The World This Week November 14 - November 18 2016
The World This Week
November 14 – November 18, 2016
Currently the focus is on Federal rate hike and Trump’s election. The global expectation for the
next 3-4 weeks is that markets are going to be volatile and that there might be a rate hike by the
US Fed in the month of December.
India faced certain issues as demonetization was introduced. The impact was felt in many of the
favorite industries as demand was affected. The interesting numbers to be watched would be
the economic indicators which will keep on coming because the actual earnings impact will only
be seen in the month of January.
Share prices are a slave of earnings so what we can watch over the next few weeks would be the
macro indicators and markets are expected to go down further in the short term. Deutsche bank
has taken its end year focus from 28000 to 25000 on the Sensex.
Karvy believes that stock markets would be in a good range to buy in the next two to three
weeks and that would give a great opportunity for long term allocations in equity funds and
PMS. It is a good time for debt allocation as well because with demonetization a lot of money
has come into the banking system and Mr. Modi has himself mentioned that rate cuts by banks
are expected. Many banks have in fact taken their lending rates down on their own and the
entire transmission challenge that MrRaghuram Rajan had seemed to have been solved at one
go. Therefore chances are very high that we will have rate cuts which will help the industry and
equity market in the long run and also debt funds in the short term. However, these rate cuts
would be discounted very fast.
A number of industries are recommending duration funds. In the short term perspective
duration funds are not an issue however, most clients are investors and they might not be able
to capture this as most of it has been discounted. We are also looking at a FOMC rate which
might have an impact on the rate of interest in the medium term. Hence anybody looking at a
long term investment is advised to look at accrual funds or medium duration but not too long a
duration unless someone is looking to buy G-sec and building actively in G-sec.
FD rate cuts give people an opportunity for to take risk by buying a MIP or buying a balanced
fund by adding equity allocation to debt portfolio. Times are good for us and customers to
change their approach slightly and move away from low interest rate products to high interest
rate products and to the equity market.
Large caps have corrected by almost 12% and there has been 18-20% correction in the midcap
space. It is a better risk to reward ratio in the short to medium term as well.
Tax revenue of the Centre, after the mandatory transfer to states, is expected to exceed
the Budget target by at least R 50,000 crore, or close to 5%, during the current fiscal,
helping the government meet the fiscal deficit target of 3.5% of the gross domestic
product rather easily.
Prime Minister Theresa May will unveil her new industrial strategy on Monday, pledging
to spend billions of pounds on science, technology and research to spur a new
"ambitious" way of doing business in Britain.
The U.S. economy is on track to grow at a 3.6 percent annualized pace in the fourth
quarter after data showed domestic housing starts hit a nine-year high in October, the
Atlanta Federal Reserve's GDP Now forecast model showed.
Chinese policymakers have been unfazed by the yuan's recent slide, but are ready to
slow its descent for fear of fanning capital flight if the currency falls too quickly through
the psychologically important 7-per-dollar level.
Abhijit Bhave Shantanu Awasthi
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