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stockaxis Market Intelligence (Commentary for January 2018; outlook for February 2018)

February 20, 2018

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We are pleased to present to you our monthly market commentary and outlook for the forthcoming month. The ‘StockAxis’ Market Intelligence’ is a quick update on the markets for the month gone by and our view for the next month. Use our sharp and crisp synopsis to continue building your wealth!

Global Trends

  • During last year, the dollar declined as global growth outside of the US strengthened. Dollar is currently at its three-year low against the euro with USD/EUR at 1.24.
  • In the UK, during the final three months of 2017, GDP grew by 0.5% on the quarter and the labour market strengthened. Whereas in the US, real GDP growth missed expectations slightly at 2.6% but the US jobs reported robust increase with 148,000 new non-farm jobs created in the month.
  • US core inflation came in above expectations but is still subdued at 1.8%.
  • US Treasury prices fell and the 10-year yield ended the month at 2.7% but the S&P 500 roared ahead with prices up 5.6%.
  • China’s economy grew slightly above consensus at 6.8% year on year.

Domestic Trends

  • Fiscal Deficit pegged at 3.5 %, projected at 3.3 % for 2018-19.
  • Proposal to extend reduced rate of 25 percent currently available for companies with turnover of less than 50 crore (in Financial Year 2015-16), to companies reporting turnover up to Rs. 250 crore in Financial Year 2016- 17, to benefit micro, small and medium enterprises.
  • World's largest Health Protection Scheme covering over 10 crore poor and vulnerable families launched with a family limit upto 5 lakh rupees for secondary and tertiary treatment.
  • Two New Funds of Rs 10,000 crore announced for Fisheries and Animal Husbandary sectors; Re- structured National Bamboo Mission gets Rs.1290 crore.
  • MSP for all unannounced kharif crops will be one and half times of their production cost like majority of rabi crops: Institutional Farm Credit raised to 11 lakh crore in 2018-19 from 8.5 lakh crore in 2014-15.
  • 22,000 rural haats to be developed and upgraded into Gramin Agricultural Markets to protect the interests of 86% small and marginal farmers.
  • The central bank has cut GVA guidance for FY18 to 6.6 percent from 6.7 percent earlier and for FY19 the guidance has been cut to 7.2 percent from 7.4 percent.
  • MPC keeps key policy rates unchanged. Repo rates at 6 percent, reverse repo at 5.75 percent.
  • RBI governor says inflation may ease to 4.5-4.6 percent in second half.

Market Trends

  • The markets reached all-time high on 29th January, 2018 touching 11,171.55 with positive marco-economic data on the back of robust performance of manufacturing and capital goods sectors creating an overall positive sentiment for the economy.
  • FIIs recorded a net inflow from the Indian stock markets to the tune of Rs. 9568 crores in January 2018 against a net outflow of Rs. 6411.57 crores in December 2017.
  • On the last day of trading in January 2018, the Nifty closed at 11,027.70 which was up by 497 points over the previous month-end of 10,530.70.
  • The Nifty 50 P/E ratio was at 27.50 at the end of January 2018.

Highlights

  • The Good: Budget guided by mission to strengthen agriculture, rural development, health, education, employment, MSME and infrastructure sectors.
  • The Bad: Tax on Long Term Capital Gains exceeding Rs. 1 lakh at the rate of 10 percent, without allowing any indexation benefit. However, all gains up to 31st January, 2018 will be grandfathered.

StockAxis’ Outlook for February 2018

The union budget is over and it was on expected lines; anyway most of the economic reforms & decisions are made outside the budget. India is still hugely under-invested in equities; household savings have only started to flow. So 10% LTCG is still better, however government may come with indexation and also may scrap STT.

The Government has taken up programmers to direct the benefits of structural changes and good growth to reach farmers, poor and other vulnerable sections of the society and to uplift the under-developed regions. The Budget somehow consolidated these gains and particularly focused on strengthening agriculture and rural economy, provision of good health care to economically less privileged, taking care of senior citizens, infrastructure creation and working with the States to provide more resources for improving the quality of education in the country. All in all the union budget 2018 is very pragmatic and has taken into consideration a large part of the population be it farmers, small corporate, Senior Citizens etc and would help in boosting growth, jobs and private investment.

However, the market reacted to budget in negative way and we believe Corrections like the one we just witnessed keeps markets healthy as they keep a check on complacency, leverage and excesses.

A number of factors are supportive of activity and stocks in emerging markets, including a weaker US dollar, stronger commodity demand and prices, and an expansion in global business investment. All of which are supportive of emerging market technology producers.

We, as stockaxis continue to focus on stock-picking in world’s fastest growing economy, which is attempting to enter into a new growth orbit. We continue to strive and find impressive investing opportunity to compound your wealth.

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