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Markets In November 2016: Movers & Shakers Of The Month

December 07, 2016


November had a truly historical event, one that the Indian investors have seen just twice before (1946 and 1978), making most major indices register some of the biggest ever intraday falls; the impact of which is still seen in the market. The month turned out to be a totally different experience for many and a forgettable one for most. We bring to you the movers and shakers of the Indian stock market, the ones that actually made a difference for the month of November 2016, so sit back and enjoy:

Demonetization of Rs. 500 and Rs. 1000 notes

  • On the 8th of November, the Prime Minister of India, Mr. Narendra Modi announced to demonetize almost 85% of our total currency of Rs. 15 lakh crores. The move is aimed at eradicating black money and slush funds operating since Independence and also cutting out all possible forms of funding to terrorists.
  • The move has polarized the country between those who support the idea and those who are against it. (For more, click here)

Good Corporate Earnings:

  • As of 30th November 2016, 48 of the 51 companies that form the benchmark Nifty50 index had declared their Q2FY17 results.
  • Total combined revenue of those 48 companies stood at Rs. 739382 crores as against Rs. 681936 crores in the same period last year, thereby registering a rise of 8.42%. On the other hand, the combined PAT during the second quarter was Rs. 67779.24 crores as against Rs. 72137.95 crores in Q2FY16 showing de-growth of 6.04% Y-o-Y.

Automobile Sales

  • November 2016 was quite an eventful month for the Indian automotive sector. The demonetization announcement in the middle of the festive season did not have a considerable impact on sales. In fact, a lot of automakers managed double digit growth.
  • Have a look at the car sales (approx) posted by some of the top companies in the space:
Company Name Nov 2016 Sales Nov 2015 Sales Growth
Maruti 126220 110559 14.10%
Hyundai 40016 43651 (-)8.30%
Tata 12736 10517 21.10%
M&M 12707 18907 (-)32.80%
Toyota 11309 10278 10.00%
Renault 9604 7819 22.80%

Also, have a look at the two & three wheeler sales (approx) posted by some of the top companies in the space (Contrary to the car sales figures, most of the leaders in the two & three wheeler space witnessed a double digit contraction):

Company Name Nov 2016 Sales Nov 2015 Sales Growth
Hero MotoCorp 479856 550731 (-)12.90%
Honda 325448 326466 (-)0.30%
Bajaj Auto 269948 309673 (-)12.80%
TVS 224971 225401 (-)0.20%
Royal Enfield 57313 40769 40.60%
Yamaha 51106 42719 19.60%

Dip In Manufacturing and Services PMI:

  • The performance of India's service sector weakened in November as a result of cash shortages. Activity decreased in three of the six monitored sub-sectors, namely Financial Intermediation, Hotels & Restaurants and Renting & Business Activities.
  • The Nikkei/Markit Services Purchasing Managers’ Index sank to 46.7 in November from October’s 54.5, the first time since June 2015 that the index has gone below the 50 mark that separates growth from contraction. It was also the biggest one-month drop since November 2008, just after the collapse of Lehman Brothers triggered the global financial crisis.
  • At 52.3, the seasonally adjusted Nikkei India Manufacturing Purchasing Managers Index was lower than the 22-month high of 54.4 in October. The sub index for new orders fell to 53.3 from 57.7 in October.

FII/FPI Outflow At Record High:

  • Concerns over the surprise outcome of the US presidential election and its implications for emerging markets, the impending Fed rate hike and a hit on consumption demand after the Modi government’s demonetization drive led the FIIs and FPIs to withdraw a record Rs. 18244 crores and Rs. 21152 crores from Equity and Debt markets respectively. Here is the bifurcation for the same along with last two months’ data:
FII/FPI Inflows (Rs. Cr) November 2016 October 2016 September 2016
Equity -18244 -4306 10443
Debt -21152 -6000 9789
Total -39396 -10306 20233

RBI Hikes Cash Reserve Ratio (CRR):

  • The government’s demonetization move left banks flush with deposits with no viable credit opportunities to deploy them. Banks have thus been deploying the excess funds by lending to the RBI through the reverse repo option and investing in safe government securities.
  • The aggressive buying of government securities has led to yields falling sharply over the past two weeks. PSU banks have been net buyers to the tune of around Rs. 21000 crores, while private banks have purchased around Rs. 6500 crores of government securities over the last two weeks.
  • This was followed by a sharp 60 basis point decline (to 6.19%) in the yield on the 10-year government securities, thereby slipping below the RBI’s repo rate of 6.25%. This temporary inversion in the CRR which is set to be reviewed again on 9th December 2016, has already increased the yield to around 6.30%, which is now slightly above the repo rate.
  • Cash Reserve Ratio (CRR) is the percentage of total deposits that banks have to mandatorily keep with the RBI. The RBI doesn't pay any interest on it. The above mentioned hike is seen as a measure to suck out excess liquidity from the banking system.

Market Performance & Concluding Thoughts:

  • Continuing on its downtrend for the third straight month, the broader index CNX Nifty lost more than 400 points in November 2016, thereby registering a fall of 4.65% during the month. Have a look at the performances of Nifty50, S&P BSE Mid-Cap and S&P BSE Small Cap:
Index November 2016
Nifty50 (-)4.65%
S&P BSE Mid-Cap (-)7.23%
S&P BSE Small Cap (-)9.23%
  • The Indian equity investors have been feeling the brunt of selling, with the Nifty50 sinking by over 6.39% during the period from September to November. With the first possible rate cut after demonetization just around the corner, this could well be a welcome departure from the negative sentiments that have been building around.
  • Also, with the news of a so-called ‘imminent stock market crash in 2017’ making rounds on the internet, we, like always, strongly advise our subscribers to ignore the noise created by these ‘marketgurus’, and instead focus on company fundamentals. And even if we do witness a fall, it should be used as an opportunity to enter into businesses, which you had missed out on earlier, that too, now at comparatively lower valuations.

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