Market Overview - US equities opened lower, with the S&P 500 down 0.1% and the Dow Jones Industrial Average falling 108 points or 0.2%, as major technology stocks weakened despite a rally in defence stocks [1] - The Nasdaq Composite underperformed, sliding 0.3% due to pressure on large-cap technology stocks that have driven recent market gains [1][3] Technology Sector - Technology stocks, including Meta Platforms, Apple, and Netflix, experienced declines, which limited market upside even as other sectors showed strength [3] - The pullback in tech stocks followed a cautious tone from the previous session, where both the S&P 500 and the Dow finished in the red after reaching all-time highs [3] Defence Sector - Defence stocks surged following President Trump's proposal for a $1.5 trillion defence budget for 2027, a significant increase from the $901 billion budget approved for 2026 [5] - Northrop Grumman rose over 8%, Lockheed Martin climbed 6%, RTX advanced more than 3%, and Kratos Defence jumped nearly 13%, making defence one of the strongest-performing segments [5][6] Economic Indicators - Initial jobless claims for the week ended Jan. 3 were reported at 208,000, up from 200,000 the previous week, but below economists' expectations of 210,000, indicating resilience in the US labour market [7][8] - Claims data has shown volatility recently, but initial claims remain near the lower end of the range seen over the past year, suggesting employers are retaining their workforces [8][9]

Core Viewpoint - Donald Trump's announcement regarding the indefinite flow of Venezuelan oil to the US has led to a decline in oil prices and significant market reactions, particularly affecting oil companies and stock indices [6][8][41]. Group 1: Oil Production and Investment Needs - Venezuela's oil production, which was around 3 million barrels per day before 1999, has drastically decreased due to underinvestment and mismanagement, now requiring approximately $183 billion to restore production to previous levels [2][3][57]. - Rystad Energy estimates that $53 billion is needed over the next 15 years just to maintain current production levels at 1.1 million barrels per day, with an immediate requirement of $30 billion to $35 billion in international capital over the next two to three years to make future production goals plausible [2][59]. Group 2: Market Reactions and Stock Performance - Following Trump's announcement, oil prices fell, with Brent crude declining about 1% to $59.90 per barrel and West Texas Intermediate down 0.7% to $56.02 per barrel [8][41]. - The FTSE 100 index experienced its first decline of the year, dropping approximately 0.74% due to weaknesses in commodity prices, particularly affecting oil and mining companies [7][16]. - Major oil companies such as Shell and BP saw significant drops in their stock values, with more than £9.7 billion wiped off the value of FTSE oil companies after the announcement [41][56]. Group 3: US-Venezuela Oil Deal Dynamics - The US plans to sell Venezuelan oil at market prices, with Trump stating that the proceeds will be controlled by the US government to benefit both American and Venezuelan people [5][11][32]. - The deal includes the transfer of 30 million to 50 million barrels of sanctioned crude oil to the US, which is expected to disrupt the supply line to China, historically the largest buyer of Venezuelan oil [33][49]. - US Energy Secretary Chris Wright indicated that the US would supply materials and equipment to support the revival of Venezuela's oil production, aiming to stabilize and eventually increase output [4][30][31].

Group 1 - Defence stocks in Europe experienced significant gains on Monday, driven by recent U.S. military action in Venezuela [1] - The military action in Venezuela has positively influenced market sentiment towards the defence sector [1]

Core Viewpoint - The geopolitical risks associated with the U.S. intervention in Venezuela are being underestimated by financial markets, despite the initial calm reaction from investors [1][3][6]. Market Reactions - Asian stocks surged while oil prices saw a modest decline, and gold prices increased due to safe-haven flows following President Trump's announcement regarding U.S. control over Venezuela [2]. - The relatively muted market response to the capture of President Maduro is attributed to Venezuela's small oil production relative to global output, which would require years of investment to restore [4]. Geopolitical Implications - The U.S. military actions in Venezuela could have broader implications for stability in Latin America, raising concerns about potential flow-through effects on the region [4]. - Analysts suggest that the financial markets may not be efficiently pricing the geopolitical risks stemming from U.S. policy shifts in Latin America [6]. Sector-Specific Impact - The defense sector is expected to see immediate impacts, with countries likely to increase defense spending in response to Trump's willingness to use military force [8]. - American oil companies are preparing to invest in Venezuela to restore its oil production, which could unlock the country's vast reserves and potentially boost risk assets in the long term [5].

Core Viewpoint - Antique projects CY26 as a potential turning point for Indian equities, anticipating a recovery in corporate profits and foreign portfolio investor (FPI) flows, with a target of 29,500 for the Nifty index, implying a 13% upside from current levels [1][13] Earnings Outlook - Nifty earnings are expected to grow at a compound annual rate of approximately 16% over FY26–28, significantly higher than the 7% CAGR recorded over FY24–26 [1][13] - The brokerage emphasizes an earnings-led market recovery rather than relying on multiple expansions, with corporate earnings positively correlated with wholesale price inflation and nominal GDP growth, both expected to normalize in FY27 [3][13] - A broad-based recovery in profits is anticipated, particularly in sectors such as electronics manufacturing services, telecom, industrials, and retail, while oil and gas, IT services, power utilities, FMCG, and automobiles are expected to lag [3][13] Capital Expenditure and Financials - The capital expenditure theme is expected to rebound after two years of slowdown, with favorable conditions across global monetary policies and domestic support [7][13] - Financials are a core focus, with expectations for banks to enter an earnings upcycle in CY26, supported by a strong domestic macro backdrop and the nearing end of the rate-cut cycle [8][13] - Public sector banks are favored due to comparable growth metrics to private lenders while trading at a 45% discount [8][13] Consumption Sector and Mid/Small-Cap Stocks - The broader consumption sector is viewed with caution due to high valuations and competitive pressures, although select discretionary segments like alcoholic beverages and hotels are seen positively [9][13] - Mid- and small-cap stocks are expected to show earnings growth that outpaces the Nifty over the next two to three years, driven by domestic cyclicals and increased capex activity [10][13] Stock Picks and Market Flows - Top large-cap stock picks include ICICI Bank, State Bank of India, and Hindustan Aeronautics, while mid-cap and small-cap preferences include Siemens Energy India and Chalet Hotels, respectively [11][13] - After a significant outflow of $17.5 billion from Indian equities in CY25, Antique anticipates stabilization and potential revival of FPI flows in CY26, supported by low FPI ownership and reasonable valuations [11][13] - Despite trading at a premium to historical averages, valuations are expected to be sustained due to lower bond yields and sectoral divergence, with many Nifty 500 stocks having corrected over 20% from their highs [12][13]

Market Overview - The domestic market closed higher, continuing the year-end rally for the second consecutive session, supported by strong liquidity and positive global cues, with expectations of further US Fed easing in 2026 enhancing risk sentiment [1][2] - The BSE Sensex rose by 638.12 points or 0.75% to close at 85,567.48, while Nifty 50 increased by 206 points or 0.79% to 26,172.40 [3] Sector Performance - All sectoral indices ended positively, except for consumer durables, with the defence index outperforming by rallying over 3% and the IT index gaining over 2% for the fourth consecutive session [6] - The Nifty midcap 100 advanced by 0.84% and the Nifty smallcap index rose by 1.17%, indicating broader market strength [5] Investor Activity - Foreign Institutional Investors (FIIs) turned net buyers, reinforcing positive market momentum, while domestic institutional investors (DIIs) also showed significant buying activity [2][16] - The NSE cash market turnover increased by 5% compared to the 10-day average, reflecting heightened participation [4] Stock Highlights - Top gainers in the Nifty 50 included Trent, Shriram Finance, Wipro, Infosys, and Bharti Airtel, while Tata Consumer Products, State Bank of India, and Kotak Mahindra Bank were among the biggest losers [9] - Defence stocks such as Cochin Shipyard and Solar Industries saw significant gains, with increases ranging from 5% to 8% [9] Technical Indicators - Volatility increased, with the India VIX rising by 9.6%, indicating a cautious market sentiment despite the overall market advance [4] - Market breadth remained positive, with 2,794 stocks advancing against 1,515 declining, and 192 stocks unchanged out of 4,501 traded on the BSE [10]

Core Insights - Defence stocks on the ASX have gained significant attention due to rising geopolitical tensions and advancements in military technology, leading to substantial capital inflow and sharp increases in share prices over the past year [2][15]. Company Summaries Droneshield Limited (ASX: DRO) - Droneshield's share price has surged by 348% in the past year, driven by a major European military contract worth $49.6 million and a strong pipeline of international orders [3][5]. - The company specializes in technology for detecting and neutralizing hostile drones, which are increasingly relevant in modern conflicts [4]. - Despite its growth, Droneshield's earnings are volatile, with potential sharp pullbacks following periods of high expectations [6][7]. Electro Optic Systems Limited (ASX: EOS) - Electro Optic Systems has experienced a remarkable share price increase of over 668%, attributed to large international contracts, including an $80 million deal for high-energy laser weapons in South Korea [3][8]. - The company has improved its operational execution, leading to better margins and clearer earnings visibility after previous challenges with cost overruns and delays [9]. - However, the company faces high expectations and is sensitive to long procurement cycles and geopolitical factors [10]. Austal Limited (ASX: ASB) - Austal's share price has risen by nearly 118%, supported by long-term contracts, including billion-dollar deals related to US naval expansion [12][13]. - The company focuses on designing and building naval vessels, providing more stable revenue visibility compared to its peers [12]. - Austal's business model offers exposure to defence spending through industrial execution, which entails steady cash flows but also risks related to cost control and project management [14]. Industry Overview - The ASX defence sector reflects a structural shift in defence spending and technology evolution, with Australian capabilities becoming increasingly relevant to allied nations [15]. - Investors are advised to understand the business models and contract flows of defence companies, as volatility can create opportunities for those familiar with the sector [15][16].

Core Viewpoint - European defence stocks experienced a decline following the announcement of U.S. officials proposing NATO-style security guarantees for Kyiv as part of a potential peace deal with Russia, which was discussed during talks in Berlin [1] Group 1 - The decline in European defence stocks occurred on Tuesday, indicating a market reaction to geopolitical developments [1] - The U.S. proposal for security guarantees is linked to ongoing discussions about a peace deal with Russia, highlighting the strategic importance of NATO's role in European security [1] - The talks in Berlin lasted for two days, suggesting a significant diplomatic effort to address the conflict and its implications for regional stability [1]

Core Points - Russia is introducing a new tax on electronics, primarily targeting imported consumer items, with an expected revenue of $2.7 billion to support the domestic electronics industry, including defense [1][2][4] - The new tax is part of broader fiscal measures, including VAT increases and taxes on small businesses, aimed at balancing the state budget amid high military spending and declining energy revenues [2][3] - The tax will be implemented in September 2026, with a focus on imported smartphones and notebooks, and will later extend to their components [3][4] Industry Implications - The electronics industry is deemed strategic for Russia, with import substitution being critical for maintaining the country's defense capabilities [3][4] - The lack of access to modern electronics has hindered Russia's competitiveness in artificial intelligence development, which relies heavily on advanced computing power [2] - The government plans to allocate tax proceeds to special funds dedicated to supporting domestic producers in the electronics sector [4]

Core Viewpoint - The final quarter of 2025 showed gradual improvement in UK financial markets, with investors beginning to look beyond earlier turbulence, despite ongoing concerns about inflation and household demand [3][4]. Economic Overview - UK CPI rose to 3.8% in July, plateauing in August and September, with a lower-than-expected September reading potentially indicating a period of lower inflation [4] - Unemployment increased to 4.8% in August, allowing the Bank of England to consider further interest rate cuts after a 25bps reduction to 4.00% in August [4] - Consumer sentiment improved, although households remained cautious with high savings rates and reduced debt [5] - Gilt yields rose due to concerns over public spending and high inflation, indicating challenges for the upcoming Autumn Budget [6] Investment Performance - The unaudited NAV per share increased from 36.43 pence to 36.46 pence, with a total return of +3.51% for shareholders [8] - Qualifying investments contributed positively, with Qureight increasing by 102.4% and Diaceutics by 41.7% [9][10] - Non-qualifying investments saw mixed results, with the IFSL Marlborough UK Micro-Cap Growth Fund and Special Situations Fund posting gains, while WH Smith faced issues due to accounting irregularities [15] Portfolio Structure - The company maintained a strong investment position, ending the period at 98.98% invested, with an increase in qualifying investments from 53.7% to 54.1% [16] - There were no new VCT qualifying IPOs in the quarter, but the company remains optimistic about future deal flow [17] - The company executed three full exits and adjusted its investment in Cohort following strong share price performance [18] Share Buybacks and Market Activity - The company repurchased 3.7 million shares at an average price of 33.31 pence, with the share price increasing from 34.10 pence to 34.40 pence [21] - As of 30 September 2025, the shares traded at a discount of 3.83% to the last published NAV per share [21] Post Period Developments - The unaudited NAV per share decreased to 35.84 pence as of 31 October 2025, reflecting a decline of 1.70% [22]