Mutual Fund News of 14th December 2018

News U Can Use

December 14, 2018

The Week that was…

December to 14

December

Indian Economy

• The Consumer Price Index (CPI)-based inflation or retail inflation came in 2.33% in Nov

2018 compared with upwardly revised 3.38% (originally reported 3.31%) in the previous

month and 4.88% in the same month of the previous year. The consumer food price index-

based inflation subsequently stood at -2.61% in Nov 2018 compared with -0.86% in the

previous month and 4.35% in the same month of the previous year.

• India’s Wholesale Price Index-based inflation (WPI) came in at 4.64% in Nov 2018 as

against 5.28% in Oct 2018 as prices of food articles, mainly vegetables, and petroleum

products came down. This marked a 3-month low. Wholesale price inflation was at 4.02%

in Nov 2017. Inflation in food articles fell 3.31% as against a fall of 1.49% in Oct.

• The Index of Industrial Production (IIP) rose to 8.1% in Oct 2018 as against growth of

4.5% in the previous month and 1.8% in the same period of the previous year. For the

period from Apr to Oct of 2018, IIP grew 5.6% as against an increase of 2.5% in the same

period of the previous year.

• According to the preliminary numbers released by the Reserve Bank of India (RBI),

Current Account Deficit (CAD) rose to $19.1 billion or 2.9% of GDP in Q2 of 2018-19, up

from $6.9 billion or 1.1% of GDP in Q2 of 2017-18 and $15.9 billion (2.4% of GDP) in Q1

2018-19.

• India’s trade deficit in Nov 2018 came in at $16.67 billion as against a deficit of $17.13

billion in Oct 2018. Exports increased 0.80% in Nov as against an increase of 17.86% in

Oct. Imports increased 4.31% in Nov 2018 compared with a rise of 17.62% in Oct 2018.

Indian Equity Market

Domestic Equity Market Indices

Indices

14-Dec-18

1 Week Return

YTD Return

S&P BSE Sensex

35,962.93 0.81% 5.60%

Nifty 50

10,805.45 1.05% 2.61%

S&P BSE Mid

-Cap 15,192.84 3.23% -14.75%

S&P BSE Small

-Cap 14,501.76 2.82% -24.59%

Source: MFI Explorer

NSE Advance/Decline Ratio

Date Advances Declines

Advance/Decline Ratio

10-Dec-18 338 1,455 0.23

11-Dec-18 1,230 519 2.37

12-Dec-18 1,474 311 4.74

13-Dec-18 1,085 674 1.61

14-Dec-18 836 938 0.89

Source: NSE

• Indian equity markets initially reacted

negatively to RBI governor’s

resignation. Later, appointment of the

new governor and his initiation to hold a

meeting with a few public sector banks

to understand their problems was seen

as an encouraging sign by investors.

Assembly election results also dictated

market movement and despite an

unfavourable outcome, investors

reportedly became optimistic over high

chances of the ruling party’s re-election

in upcoming general election in 2019.

• Positive key economic data further

helped sentiment as inflation eased for

Nov 2018 and the index of industrial

production increased in Oct 2018. On

the global front, weak Chinese

economic data raised concerns over

global growth. Market participants

remained hopeful of further progress of

U.S.-China trade negotiations.

Ratios

S&P BSE

Sensex

Nifty 50

S&P BSE

Mid Cap

S&P BSE

Small Cap

P/E

23.47 26.14 32.52 -98.76

P/B

2.98 3.42 2.61 2.15

Dividend Yield

1.22 1.23 0.96 0.87

Source: BSE, NSE Value as on Dec 14, 2018

Indian Equity Market (contd.)

Sectoral Indices

Indices

Last Returns (in %)

Closing* 1-Wk 1-Mth

S&P BSE Auto

20,882.29 4.51% 2.28%

S&P BSE Bankex

30,003.15 1.15% 2.40%

S&P BSE CD

20,929.91 3.39% 5.92%

S&P BSE CG

18,500.56 1.31% 1.04%

S&P BSE FMCG

11,774.18 2.73% 4.10%

S&P BSE HC

13,742.69 0.62% -3.43%

S&P BSE IT

14,663.55 1.78% 4.84%

S&P BSE Metal

11,634.58 1.36% -8.29%

S&P BSE Oil & Gas

13,412.01 3.42% -2.24%

Source: Thomson Reuters Eikon

*Value as on Dec 14, 2018

• On the BSE sectoral front, all the indices

closed in the green and S&P BSE Auto

(4.51%) stood as the major gainer followed

by S&P BSE Oil & Gas (3.42%) and S&P

BSE CD (3.39%).

• In the auto sector according to SIAM,

passenger vehicle sales fell 3.43% YoY to

2,66,000 units in Nov 2018. However, two-

wheeler sales rose 7.15% YoY to 16,45,791

units. Also, vehicle sales across categories

registered a rise of 5.03% to 20,38,015 units

in Nov 2018.

Indian Derivatives Market Review

• Nifty Dec 2018 Futures were at 10,820.3 points, a premium of 14.85 points, above the spot

closing of 10,805.45 The total turnover on NSE’s Futures and Options segment for the

week stood at Rs. 44.79 lakh crore as against Rs. 39.51 lakh crore for the week to Dec 7.

• The Put-Call ratio stood at 0.97 compared with the previous week’s close of 0.78.

• The Nifty Put-Call ratio stood at 1.53 against the previous week’s close of 1.47.

Domestic Debt Market

Debt Indicators

(%)

Current

Value

Ago

Mth

Ago

Mth

Ago

Call Rate

6.41 7.14 6.34 6.09

91 Day T

-Bill

6.68 6.69 6.91 6.52

7.80% 2021, (5

Yr GOI)

7.22 7.22 7.49 7.77

7.17% 2028, (10

Yr GOI)

7.44 7.46 7.73 7.94

Source: Thomson Reuters

Eikon

Value as on Dec 14, 2018

• Bond yields rose initially following the

outcome of five state elections and

after sudden resignation of the RBI

Governor. However, the trend

reversed as market participants

resorted to bargain hunting.

• Also, hopes that the new RBI

Governor will look into the issues that

has been plaguing the financial sector

of late further boosted investor

sentiment. More than expected fall in

retail inflation in Nov 2018 further

boosted the prices as it raised the

possibility of easing monetary policy

stance in the next review meet.

• Yield on the 10-year benchmark

paper (7.17% GS 2028) fell 2 bps to

close at 7.44% from the last week’s

close at 7.46%, after trading in a

range of 7.38% to 7.70%.

7.38

7.51

7.64

10-Dec 11-Dec 12-Dec 13-Dec 14-Dec

Yield in %

10 -Yr Benchmark Bond ( % )

Source: CCIL

Domestic Debt Market (Spread Analysis)

Maturity

G-

Sec Yield

(%)

Corporate Yield

(%)

Spread

bps

1 Year 7.10 8.52 142

3 Year 7.36 8.48 113

5 Year 7.49 8.36 87

10 Year 7.58 8.29 71

Source: Thomson Reuters Eikon

Value as on Dec 14, 2018

• Yields on gilt securities fell across

maturities by up to 14 bps, barring 2-year

paper that rose 1 bps. Yield on 6- and 15-

year papers were steady.

• Corporate bond yields dropped across

curve in the range of 2 to 8 bps, barring

2-year paper that increased 1 bps.

• Spread between AAA corporate bond and

gilt contracted across segments by up to

6 bps, leaving 1-, 2- and 7-year papers

that rose by up to 7 bps. Spread fell the

most on 10-year paper.

-18

-9

6.10

7.10

8.10

3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs

India Yield Curve Shift (%) (W-o-W)

Change in bps 14-Dec-18 07-Dec-18

Yield

in %

Change

in bps

Source: Thomson Reuters Eikon

Regulatory Updates in India

• The Securities and Exchange Board of India (SEBI) lined up some relaxations for new-age

ventures in sectors like e-commerce, data analytics and bio-technology to raise funds and

get their shares traded on stock exchanges. This comes as a major push to kickstart listing

of start-ups in India. The relaxation in the norms comes on the wake of tepid market interest

to the existing platform. Also, demands from various stakeholders to make the norms easier

and the platform more accessible led to the relaxation of norms.

• The Ministry of Finance announced that the contribution by the Central government

employees under the Tier-II of the National Pension System (NPS) will now qualify for

deduction under section 80C of the Income Tax Act. However, prior to the announcement,

the deduction was available only for investments in TIER-I account of NPS scheme.

• The Department of Industrial Policy and Promotion (DIPP) floated a draft rule to amend the

Patents Rules, 2003, in order to further streamline examination of applications. As per the

draft rules, removal of the transmittal fee for international application (for e-patent

cooperation treaty filing) for startups and small entities is suggested. The move is important

as the ministry is taking steps to fast track examination of patent applications particularly for

startups.

Regulatory Updates in India (contd..)

• The government is planning to infuse additional capital of up to Rs. 30,000 crore in public

sector banks as they have been unable to raise required funds from the markets, as per

media reports. As part of the capital infusion plan announced by the Ministry of Finance in

Oct 2017, the government envisaged that public sector banks (PSBs) would raise Rs.

58,000 crore from the stock markets by Mar 2019 to meet Basel III norms. However, due to

submissive market conditions, banks were unable to raise enough funds from the markets

till now.

• The Goods and Services Tax (GST) Council is planning to rationalise the 28% slab by

cutting tax rates on construction items, like cement, in a meeting scheduled next week. The

council, chaired by Union finance minister and encompassing his state counterparts, has

trimmed the 28% slab by cutting tax rates on 191 goods over the last one-and-a-half year,

leaving only 35 items in the highest slab.

• Seven public sector banks in their meeting with the newly-appointed Reserve Bank of India

(RBI) governor sought relaxation of prompt corrective action (PCA) norms, easing of one-

day default circular, among other things, according to media reports. In the 90-minute

meeting the governor tried to understand the problems of state-owned banks.

• The government is nearing to finalise National Policy on Electronics, a policy that will help

boost electronics manufacturing in India on a big scale, according to the IT minister. The

minister said the government is pushing India's case for $1 trillion digital economy.

Global News/Economy

• According to the Labor Department, U.S. Consumer Prices Index (CPI) came in flat in Nov

2018, as expected, because of a sharp pullback in gasoline prices offset increase in other

prices. CPI was unchanged in Nov 2018 after rising 0.3% in Oct 2018.

• The European Central Bank left its interest rates unchanged and confirmed that it will end its

4-year long EUR 2.6 trillion asset purchase programme in Dec 2018. The bank said it is

"enhancing its forward guidance on reinvestment." Till Oct 2018, the bank had said it will

reinvest bond sale proceeds "for an extended period of time after the end of the net asset

purchases". Markets were expecting the reinvestment to continue until late 2020.

• A report from the Centre for European Economic Research showed that ZEW Indicator of

Economic Sentiment for Germany surprisingly grew 6.6 points to reach -17.5 points in Dec

2018. However, caution prevailed as current economic situation declined sharply due to

sluggish economic growth and uncertainties related to global trade and Brexit.

• According to a report form Cabinet Office, Japan’s economy fell at an annual rate of 2.5% for

the quarter Jul-Sep 2018. This marked the sharpest contraction in more than four years as a

number of natural disasters weighed on capital expenditure.

• According to the National Bureau of Statistics, China’s industrial output missed market

expectations and grew 5.4% YoY in Nov 2018. This marked the slowest pace in almost three

years. Also, retail sales missed market expectations and grew 8.1%, thereby marking the

weakest pace since 2003.

Global Equity Markets

Global Indices

Indices

14-Dec-18

1-Week

Return

YTD

Return

Dow Jones

24,100.51 -1.18% -2.50%

Nasdaq 100

6,594.96 -0.28% 3.10%

FTSE 100

6,845.17 0.99% -10.96%

DAX Index

10,865.77 0.72% -15.88%

Nikkei Average

21,374.83 -1.40% -6.11%

Straits Times

3,077.09 -1.09% -9.58%

Source: Thomson Reuters Eikon

Value as on Dec 14, 2018

U.S.

• U.S. markets closed in the red,

reflecting lingering concerns about the

global economic outlook following

release of a series of weak economic

data from China and euro zone.

• Skepticism about the possibility of a

long-term trade deal between the U.S.

and China kept investors wary.

Europe

• European markets managed to gain, even though the underlying tone remained cautious

amid Brexit uncertainty and concerns over violent protests in France. The latter is faced

with political movements triggered by rising fuel prices, high cost of living and claims that a

disproportionate burden of the government's tax reforms is falling on the working and

middle classes. Meanwhile, market participants remained upbeat on the prospect of a

trade deal between the U.S. and China.

Asia

• Asian markets largely remained under pressure following disappointing industrial output

and retail sales growth in China in Nov 2018. The data reflected slowdown in the world's

second largest economy amid trade tensions with the U.S. Japanese stocks closed lower

with investors brooding over contraction in the nation’s economy in Q3 of 2018.

Global Debt (U.S.)

• Yields on the 10-year U.S. Treasury

bonds grew 4 bps to close at 2.89%

from the previous close of 2.85%.

• Price fell on signs of progress in trade

discussions between U.S. and China

and easing tensions on Britain's exit

from the European Union after U.K.

Prime Minister looked to have gathered

sufficient support to survive a no-

confidence vote. Increase in U.S. core

retail sales in Nov 2018 added to the

losses.

• However, European Central Bank's

lower growth and inflation forecasts for

eurozone in 2019 and warning of

economic risks restricted the losses.

Also, steeper than expected decline in

U.S. import prices for Nov 2018

supported U.S. Treasury prices.

2.81

2.86

2.91

2.96

10-Dec 11-Dec 12-Dec 13-Dec 14-Dec

US 10-Year Treasury Yield Movement

Source: Thomson Reuters Eikon

Commodities Market

Performance of various commodities

Commodities

Last Closing*

1-Week Ago

Brent Crude($/Barrel)

58.50 61.73

Gold ($/Oz)

1,238.12 1,247.71

Gold (Rs/10 gm)

31,374.00 31,050.00

Silver ($/Oz)

14.57 14.62

Silver (Rs/Kg)

37,375.00 36,595.00

Source: Thomson Reuters

Eikon *Value as on Dec 14, 2018

Gold

• Gold prices fell after U.S. retail sales

came in higher than expected in Nov

2018. Progress in the U.S.-China trade

talks as the two countries are trying to

resolve their differences added to the

losses. However, expectations that the

U.S. Federal Reserve may consider

pausing its monetary tightening plan

next year restricted the downside.

Brent Crude

• Brent crude prices plunged as signs of

slowing growth in China weighed on the

demand outlook. Besides, uncertainty

surrounding U.S.-China trade feud also

triggered concerns over future demand

for the commodity.

Baltic Dry Index

• The Baltic Dry Index gained on the back

of improved capesize and panamax

activities.

8.72

9.36

10.00

10.64

14-Nov-18 29-Nov-18 14-Dec-18

Global Commodity Movement

Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)

Global

Commodity Prices

Rebased to 10

Source: Thomson Reuters Eikon

-5.23%

-0.77%

-0.35%

Currencies Markets

Movement of Rupee vs Other Currencies

Currency

Last Closing*

1-Wk Ago

US Dollar

71.74 70.57

Pound Sterling

90.58 90.12

EURO

81.46 80.22

100 JPY

63.20 62.53

Source: RBI Figures in INR , *

Value as on Dec 14, 2018

Rupee

• The Indian rupee weakened against the

greenback as market participants

exercised caution following the surprise

resignation of the former RBI governor

and assembly election results in 5 states.

Euro

• The euro weakened against the

greenback on growing possibility of a

rate hike by the U.S. Fed in its upcoming

monetary policy review.

Pound

• The pound weakened against the

greenback as market participants

remained concerned over political

uncertainty in Britain.

Yen

• The yen weakened against the

greenback on growing possibility of a

rate hike by the U.S. Fed in its upcoming

monetary policy review and upbeat U.S.

retail sales data for Nov 2018.

9.31

9.61

9.92

10.23

14-Nov-18 24-Nov-18 4-Dec-18 14-Dec-18

USD GBP Euro JPY

Source: RBI

Currency

Prices (

in terms of INR)

Rebased to 10

Currency Movement

1.66%

0.51%

1.54%

1.07%

The Week that was…

December to 14

December

The Week that was (Dec 10 – Dec 14)

Date Events

Present

Value

Monday,

December 10, 2018

•

Japan Eco Watchers Survey Current (Nov) 51 49.5

•

Germany Trade Balance (Oct) 18.3B 18.3B

•

U.K. Industrial Production (YoY) (Oct)

-0.80%

0.00%

•

U.K. Gross Domestic Product (MoM) 0.10% 0.00%

•

U.K. Manufacturing Production (YoY) (Oct)

-1.00%

0.50%

Tuesday,

December 11, 2018

•

Germany ZEW Survey Expectations (Dec) -17.5 -24.1

•

Japan Machine Orders (YoY) (Oct) 4.50% -7.00%

•

U.K. Jobless Claims Change (Nov) 21.9K 23.2K

Wednesday,

December 12, 2018

•

India Consumer Price Index (YoY) (Nov) 2.33% 3.38%

•

India Index of Industrial Production (Oct) 8.10% 4.50%

•

U.S. Consumer Price Index (YoY) (Nov) 2.20% 2.50%

•

Eurozone Industrial Production (YoY) (Oct) 1.20% 0.80%

Thursday,

December 13, 2018

•

European Central Bank Rate Decision 0.00% 0.00%

•

U.S.Export Price Index (YoY) (Nov) 1.80% 3.10%

Friday,

December 14, 2018

•

India Wholesale Price Index (YoY) (Nov) 4.64% 5.28%

•

U.S. Retail Sales Advance (MoM) (Nov) 0.20% 1.10%

•

China Industrial Production (YoY) (Nov ) 6.30% 6.40%

The Week Ahead

December to 21

December

The Week Ahead

Day Event

Monday,

December 17, 2018

•

U.K. Rightmove House Prices (YoY) (Dec)

•

Eurozone Consumer Price Index (YoY) (Nov F)

•

U.S. NAHB Housing Market Index (Dec)

Tuesday,

December 18, 2018

•

U.K. GfK Consumer Confidence (Dec)

•

Germany IFO Business Climate (Dec)

•

U.S. Housing Starts (MoM) (Nov)

•

Japan Trade Balance (Nov)

Wednesday,

December 19, 2018

•

U.S. FOMC Rate Decision

•

U.K. Consumer Price Index (YoY) (Nov)

•

U.K. House Price Index (YoY) (Oct)

•

U.S. Existing Home Sales (MoM) (Nov)

Thursday,

December 20, 2018

•

Bank of Japan Rate Decision

•

Bank of England Rate Decision

•

Japan National Consumer Price Index (YoY) (Nov)

Friday,

December 21, 2018

•

U.S. Gross Domestic Product Annualized (QoQ) (3Q T)

•

U.S. Durable Goods Orders (Nov P)

•

U.S. Personal Consumption Expenditure Core (YoY) (Nov)

•

U.K. Gross Domestic Product (YoY) (3Q F)

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