News U Can Use
August 02, 2019
The Week that was…
29
th
July to 02
nd
August
2
Indian Economy
• After falling on MoM basis in Jun 2019, Nikkei India Manufacturing Purchasing Managers'
Index (PMI) grew to 52.5 in Jul 2019 from 52.1 in Jun 2019 driven mainly by improved
output and new orders. New export orders continued to rise, however, there was slowdown
in growth. Consumer goods producers led the upturn for the third consecutive month.
Meanwhile, Intermediate goods producers also witnessed stronger improvement in
business conditions.
• Government data showed that the growth in the index of eight core industries grew 0.2% in
Jun 2019 against a revised growth of 4.3% in May 2019 (5.1% growth originally reported),
and 7.8% in the same period of the previous year. Refinery products growth fell 9.3%
followed by crude oil that went down 6.8%. The electricity sector witnessed the maximum
growth of 7.3% followed by steel and coal, which grew 6.9% and 3.2%, respectively.
• Government data showed that India’s fiscal deficit for the period from Apr 2019 to Jun
2019 stood at Rs. 4.32 lakh crore or 61.4% of the budget estimate compared with 68.7%
of the budget estimate in the corresponding period of the previous year. The revenue
deficit in the same period stood at Rs. 3.74 lakh crore or 79.4% of the budget estimate
compared with 84.7% of the budget estimate in the corresponding period of the previous
year. Total expenditure for the period from Apr 2019 to Jun 2019 stood at Rs. 7.22 lakh
crore or 25.9% of the budget estimate compared with 29.0% of the budget estimate in the
corresponding period of the previous year.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 02-Aug-19 1 Week Return YTD Return
S&P BSE Sensex 37118.22 -2.02% 2.91%
Nifty 50 10997.35 -2.54% 1.24%
S&P BSE Mid-Cap 13546.92 -2.23% -12.25%
S&P BSE Small-Cap 12496.35 -4.32% -15.03%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
29-Jul-19 488 1341 0.36
30-Jul-19 346 1514 0.23
31-Jul-19 853 988 0.86
01-Aug-19 531 1291 0.41
02-Aug-19 793 1013 0.78
Source: NSE
• Indian equity markets closed on weak
note for fourth week in a row. Investors
became cautious ahead of the U.S.
Federal Reserve’s meeting that was
held on Jul 30-31, 2019. The U.S. Fed
cut interest rates in its monetary policy
meeting but stated that the move was
not the beginning of a long-running
rate-cut cycle.
• Additionally, weak global cues on
escalating U.S. and China trade war
concerns added to the losses. U.S.
President has reportedly stated that
10% tariff would be levied on the
remaining $300 billion of Chinese
imports beginning from Sep 1, 2019.
Further, tepid earnings results by a
slew of corporates and worries over
ongoing credit crunch muted buying
interest. Weak auto sales from some of
the auto majors has also taken a toll
over the market sentiments.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
26.11 27.09 30.70 33.50
P/B
2.80 3.42 2.27 1.76
Dividend Yield
1.25 1.34 1.10 1.16
Source: BSE, NSE Value as on Aug
02, 2019
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
15635.3 -3.40% -13.88%
S&P BSE Bankex
31903 -3.67% -9.06%
S&P BSE CD
22567.4 -1.64% -13.49%
S&P BSE CG
17274.1 -2.84% -13.34%
S&P BSE FMCG
10982.5 -1.20% -3.62%
S&P BSE HC
12555.4 -3.12% -3.03%
S&P BSE IT
15531.5 0.58% -1.61%
S&P BSE Metal
9176.6 -8.94% -17.70%
S&P BSE Oil & Gas
13061.6 -3.44% -11.23%
Source: Thomson Reuters Eikon
*Value as on Aug 02, 2019
• S&P BSE Metal was the major loser that fell
8.94% followed by S&P BSE Realty that fell
4.04%. S&P BSE Bankex and S&P BSE Oil &
Gas that fell 3.67% and 3.44%, respectively.
Metal sector came under pressure as risks to
global economy increased after U.S.
President announced imposition of fresh
tariffs on Chinese imports. S&P BSE Auto
and S&P BSE Healthcare fell 3.40% and
3.12%, respectively.
• However, S&P BSE IT was the only gainer
and grew 0.58% amid weakness in rupee
that helped the export-oriented sector to
gain.
Indian Derivatives Market Review
• Nifty Aug 2019 Futures stood at 11,024.05, a premium of 26.70 points above the spot
closing of 10,997.35. The total turnover on NSE’s Futures and Options segment for the
week stood at Rs. 53.03 lakh crore as against Rs. 71.70 lakh crore for the week to Jul 26.
• The Put-Call ratio stood at 0.76 compared with the previous week’s close of 0.87.
• The Nifty Put-Call ratio stood at 1.18 against the previous week’s close of 1.37.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
5.60 5.56 5.71 6.43
91 Day T-Bill
5.65 5.74 5.96 6.55
07.32% 2024, (5 Yr GOI)
6.25 6.46 6.74 7.33
07.26% 2029, (10 Yr GOI)
6.35 6.53 6.85 7.38
Source: Thomson Reuters Eikon
Value as on Aug 02, 2019
• Bond yields plunged and witnessed
the biggest weekly fall since Jul 12 on
hopes that the Monetary Policy
Committee might cut interest rates by
25 bps in its upcoming monetary
policy review which is scheduled on
Aug 7, 2019. Expectations
surrounding the sovereign bond
issuance plan as proposed by the
government in the Union Budget also
boosted market sentiments even
though lack of clarity regarding the
same capped the gains to some
extent. Renewed concerns over U.S.-
China trade tensions also contributed
to the upside as it fuelled
expectations of more monetary
easing by the U.S. Federal Reserve.
• Yields on the 10-year benchmark
paper (7.26% GS 2029) fell 18 bps to
close at 6.35% compared with the
previous close of 6.53% after trading
in the range of 6.32% to 6.46%.
6.30
6.35
6.40
6.45
29-Jul 30-Jul 31-Jul 1-Aug 2-Aug
Yield in %
10 -Yr Benchmark Bond ( % )
Source: CCIL
Domestic Debt Market (Spread Analysis)
7
Maturity
G-Sec Yield
(%)
Corporate Yield
(%)
Spread
bps
1 Year 6.04 7.49 145
3 Year 6.21 7.62 141
5 Year 6.42 7.77 135
10 Year 6.45 8.02 156
Source: Thomson Reuters Eikon Value as on Aug 02, 2019
• Yields on gilt securities fell across the
maturities in the range of 2 bps to 22 bps
barring 1-year paper which increased 4 bps.
• Corporate bond yields fell across the
maturities by up to 28 bps. The maximum
decline was witnessed on 1-year paper and
the minimum decline was witnessed on 4
and 5-year paper.
• Spread between AAA corporate bond and
gilt expanded across 3 to 7-year maturities
and 15-year paper by up to 13 bps barring
1, 2 and 10-year paper which contracted by
up to 32 bps.
-19
-11
-3
5
5.00
5.80
6.60
7.40
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 02-Aug-19 26-Jul-19
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• The Reserve Bank of India (RBI) has relaxed rules for end-use of money raised through
external commercial borrowings (ECBs). RBI said ECBs with a minimum average maturity
period of seven years can be used for repayment of rupee loans taken domestically for
capital expenditure as also by non-banking financial companies for on-lending for the same
purpose.
• Under the Consumer Protection Bill 2019 passed in Lok Sabha, misleading advertisements
will now attract penalties. The bill contains provisions to penalise a manufacturer or service
provider as well as celebrity endorser involved in such advertisements. Apart from
conventional media such as television, print and outdoor, the bill also takes into account e-
commerce, direct selling, telemarketing, etc.
• Reserve Bank of India (RBI) plans to discuss the proposition from the government to raise
foreign currency debt next month, media reports said. The board of RBI will meet on Aug
16, 2019, to discuss, among other matters, the maiden offshore bond sale plan. This comes
amid risks raised by economists about the plan.
• The Income Tax department has identified undisclosed foreign assets in excess of Rs. 200
crore across Delhi, Haryana, and Himachal Pradesh, media reports showed the finance
ministry said in a declaration. More than Rs. 30 crore domestic tax evasion was also
detected during the searches. The searches were conducted at 13 facilities across the three
states on Jul 23, 2019.
Regulatory Updates in India (contd..)
9
• The commerce and industry ministry has issued a cabinet note for a new export incentives
scheme that would be compliant with the World Trade Organization (WTO) rules. The
Rebate of State and Central Taxes and Levies (RoSCTL) scheme, which is available on
export of garments and made-ups, will now be extended to all exports in phases. The new
scheme will replace the extant Merchandise Exports from India Scheme (MEIS), which was
challenged by the U.S. last year in WTO.
• Comptroller and Auditor General has identified the vulnerability of the Goods and Services
Tax (GST) system to fraud. It cited as example a settlement under which a taxpayer claimed
79% of the total input tax credit in a month and the matter remained undetected for a long
time. CAG has said these areas in the indirect tax reform should be relooked.
• India's Comptroller and Auditor General (CAG) discovered that nearly Rs. 500 crore
agricultural income was permitted by income-tax officials as exempt without proper
verification. For the year ended Mar 2018, the auditor's study on direct taxes concentrated
on exempt income— both agricultural and charitable trusts gained. CAG has suggested that
the I-T department review all cases where agricultural income exceeds a certain limit — say
Rs. 10 lakh — to ensure that only genuine taxpayers are permitted exemption.
Global News/Economy
• The U.S. Federal Reserve's Federal Open Market Committee lowered interest rates by a
quarter point to a target range of 2% to 2-1/4%, which is down 25 basis points from the
previous range of 2-1/4% to 2-1/2%. The implications of global developments for the
economic outlook as well as muted inflation pressures were given as reasons for the rate
cut.
• According to a report from the Labor Department, U.S. non-farm payroll employment came
in line with market expectations and grew by 164,000 jobs in Jul as against downwardly
revised 193,000 jobs (surge of 224,000 jobs originally reported) in Jun 2019.
• The Bank of England (BoE) unanimously held the bank rate at 0.75%, in line with
expectations. BoE downgraded its growth projections while warning there is a one-in-three
chance of a U.K. recession, citing intensifying Brexit-related uncertainties and weaker global
growth and trade disputes.
• The Bank of Japan (BoJ) has maintained its ultra-loose monetary policy and vowed to ease
further if needed to achieve inflation target. The Policy Board of BoJ voted 7-2 to maintain
interest rate at -0.1% on current accounts that financial institutions maintain at the bank. The
bank said it will purchase government bonds so that the yield of 10-year JGBs will remain at
around zero %.
• National Bureau of Statistics survey showed manufacturing sector in China continued to
contract in Jul 2019, although at a slower pace. Manufacturing PMI score came in at 49.7,
up from 49.4 in Jun 2019.
10
Global Equity Markets
11
Global Indices
Indices
02-Aug-19
1-Week
Return
YTD
Return
Russell 3000 1,287.73 -3.24% 21.18%
Nasdaq 100 7,692.80 -4.04% 21.53%
FTSE 100 7,407.06 -1.88% 10.09%
DAX Index 11,872.44 -4.41% 12.44%
Nikkei Average 21,087.16 -2.64% 5.36%
Straits Times 3,261.11 -3.05% 6.27%
Source: Thomson Reuters Eikon
Value as on Aug 02, 2019
U.S.
• U.S. markets reeled under selling
pressure, in reaction to comments from
U.S. Fed chairman. Although, Fed
reduced interest rates by quarter point,
as expected, but signalled the rate cut is
not the start of a trend. Nonetheless, a
series of weaker than expected
economic data revived investors' hopes
to some extent for future interest rate
cuts. Markets were further hit by
concerns over lingering U.S.-China
trade relation.
Europe
• European markets too ended the week in solid red as U.S. – China trade worries loomed
large. The new tariffs announced by U.S. government represented the latest escalation in
the trade war between the U.S. and China. The U.S. government accused China of failing
to undertake its pledges to buy large quantities of U.S. agricultural products and stop the
sale of Fentanyl to the U.S.
Asia
• Asian markets too succumbed to heavy selling pressure following escalation of U.S.-
China trade war. Worries over Japan-South Korea trade tensions also played a spoilsport.
Global Debt (U.S.)
12
• Yields on the 10-year U.S. Treasury
bond fell 23 bps to 1.86% compared
with the previous week’s close of 2.08%.
• U.S Treasury prices grew following
reports that the U.S. Fed chairman has
tempered bets on more rate cuts after
the central bank made the first cut since
2008. Further, reports that U.S.
President has stated that additional
tariffs of 10% on remaining $300 billion
in Chinese goods would be added in
Sep 2019 boosted the safe haven
appeal of U.S. Treasuries.
• Further, unexpected fall in U.S.
manufacturing activity in Jul 2019,
global economic uncertainty and
mounting Brexit concerns added to the
gains. Towards the end of the week,
prices grew on slower jobs growth in Jul.
However, slight rise in wages soothed
concerns about consumer spending,
thereby restricting the gains.
1.80
1.90
2.00
2.10
29-Jul 30-Jul 31-Jul 1-Aug 2-Aug
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Commodities
Last Closing* 1-Week Ago
Brent Crude($/Barrel) 60.26 62.30
Gold ($/Oz) 1440.46 1418.31
Gold (Rs/10 gm) 35341 34781
Silver ($/Oz) 16.21 16.39
Silver (Rs/Kg) 40746 40811
Source: Thomson Reuters Eikon *Value as on Aug 02, 2019
Gold
• Gold prices rose amid escalating trade
tension between the U.S. and China
following the U.S. President’s comment
on imposing fresh tariffs on Chinese
imports worth $300 billion. Weakness in
the international bond yields following
disappointing Japanese and European
data and 25 bps rate cut by the U.S. Fed
also added to the bullion’s appeal.
Brent Crude
• Brent crude prices fell amid global growth
economic concerns, which aggravated
after the U.S. President stated that
additional tariffs of 10% would be levied
on $300 billion worth of Chinese imports
starting Sep 2019.
Baltic Dry Index
• The Baltic Dry Index fell on the back of
declining capesize and panamax
activities.
02-Aug-19
9.50
10.00
10.50
11.00
2-Jul-19 13-Jul-19 24-Jul-19
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
-3.27%
1.56%
-1.08%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
69.40 69.06
Pound Sterling
84.09 85.85
EURO
76.94 76.94
100 Yen
64.82 63.58
Source: RBI Figures in INR , *Value as on Aug 02, 2019
Rupee
• The rupee weakened amid escalating
trade tension between the U.S. and
China following the U.S. President’s
comment on imposing fresh tariffs on
Chinese imports.
Euro
• The euro weakened after the U.S. Fed
chairman said that the rate cut made
should be viewed as a mid-cycle policy
adjustment and not as a start to a
broader easing of the monetary policy.
Pound
• The pound plunged against the
greenback as investors factored in the
risk of no-deal Brexit and the possibility
of a snap election.
Yen
• The yen strengthened against the U.S.
dollar after U.S. President announced to
impose an additional 10% tariff on
Chinese imports, thereby bolstering
demand for safe-haven currency.
9.40
9.70
10.00
10.30
2-Jul-19 13-Jul-19 24-Jul-19
USD GBP Euro JPY
Source: Thomson Reuters Eikon
Currency Prices ( in terms of
INR)
Rebased to 10
Currency Movement
-2.05%
0.49%
-0.01%
1.95%
02-Aug-19
15
The Week that was…
29
th
July to 02
nd
August
The Week that was (July 29 – August 02)
16
Date Events Present Value Previous Value
Monday,
July 29, 2019
• Japan Industrial Production (YoY) (Jun P) -4.10% -2.10%
Tuesday,
July 30, 2019
• Japan Bank of Rate Decision (Jul 30) -0.10% -0.10%
• Germany Consumer Price Index (YoY) (Jul P) 1.70% 1.60%
• U.S. Consumer Confidence Index (Jul) 135.70 121.50
• U.S. PCE Core (YoY) (Jun) 1.60% 1.50%
Wednesday,
July 31, 2019
• India Eight Core Industries (Jun) 0.20% 4.30%
• China Manufacturing PMI (Jul) 49.70 49.40
• Germany Unemployment Claims Rate (Jul) 5.00% 5.00%
• Eurozone Gross Domestic Product (YoY) (2Q A) 1.10% 1.20%
• Eurozone Consumer Price Index Estimate (YoY) (Jul) 1.10% 1.20%
• U.S. FOMC Rate Decision (Upper Bound) (Jul 31) 2.25% 2.50%
• U.S. FOMC Rate Decision (Lower Bound) (Jul 31) 2.00% 2.00%
Thursday,
August 01, 2019
• India Manufacturing PMI (Jul) 52.50 52.10
• Bank of England Rate (Aug 1) 0.75% 0.75%
• U.S. ISM Manufacturing (Jul) 51.20 51.70
• U.S. ISM Employment (Jul) 51.70 54.50
Friday,
August 02, 2019
• U.S. Change in Non-farm Payrolls (Jul) 164k 193k
• Eurozone Retail Sales (YoY) (Jun) 2.60% 1.00%
17
The Week Ahead
05
th
August to 09
th
August
18
The Week Ahead
Day Event
Monday,
Aug 05, 2019
• India Nikkei Services PMI (Jul)
• China Caixin Services PMI (Jul)
Tuesday,
Aug 06, 2019
• Japan Coincident Index (Jun P)
• Germany Factory Orders (YoY) (Jun)
• Germany Markit Construction PMI (Jul)
Wednesday,
Aug 07, 2019
• U.S. Consumer Credit (Jun)
• Japan Housing Loans (YoY) (2Q)
• Japan Trade Balance - BOP Basis (Yen) (Jun)
Thursday,
Aug 08, 2019
• Japan Gross Domestic Product Annualized (QoQ) (2Q P)
• China Trade Balance (Jul)
• U.S. Initial Jobless Claims (Aug 3)
Friday,
Aug 09, 2019
• China New Yuan Loans CNY (Jul)
• China Consumer Price Index (YoY) (Jul)
• U.K. Gross Domestic Product (YoY) (2Q P)
Disclaimer
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19
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