Newsletter Dated: 16-11-2018
International Snapshot:
There were major events lined up last fortnight, which passed on very smoothly.
- Sanctions were imposed on Iran, but the last moment exemptions to 8 crude importing countries, India and China amongst major ones led to further cooling off in crude price. These exemptions would continue for 180 days. In our last newsletter we mentioned how the symptoms pointed that some way was being worked out by Mr. Trump's to keep the crude prices under check. Crude hit low of 65 $ per barrel for Brent on 13/11/2018.
- Mid-Term polls in USA: Democrats won in the House of Representatives and Republicans won in the Senate (as anticipated widely and even by us). This will keep Mr. Trump rampant actions under check ‘probably’.
- Federal Reserve left the rates unchanged for now, resulting into high probability of rate hike on 19th December meet. However in our opinion the pace has definitely reduced and as we said, the flattering 10 year yield curve shows that, a lot of rises are discounted and much of fear on bond yields are behind us.
The mother market ‘US’ has been correcting especially Nasdaq , where the ‘FANG’ stocks are falling the most, however we keep our stance intact that this fall will result in money getting attracted towards emerging economies.
Domestic Snapshot:
With the fall in crude prices to as low as 65 $ per barrel on Brent, what more can we ask? One can expect the macros to start looking good; again. GST collection for the month of October was greater than 1 lakh cr, a much required number to keep our Current account deficit in check. SIP collection rose to 7985 Crore in October Vs 7727 crore in September, which is a very significant data point according to us. This shows the matured behavior of the investors contrary to previous experiences. 10 year Indian Government Bond yields has softened to 7.76%, rate which was somewhere in May 2018, clearly indicating to us that the commercial papers story was just a temporary liquidity crisis and not systemic one and now in next 15 days, when majority of the CP’s will be rolled over, it shall get confirmed. To our mind this will spark rally in Bank stocks especially PSU’s, because a lot of their money is parked in treasuries. (Remain positive on very large PSU Banks)
We have entered the election season with 1st amongst the 5 states i.e. Chhattisgarh voted in the 1st phrase on 12th November. Though for all the 5 states results will be out on Dec 12’ 2018, but it will surely create a lot of volatility in the stock markets. Our view has been clear for a while now that one must make use of this volatile period by continuing to increase exposure to equity. With crude at this level, GST collections in comfortable zone and continuous support from DII through SIP money, if the only big uncertainty is elections, it’s worth taking risk. We have doubled our SIP commitments and shall continue for next at least 6 months until the Loksabha election results are out and shall decide on future course of action based on the outcome. Our advice would remain the same for our clients and readers.
- CA JAYESH GANDHI
Disclaimer: This is an informative document and opinions expressed in it are our own and not any advice. We are not SEBI registered investment advisory or research analyst. We are AMFI registered MUTUAL FUNDS DISTRIBUTOR.
