Caution prevails; Global cues in focus this week
Volatility was high last week on subdued global market sentiments as fears of contagion in the global banking sector weighed. Cautiousness also prevailed after the government hiked securities transaction tax (STT) on futures & options contracts. Globally, the US Fed increased the rate as was widely expected by 25 bps to 4.75-5 pct. The decision was unanimous with the committee backing the view that “some additional policy firming may be appropriate”. Comments from US Treasury Secretary Janet Yellen after she said that she had “not considered or discussed anything having to do with blanket insurance or guarantees of all deposits” caused nervousness in the markets rather than Fed rate action.
For the week, the Nifty ended down by 0.9 pct to 16,945 levels and the Nifty Midcap and Nifty Smallcap index fell by 1.8 pct each. On the institutional front, FIIs were net sellers to the tune of Rs 67.75 bn, and DIIs were net buyers to the tune of Rs 94.28 bn.
Crude oil prices gained marginally from the previous close of USD 74.70 to close near USD 75 a bbl. It made a low of USD 72.97 a bbl during the week. Gold prices rebounded from the previous week’s close of USD 1,973 to end the week at USD 1,984 an oz after the Federal Reserve signaled a potential end to its monetary tightening cycle could be on the horizon.
According to the amendments proposed to the Finance Bill 2023, taxation of capital gains of investors in debt funds which have 35 pct or less of their assets under management in domestic equities will be at the slab level across tenures. It also proposes to do away with the benefit of indexation benefit. So, post 1st April 2023, no benefit of indexation to debt mutual fund investment made, and the taxation will be as per tax slab. This move is expected to bring Bank FDs at par and will impact debt mutual funds as investors no longer have any advantage of investing in debt funds.
India’s trade deficit moderated to 6.1 pct in February from 6.2 pct in January, helped by a sequential fall in non-oil non-gold imports while the fall in global crude prices is likely to offer a respite for India’s current account deficit management.
Stocks/Sector in Spotlight
- GAIL India was in action after PNGRB, in its tariff order dated 22nd Mar’23, approved a levelized tariff of Rs 58.6/mmBtu for GAIL’s integrated natural gas pipeline, effective 1st Apr’23. The management highlighted that the revised integrated tariff of Rs 58.61/mmbtu is a positive for the company and is likely to result in its gas transmission segment annual revenue increasing by ~Rs 20 bn to around ~Rs 80 bn at Q3FY23 volume of 104 mmcmd and rising further to +Rs 90 bn in FY24 assuming gas transmission volume jumps to 120 mmcmd.
- Maruti Suzuki said it continues to witness increased cost pressure driven by overall inflation and regulatory requirements. While the company makes the maximum effort to reduce cost and partially offset the increase, it has become imperative to pass on some of the impacts through a price increase it said.
- Hero MotoCorp too announced that it will increase the prices of its model range by around 2 percent from next month in order to offset the impact of the rise in production cost in order to conform to stricter emission norms.
- Tata Motors has announced a price increase of up to 5 pct on its commercial vehicles starting April 1 as it seeks to comply with the more stringent BS6 phase II emission norms.
- Interglobe Aviation said that its international expansion shall drive the next leg of growth for the company. It plans to increase its fleet size from the current 302 (as of 9mFY23) to 350 in FY24 and double its size to 600- aircraft fleet by 2030. The management expects to increase the number of destinations to go up to 115, with around 10-15 destinations likely to be added to the network during the year, as against 104 in FY23.
- Bank of Baroda-promoted IndiaFirst Life Insurance Company has received approval from capital market regulator Sebi to float a public issue. The IPO will comprise fresh issuance of shares worth Rs 500 mn, and an offer-for-sale of 14.12 crore equity shares by selling shareholders. Promoters Bank of Baroda and Carmel Point Investments India are going to offload 8.9 crore equity shares and 3.92 crore shares, respectively, through an offer-for-sale.
International News
- US new home sales climbed by 1.1 pct to an annual rate of 640,000 in February after jumping by 1.8 pct to a downwardly revised rate of 633,000 in January. Economists had expected new home sales to pull back to an annual rate of 645,000 from the 670,000 originally reported for the previous month.
- US initial jobless claims slipped to 191,000, a decrease of 1,000 from the previous week’s unrevised level of 192,000. Economists had expected jobless claims to rise to 201,000.
- US existing home sales spiked by 14.5 pct to an annual rate of 4.58 million in February after falling by 0.7 pct to a rate of 4.00 million in January. Economists had expected existing home sales to climb to an annual rate of 4.17 million.
- Overall consumer prices in Japan were up 3.3 pct on year in February. That was slightly lower than forecasts for 3.6 pct and down from 4.3 pct in January.
- China’s economic data is showing signs of recovery with manufacturing PMI rising to an 11-year-high and property prices starting to stabilize. Manufacturing activity in China, the world’s second-largest economy, expanded at the fastest pace in more than a decade in February as production increased after the lifting of Covid restrictions in December.
Mutual Funds Industry Update
Axis Mutual Fund aims to raise Rs 50 crore from a new ETF fund of funds
Axis Mutual Fund is looking to raise at least Rs 50 crore from a new fund offer during the primary subscription period of March 22- April 5. The open-ended S&P 500 ETF fund of funds will invest in exchange-traded funds replicating the S&P 500 index. Vinayak Jayanath will be managing the fund, which will carry an exit load of 25 bps if redeemed/switched out within 30 days from the date of allotment, and no exit load if redeemed/switched out within 30 days of allotment.
Mirae Asset Mutual Fund launches Mirae Asset Nifty 100 Low Volatility 30 ETF
Mirae Asset Mutual Fund announced the launch of Mirae Asset Nifty 100 Low Volatility 30 ETF. The New Fund Offer (NFO) is open and it will close for subscription on March 21. The scheme reopens for continuous sale and repurchase on March 27. The fund will be managed by Ekta Gala. During the NFO, an investor can invest a minimum of Rs 5,000 or any quantum above that in multiples of Re 1. Nifty100 Low Volatility 30 Index is a Smart Beta ETF that aims to measure the performance of the low volatile securities in the large market capitalization segment. Smart Beta ETFs aim to potentially combine the benefits of both active and passive investing.
Edelweiss to Merge Bharat Bond ETF 2023 with 2025
Edelweiss Mutual Fund will merge Bharat Bond ETF 2023 with Bharat Bond ETF 2025, the next scheme in the series. Along with this, the fund of funds (FoF) will also merge. Markets regulator Securities and Exchange Board of India (Sebi) has conveyed no objection to the proposal to merge the two schemes.
Outlook Week Ahead
The week is a truncated one as it has a trading holiday on Thursday, the 30th of March, and hence March futures would expire on Wednesday, a day earlier. Wednesday would be the last trading day for the current financial year 2022-23, and trading on Friday the 31st of March would be accounted for in the next financial year.
USDINR last week ended on a flat note stalling earlier week of advance and failing to penetrate the key resistance of 83 on the back of weakness in the Dollar. We expect USDINR to weaken in the coming days to re-test 79.5 and complete the ‘E’ leg of the running triangle in the coming months. Hence one can consider selling USDINR below 82.25 with an SL of 83 for a short-term target of 79.5. An occurrence of Doji hints at early reversal and we expect selling pressure to resume in the coming week.
Markets are expected to remain range-bound due to a lack of triggers. The global environment continues to remain volatile as uncertainties persist amid the banking crisis. Markers will continue to witness volatile movements ahead of the monthly F&O expiry this week.
Disclaimer: The views expressed in the blog are purely based on our research and personal opinion. Although we do not condone misinformation, we do not intend to be regarded as a source of advice or guarantee. Kindly consult an expert before making any decision based on the insights we have provided.
