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stockaxis Market Intelligence (Commentary for October 2017; Outlook for November 2017)

November 02, 2017

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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

  • US Secretary of State, Rex Tillerson, stated that he wanted to see stronger defence ties between India and the US in the face of China’s rising influence in Asia.
  • US President Donald Trump celebrated the Indian festival of Diwali at the White House and conveyed his appreciation to contribution made by the Indian-American community to the US and the world.
  • During his maiden trip to Asia, US President Donald Trump has stated that he would reaffirm his commitment to US alliances and partnerships, and reaffirm the United States leadership in promoting a free and open Indo-Pacific region.
  • The Indian government approved two new World Bank supported schemes to the extent of Rs 6,655 crores for skill development training programmes, including vocational education and training from inputs to results.
  • The Indian commerce ministry is organizing ‘Make in India: Sweden 2017’ to invite Swedish firms to explore business opportunities in India.
  • In a case study on India’s digital revolution, the International Monetary Fund (IMF) has stated that India is currently undergoing an "exciting" route of digital transformation.

Domestic Trends

  • Small and medium enterprises (SMEs) will receive respite with respect to the goods and services tax (GST) in terms of late filing of returns and late tax payments.
  • The government is likely to meet its fiscal deficit target of 3.2% of GDP; however, some planned capital expenses may need to be curtailed to meet this target.
  • The government proposes to reduce its holding in 8 public sector banks to meet the SEBI-stipulated minimum public shareholding norms.
  • India's foreign exchange reserves touched a record high of USD 402.5 billion in September and the current stock is sufficient to cushion India against unexpected global risks.
  • The finance ministry plans to finalize its Rs 2.11 lakh crore capital infusion strategy for the public sector banks (PSBs) by December this year.
  • India’s industrial output rose sharply 4.3% in August, the highest in nine months, indicating signs of recovery, aided by an expansion in the manufacturing sector.
  • India rose 30 spots to 100th rank in the World Bank's Ease of Doing Business Report 2018 (DB 2018).

Market Trends

  • The markets reached all-time highs with the government announcing the Rs.2.11 lakh crore PSU banks’ recapitalization package and overall positive sentiment.
  • FIIs recorded a net inflow into the Indian stock markets to the tune of Rs. 3,054.97 crores in October 2017 against a net outflow of Rs. 11,836.18 crores in September 2017.
  • On the last day of trading in October 2017, the Nifty closed at 10335.30 up 546.7 points over the previous month-end.
  • The Nifty 50 P/E ratio was at 26.38 at end-October 2017.

Highlights

  • The good: Continuation of global recovery, bank recapitalization plan, low interest rates
  • The bad: Possibility of further Fed rate hike, signs of rising inflation, stronger INR

stockaxis’ Outlook for November 2017

PSU banks have been burdened with non-performing assets (NPA) and lack of funds for fresh lending. To remedy this situation, the Ministry of Finance announced a large package aggregating to Rs.2.11 lakh crores spread across two years to recapitalize these banks. This move, along with the recently introduced insolvency code, will help PSU banks fully provide for their non-performing loans, improve their credit profiles, resume fresh lending and thereby improve the chances of earning a reasonable return on assets. Both these moves are very positive for PSU banks.

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