016, the same as in the previous period and in line with market expectations. The employment rate held at an all-time high of 74.5 percent and wages grew at a faster pace. FTSE 100 fell by 1.9% last week.
The Chinese economy advanced 6.8% (Q-o-Q) in Q4Fy16, compared to a 6.7% growth in the previous three quarters and above market expectations of 6.7%. It was the strongest expansion since the fourth quarter of 2015, supported by consumer spending and higher government expenditure. Considering full year 2016, the Chinese economy expanded 6.7%, lower than 6.9% expansion seen in 2015. It is the weakest full-year growth since 1990 but within the government’s target range of 6.5 to 7%. Shangai Composite rose by 0.6% last week.
Global Markets
Donald Trump was sworn in as 45th US President on 20th January 2016. Wall street closed on a positive note on 20th January 2016 after Donald Trump’s inauguration speech. On weekly basis, Dow Jones fell by 0.29%, Nasdaq fell by 0.34%, S&P 500 fell by 0.15%.
In Europe, equities finished mixed as investors remained cautious ahead of the inauguration of President Donald Trump. The FTSE 100 lost 0.1%, by contrast, the CAC 40 gained by 0.2%. On weekly basis, FTSE 100 fell by 1.9%. DAX was marginally up by 0.01%.
Italy’s Luxottica and France’s Essilor have agreed to merge both entities, merger deal is valued at USD 49 billion. Merged entity will be the global leader in eyewear industry with revenue of nearly USD 18 billion. Share price of Luxottica and Essilor fell by 8% & 6% respectively last week.
British American Tobacco agreed to pay nearly USD 50 billion to acquire the controlling stake in US firm Reynolds America, creating the world’s largest listed tobacco company. Share price of Reynolds America and British American Tobacco rose by 5% and 0.6% respectively last week.
Indian Markets
The Sensex and the Nifty lost by 0.75% and 0.61% respectively in the last week.
IMF cuts India growth forecast for Fy17 by 1% due to demonetisation woes, current forecast is 6.6% down from 7.6% estimated earlier.
SEBI reported an outflow of USD 11 billion of FPI investments during the October- December 2016 period.
Committee related to Ministry of Environment, Forests and climate change has given a green signal to Cairn India to initiate drilling works of 64 exploratory wells in the KG basin in Andhra Pradesh. Share price of Cairn India fell by 0.3% last week.
Motherson Sumi System Ltd has agreed to buy PKC group (truck wire manufacturer) for USD 609 million. Motherson Sumi offered 23.55 Euro per share which is 52% premium to the 19th January 2016 closing price. Share price of Motherson Sumi and PKC rose by 0.10% and 49% respectively last week.
Results Corner
RBL Bank reported its Q3Fy17 results, net profit surged by 59% (Y-o-Y) to Rs. 1290 million, net interest income surged by 44% (Y-o-Y) to Rs. 3216 million. Gross NPA surged by 43% (Y-o-Y) to Rs. 2847 million. Share price of RBL Bank fell by 0.72% last week.
YES Bank reported its Q3Fy17 results, net profit increased by 30% (Y-o-Y) to Rs. 8826 million, net interest income increased by 30% (Y-o-Y) to Rs. 15075 million, other income for the bank increased by 34% (Y-o-Y) to Rs. 9983 million. Provision and contingencies amount fell by 30% (Y-o-Y) to 1153 million. Share price of YES Bank rose by 2% last week.
Canara Bank reported its Q3Fy17 results, net profit surged by 279% (Y-o-Y) to RS 3220 million, net interest income increased by 8.4% (Y-o-Y) to Rs 24140 million, net NPA rose by 9.72% (Q-o-Q). Share price of Canara Bank fell by 2.47% last week.
IPO Corner
Bombay Stock Exchange (BSE) is the oldest stock exchange in Asia, formed on 9th July 1875. As of 30th June 2016, BSE was the world’s largest exchange based on number of listed companies and India’s largest exchange by market capitalization with USD 1.5 trillion.
BSE ltd has set a price band of Rs 805 – 806 for bidding in its IPO opening this week, At the upper of the price band at Rs 806, the EPS(TTM) and P/E multiple are Rs 38.44 (TTM) and 21x, respectively. At the lower end of the price band at Rs 805, the P/E multiple stands at 20.94x. As of now there’s no peer listed in domestic markets to compare financials.
IPO opens on 23rd January 2016 and closes on 25th January 2016.
Click here to view our recommendation and analysis of BSE Ltd IPO note.
Portfolio Performance
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Industry and Stock Specific trends
The sectoral indices closed in negative territory last week. The S&P Bankex, Auto, PSU, Oil & Gas and IT indices have lost by 0.54%, 0.05%, 0.84%, 1.33% and 1.21% respectively.
Derivatives
The Nifty Index futures saw fall in open interest by 10% for the January series. There was a rise in open interest by 87% for February series and March series by 28% in the last week. Implied volatility(IV) rose for put and call options in the last week. Rise in IV for call and put option shows unsteady support for Nifty at present levels.
Axis Bank witnesses rise in turnover and Open Interest in Stock Derivatives
Axis Bank has witnessed significant fall in open interest in the stock future segment in the last week, open interest fell by 21% on weekly basis. Share price of Axis Bank fell by 5.62% in last week.
On 19th January 2017, post market hours, Axis Bank management reported Q3Fy17 results. Axis Bank net profit nosedived by 73% (Y-o-Y) to Rs.5796 million, net interest income increased by 4.1% (Y-o-Y) to Rs. 43337 million. Bank’s gross NPAs increased by 25% (Q-o-Q) to Rs.204668 million, provisions and contingencies amount surged by 423% (Y-o-Y) to Rs. 37958 million.
Foreign Institutional Investors (FIIs) Derivative Statistics have shown rise in the open interest across Index Options, Index Futures, Stock Options and Stock Futures on a week on week basis.
Currency
Indian rupee appreciated by 0.209% against USD, USD/INR pair is trading at 68.0883.
