To invest wisely you need to feel the pulse of the market and this update is your stethoscope. These highlights give a brief overview – subscribe for the full monthly update.
The Organisation for Economic Cooperation and Development (OECD) has warned that the global economy is stuck in a low growth trap and believes the world's central banks are “pretty close” to the limits of their ability to stimulate economies. It has lowered the growth forecast for 2016 to 2.9% from 3% citing weak global trade.
Most key global indices advanced in September, except the US’ Dow Jones (down 0.5%) and Japan’s Nikkei (down 2.6%). Nasdaq (up 1.9%) was the best performer.
The Monetary Policy Committee (MPC) decided to:
Reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.5% to 6.25% with immediate effect.
Consequently, the reverse repo rate under the LAF stands adjusted to 5.75%, and the marginal standing facility (MSF) rate and the Bank Rate to 6.75%.
Benchmarks Nifty 50 and S&P BSE Sensex lost 1.99% and 2.06%, respectively. The market tanked on worries about escalating tension between India and Pakistan after surgical strikes at terror launch pads in Pakistan by the Indian army. Sentiments were jittery from the beginning of the month on concerns about the interest rate hike by the US Fed.
Inter-bank call money rates moved near the repo rate of 6.50% for most of the month, mainly owing to comfortable liquidity conditions in the system.
Government bond prices or gilts ended higher in the month with the yield of the newly-issued 10-year benchmark – the 6.97%, 2026 paper – falling to 6.81% on September 30, 2016 compared with 6.97% on September 02, 2016. The yield of the erstwhile 10-year benchmark bond - the 7.59%, 2026 paper – fell to 6.96% on September 30, 2016, compared with 7.11% on August 31, 2016. Expectations of a rate cut by the RBI in its policy meeting on October 4, 2016 buoyed sentiments.
The Indian mutual fund industry’s average assets under management (AUM) hit a historic high of Rs 16.11 lakh crore (excluding fund of funds) in the quarter ended September 2016, according to numbers released by the Association of Mutual Funds in India (AMFI).
Equity funds scaled a new high, crossing the Rs 5 lakh crore mark to close at Rs 5.37 lakh crore led by a strong mix of inflows and mark-to-market (MTM) gains. The category rose 13.44%, or by Rs 63,658 crore (record in absolute terms), during the quarter. The category reported Rs 15,026 crore inflows in July-August 2016 vis-à-vis Rs 14,973 crore in the preceding quarter.
The rupee ended a volatile month higher against the US dollar, with the exchange rate settling at Rs 66.62 per dollar on September 30, 2016 against Rs 66.96 per dollar on August 31, 2016.
Global crude oil prices (up 7.9%) closed at $48.24 a barrel on September 30, vis-à-vis $44.70 a barrel on August 31 on the New York Mercantile Exchange (NYMEX). Reasons for rise in oil prices:
a) the US government data revealed the largest drop in crude oil supplies since 1999,
b) heightened uncertainty about Libyan production and an upcoming meeting of major oil producers,
c) the US Fed’s decision to keep the interest rates unchanged, and
d) the Organization of the Petroleum Exporting Countries agreed on the need to cap crude oil production. Some gains were chipped off on sporadic worries about the global oil supply glut.
Source :Crisil Research
CRISIL Research, a division of CRISIL Limited (CRISIL) has taken due care and caution in preparing this Report based on the information obtained by CRISIL from sources which it considers reliable (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. This Report is not a recommendation to invest / disinvest in any company covered in the Report. CRISILespecially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this Report. CRISIL Research operates independently of, and does not have access to information obtained by CRISIL’s Ratings Division / CRISIL Risk and Infrastructure Solutions Limited (CRIS), which may, in their regular operations, obtain information of a confidential nature. The views expressed in this Report are that of CRISIL Research and not of CRISIL’s Ratings Division / CRIS. No part of this Report may be published / reproduced in any form without CRISIL’s prior written approval.