OVERVIEW OF MARKET
The economy is seeing the early effects of the demonetisation and recovery is likely to be gradual. Uncertainty over future government action is hurting SME sentiment. In its fifth bi- monthly policy, RBI has left its key policy rates unchanged and withdrew the incremental CRR requirement. On the international front, oil prices continued to rise as the historic OPEC deal to cut production by 1.8 million barrels per day took effect on Jan 1st 2017 which led to crude prices soaring 12.6% during the month to $ 56.8/ barrel. US bond yields rose further during the month in anticipation of Donald Trump to provide an impetus on the US economy.
The Index of Industrial Production (IIP) for the month of Oct 2016 fell 1.87% as compared to 0.73% increase in Sep 2016. Consumer Price Index (CPI) decreased to 3.63% in November 2016 from 4.20% in October, 2016.
During December 2016, Nifty was largely flat due to rising US yields and slowdown in domestic consumption due to demonetization. For the month, IT and Oil & Gas outperformed whereas there was underperformance in Pharma, Metals, Banking and Capital Goods. FIIs were sellers for more than Rs8,100 cr which was absorbed by domestic institutional buyers who bought more than Rs9,100 cr of equity during the month.
The Bond yields rose during the month of Dec 2016. The benchmark 10 year G-Sec (7.59% GOI 2026) opened at 6.36% and closed 27bp higher at 6.63% during the month. The newly issued 10 year security (6.97% GOI 2026) closed at 6.52%.