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

March 08, 2018

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

Global Trends

  • United States raised its overnight rate three times in 2017, to between 1.25 percent and 1.5 percent. There are speculations of Fed Rate hike for 10 years bond, this would bring sell off across emerging markets.
  • World Economy has been expanding in 2017, US PMI stands at 54 & Europe at 58.
  • Weak dollar has helped fuel emerging market rally globally.
  • US dollar has remained under pressure despite decent US data.
  • Producer prices in Japan were up 0.7 percent on year in January. That was shy of expectations for a gain of 0.8 percent, which would have been unchanged from the previous month. On a monthly basis, producer prices were down 0.6 percent after adding 0.2 percent in December.
  • Eurozone inflation slowed to a 14-month low in February on food and energy prices. Inflation eased to 1.2 percent from 1.3 percent in January. This was the third consecutive slowdown and the weakest since December 2012, when prices gained 1.1 percent.

Domestic Trends

  • India’s finance ministry has set a 15-day deadline for state banks to take pre-emptive action against operational and technical risks, following a $2 billon fraud at the country’s second-biggest state lender Punjab National Bank.
  • The Indian government imposed a definitive anti-dumping duty on the import of toluene diisocyanate from China, Japan, and South Korea for a period of five years.
  • The government plans to cut red tape and ease rules for foreign portfolio investors (FPI), as it seeks to attract more investments into Asia’s third largest economy.
  • Lack of clarity over tax and regulations in the solar sector has pushed close to 3.5 Gigawatt of tenders to cancellation or delay for more than a year now. Of this, 980 Megawatt (Mw) of projects were under the domestic content category that has been shrouded in controversy
  • India seen to be top global energy growth driver by 2030, said a top official of BP.

Market Trends

  • The markets reached high of 11,117.35 on 1st February, 2018 and low of 10,276.30 on 6th February, 2018 with negative sentiments post implementation of LTCG and $2 billion fraud.
  • FIIs recorded a net outflow from the Indian stock markets to the tune of Rs. 18,619.15 crores in February 2018 against a net inflow of Rs. 9568 crores in January 2018.
  • On the last day of trading in February 2018, the Nifty closed at 10,492.85 which were down by 534.85 points over the previous month-end of 11,027.70.
  • The Nifty 50 P/E ratio was at 25.68 at the end of February 2018.

Highlights

  • The Good: Sharp jump was witnessed in gross fixed capital formation at 12%
  • The Bad: Manufacturing activity in India fell to as four-month low in February 2018 as factory output and new business orders rose at a slower pace.

stockaxis’ Outlook for March 2018

With the worst behind us, we expect GDP to recover to 7.1% in FY19 from the current 6.6% with a continued push from the government on the infrastructure side, rural development etc., but with the private sector investment demand remaining weak. The monsoon’s effect on the agriculture sector and overall consumption demand in the economy would remain of crucial importance in FY19.

Q3FY18 growth reinstates positive sentiments. In the last quarter, Agriculture showed encouraging growth. The good story continued for the manufacturing sector with the GVA for the sector up at 8.1%. Construction sector GVA growth also revived sharply. Service sector displayed growth with higher growth in Public administration, Defense and other. Benefits of the Budget initiatives for the rural sector and the infrastructure push should remain beneficial for further growth.

Post the imposition of the LTCG Tax and unraveling of scams this month, the outlook on the Indian equity markets for the short term does not look positive. But in the long run, the fundamentals of all the companies with sound businesses remain intact and shall bear fruit as soon as this negative wave passes by. We here at Sock Axis remain convicted at the formula of smart stock picking backed by rock solid research to augment your wealth. The corrected market levels are only a wonderful opportunity to pick up credible stocks at feasible prices.

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