News U Can Use
December 07, 2018
The Week that was…
03
rd
December to 07
th
December
2
Indian Economy
• The Monetary Policy Committee (MPC) in its fifth bi-monthly monetary policy review for
FY19 kept key policy repo rate on hold for the second consecutive time after it increased
the same by 25 bps each in Jun 2018 and Aug 2018. The key policy repo rate stood
unchanged at 6.50%. The reverse repo rate stood at 6.25% and the marginal standing
facility rate and the Bank Rate stood at 6.75%.
• The Monetary Policy Committee proposed to lower the Statutory Liquidity Ratio (SLR) by
25 basis points (bps) every calendar quarter until it reaches 18% of Net Demand and Time
Liabilities (NDTL). The first reduction of 25 bps will take effect in the quarter beginning Jan
2019. Currently, scheduled commercial banks have to reach the minimum LCR of 100% by
Jan 1, 2019 and the SLR is 19.5% of NDTL. The objective of the move is to align statutory
liquidity ratio with liquidity coverage ratio.
• The Nikkei India Manufacturing Purchasing Managers' Index (PMI) increased for the third
straight month in Nov 2018 to 54.0 from 53.1 in Oct 2018. A reading of over 50 indicates
expansion and otherwise contraction. The growth reflects strengthening manufacturing
operating conditions since healthy new order inflows made companies increase production
compared with Oct. The month saw sustained job creation and improved sentiment.
• The Nikkei India Services PMI grew to 53.7 in Nov 2018 from 52.2 in Oct 2018, thereby
marking a four-month high. The upside was driven by new work orders that led to a
continued rise in jobs. Seasonally adjusted Nikkei India Composite PMI Output Index grew
to 54.5 in Nov as against 53.0 in Oct because of strongest expansion in private sector
activity since Oct 2016.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 07-Dec-18 1 Week Return YTD Return
S&P BSE Sensex 35,673.25 -1.44% 4.75%
Nifty 50 10,693.7 -1.68% 1.55%
S&P BSE Mid-Cap 14,717.49 -2.14% -17.42%
S&P BSE Small-Cap 14,104.65 -2.24% -26.66%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
03-Dec-18 972 848 1.15
04-Dec-18 815 972 0.84
05-Dec-18 473 1,311 0.36
06-Dec-18 385 1,405 0.27
07-Dec-18 769 999 0.77
Source: NSE
• Indian equity markets fell in the week
ended Dec 7, 2018, after witnessing
gains in the last week. The decline
came despite the MPC keeping policy
rates unchanged, which was in line with
market expectations. Investor
sentiment was soured by weak GDP
figures for the second quarter of FY19
and fiscal deficit crossing budget
estimates in the period Apr-Oct 2018.
Surge in crude oil prices and weakness
in rupee also muted buying interest.
• Weak global cues due to sharp fall in
long-term U.S. Treasury yields and
resurgent trade concerns raised worries
about global economic growth and
weighed on investor sentiment. Global
markets also remained under pressure
after U.S. ordered the arrest of a top
executive of a Chinese tech giant,
putting the 90-day truce between the
two countries under shadow.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
23.31 25.87 31.62 -92.01
P/B
2.96 3.38 2.52 2.09
Dividend Yield
1.22 1.24 1.00 0.90
Source: BSE, NSE Value as on Dec
07, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
19,980.56 -4.40% -2.57%
S&P BSE Bankex
29,660.88 -0.96% 2.60%
S&P BSE CD
20,243.90 -1.38% 5.17%
S&P BSE CG
18,262.02 -2.02% 1.11%
S&P BSE FMCG
11,460.83 -1.60% 3.16%
S&P BSE HC
13,657.75 -4.71% -5.43%
S&P BSE IT
14,407.42 0.77% 1.26%
S&P BSE Metal
11,478.84 -2.98% -11.01%
S&P BSE Oil & Gas
12,968.02 -2.10% -3.14%
Source: Thomson Reuters Eikon
*Value as on Dec 07, 2018
• On the BSE sectoral front, indices closed
on a negative note. S&P BSE healthcare
was the major loser that fell 4.71%
followed by S&P BSE Auto that fell 4.40%.
S&P BSE Metal and S&P BSE Oil & Gas
plunged 2.98% and 2.10%, respectively.
• Healthcare sector lost as India’s biggest
pharma company was surrounded by
allegations of mis-governance and insider
trading. Auto stocks also witnessed steep
decline after a major credit rating agency
lowered the score of a luxury car unit of an
auto major.
Indian Derivatives Market Review
• Nifty Dec 2018 Futures were at 10,735.15 points, a premium of 41.45 points, above the
spot closing of 10,693.70. The total turnover on NSE’s Futures and Options segment for
the week stood at Rs. 39.51 lakh crore as against Rs. 46.42 lakh crore for the week to Nov
30.
• The Put-Call ratio stood at 0.78 compared with the previous week’s close of 0.99.
• The Nifty Put-Call ratio stood at 1.47 against the previous week’s close of 1.70.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
6.41 6.41 6.43 6.03
91 Day T-Bill
6.69 6.75 6.94 6.50
7.80% 2021, (5 Yr GOI)
7.22 7.30 7.57 7.82
7.17% 2028, (10 Yr GOI)
7.46 7.61 7.80 7.99
Source: Thomson Reuters
Eikon
Value as on Dec 07, 2018
• Bond yields plunged after the release
of the Monetary Policy Committee’s
fifth bi-monthly policy Monetary Policy
Statement for FY19. The key interest
rate remained unchanged at 6.50%
and the inflation forecast was
reduced to 2.7%-3.2% for the latter
half of the fiscal. This lifted the bond
market sentiment.
• In the post-policy press conference,
the Deputy Governor of the Reserve
Bank of India (RBI) also hinted that
more open market purchases will be
required until end of Mar 2019, which
also boosted investor sentiment.
• Yield on the 10-year benchmark
paper (7.17% GS 2028) fell 15 bps to
close at 7.46% from the last week’s
close at 7.61%, after trading in a
range of 7.37% to 7.65%.
7.32
7.46
7.59
7.73
3-Dec 4-Dec 5-Dec 6-Dec 7-Dec
Yield in %
10 -Yr Benchmark Bond ( % )
Source: CCIL
Domestic Debt Market (Spread Analysis)
7
Maturity
G-Sec Yield
(%)
Corporate Yield
(%)
Spread
bps
1 Year 7.25 8.49 125
3 Year 7.37 8.56 119
5 Year 7.53 8.42 89
10 Year 7.60 8.34 74
Source: Thomson Reuters Eikon
Value as on Dec 07, 2018
• Yields on gilt securities fell across the
maturities in the range of 5 bps to 20 bps
barring 2-year paper that increased 1
bps.
• Corporate bond yields fell across the
maturities by up to 8 bps barring 1-year
paper that increased 2 bps.
• Difference in spread between AAA
corporate bond and gilt expanded across
the maturities in the range of 2 bps to 19
bps. The maximum expansion was
witnessed on 15-year paper and the
minimum on 2- and 4-year papers.
-20
-15
-10
-5
0
6.00
6.50
7.00
7.50
8.00
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 07-Dec-18 30-Nov-18
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• The Monetary Policy Committee decided that the Reserve Bank of India will provide
information on daily Cash Reserve Ratio (CRR) balance of the banking system to the
market participants on the very next day. Accordingly, with effect from Dec 6, 2018, the daily
Money Market Operations press release will contain the CRR figure for the previous day.
This comes in order to enable banks to forecast their liquidity requirements with a greater
degree of precision.
• MPC has proposed that all new floating rate personal or retail loans and floating rate loans
to Micro and Small Enterprises (MSMEs) extended by banks shall be benchmarked to any
one of the following. a. Reserve Bank of India policy repo rate, b. Government of India 91
days T-Bill yield produced by the Financial Benchmarks India Private Ltd (FBIL), c.
Government of India 182 days T-Bill yield produced by the FBIL, d. any other benchmark
market interest rate produced by the FBIL.
• The Securities and Exchange Board of India (SEBI) allowed the Metropolitan Stock
Exchange (MSE) to launch the weekly options on U.S. Dollar–Indian Rupee (USD-INR) and
two new currency products.
• The National Stock Exchange announced that it has introduced futures on overnight call
rate (Mumbai Inter-Bank Offer Rate or MIBOR). This is expected to provide participants an
opportunity to manage risk exposures.
Regulatory Updates in India (contd..)
• SEBI was recommended by a high-level panel to permit direct listing of Indian companies
on overseas bourses and of foreign firms on Indian exchanges. Currently, Indian companies
can list their shares through depository receipts abroad. Meanwhile, foreign companies
have to go through the Indian Depository Receipt route for listing of equities.
• SEBI made the settlement rules more attractive to help fast-track cases. The new norms will
be effective from Jan 1, 2019. The market regulator has included confidentiality and lenient
terms for approvers, however, not for settling the cases of defaulters and fugitive economic
offenders. SEBI stated that it will not settle proceeding in case the alleged default has
widely impacted the market and has resulted in losses to a large number of investors.
• SEBI issued stricter cybersecurity framework for stock brokers and depository participants.
The new norms that will be effective from Apr 2019 come on the wake of concerns over
possible data breaches. With the new norms, the stock brokers and depository participants
would be required to define the responsibilities of individuals which will include outsourced
staff that have privileged access to the networks.
• The Union cabinet has given approval for an export policy for agriculture, thereby imposing
no restrictions on export of all organic and processed products. The move is expected to
help the government’s efforts to double farmers’ income by 2022. However, policy for farm
goods such as onions will be reviewed from time to time.
9
Global News/Economy
• U.S. non-farm payroll employment rose less than expected by 155,000 jobs in Nov 2018
after surging up by a downwardly revised 237,000 jobs in Oct 2018. Meanwhile, the
unemployment rate remained unchanged for the second straight month at 3.7% in Nov.
• According to a report released by payroll processor ADP, U.S. private sector employment
climbed less than expected by 179,000 jobs in Nov 2018 following increase by a downwardly
revised 225,000 jobs in Oct 2018.
• According to a survey by the Bank of England, U.K.’s median expectations of the rate of
inflation over the coming year rose to 3.2% from to 3% predicted in Aug 2018. The central
bank also warned that a no-deal Brexit would lead to a severe recession in the country that
has not been even seen during the global financial crisis a decade ago.
• Nikkei’s latest survey showed Japan’s manufacturing sector continued to expand in Nov
2018 but at a slower pace. Manufacturing PMI score came in at 52.2, down from 52.9 in Oct
2018.
• According to a report released by payroll processor ADP, U.S. private sector employment
climbed less than expected by 179,000 jobs in Nov 2018 following increase by a downwardly
revised 225,000 jobs in Oct 2018.
• Caixin’s latest survey showed China’s manufacturing sector accelerated slightly in Nov 2018.
Manufacturing PMI score came at 50.2, same as the reading in Oct 2018.
10
Global Equity Markets
11
Global Indices
Indices
07-Dec-18
1-Week
Return
YTD
Return
Dow Jones
24,388.95 -4.50% -1.34%
Nasdaq 100
6,613.28 -4.83% 3.39%
FTSE 100
6,778.11 -2.90% -11.83%
DAX Index
10,788.09 -4.17% -16.49%
Nikkei Average
21,678.68 -3.01% -4.77%
Straits Times
3,111.12 -0.21% -8.57%
Source: Thomson Reuters Eikon
Value as on Dec 07, 2018
U.S.
• U.S. markets ended the week in the red
with investors booking profit following
the strong gains in reaction to the
easing trade tension between U.S. and
China.
• Uncertainty about the long-term trade
agreement between the nations kept
investors on the sidelines following the
arrest of a top executive at a Chinese
technology giant.
Europe
• European markets settled lower during the week as initial optimism over the resolution of
the trade turf between U.S. and China faded and investors became skeptical following the
arrest of a top executive of a Chinese tech giant. Uncertainty over Brexit also weighed on
market sentiment after the U.K. government suffered three successive defeats in the
British Parliament.
Asia
• Asian markets were no exception to the weakness in global peers. Initial positive cues
over the temporary relief between the U.S. and China over their trade disputes faded amid
doubts over whether the nations will be able to resolve their differences in the 90-day
period. Investors became more skeptical following the arrest of the top executive of a
Chinese tech giant.
Global Debt (U.S.)
12
• Yields on the 10-year U.S. Treasury
bonds plunged 16 bps during the week
to close at 2.85% from the previous
close of 3.01%.
• U.S. Treasury prices rose as the yield
curve between 3-year and 5-year U.S.
Treasuries reportedly inverted for the
first time since 2007, which stoked
concerns about a slowdown in U.S.
economic growth.
• The uptrend continued as uncertainties
over negotiations for Britain to exit the
European Union and worries over
escalating trade tensions between
China boosted safe-haven appeal for
U.S. Treasuries.
• Prices rose further after U.S. nonfarm
payroll employment data and private
sector jobs data for Nov 2018 came
lower than market expectations, which
reinforced concerns of a slowdown in
U.S. economy.
2.83
2.90
2.97
3.04
3-Dec 4-Dec 5-Dec 6-Dec 7-Dec
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Commodities
Last Closing* 1-Week Ago
Brent Crude($/Barrel) 61.73 57.55
Gold ($/Oz) 1,247.71 1,221.88
Gold (Rs/10 gm) 31,050 30,240
Silver ($/Oz) 14.62 14.17
Silver (Rs/Kg) 36,595 35,519
Source: Thomson Reuters
Eikon *Value as on Dec 07, 2018
Gold
• Gold prices gained over the week on
expectations that the U.S. Federal
Reserve (Fed) may not go ahead with
the multiple interest rate hike plan in
2019. U.S. Fed chair said in a recent
speech that interest rates are below
neutral, signaling that the central bank
may not go forward with its aggressive
interest rate-hike plan.
Brent Crude
• Brent crude prices surged as the trade
tension between U.S. and China eased
after their Presidents agreed on a 90-
day truce. The two sides are expected
to hold talks to bridge differences and
reach a deal in the period.
Baltic Dry Index
• The Baltic Dry Index gained on the back
of improved capesize and panamax
activities.
8.00
8.50
9.00
9.50
10.00
10.50
7-Nov-18 17-Nov-18 27-Nov-18 7-Dec-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
7.26%
2.11%
3.15%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
70.57 69.66
Pound Sterling
90.12 89.08
EURO
80.22 79.36
100 JPY
62.53 61.43
Source: RBI Figures in INR , *Value as on Dec 07, 2018
Rupee
• The Indian rupee weakened against the
greenback due to rise in crude oil prices
and slow economic growth in the Jul-Sep
quarter.
Euro
• The euro strengthened against the
greenback after weak U.S. jobs data for
Nov 2018 triggered expectations of fewer
interest rate increases from the U.S. Fed
in 2019.
Pound
• The pound weakened against the
greenback amid concerns about British
parliamentary approval for a proposed
Brexit deal.
Yen
• The yen strengthened against the
greenback as the latter weakened
following reports that U.S. employers
hired fewer workers than expected in
Nov 2018.
9.20
9.40
9.60
9.80
10.00
10.20
6-Nov-18 16-Nov-18 26-Nov-18 6-Dec-18
USD GBP Euro JPY
Source: RBI
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
1.30%
1.16%
1.09%
1.79%
7-Dec-18
15
The Week that was…
03
rd
December to 07
th
December
The Week that was (Dec 03 – Dec 07)
16
Date Events
Present
Value
Previous
Value
Monday,
December 03, 2018
• India Nikkei Manufacturing PMI (Nov) 54.0 53.1
• U.S. ISM Manufacturing (Nov) 59.3 57.7
• U.K. Markit Manufacturing PMI (Nov) 53.1 51.1
• China Caixin Manufacturing PMI (Nov) 50.2 50.1
Tuesday,
December 04, 2018
• U.K Markit/CIPS Construction PMI (Nov) 53.4 53.2
Wednesday,
December 05, 2018
• India Fifth Bi-monthly Monetary Policy Statement, 2018-19 6.5% 6.5%
• India Nikkei Services PMI (Nov) 53.7 52.2
• Japan Nikkei Composite PMI (Nov) 52.4 52.5
Thursday,
December 06, 2018
• Germany Factory Orders (YoY) (Oct) -2.7% -2.6%
• U.S. ISM Non-Manufacturing/Services Composite (Nov) 60.7 60.3
• U.S. Initial Jobless Claims (Dec 1) 231k 235k
• U.S. Factory Orders (Oct) -2.1% 0.2%
Friday,
December 07, 2018
• Eurozone Gross Domestic Product (YoY) 1.6% 1.7%
• U.S. Change in Non-farm Payrolls (Nov) 155k 237k
• U.S. Unemployment Rate (Nov) 3.7% 3.7%
• U.S. University of Michigan Sentiment (Dec P) 86.1 88.1
• Japan Leading Index CI (Oct P) 100.5 104.3
17
The Week Ahead
10
th
December to 14
th
December
18
The Week Ahead
Day Event
Monday,
December 10, 2018
• China Consumer Price Index (YoY) (Nov)
• Japan Gross Domestic Product Annualized (QoQ) (3Q F)
• China New Yuan Loans China (Nov)
• U.K. Industrial Production (YoY) (Oct)
Tuesday,
December 11, 2018
• Eurozone German ZEW Survey Expectations (Dec)
• Japan Machine Orders (YoY) (Oct)
• U.K. ILO Unemployment Rate 3Mths (Oct)
Wednesday,
December 12, 2018
• India Consumer Price Index YoY (Nov)
• India Index of Industrial Production YoY (Oct)
• U.S. Consumer Price Index (YoY) (Nov)
Thursday,
December 13, 2018
• European Central Bank Rate Decision
• Eurozone German Consumer Price Index (YoY) (Nov F)
Friday,
December 14, 2018
• India Wholesale Price Index YoY (Nov)
• Japan Nikkei Japan PMI Manufacturing (Dec P)
• China Retail Sales (YoY) (Nov)
• U.S. Retail Sales Advance (MoM) (Nov)
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19
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