FMCG sector leads the week; advise focus on value picking at current market levels..
Nifty and Sensex were marginally up by
0.29% and 0.92% respectively. In terms of sectors Metals, FMCG and IT were the
winners of the week. Media, Textiles and Construction were the notable losers
this week. FMCG leads the week gaining 1.6% post GST rates while Media sector
was underperformer losing 1%.
Historical data shows that global
volatility indices are correlated. Lately the CBOE VIX has seen spurt from sub
10 levels to 14.6 levels while India VIX has not reacted to the same extent
till now. The options premiums at this point in time are at the lowest levels
in history mainly due to implied volatilities hitting all time low mark. Things
to watch for as triggers in the short term are Development in Brazil Crisis,
FBI investigation on Trump and North Korea Crisis. Any negative surprise could
lead to spurt in volatility.
India's exports grew by 19.77 percent
to USD 24.63 billion in April on account of robust performance by sectors like
petroleum, textiles, engineering goods as well as gems and jewellery. Imports
too jumped 49.07 per cent to USD 37.88 billion last month from USD 25.4 billion
in April 2016, according to the data released by the commerce ministry. A huge
jump in gold imports pushed up the trade deficit to USD 13.24 billion during
the month under review from USD 4.84 billion a year ago. The imports of the
precious metal rose 3-fold to USD 3.85 billion in April compared to USD 1.23
billion in the same month last year.
GST Council Meet
the end of the 2-day GST council meet, sources said that most of the services
would be taxed at the rate of 18% under the GST regime.81% of the goods are likely to be taxed at 18% or below
has come as a comfort and markets might take it in a positive note. The fact
that several daily use items such as milk, fruits, vegetables and cereals &
food grains will be exempted from all tax makes us believe that in fact
inflation may not be an issue post implementation of GST
there will be no new addition of services in the exempted list under GST.
The council has also agreed on 18% rate for telecom & financial
service. The Council has still not decided the tax for beedi, cigarette, gold
while transportation to fall under 5% bracket. GST rate for branded garments at
18% and all hotel services with tariff over Rs 5,000 to be taxed at 28%.
Goods and Services Tax (GST) Council on Thursday fixed tax rates on 1,211
items, most of which will likely become cheaper while for some it might be
negative news where the effective GST rate is higher than the effective tax
GST trend does not show any major deviation from the current effective tax
rates for most products except in the case of a few consumer products.
Companies catering to products in automobiles, cement, beverages, food items,
personal care items as well as building material.
primary food articles like cereals, meat, fish, and vegetables have been kept
in 0-5 percent tax bracket as expected. It would be best to assume that most
rate changes will be passed on to consumers. The council will decide on the
balance rates and the GST rate for services on May 20.
companies stand out as key beneficiaries and stocks like Colgate, HUL as well
as Pidilite Industries stand out as key beneficiaries.
personal care products will be taxed at 28 percent except hair oil, soaps and
toothpaste, whose tax rate is 18 percent. Among food and beverage items,
aerated water, chocolates, chewing gum, malted food drinks will be taxed at 28
percent, cakes, cornflakes, jams at 18 percent while the rest will be between
The next meeting of the GST Council will take place on June 3.
markets have shown an uptick in volatility in last couple of days. Firstly, US
markets witnessed largest single day decline of last 8 months on 17th May
followed by Brazilís Bovespa Index, which witnessed a 9% decline yesterday
after Brazilian President Michel Temerís involvement was found in authorising
bribe payments in silencing a jailed former party ally. Rise in geopolitical
tensions to bring volatility in markets. Indian equities are witnessing lowest
level of volatility of last 10 years.
rose but closed below their session highs on renewed concerns about Donald
Trump's presidency, after two new reports related to a federal investigation into
possible coordination between Russia and Trump's election campaign.
left on Friday for his first foreign trip since taking office, which the White
House hopes will shift the focus away from domestic controversies.
Wall Street ended higher it failed to fully regain all the ground lost in
Wednesday's big selloff after reports earlier this week that Trump tried to
interfere in the federal investigation. Investors have been closely following
events in Washington as they worry whether Trump will be able to fulfil
campaign promises for fiscal stimulus and tax reform. Many investors saw the
policy promises as a key reason for the post-election rally.
Jones Industrial Average was up 141.82 points, or 0.69 percent, to 20,804.84,
the S&P 500 had gained 16.01 points, or 0.68 percent, to 2,381.73 and the
Nasdaq Composite had added 28.57 points, or 0.47 percent, to 6,083.70. But all
three indexes clocked losses for the week with the Dow and S&P falling 0.4
percent and Nasdaq off 0.6 percent. All of the 11 major S&P industry
sectors ended the day higher.
S&P 500 posted 26 new 52-week highs and 8 new lows; the Nasdaq Composite
recorded 81 new highs and 58 new lows. About 7.03 billion shares changed hands
on US exchanges in line with the average volume for the last 20 sessions.
current levels, Nifty is valued at a P/E of 22x on trailing twelve months
earnings which we believe is on a higher side. Nifty has been on a upmove since
seen rally in last 4-5 weeks. We believe this was mainly due to liquidity
infused by DIIs. Going forward, sector specific buying after GST council
finalizing GST rates. A correction at this point would make markets healthier
to invest in. We were happy to see PSUs banks like SBI, Bank of Baroda and PNB
outperforming in Q4 results and beating our expectations. As recommended
earlier, we continue to remain bullish on PSU banks going forward and expect
the PSU banking sector to get rerarted soon.
markets will take their cue from the following economic updates. From 15st May
US - Manufacturing PMI (May), Services PMI (May),
New Home Sales (Apr), House Price Index (YoY) (Mar), House Price Index
(Mar), Manufacturing PMI (May), Services PMI (May), GDP Price Index (QoQ)
(Q1), Real Consumer Spending (Q1),
INDIA - M3 Money Supply, Bank Loan Growth, Deposit