Market Fundamentals
Global Equity Review
Asian shares weakened further on Wednesday as oil prices sank again due to fading hopes of a deal to curb a global supply glut, and slew of weak manufacturing data – from China and USA - released earlier in the week dented sentiments.
After falling sharply at the open, the US stocks had remained firmly in negative territory throughout the trading session on Tuesday. European markets too had dropped on Tuesday. Disappointing earnings reports from energy giant BP and Swiss bank UBS contributed to the negative mood among investors.
The euro area unemployment rate has reached its lowest level in more than four years in December, but it remained at an elevated level as rates stayed stubbornly high in Greece and Spain. The jobless rate dropped to 10.4% in December 2015 from 11.4% a year ago.
Crude oil futures fell below USD 30 a barrel Tuesday. March WTI oil was down USD 1.7, or 5.5%, to settle at USD 29.9/bbl, moving back near 12-year lows from a few weeks back. There are few positive catalysts on the horizon for oil prices, given OPEC's reluctance to curb supplies and Iran's aim for crude exports of 2.3mn barrels per day beginning on March 21, 2016.
India Market News
Sentiments in India were dampened with Moody's Investors Service's report that RBI's target to bring down retail inflation at 5% by March 2017 will face some risks from monsoon uncertainty and execution of 7th Pay Panel recommendations, while macro-economic factors will be critical for sustaining growth.
The Reserve Bank of India on Tuesday has left the interest rates unchanged (repo rate at 6.75% and CRR 4%) and has signaled that any further reductions will depend on the government sticking to its fiscal consolidation path and the impact of wage hikes proposed by the 7th Pay Commission on inflation.
DLF Ltd has posted 25% y/y increase in net profit to INR 1.6bn in the Q3 FY2016. India's largest developer by market value reported an almost 45% y/y jump in revenue to INR 28.3bn helped by one-time gains from sale of land by its subsidiary.
Crompton Greaves posted a consolidated net loss of INR 1.1bn for the Q3 FY2016. The loss was on account of lower sales, even as the company booked one-off gains worth INR 300mn during the quarter.
The government is gearing up to announce a mammoth rollout of the National Food Security Act with an outlay at INR 1.3tr. The planned commitment is greater than the entire allocation towards food subsidy in this year's Budget—INR 1.2tr—and the full-fledged rollout of the Act will begin from 1 April 2016.
India Market Outlook
Markets expected to open on a negative note following the weak global cues. The sharp fall in US markets on lower crude oil prices and weak earnings data pulled the major indices down c.1.8%. Asian market trade on a weaker note and may impact the sentiments in Indian markets. RBI has left the policy repo rate unchanged at 6.75%. Technically intraday supports are placed at 7400 and 7350 and resistances are 7550 and 7600.
Kindly find attached India Morning Memo & Derivative Watch for 03 February 2016
Investment Strategy
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