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stockaxis Market Intelligence (Commentary for August 2017; Outlook for September 2017)

September 07, 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

  • U.S. gross domestic product (GDP) increased at an annual rate of 3% in the second quarter, its quickest pace in more than two years.
  • The UK trade body, the Engineering Employers' Federation (EEF) has stated that the UK government must permit EU workers to work in the UK; about 2/3rds of UK firms hire EU nationals because of insufficient UK applicants and unavailability of requisite skills.
  • Ahead of Indian prime minister Narendra Modi’s visit to China, Chinese Foreign Minister Wang Yi stated that both the Asian giants have great potential for cooperation.
  • The last week of August witnessed a fall in oil prices as a result of Hurricane Harvey destroying nearly a quarter of US refineries. However, gasoline prices rose to their highest since mid-2015.

Domestic Trends

  • India's factory output rose in August; this was evident from the Nikkei/Markit Manufacturing Purchasing Managers' Index which increased to 51.2 in August from 47.9 in July. This is the biggest one-month rise recorded in 5-1/2 years.
  • The government has informed sugar mills that they can hold a maximum of 21% of their sugar output by end of September in order to prevent sugar price rise ahead of the festive season.
  • The National Stock Exchange (NSE) has decided to remove Tata Power, ACC Ltd, Bank of Baroda (BoB) and Tata Motors DVR from the Nifty 50 index and add Bajaj Finance Ltd, Hindustan Petroleum Corp. Ltd (HPCL) and UPL Ltd. These changes will take effect from 29 September 2017.
  • State Bank of India (SBI), India’s largest lender, is expecting a surge in home loans’ demand resulting from the government’s focus on affordable housing; it is preparing to meet this demand with additional resources and a speedier approval process.
  • The Reserve Bank of India (RBI) has instructed banks to refer 20 defaulting companies to the bankruptcy court if no resolution is arrived at by mid-December 2017. RBI also sent a list of 40 large corporate defaulters to be referred to the National Company Law.
  • The Indian Rupee strengthened vis-à-vis the dollar over the month ending August at 63.93 (66.6074 at end-July).

Market Trends

  • Markets were volatile during the month due to upheavals such as the CEO of Infosys, Vishal Sikka’s resignation, North Korea’s missile launch over Japan saw the markets, which led to speculation of the possibility of US retaliation.
  • FIIs recorded a net outflow from the Indian stock markets to the tune of Rs. 14,293.49 crores in August 2017 as against a net investment of Rs. 10,321.42 crores in July.
  • On the last day of trading in August 17, the Nifty closed at 9917.90, down 159.2 points over the previous month-end.
  • The Nifty 50 P/E ratio was at 25.62 at end-August 2017.

Highlights

  • The good: Continuation of global recovery, good monsoons, low interest rates, GST impact stabilized, NPA resolution
  • The bad: Geo-political risks, possibility of Fed rate hike

StockAxis’ Outlook for September 2017

To protect the Indian industry from predatory pricing from imported products, especially imports from China, currently anti-dumping duty is in force on over 90 products. Broadly these products fall in the category of chemicals, metals, yarn, rubber, plastic, capital goods and electronics. These duties aid Indian businesses to maintain reasonable margins in the backdrop of a highly competitive environment.

Also, after an industrial boom fueled by government spending and easy money, China has been cracking down on industries that have contributed to large-scale environmental violations. Strict penalties have led to several plants shutting down thereby providing an opportunity for Indian firms to pick up the slack, especially in chemicals, petrochemicals, steel and rubber industries.

We, at StockAxis, are constantly on the lookout for great businesses run by honest promoters that are available at the right price with sufficient margin of safety. Our stringent stock selection guidelines and clearly stipulated entry and exit points make equity investing a ‘rich’ experience for our subscribers!

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