Mutual Fund News of the Week 23rd Apr’18 to 27th Apr’18

News U Can Use

April 27, 2018

The Week that was…

April to 27

April

Indian Economy

• The government of India has entered into a loan agreement with the World Bank for $125

million to fund a project called ‘Innovate in India for Inclusiveness’. The objective of the

project is to boost indigenous innovation, foster local product development and accelerate

commercialisation process. It will connect critical skill and infrastructure gaps to promote

affordable and innovative healthcare product generation for inclusive development and

increasing competitiveness in India.

• The Indian government has provisioned Rs. 1,290 crore for Centrally Sponsored Scheme

of National Bamboo Mission (NBM) under National Mission for Sustainable Agriculture

(NMSA) during the remaining period of the 14th Finance Commission (FY19 and FY20).

The mission is to bring around one lakh hectare area under plantation and is expected to

benefit one lakh farmers.

• The government has increased the minimum support price (MSP) of raw jute to Rs. 3,700

per quintal for the 2018-19 crop season from Rs. 3,500 per quintal in 2017-18. The

decision would benefit jute farmers majorly in West Bengal, Assam and Bihar that

accounts for 95% of the country’s jute production. The government in the Budget for 2018-

19 had announced fixing MSPs at 1.5 times the cost of production for various crops.

• A major credit rating agency retained its sovereign rating at 'BBB-' for India. 'BBB-' is the

lowest investment grade with a stable outlook. The agency has not upgraded India's credit

rating in the last 12 years, stating that weak fiscal balances continue to constrain its

ratings.

Indian Equity Market

Domestic Equity Market Indices

Indices

27-Apr-18

1 Week Return

YTD Return

S&P BSE Sensex

34969.7 1.61% 3.42%

Nifty 50

10692.3 1.21% 2.46%

S&P BSE Mid

-Cap 16917.18 0.70% -5.15%

S&P BSE Small

-Cap 18239.96 0.34% -5.39%

Source: MFI Explorer

NSE Advance/Decline Ratio

Date Advances Declines

Advance/Decline Ratio

23-Apr-18 922 884 1.04

24-Apr-18 789 1020 0.77

25-Apr-18 558 1252 0.45

26-Apr-18 796 982 0.81

27-Apr-18 981 815 1.20

Source: NSE

• Indian equity markets ended the

week on a positive note. Encouraging

quarterly earnings of major

companies, including a big private

sector lender, buoyed sentiment.

Market participants remained

optimistic over the Indo-China

Summit.

• Fears over rising 10-year U.S.

Treasury yields were overcome

towards the end as the same eased

on the last day of the week.

• North Korean leader and South

Korean President deciding to end

their seven decades fiery

relationships acted as catalysts, too.

Ratios

S&P BSE

Sensex

Nifty 50

S&P BSE

Mid Cap

S&P BSE

Small Cap

P/E

23.71 26.54 38.48 100.13

P/B

3.15 3.67 2.95 2.61

Dividend Yield

1.13 1.20 0.84 0.63

Source: BSE, NSE Value as on Apr 27, 2018

Indian Equity Market (contd.)

Sectoral Indices

Indices

Last Returns (in %)

Closing* 1-Wk 1-Mth

S&P BSE Auto

25733.9 1.17% 6.84%

S&P BSE

Bankex

28529.8 2.42% 4.22%

S&P BSE CD

22408.6

-0.71%

0.90%

S&P BSE CG

19258.6 0.35% 4.11%

S&P BSE FMCG

11155.1 0.78% 8.01%

S&P BSE HC

14035.8 1.54% 5.46%

S&P BSE IT

13374.8 0.30% 10.19%

S&P BSE Metal

14231.6

-3.40%

4.65%

S&P BSE Oil & Gas

14586.6 1.76% -0.13%

Source: Thomson Reuters

Eikon *Value as on Apr

27, 2018

• On the BSE sectoral front, most of the

indices closed in a positive note. S&P BSE

Bankex (2.42%) stood as the major gainer

followed by S&P BSE Oil & Gas (1.76%)

and S&P BSE Realty (1.73%).

• Meanwhile, S&P BSE Metal (-3.40%)

stood as the major loser followed by S&P

BSE Consumer Durables (-0.71%) and

S&P BSE Power (-0.56%). Decline in

aluminium prices that hurt metal sector.

Meanwhile, a major IT company touched

the $100 billion market capitalisation mark

during one of the trading sessions.

Indian Derivatives Market Review

• Nifty Apr 2018 Futures settled on Apr 26 at 10,617.80. Nifty May 2018 Futures were at

10,723.80 points, a premium of 31.50 points, above the spot closing of 10,692.30. The

turnover on NSE’s Futures and Options segment stood at Rs. 43.61 lakh crore as against

Rs. 37.00 lakh crore on Apr 20.

• The Put-Call ratio stood at 0.94 compared with the previous week’s close of 0.98.

• The Nifty Put-Call ratio stood at 1.52 compared with the previous week’s close of 1.62.

Domestic Debt Market

Debt Indicators

(%)

Current

Value

Ago

Mth

Ago

Mth

Ago

Call Rate

6.02 5.97 6.00 5.86

91 Day T

-Bill

6.20 6.15 6.13 6.10

7.80% 2021, (5

Yr GOI)

7.57 7.36 7.11 6.57

7.17% 2028, (10

Yr GOI)

7.77 7.72 7.33 --

Source: Thomson Reuters

Eikon

Value as on Apr 27, 2018

• Bond yields rose following surge in

U.S. Treasury yields and global crude

oil prices. Losses in the domestic

currency against the greenback

weighed on market sentiment.

• Yields rose further following lack of

demand in the weekly auction for the

second consecutive week leading to

devolvement of short-tenure bonds.

However, value buying by investors

restricted some of the losses.

• RBI conducted auction of four

government securities for a notified

amount of Rs. 12,000 crore for which

Rs. 9,043.12 crore was accepted.

One of the paper (7.73% GS 2023)

was almost fully devolved on primary

dealers who underwrite the bond

auctions.

7.60

7.71

7.82

23-Apr 24-Apr 25-Apr 26-Apr 27-Apr

Yield in %

10 -Yr Benchmark Bond ( % )

Source: CCIL

Domestic Debt Market (Spread Analysis)

Maturity

G-

Sec Yield

(%)

Corporate Yield

(%)

Spread

bps

1 Year 6.79 8.02 123

3 Year 7.57 8.29 72

5 Year 7.78 8.44 66

10 Year 7.77 8.48 71

Source: Thomson Reuters

Eikon Value as on Apr 27

, 2018

• Yields on gilt securities surged across all

maturities by up to 23 bps. Maximum

rise was in 2-year paper while minimum

increase was on 14-year paper.

• Corporate bond yields increased on 1 to

5 years’ papers by up to 18 bps while 7

to 10 years’ papers and 15-year paper

fell 2 bps each. Yield on 6-year paper

was flat.

• Spread between AAA corporate bond

and gilt contracted across all maturities

in the range of 3 to 22 bps, barring 1-

year maturity that expanded 5 bps.

5.80

7.00

8.20

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

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

Change in bps 27-Apr-18 20-Apr-18

Yield

in %

Change

in bps

Source: Thomson Reuters Eikon

Regulatory Updates in India

• The Income Tax Department has framed rules for specific situations wherein the recently

imposed capital gains tax would apply even though no Securities Transactions Tax (STT)

are being paid. Cases where no STT is paid but new capital gains tax regime will be

imposed are bonus shares, policy compliant foreign investment, shares acquired via a will

or inheritance, court or regulator approved acquisition, shares acquired under insolvency

resolution and those under government disinvestment. The tax rate would be 10% and the

rule will be applicable from Apr 2019. In cases where new capital gains tax could not be

paid, such gains will be clubbed with total income and will become eligible for higher tax.

• The Ministry of Finance has fixed the rate of interest at 8.55% for 2017-18 on provident fund

savings. This is the lowest rate of interest in the last five years paid by the EPFO. In the

previous year, the same stood at 8.65% and 8.80% in 2015-16. In the two preceding years

– 2013-14 and 2014-15 – the interest rate for EPFO stood at 8.75%.

• According to a major domestic credit rating agency, government support is imperative to

implement Minimum Indicative Export Quota (MIEQ) scheme. In Mar 2018, the Food and

Consumer affairs (FCA) Ministry gave approval for export of 2 million metric tonnes (MT) of

sugar during sugar year (SY) 2018, under the MIEQ scheme. The higher than expected

sugar production in SY 2018 resulted in a fall in sugar prices. Surplus stocks could be

cleared and the cash flow of the mills could be improved. In turn, the sugar mills would be

able to clear dues to farmers.

Regulatory Updates in India (contd..)

• To improve cyber security, Securities and Exchange Board of India (SEBI) proposed to

inculcate biometric check for traders and investors when they purchase or sell stocks

through mobile applications. SEBI added that brokers should ensure that no person by

virtue of rank or position shall have access to confidential data, facilities, system resources

and applications. It added that after a certain number of failed login attempts, the

customer’s account should get locked till fresh authentication is carried out.

Employees/outsourced resources having access to critical data shall be subject to stringent

monitoring.

• The Prime Minister gave approval to the proposal put forward by the ministry of labour

regarding social security plan. The plan is expected to provide coverage to 500 million

workers with the poorest being the first to be benefited.

Global News/Economy

• According to a report released by the Commerce Department, real Gross Domestic Product

(GDP) of U.S. rose 2.3% in the first quarter of 2018, slower than 2.9% rise in the fourth

quarter of 2017. However, the rate of growth was higher than market expectations.

• According to a report from the Conference Board, U.S. consumer confidence grew to 128.7

in Apr 2018 as against downwardly revised score of 127.0 in Mar 2018 (127.7 originally

reported). Similarly, the present situation index surged to 159.6 in Apr from 158.1 in Mar.

• The European Central Bank in its monetary policy review kept interest rates unchanged and

is expected to remain same for an extended period. The bank further stated that net asset

purchases will remain at the existing rate of EUR 30 billion until the end of Sep 2018, or

beyond, if necessary.

• According to the Office for National Statistics, U.K. economy grew 0.1% in the first quarter of

2018 from 0.4% in the fourth quarter of 2017. This was the slowest rate since the fourth

quarter of 2012. The major reason for slowdown was 3.3% fall in construction output.

• The Bank of Japan kept its monetary stimulus unchanged and decided to hold its target of

raising the amount of outstanding Japanese Government Bonds (JGB) holdings at an annual

pace of about JPY 80 trillion. The bank stated that it will purchase government bonds so that

the yield of 10-year JGBs will remain at approximately 0%. The board decided to maintain

the -0.1% interest rate on current accounts that financial institutions maintain at the bank.

With regards to outlook, Japan's economy is likely to continue its moderate expansion.

Global Equity Markets

Global Indices

Indices

27-Apr-18

1-Week

Return

YTD

Return

Dow Jones

24,311.19 -0.62% -2.07%

Nasdaq 100

6,656.35 -0.17% 2.23%

FTSE 100

7,502.21 1.82% -1.91%

DAX Index

12,580.87 0.32% -2.26%

Nikkei Average

22,467.87 1.38% -1.30%

Straits Times

3,577.21 0.11% 5.12%

Source: Thomson Reuters

Eikon

Value as on Apr 27, 2018

U.S.

• U.S. markets remained low as impact of

upbeat corporate earnings were

overshadowed by concerns over

interest rate outlook. Stronger than

estimated U.S. GDP growth for the first

quarter of 2018 stoked expectations of

policy tightening by U.S. Federal

Reserve in 2018.

• Increase in U.S. Treasury yields kept

markets under pressure before easing

on the last trading day of the week.

Europe

• European markets rose on the back of a series of encouraging quarterly earnings of major

companies. Initial weakness following rise in U.S. Treasury yields was made good as the

same eased on the last trading day of the week. The European Central Bank kept interest

rates, asset purchases and forward guidance unchanged, which gave investors solace.

Asia

• Asian markets largely remained positive backed by strong earnings of major companies

for the first quarter of 2018. The European Central Bank and Bank of Japan kept their

monetary policy steady, as was widely expected. Japan’s industrial output increased

sequentially in Mar and jobless rate remained flat at 2.5% during the period.

Global Debt (U.S.)

• Yield on the 10-year U.S. Treasury bond

rose 1 bps to close at 2.96% from the

previous week’s close of 2.95%.

• U.S. Treasury prices fell in the first half

with yields touching its highest level in

four years due to worries regarding

growing supply of government debt and

accelerating inflation as oil and

commodity prices climb.

• However, after continuous selling,

losses were pared as market

participants bought bonds at lower

prices.

• At the end, most of the losses got

erased on doubt over the global

economy even as U.S. economy grew

better than expected in the Mar quarter

of 2018.

2.94

2.99

3.04

23-Apr 24-Apr 25-Apr 26-Apr 27-Apr

Yield (%)

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)

76.07 75.36

Gold ($/Oz)

1,321.89 1,334.72

Gold (Rs/10 gm)

31,190 31,298

Silver ($/Oz)

16.50 17.11

Silver (

Rs/Kg) 39,236 40,106

Source: Thomson Reuters

Eikon *Value as on Apr 27, 2018

Gold

• A successful inter-Korea summit dented

the safe- haven appeal of the metal.

North Korean leader and South Korean

President are expected to end their

hostile relationships soon. Easing trade

tensions between China and stronger

outlook for the U.S. economy weighed

on the precious metal.

Crude

• Brent crude prices gained over the week

as the Organization of the Petroleum

Exporting Countries (OPEC) and non-

OPEC countries are likely to continue

with output cuts until stocks return to

their normal levels.

Baltic Dry Index

• The Baltic Dry Index rose 7.34% on the

back of improved capesize and

panamax activities.

9.20

10.30

11.40

27-Mar-18 6-Apr-18 16-Apr-18 26-Apr-18

Global Commodity Movement

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

Global

Commodity Prices

Rebased to 10

Source: Thomson Reuters Eikon

0.94%

-0.96%

-3.59%

27-Apr-18

Currencies Markets

Movement of Rupee vs Other Currencies

Currency

Last Closing*

1-Wk Ago

US Dollar

66.78 66.02

Pound Sterling

92.89 92.73

EURO

80.74 81.46

100 JPY

61.08 61.40

Source: RBI Figures in INR , *

Value as on

Apr 27, 2018

Rupee

• The Indian rupee weakened against the

U.S. dollar because of rising global crude

oil prices and speculation that the Fed

will hike interest rates faster than

expected in 2018.

Euro

• The euro weakened against the

greenback as the U.S. 10-year treasury

yields grew on growing possibility that

the U.S. Fed will hike interest rates faster

than expected in 2018.

Pound

• Sterling weakened against the U.S.

dollar as the latter gained following rising

U.S. Treasury yields and reports that

U.K.’s economic growth in the first

quarter of 2018 slowed.

Yen

• Yen weakened against the dollar as the

latter gained due to surge in the 10-year

U.S. Treasury yield to 3% level.

9.80

10.10

10.40

27-Mar-18 6-Apr-18 16-Apr-18 26-Apr-18

USD GBP Euro JPY

Source: RBI

Currency

Prices (

in terms of INR)

Rebased to 10

Currency Movement

27-Apr-18

1.16%

0.18%

-0.88%

-0.52%

The Week that was…

April to 27

April

The Week that was (Apr 23 – Apr 27)

Date Events

Present Value

Value

Monday,

Apr 23, 2018

• Japan Nikkei Japan PMI Manufacturing (Apr P)

53.3 53.1

•

Markit Eurozone Composite PMI (Apr P) 55.2 55.2

• U.S.

Markit US Composite PMI (Apr P) 54.8 54.2

• U.S. Existing Home Sales (Mar)

5.60m 5.54m

Tuesday,

Apr 24, 2018

• Euro zone German IFO Current Assessment (Apr)

105.7 106.5

• U.K. Public Sector Net Borrowing (Mar)

-0.3b -0.4b

• U.S. New Home Sales (Mar)

694k 667k

• U.S. Consumer Confidence Index (Apr)

128.7 127.0

Wednesday,

Apr 25, 2018

• Japan All Industry Activity Index (

MoM) (Feb)

0.4% -1.1%

Thursday,

Apr 26, 2018

• European Central Bank Rate Decision

0.0% 0.0%

• U.S. Durable Goods Orders (Mar P)

2.6% 3.5%

• U.S. Wholesale Inventories (

MoM) (Mar P)

0.5% 1.0%

• Japan Industrial Production (YoY) (Mar P)

2.2% 1.6%

Friday,

Apr 27, 2018

• Bank of Japan Rate Decision

-0.1% -0.1%

• U.K. Gross Domestic Product (YoY) (1Q A)

1.2% 1.4%

• U.S. Gross Domestic Product Annualized (QoQ) (1Q A)

2.3% 2.9%

The Week Ahead

April to 4

May

The Week Ahead

Day Event

Monday,

April 30, 2018

•

China Manufacturing PMI (Apr)

•

Eurozone German Consumer Price Index (YoY) (Apr P)

•

U.S. PCE Core (YoY) (Mar)

•

U.S. Pending Home Sales (YoY) (Mar)

Tuesday,

May 01, 2018

•

U.S. ISM Manufacturing (Apr)

•

U.K. Markit UK PMI Manufacturing s.a. (Apr)

Wednesday,

May 02, 2018

•

Eurozone Gross Domestic Product s.a. (YoY) (1Q A)

•

U.S. FOMC Interest Rate Decision

•

Japan Nikkei Japan PMI Composite (Apr)

•

U.S. Trade Balance (Mar)

Thursday,

May 03, 2018

•

Eurozone Consumer Price Index Estimate (YoY) (Apr)

•

U.S. ISM Non-Manufacturing/Services Composite (Apr)

•

U.S. Factory Orders (Mar)

•

U.K. Markit/CIPS UK Services PMI (Apr)

Friday,

May 04, 2018

•

U.S. Change in Non-farm Payrolls (Apr)

•

U.S. Unemployment Rate (Apr)

•

Eurozone Retail Sales (YoY) (Mar)

•

China Caixin China PMI Composite (Apr)

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