---------------------------------------------------------- · dark clouds and silver linings on the...

November 2018 Issue:I Vol: 85

Stock Picks

INR Fund Picks

Company Name

Performance as on 31/10/18

3Yr Returns (CAGR)

5Yr

(Dec 2018 future Contract) (Dec 2018 future contract)

CPM (Rs) Target (Rs)

UAE Round Up

35,011.65 10,553.00 25,270.83 7,356.99 72.92 $1233.30 $63.14

Source: Geojit Financial Services Ltd.

Tata Equity PE - Growth Thematic 14.17 20.95

HDFC Mid-Cap Opp Midcap 11.06 22.89

Mirae Asset India Equity Flexicap 12.76 18.81

ICICI Pru Equity & Debt Balance 10.94 16.22

HDFC Top 100 - Growth Largecap 11.70 14.80

InterGlobal Aviation Ltd 884 1018

Company Name

For private circulation only

KNOWLEDGE POWER . WEALTH ENHANCER

India:

#

#

#

#

#

#

Capital First Ltd. 476 521

Gabriel India Ltd 127 150

https://www.facebook.com/barjeelgeojitae/ https://twitter.com/BarjeelGeojithttps://goo.gl/7T5qRA

Property prices in Abu Dhabi fell by more than 3 percent during the third quarter of 2018 and are now 8.3 percent lower than a year ago, according to a new report.

Dubai issues nearly 14,000 new business licences so far in 2018. Indians, Pakistanis, followed by Brits, Egyptians and French, are top nationalities in securing new licences in �rst nine months of 2018.

UAE gold demand set to rebound on VAT refund , Gold jewellery demand in the UAE fell six tonnes in the third quarter.

For the week, the NSE Nifty50 rose 5%, while Bank Nifty surged 5.2%.

Markets staged a strong relief rally during the week as the Sensex, Nifty, and Bank Nifty registered their biggest weekly gains since May 2016. Falling crude oil prices and a strengthening Indian rupee were the main factors that lifted sentiments on Dalal Street. Investor sentiment also got a �llip after index heavy-weights like Hindalco, L&T, Tech Mahindra, and HCL announced better-than-expected results for Q2FY19. Tata Motors, HPCL, IOC, and Vedanta, on the other hand, came out with disappointing quarterly earnings.

S��: N��: D�� J��: N��: USD/INR: G��: O��:

https://youtu.be/ox6GrfGZRrM

Global:

MARKET UPDATE

The S&P 500 staged a rebound e�ort this week, tallying a 2.4% weekly gain. The continued expectation that the market was due for a bounce-back after last month's sell-o�, compounded with mostly upbeat earnings and easing trade tensions underpinned the rally. As for the other major averages, the blue-chip Dow Jones Industrial Average gained 2.4%, the tech-sensitive Nasdaq Composite gained 2.7%, and the small-cap Russell 2000 gained 4.3%.

Cyclical sectors were largely the best-performing groups this week, with the lightly-weighted materials sector (+6.1%) and the heavily-weighted �nancials (+4.4%) sectors leading the advance. The consumer discretionary sector (+4.0%) also had a notable gain. On the downside, utilities was the only group to settle in the red, losing 0.6%.

U.S.-China trade tensions eased this week, with U.S. President Trump saying that he had a "long and very good conversation" with China's President Xi, adding that the two leaders will be getting together at the upcoming G-20 summit in Argentina. There were some con�icting reports as to whether Mr. Trump has asked his cabinet to begin drafting a trade deal, but the president did say he thinks a deal will eventually be reached.

On the earnings front, Facebook's (FB) third quarter report was "good enough" to temper negativity surrounding the stock, helping to ease growth-related worries. Apple (AAPL), on the other hand, raised some red �ags after forecasting softer-than-expected revenue guidance for the holiday quarter and announcing that it will no longer provide unit-sales data for the iPhone, iPad, and Mac.

Highlighting this week's batch of economic data was the Employment Situation report for October. Nonfarm payrolls increased by 250,000, higher than the consensus of 190,000, while average hourly earnings increased 0.2% as expected. The unemployment rate remained at a nearly 50-year low of 3.7%. The key takeaway from the report is that it is consistent with labor market trends that will keep the Federal Reserve on a tightening path. The U.S. Federal Reserve will be meeting next week, but no rate hike is expected until December.Overseas, European and Asian stocks rose with Wall Street this week. In Germany, Chancellor Angela Merkel announced that she won't be seeking re-election as head of the CDU, following disappointing results for her party in a regional election. Her plan, however, is to remain Chancellor until 2021. Mean-while, the Bank of England and the Bank of Japan released their latest policy decisions, keeping interest rates unchanged.

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

#

#

IhÀ Unssk³: hnim-Jv cmPv

skÂ-^v slÂ]v ~ 170

Hcp Un kn _pIvkv ap{ZWwwww.dcbooks.com

E-book available

k¼m-Zyhpw \n-t£-]hpw

sI

. hn. j

w-kp-±

o³ # k

¼m

-Zyh

pw \n-t

£-]

hpw

sI. hn. jw-kp-±o³

sshhn[y-amÀ¶ \nt£-]-§fn-eqsS k¼mZyw

hÀ²n¸n¡p-hm³ km[m-c-W-¡m-sc {]m]vXcm

¡p¶ ]pkvX-Iw. km¼¯n-I-A-¨-S¡w ssI

hcn-¡p-¶Xphgn \n§-fpsSbpw IpSpw-_-¯n

sâbpw `mhn kpc-£n-X-am-¡m-\pÅ amÀ¤

-\nÀt±in. ]Xn-äm-|p-I-fmbn KÄ^v ae-bm-fn-

I-Ä¡v [\-Imcytkh\w \S-¯p¶bmfmWv

jwkp-±o³. At±-l-¯n-sâ \o| {]hmk

Pohn-X-¯nÂ\n¶pw BÀÖn-s¨-Sp¯

A\p`-h-§-fm-Wn-Xn-sâ aqe-[\w.




E-book available


sI

. hn. j

w-kp-±

o³ # k

¼m

-Zyh

pw \n-t

£-]

hpw

sI. hn. jw-kp-±o³











“Savings & Investment”-

For a better tomorrow

for you and your family.

“Launch of the Book” Written by Mr. K. V. Shamsudheen

Index Started Week Ended Week Change Change% YTD %

DJIA 24688.31 25270.83 582.52 2.4 2.2

Nasdaq 7167.21 7356.99 189.78 2.6 6.6

S&P 500 2658.69 2723.06 64.37 2.4 1.8

started to improve after a long gap. But this positive turn around has been impacted, hopefully temporarily, by the surge in crude and the consequent damage to the macros.

What is the state of the economy and markets? What are the likely trends, going forward? Let's take a look at the looming clouds on the economic horizon and the silver linings among them.

The crude surge

India has a structural economic issue - the current account

de�cit - which in turn, is hugely impacted by the price of crude.

Even a quarter century after the initiation of economic reforms

in India in 1991, we have not �xed our Balance of Payments,

which continue to be at the mercy of crude. The near 50

percent increase in the price of crude this year has worsened

the CAD, and since the government is committed to the �scal

de�cit target of 3.3 percent for FY 2019, the government

Nobel laureate economist George Stigler once famously remarked that “abnormal is when everything is normal”. Everything turning favorable for the economy and markets is very rare. When it happens, as during 2004-08 for the global economy and markets, it is not likely to last long; euphoria will be followed by crisis. Cyclical upswings and downswings are normal for economy and market.If the macros of the economy do well, the micros (pro�t-ability of companies) also will do well, sometimes with a lag. During 2004-07, both macros and micros were good for India. But those good times ended with the Global Financial Crisis of 2008. The ‘taper tantrums’ of 2013 impacted India’s macros and this led to sharp correction in the markets.

In 2014, the election outcome boosted expectations and markets, but the macros didn’t improve as expected. The consequent PE expansion made markets very expensive. By Q1 of FY2019, we reached a stage where micros had

Dark clouds and silver linings on the

economic horizon

Geojit Financial Services Ltd.By: Dr. Vijaykumar




E-book available


sI

. hn. j

w-kp-±

o³ # k

¼m

-Zyh

pw \n-t

£-]

hpw

sI. hn. jw-kp-±o³











doesn’t have the �scal space to cut the tax on petroleum prod-

ucts and give relief to consumers.

The surge in crude has impacted the CAD, which is likely to be

more than 2.5 percent this year. There is the risk of crude surging

again, as some fear, beyond the $ 90 mark, in which case, the

CAD will rise to 3 percent. This can be problematic for the econo-

my. Crude price is presently being dictated by a whole host of

factors including geo-political issues. The possibility of crude

declining sharply also is bright. If this happens, India’s macros

will get a boost with the bene�cial e�ects spreading to the

market too.

Rising US bond yields

The US bond yield, particularly the 10 year yield, is perhaps the

most important global index, from the �nancial market perspec-

tive. Rise and fall in the US bond yields have the potential to

unleash capital �ows profoundly impacting �nancial markets

across the globe. The ultra loose monetary policy implemented

in the US following the Global Financial Crisis of 2008 led to

historically low levels of bond yields in the US, which in turn, led

to capital �ows to Emerging Markets like India boosting their

asset prices, particularly stock prices. And now, since the US

economy is back to high growth, the Fed has to normalize its

balance sheet and they are doing that through gradually raising

the rates. After six rate hikes of 25 bp by the Fed, the US Fed

funds rate is still low at around 2 percent, but the dollar index

has moved up to around 95 and the 10-year yield has shot up to

above 3.2 percent. As I write this, the10-year yield has eased to

around 3.15. It is important to understand that 3.15 percent risk

free return is hugely attractive for institutional investors, particu-

larly in the context of depreciating EM currencies. Since the US

economy is �ring on all cylinders and is at near full employment

levels, the risk of in�ation moving up is high and therefore the

Fed is likely to tighten rates if signs of in�ation emerge. There-

fore, watch out for the US 10 year bond yield.

The INR depreciation

The crude surge and capital out�ows to the US had impacted EM

currencies this year, particularly those with vulnerable CAD. The

INR, which has been stable during 2015-17, depreciated sharply

this year by almost 15 percent. Currency depreciation is not a

disaster; in fact controlled depreciation (India has a ‘managed

�oat’ exchange rate system) is desirable since it boosts exports

and brings about an automatic adjustment of trade and current

account de�cits. Also, from the corporate earnings perspective,

INR depreciation is good since it boosts the earnings of export-

ers. But, the �ip side is that it accelerates capital out�ows, further

depreciating the currency. There is also the risk of ‘imported

in�ation’ and rising cost of foreign debt servicing. Currency

depreciation, in tune with the REER (Real E�ective Exchange

Rate) is desirable, but sharp depreciation can be problematic.

The IL&FS crisis

An unexpected crisis that hit the market was the IL&FS crisis.

Default by IL&FS and the consequent liquidity crisis threatened

to become a contagion impacting markets. But prompt action

by the Government, OMOs (Open Market Operation) by the RBI

and liquidity infusion by the SBI through loan buying helped

contain the crisis even though it is too early to say that the crisis

is completely behind us. The IL&FS crisis raises some valid ques-

tions, which need to be satisfactorily answered, to prevent the

occurrence of a similar crisis in future. The role of the manage-

ment, independent directors and rating agencies need to be

probed. Financial stability is hugely important in �nancial devel-

opment and economic growth.

Apart from the above headwinds, there are challenges arising

from the change in monetary stance of the RBI from neutral to

‘calibrated tightening’. Tightening stance, along with the liquid-

ity crunch, will raise the cost of funds, impacting particularly the

NBFC sector.

The silver linings

The silver linings amongst the clouds need to be appreciated.

Despite the macro headwinds, India’s GDP growth rate this year

will be impressive at around 7.4 percent. It is important to

appreciate the fact that this will be the fastest growth rate

among the large economies of the world. And India is favorably

placed to sustain and improve this growth rate, going forward.

A bright silver lining in the Indian economy presently is the

benign in�ation (CPI in�ation is at 3.77 percent in September),

which is within RBI’s comfort zone. The fuel in�ation and depre-

ciating currency has, so far, not translated into higher headline

in�ation. Also, the fact that the government has taken the

unpopular but courageous decision to pass on the increased

cost of fuel to consumers re�ects its commitment to stick to the

�scal de�cit target

To conclude, the economic and market environment will

continue to be volatile, going forward. Market volatility will

provide opportunities for investors.

Book launch- few excerpts

started to improve after a long gap. But this positive turn around has been impacted, hopefully temporarily, by the surge in crude and the consequent damage to the macros.

What is the state of the economy and markets? What are the likely trends, going forward? Let's take a look at the looming clouds on the economic horizon and the silver linings among them.

The crude surge

India has a structural economic issue - the current account

de�cit - which in turn, is hugely impacted by the price of crude.

Even a quarter century after the initiation of economic reforms

in India in 1991, we have not �xed our Balance of Payments,

which continue to be at the mercy of crude. The near 50

percent increase in the price of crude this year has worsened

the CAD, and since the government is committed to the �scal

de�cit target of 3.3 percent for FY 2019, the government

Nobel laureate economist George Stigler once famously remarked that “abnormal is when everything is normal”. Everything turning favorable for the economy and markets is very rare. When it happens, as during 2004-08 for the global economy and markets, it is not likely to last long; euphoria will be followed by crisis. Cyclical upswings and downswings are normal for economy and market.If the macros of the economy do well, the micros (pro�t-ability of companies) also will do well, sometimes with a lag. During 2004-07, both macros and micros were good for India. But those good times ended with the Global Financial Crisis of 2008. The ‘taper tantrums’ of 2013 impacted India’s macros and this led to sharp correction in the markets.

In 2014, the election outcome boosted expectations and markets, but the macros didn’t improve as expected. The consequent PE expansion made markets very expensive. By Q1 of FY2019, we reached a stage where micros had

Answer to the last quiz, Q: If you invest in a closed-end mutual fund and you want to divest some of the shares, are there restrictions?

b) You can sell your shares only to other investors on the secondary market.

Share the answer at [email protected]

Winners Name will be published in the next issue of Market Digest. All the best!

Foreign Securities Promotion Brokers of Buying & Selling Commodities, Options & Future Contracts DGCX (Broker / Clearing Member): License No.: 607007 A SCA Regulated Company

Disclaimer:(I) Investments in Financial instruments are subject to market risks, please read the relevant risk disclosure documents before investing.(II) Past performance does not guarantee returns in the future.(III) Barjeel Geojit Securities LLC (Barjeel Geojit) does not offer any products with guaranteed returns.(IV) You are aware and agree that your personal information provided by you through this document and or any other means such as website, social media, campaigns, etc. will be used by Barjeel Geojit for regulatory and business purposes.You permit Barjeel Geojit to update you the new offerings, changes and developments in the product offerings and regulatory environment(V) Barjeel Geojit does not sell personal data to third parties and all reasonable steps are taken to ensure strict confidentiality.(VI) Barjeel Geojit facilitates you to trade in the Indian Stock Market with Geojit Financial Services Limited. All your trade dealings, rights / obligations as an investor, rights / obligations to remedies in NSE and BSE executed through Geojit Financial Services Limited will be governed by the prevailing relevant rules and regulation in India and dealt with by Geojit Financial Services Limited.

Dubai: Tel: +971 4 3060900 Abu Dhabi: Tel: +971 2 4125000 Sharjah: Tel: +971 6 5932000 Al Ain: Tel: +971 3 7648100

Q: Unscramble the word!!!

OPTOFLORI

---------------------------------------------------------- · dark clouds and silver linings on the...

Documents