SINCE 1989 Monthly Newsletter March 2017 Food For Thought: Investing isn t risky; not being in control is risky. Equity Update Indian stock markets have shown consistent performance in the past three months. Nifty-50 index closed up 3.3% at 9,174 as on 31 st March 2017 as compared to the 28 th Feb 2017 while Nifty Midcap index was up by 4.35% during the month. Nifty-50 also cheered investors in FY2017 by generating 18.55% return. The month started on a negative note as there were concerns over the rate hike by the US Federal Reserve and a possibility of negative surprise in state election results. The US Federal reserve increased the policy rate by 25 bps and continued to project two more rate hikes for the year. However, FPIs have shown confidence in the Indian market and inflow was much higher than expected during the month. On the political front, the BJP performed stunningly in the state elections, especially in Uttar Pradesh, the largest state of India and the timeline of GST adoption in July 2017 seemed to be in track after passage of four key GST bills in the Parliament.
About Sectoral performance, Nifty Realty index was the best performing index which generated 9% return followed by Nifty PSU Bank which rose by 7.31% while Nifty Pharma Index could not perform and declined 1.64% during the month. Foreign investors have shown confidence in Indian government while taking the state election results positively with a possibility of reforms in coming years. Since October 2016 foreign investors had turned net sellers which only got intensified post demonetization move made by the government in November 2016. Cumulatively, foreign investors sold stock worth USD 4.5 billion between October 2016 and January 2017 in India. However, in March 2017 alone FPIs have bought stock worth USD 4.7 billion (INR 30,906 crore). Domestic Institutional Investors (DIIs) turned net seller in the market and sold USD 653 million (INR 4,303 crore) worth of stock in March 2017. Strong performance of Indian currency As we discussed, March month has witnessed strong surge in foreign fund flows and decline in crude oil prices. Thus Indian currency reacted sharply and appreciated by 2.85% MoM in March 2017. It has appreciated by 4.6% in YTD CY2017. Chart 01: Trend of INR
The most awaited GST bill is on fast track Finance Minister Arun Jaitley tentatively approved four sets of rules for the new indirect tax regime in its 13 th meeting on 31 st March 2017. The introduction of Goods and Service Tax (GST) in India is now on the horizon. The current indirect tax structure is major impediment in India s economic growth and competitiveness. Tax barriers in the form of CST, entry tax and restricted input tax credit have fragmented the Indian market. Cascading effects of taxes on cost make indigenous manufacture less attractive. Complex multiple taxes increase cost of compliance. In this scenario, the introduction of GST is considered crucial for economic growth. GST will have quite a favorable impact on Indian economy. Some sectors will have more favorable impact compared to others under the proposed GST. Major impacts of GST on Indian markets and economy The GST bill will boost the ease of doing business in the country, because this single tax would come as a boon for those industries or businesses that often deal with multiple levies within the country GST will boost earnings of companies in logistics, manufacturing and transportation sectors It could help integrate the entire nation under one tax system, thus opening (and simplifying) inter-state business. This will benefit smaller businesses in India The results of the five state elections, including the key state of Uttar Pradesh (UP) were announced on March 11, 2017. This state election was important because UP is one of the largest states in terms of number of Member of Parliaments (MPs) and it happened immediately after demonetization. So it reflected the people s verdict on demonetization. The Modi led BJP party won the UP state election with a thumping majority. This result has created more assurance of BJP coming back to power in 2019 election. Fiscal deficit in the first 11 months to February reached 113.4% of the government s revised target for 2016-17. Looking ahead, in the near term, further actions from the Trump administration and how Brexit plays out will be the key global events. In India, earnings for March 2017 quarter and fiscal 2017 will start hitting the market in the next two weeks. Initial views on this year s monsoon have been reported in media claiming it to be lower than average. India is on the path of strong reforms however selection of quality stocks will play a major role for generating handsome profits from the stock markets.
Mutual Fund Update In the last two years investor s accounts in Mutual funds have increased due to robust contributions from small towns. Mutual fund houses have registered a surge of over 67 lakh investor accounts during the first 11 months of the fiscal ended on 31st March 2017, taking the total tally to a record 5.4 crore on growing interest of retail investors. According to the data from Association of Mutual Funds in India (AMFI) on total investor accounts with 43 active fund houses, the number of folios rose to a record 5,43,87,930 at the end of February, from 4,76,63,024 in the end of March 2016, a gain of 67.25 lakh. The equity category witnessed an addition of more than 40 lakh investor folios to 4 crore in April- February period of 2016-17. Mutual funds have reported a net inflow of Rs 62,151 crore in equity schemes during the period under review. IPO Update IPO's Summary (April 2016-March 2017) IPO NAME OPEN DATE CLOSE DATE OFFER PRICE LISTING DAY CLOSE PRICE LISTING DATE % Change CL Educate Ltd 3/20/2017 3/22/2017 502.00 417.90 3/31/2017-16.8% Avenue Supermarts Ltd 3/8/2017 3/10/2017 299.00 640.75 3/21/2017 114.3% Music Broadcast Ltd 3/6/2017 3/8/2017 333.00 373.15 3/17/2017 12.1% BSE Ltd 1/23/2017 1/25/2017 806.00 1069.20 2/3/2017 32.7% Laurus Labs Ltd 12/6/2016 12/8/2016 428.00 480.50 12/19/2016 12.3% Sheela Foam Ltd 11/29/2016 12/1/2016 730.00 1032.00 12/9/2016 41.4% Varun Beverages Ltd 10/26/2016 10/28/2016 445.00 461.90 11/8/2016 3.8% PNB Housing Finance Ltd 10/25/2016 10/27/2016 775.00 890.60 11/7/2016 14.9% Endurance Technologies Ltd 10/5/2016 10/7/2016 472.00 647.70 10/19/2016 37.2% HPL Electric & Power Ltd 9/22/2016 9/26/2016 202.00 189.05 10/4/2016-6.4% ICICI Prudential Life Insurance 9/19/2016 9/21/2016 334.00 297.65 9/29/2016-10.9% GNA Axles Ltd 9/14/2016 9/16/2016 207.00 245.15 9/26/2016 18.4% L&T Technology Services Ltd 9/12/2016 9/15/2016 860.00 865.10 9/23/2016 0.6% RBL Bank Ltd 8/19/2016 8/23/2016 225.00 299.30 8/31/2016 33.0% S P Apparels Ltd 8/2/2016 8/4/2016 268.00 295.00 8/12/2016 10.1% Dilip Buildcon Ltd 8/1/2016 8/3/2016 219.00 251.95 8/11/2016 15.0% Advanced Enzyme Technologies Ltd 7/20/2016 7/22/2016 896.00 1178.30 8/1/2016 31.5% Larsen & Toubro Infotech Ltd 7/11/2016 7/13/2016 710.00 697.65 7/21/2016-1.7% Quess Corp Ltd 6/29/2016 7/1/2016 317.00 503.00 7/12/2016 58.7% Mahanagar Gas Ltd 6/21/2016 6/23/2016 421.00 519.90 7/1/2016 23.5% Parag Milk Foods Ltd 5/4/2016 5/11/2016 215.00 247.80 5/19/2016 15.3% Ujjivan Financial Services Ltd 4/28/2016 5/2/2016 210.00 231.60 5/10/2016 10.3% Thyrocare Technologies Ltd 4/27/2016 4/29/2016 446.00 618.10 5/9/2016 38.6% Equitas Holdings Ltd 4/5/2016 4/7/2016 110.00 135.25 4/21/2016 23.0%
The initial public offer (IPO) route is getting busy as companies have lined up initial public offerings worth Rs 20,000 crore in the coming months to fund their business expansion and meet working capital requirements. Upcoming IPOs Hudco, NSE, Central Depository Services Ltd, Nakshatra World and Cochin Shipyard are among the names that plan to launch share sale offers in coming months. Most of these companies plan to utilise IPO proceeds for business expansion as well as working capital requirements. Commodity Update Bullions: The bullions remained range bound during the previous month, gold traded in the range of $1261 to $1194, whereas silver prices traded in the range of $18.50 to $16.80. Prices also got support from falling dollar which traded majority of the month below 100. We expect the next few months to be good for the bullions and fed rate hike will not affect prices much. Energy: Among the energy space crude prices dropped to $47 to bounce back from lower levels, whereas the natural gas prices remained range bound during the previous month. We expect energy prices to remain subdued during the month of April as well. Base metals: Base metal continued with their consolidation in the month of March 2017 as well. With copper consolidating near the upper end of the range. Lead, Zinc and Aluminium also consolidated in a narrow range, however, some weakness in prices can be seen in the month of April.
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