Monthly Newsletter DECEMBER 2016

Transcription

1 Index Returns Snapshot SINCE 1989 Monthly Newsletter DECEMBER 2016 Food For Thought: Anyone who is not investing now is missing a tremendous opportunity. Equity Update Nifty 50 closed 8,186 on December 30, 2016 with registering a decline of 39 points (-0.47%) as against 8,225 as compared to 30 November 30, Indian markets witnessed significant positive trend by September in FY2016 on account of long-term positive view of corporate India, expecting a good monsoon, lower interest rates and higher disposable incomes from the Seventh Pay Commission which is expected to offer a fillip to the economy. However, three major unexpected events in November have altered the landscape in a big way; the election of Donald Trump as the US President has resulted in flight of capital from emerging markets, given his focus to get companies back to invest in the US. Second, the likelihood of more aggressive interest rate hikes by the US Fed and announcement of Demonetisation by Prime Minister Narendra Modi. Major indices across all categories declined during the month (December) where Nifty next 50 registered largest declined of 3.58% while Nifty 50 index declined by 0.47%.

2 On sectoral performance, Nifty Pharma index was the largest loser by 7.34% followed by Nifty PSU Bank which declined by 6.21% while IT index was the largest gainer which closed up by 3.09% during the month. On yearly basis (January to December) Metal index was the best performer which increased by 45.2% followed by Auto index which increased by 10.75% while Pharma index was the largest loser which declined by 14.18%. The total value of P-Notes investment in Indian market has declined since October 2015 and the trend continued till February this year. However, it witnessed a slight increase in March 2016 but declined again in April Investments in domestic capital markets through participatory notes (P-Notes) plunged to its lowest level in past three years to Rs lakh crore by end of November According to the data available with SEBI, the total value of P-Notes investment in Indian markets; equity, debt and derivatives declined to Rs. 179,648 crore during November 2016 as compared to Rs. 199,987 crore in October P-Notes investment has gradually been declining past few years while investors are not enthusiastically investing through this route on account of tightening rules by SEBI with respect to P-Notes. The Nikkei/Markit Manufacturing Purchasing Managers declined to 49.6 in December 2016 from 52.3 in November 2016, it is first reading below the 50 mark that separates growth from contraction since December It was also the biggest month-on-month decline since November Demonetisation has shaved off growth of two quarters, but the situation is expected to be normalised in FY2018. A good Budget and interest rate cuts (interest rate reduced by some leading PSU banks, market expects further cut down by banks and RBI) can drive the growth. The market is comfortable in terms of valuation following the seventh pay commission award, good monsoon, shifting trend to lower interest rate scenario. The markets are expected to behave in response to the government announcements as there is no major clarity on how things will shape up in long-term. It is widely expected that the government may announce tax sops. While the demonetisation drive could create some medium to long-term paid for selected sectors and companies but impacts are most likely to be limited to just one or two quarters while the medium-to-long-term impact of the demonetisation is expected to be positive.

3 Mutual Fund Update The Mutual fund industry grew at a rapid pace in 2016 to reach the AUM of Rs lakh crore in November An increase in AUM is attributed to rise in new investors while retail investors remain invested in volatile markets to average out cost. According to the Securities and Exchange Board of India (SEBI) data on investor accounts with 43 active fund houses, the number of equity folios in mutual funds jumped to 38,591,768 at the end of November 2016 from 36,025,062 in November 2015, a gain of lakh. This is primarily on account of strong participation from retail investors. Investors pumped in over Rs. 36,000 crore into various mutual fund schemes in November 2016, with equity and debt schemes cornering the maximum inflow. During 2016, 2.65 million new SIP accounts have been added, up from 2.56 million a year before, in the top 15 cities. Besides the top 15 cities, the number of new SIP registrations jumped to 2.19 million, up from 1.96 million a year before. The average ticket sizes (amount invested per SIP instalment) went up as well in 2016, as per data available in CAMS MFDEx data bureau. The latest inflow has been mainly driven by contribution from income fund or debt schemes. Bank accounts of citizens are flush with liquidity as a huge amount of surplus funds has shifted from parallel economy to financial systems. Investments in Equity Linked Savings Schemes (ELSS) qualify for a tax deduction of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act. Investments in ELSS are locked in for a period of three years and investors can choose to either make lump sum investments, or use the systematic investment plan (SIP) route to invest in ELSS. Public Provident Fund (PPF) has tenure of 15 years. Interest rate on Public Provident Fund (PPF) has been reduced from 8.7% to 8.1%, while interest rate on National Savings Certificate (NSC -5 year) has been reduced to 8.1% from 8.5%.

4 IPO Update National Stock exchange (NSE) of India has filed draft red herring prospectus (DRHP) with market regulator SEBI. This could be the biggest initial public offering (IPO) in the past six years. NSE said that it intends to offer 20-25% shareholding through the offer for sale (OFS). The issue size was pegged at Rs. 10,000 crore, which is expected be more then ICICI Prudential s Rs 6,000 crore IPO concluded recently, but will be less then Coal India s Rs 14,475 crore IPO launched in October Avenue Supermarts, the corporate parent of D-Mart supermarket retail chain, has filed its DRHP and is looking to raise Rs billion through the upcoming IPO in 2017.The first nine months of calendar year 2016 were very good for the IPO mart. IPO market slowed down in November and December 2016 amid weakness in the secondary market. In 2016, about 26 companies raised over Rs. 26,000 crore through the IPO route, which is more than double of Rs. 13,564 crore grossed by 21 issuers in The primary market has emerged as the 'cash cow' for investors in 2016, amid high volatility in the secondary market, as 70 per cent of new entrants (shares) are trading well above their issue price, cheering up investor with generating a healthy return in short - term.

5 Commodity Update Bullions: The bullions traded with negative bias during major part of the month on continuing its downward trend from the month of November However, during the last week of the month prices saw some bounce back accompanied by thin volumes. Gold prices are appearing to be forming a short term base in the range of $ $1090 which can be a good accumulation zone. Silver although has some downside pending target of $15. However, we don t think it s time to exit of short sell these commodities. Energy: Crude oil prices have gained by nearly 10% during the previous month continuing its run up from the month of November Even natural gas prices gained significantly during the previous month. Overall the month of December 2016 was one of the best months for energy bulls. We expect crude prices to continue its run, whereas natural gas prices are likely to remain subdued. Base metals: Base metals after having a dream run in the month of November 2016 spent the entire month of December 2016 consolidating in a narrow range. We expect this time wise consolidation to continue during the first half of January 2016.

6 Events by LM 1. LM Group at Borivali Police station for Investor Awareness Seminar on 10th December LM Group at Mahindra & Mahindra Automobile, Jaipur for Investor Awareness Seminar on 10th Dec LM Group at Sun & Sand, Juhu for Investor Awareness Seminar on 13th Dec LM Group at Mahindra & Mahindra Automobile, Ahmedabad for Investor Awareness Seminar on 14th Dec 2016.

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