News U Can Use
August 03, 2018
The Week that was…
July to 03
Indian Economy
The Monetary Policy Committee (MPC), in its third bi-monthly policy review for 2018-19,
increased the key policy repo rate by 25 basis points to 6.50% from 6.25% and retained its
‘neutral’ stance. Consequently, reverse repo rate now stands adjusted to 6.25% and both
the marginal standing facility rate and the bank rate stood at 6.75%. Five policymakers
were in favour of the decision and one policymaker voted against the decision. MPC
decided to increase key policy repo rate as it identified several factors that may lead to an
increase in domestic inflationary pressures. Some of the factors are volatility in crude oil
prices and global financial markets, fiscal slippage at the Centre and/or state government
levels, regional distribution of monsoons, uncertainty regarding the impact of Minimum
Support Price (MSP) on domestic inflation and the staggered impact of House Rent
Allowance (HRA) revision by state governments.
Data from a private survey showed that the Nikkei India Manufacturing Purchasing
Managers’ Index (PMI) fell to 52.3 in Jul 2018 from 53.1 in Jun 2018. This is the 12th
consecutive month that the manufacturing PMI remained above 50. The decline in
manufacturing PMI can be attributed to moderate rise in output, new orders and
India’s fiscal deficit for Apr-Jun 2018 came in at Rs. 4.29 lakh crore, or 68.7% of the
budgeted target for FY19 against 80.8% in the year-ago period. Net tax receipts were Rs.
2.37 lakh crore or 16.0% of the budget estimate for FY19 compared to 14.5% in the
corresponding period of the previous year.
Indian Equity Market
Domestic Equity Market Indices
Indices 03-Aug-18 1 Week Return YTD Return
S&P BSE Sensex 37556.16 0.59% 10.28%
Nifty 50 11360.80 0.73% 7.88%
S&P BSE Mid-Cap 16206.89 1.85% -9.06%
S&P BSE Small-Cap 16833.52 2.33% -12.47%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
30-Jul-18 1170 640 1.83
31-Jul-18 1007 776 1.30
01-Aug-18 949 820 1.16
02-Aug-18 869 963 0.90
03-Aug-18 1284 548 2.34
Source: NSE
Indian equity market gained over the
week on normal rains projection by
the India Meteorological Department
(IMD) for Aug and Sep and prediction
of 95% of the Long Period Average
(LPA). Higher services sector (private
survey) data added to gains. The
manufacturing sector (private survey)
also improved albeit at a slower
However, the upside was limited as
investors preferred to cash in on the
recent gains. On the global front,
escalating trade tensions between
the U.S. and China kept investors
cautious. Further the U.S. Federal
Reserve hinted at raising interest
rates soon, albeit maintaining status
quo in interest rates in its latest policy
Nifty 50
Mid Cap
Small Cap
23.97 28.23 32.87 107.35
3.10 3.70 2.74 2.37
Dividend Yield
1.18 1.18 0.94 0.76
Source: BSE, NSE Value as on
Aug 03, 2018
Indian Equity Market (contd.)
Sectoral Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
24121.10 -0.61% 0.45%
S&P BSE Bankex
31079.29 1.09% 6.71%
21372.04 3.60% 5.31%
18304.88 0.77% 5.56%
12157.38 2.23% 8.57%
14674.96 4.61% 3.26%
14604.43 0.60% 2.90%
S&P BSE Metal
12803.28 2.34% 0.07%
S&P BSE Oil & Gas
15206.15 2.47% 11.35%
Source: Thomson Reuters Eikon
*Value as on Aug 03, 2018
On the BSE sectoral front, indices closed
in green barring S&P BSE Auto (-0.61%).
S&P BSE HC (4.61%) remained the top
gainer (4.61%) followed by S&P BSE
Consumer Durables (3.60%) and S&P
BSE Oil & Gas (2.47%).
Auto sector got impacted after one of the
major players posted its first quarterly loss
in around three years following lower sales
at its key business arm. Being a rate
sensitive sector, auto sector was further
impacted as MPC has raised key policy
rates in consecutive two policy decisions.
Indian Derivatives Market Review
Nifty August 2018 Futures closed at 11,395.75, a premium of 34.95 points, above the spot
closing of 11,360.80. The turnover on NSE’s Futures and Options segment stood at Rs.
38.77 lakh crore as against Rs. 46.62 lakh crore on Jul 27.
The Put-Call ratio stood at 0.97 compared with the previous weeks close of 0.93.
The Nifty Put-Call ratio stood at 1.73 against the previous week’s close of 1.71.
Domestic Debt Market
Debt Indicators
Call Rate
6.37 6.14 6.11 5.92
91 Day T-Bill
6.77 6.72 6.44 6.42
7.80% 2021, (5 Yr GOI)
7.65 7.67 7.75 7.16
7.17% 2028, (10 Yr GOI)
7.76 7.78 7.88 7.56
Source: Thomson Reuters
Value as on Aug 03, 2018
Bond yields declined after the
Monetary Policy Committee’s (MPC)
commentary in the third bi-monthly
monetary policy for FY19 pacified
concerns regarding the pace of
monetary tightening to some extent.
Meanwhile, MPC increased repo rate
by 25 bps as market expected and
maintained “neutral” stance. Fall in
crude oil prices added to the gains.
However, gains were limited as
market participants booked profits to
benefit from the recent bond rally.
Moreover, fresh supply worth Rs.
12,000 crore from the auction of five
government stocks, limited the fall in
Yield on the 10-year benchmark
paper (7.17% GS 2028) fell 2 bps to
close at 7.76% from the previous
week’s close of 7.78%.
30-Jul 31-Jul 1-Aug 2-Aug 3-Aug
Yield in %
10 -Yr Benchmark Bond ( % )
Source: CCIL
Domestic Debt Market (Spread Analysis)
G-Sec Yield
Corporate Yield
1 Year 7.38 8.28 90
3 Year 7.79 8.54 75
5 Year 8.00 8.66 66
10 Year 7.91 8.63 72
Source: Thomson Reuters Eikon
Value as on Aug 03, 2018
Yields on gilt securities fell across
maturities by up to 10 bps, barring 2-, 11
and 12-year maturities that increased 1,
3, and 10 bps, respectively. Yield on 1-
year paper was steady. The maximum
fall was witnessed on 30-year paper.
Corporate bond yields fell across the
curve by up to 26 bps. The maximum fall
was seen on 15-year paper while
minimum decline was on 1-year paper.
Spread between AAA corporate bond
and gilt contracted across maturities by
up to 23 bps, barring 4- to 7-year papers
that expanded by up to 6 bps.
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 03-Aug-18 27-Jul-18
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
The Monetary Policy Committee (MPC), in its third policy meet of 2018-19, extended the
Marginal Standing Facility (MSF) and Liquidity Adjustment Facility (LAF) to scheduled state
co-operative banks. MSF has been extended to scheduled primary (urban) co-operative
banks. This is being done to improve the transmission of monetary policy to money market
The Chennai National Company Law Tribunal (NCLT) approved the merger of a Limited
Liability Partnership (LLP) with a private company. This could lead to a new wave of
mergers and acquisitions as the Companies Act, 2013, and the LLP Act, 2008, do not
provide for such cross-entity union. NCLT cleared it on grounds that the intent is to facilitate
‘ease of doing business’ and to ‘create a desirable business atmosphere’.
The U.S. has placed India under the Strategic Trade Authorisation-1 (STA-1) list, which
relaxes export of high-tech items. Indian ambassador to the U.S. said this step reflects U.S.’
trust in India’s economy and as a security partner. The ambassador said this will enhance
defence partnership between the two countries in a big way.
Nine more unilateral advance pricing agreements (APAs) have been signed by the Central
Board of Direct Taxes (CBDT) with Indian taxpayers in Jul 2018. The board is doing this to
reduce litigation. The APAs relate to sectors such as telecom, manufacturing, healthcare,
engineering, media and irrigation. With this, total APAs signed by CBDT have gone up to
Regulatory Updates in India (contd..)
MPC decided that for the creation of eligible priority sector assets, all scheduled commercial
banks may co-originate loans with non-deposit taking-systemically important non-banking
financial companies (NBFC-ND-SIs). However, the scheduled commercial banks would
exclude regional rural banks and small finance banks. Besides, entailing joint contribution of
credit by both lenders at the facility level, the co-origination arrangement should involve
sharing of risks and rewards between the banks and the NBFCs. The decision comes in the
wake of providing a competitive edge for credit to the priority sector.
The Goods and Services Tax (GST) Council accepted transaction value’ to determine
leviable tax rate for the hotel industry. The industry had long lobbied for it. ‘Declared tariff’
meant higher tax rates for rooms falling in lower slabs also. There are three tax rates for
hotels 12%, 18% and 28%. Now ‘declared tariff will be replaced by value of supply or
transaction value. The rule, however, is being restricted to room tariffs, excluding
restaurants inside hotels.
Primary (urban) co-operative banks have received permission from the MPC to undertake
eligible transactions for acquisition or sale of non-SLR investment in secondary market with
mutual funds, pension/provident funds, and insurance companies. This is in addition to
undertaking eligible transactions with scheduled commercial banks and primary dealers.
This comes in the wake of bringing further efficiency in price discovery mechanism and as a
step towards harmonization of regulations for urban and rural co-operative banks.
Global News/Economy
The U.S. Federal Reserve (Fed) kept its interest rates on hold in its monetary policy review
on Aug 1, 2018. However, it kept the door open for a rate hike in the next policy meeting as it
stuck with its plan of gradually raising interest rates while maintaining its upbeat outlook on
the U.S. economy and labour market. The U.S. Fed is scheduled to hold its next monetary
policy meeting in late Sep 2018.
According to Labor Department data, U.S. jobs growth came in weaker than expected in Jul
2018 as government employment dropped. Non-farm payroll employment increased 157,000
jobs in Jul after spiking 248,000 jobs in Jun 2018. Expectations were for employment to rise
by 190,000 jobs.
The Bank of England in its monetary policy review increased its key benchmark rate by 25
bps to 0.75%. The benchmark rate thus went up to its highest level since 2009. The
Monetary Policy Committee also voted 9-0 to maintain the quantitative easing at £435 billion.
Policymakers remained concerned about above target inflation than uncertainties resulting
from Brexit.
The Bank of Japan (BoJ) maintained status quo in its policy by retaining the monetary
stimulus. The bank said it plans to carry out asset purchases and market operations in a
flexible way. In its forward guidance, BoJ said it plans to maintain the present extremely low
levels of short- and long-term interest rates for a longer period of time. To keep yield on 10-
year Japanese government bonds at about 0%, BoJ will purchase government bonds.
Global Equity Markets
Global Indices
Dow Jones
25462.58 0.05% 3.01%
Nasdaq 100
7395.49 1.35% 15.62%
FTSE 100
7659.10 -0.55% -0.37%
DAX Index
12615.76 -1.90% -2.34%
Nikkei Average
22697.88 -0.07% -0.29%
Straits Times
3297.83 -0.82% -3.09%
Source: Thomson Reuters Eikon
Value as on Aug 03, 2018
U.S. markets traded higher with strong
buying interest seen in tech stocks. A
series of encouraging economic data
provided additional support.
Market rose despite downbeat U.S. non-
farm payroll data for Jul 2018 partially
due to a drop in government
employment and the closing of one of
the U.S. toy retailer. However, gains
were restricted on trade concerns
between the U.S. and China.
European markets were weighed down by trade concerns following reports that U.S.
administration is considering increasing the proposed tariff rate on $200 billion worth of
Chinese goods to 25% from the previously announced 10%. Meanwhile, Bank of England
lifted its key interest rate in line with market expectation. The downturn was restricted by a
series of encouraging corporate earnings numbers.
Asian markets fell by renewed trade worries between U.S. and China. In retaliation to the
U.S. President’s consideration of raising the proposed tariff on $200 billion worth of
Chinese imports, China called U.S.’ move blackmail’ and warned of counter measures.
The U.S. Federal Reserve’s latest policy meeting generated mixed reactions.
Global Debt (U.S.)
Yield on the 10-year U.S. Treasury bond
fell 1 bps to close at 2.95%, from the
previous week’s close of 2.96%.
U.S. Treasury prices fell initially after the
U.S. government announced its
intention to boost borrowing in the bond
market in the coming quarters to fund
spending and debt obligations. Upbeat
U.S. private sector jobs data for Jun
2018 also weighed on U.S. Treasury
However, losses were neutralized as the
safe haven appeal of U.S. Treasuries
improved on renewed concerns over
escalating trade tensions between U.S.
and China after the latter unveiled
retaliatory tariffs on $60 billion of
American goods. Downbeat U.S.
nonfarm payroll employment data for
Jun 2018 also boosted U.S. Treasury
30-Jul 31-Jul 1-Aug 2-Aug 3-Aug
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
Commodities Market
Performance of various commodities
Last Closing* 1-Week Ago
Brent Crude($/Barrel)
73.12 75.48
Gold ($/Oz)
1213.03 1222.97
Gold (Rs/10 gm)
29428 29722
Silver ($/Oz)
15.38 15.46
Silver (Rs/Kg)
37653 37774
Source: Thomson Reuters
Eikon *Value as on Aug 03, 2018
Gold prices fell due to strength in dollar
driven. Additionally, gold remained
under pressure as the greenback was
supported by an outlook for higher
interest rates.
However, the downside was limited on
the back of renewed tensions over U.S.-
China trade war. Also, weak jobs data
for Jul 2018 supported gold’s safe
haven appeal.
Brent crude prices lowered on
oversupply concerns after a survey
showed that OPEC output in Jul was the
highest in 2018. Market worries over the
U.S. and China trade conflict and rise in
Russian oil output weighed on oil prices.
Baltic Dry Index
The Baltic Dry Index gained 4.77% on
the back of improved capesize and
panamax activities.
4-Jul-18 14-Jul-18 24-Jul-18 3-Aug-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
Currencies Markets
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
68.79 68.70
Pound Sterling
89.52 89.99
79.67 79.98
100 JPY
61.58 61.84
Source: RBI Figures in INR , *Value as on Aug 03, 2018
The rupee fell marginally against the
greenback following dollar demand from
corporates and importers. However,
greenback sales by foreign banks and
fall in crude oil prices restricted the fall.
Euro weakened against the U.S. dollar
after the U.S. Federal Reserve kept
interest rates unchanged but
characterized the economy as strong,
thus increasing the possibility of rate hike
in Sep 2018.
Pound weakened against the U.S. dollar
after the Bank of England governor
indicated that the central bank is in no
rush to tighten policy further.
Yen weakened against the U.S. dollar
after the Bank of Japan indicated to keep
interest rates low for a longer period.
4-Jul-18 14-Jul-18 24-Jul-18 3-Aug-18
Source: RBI
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
The Week that was…
July to 03
The Week that was (July 30 – Aug 03)
Date Events
July 30, 2018
Germany Consumer Price Index (YoY) (Jul P) 2.0% 2.1%
U.S. Pending Home Sales (YoY) (Jun) -4.0% -2.8%
July 31, 2018
Bank of Japan Rate Decision -0.1% -0.1%
China Manufacturing PMI (Jul) 51.2 51.5
Germany Unemployment Change (Jul) -6k -14k
Eurozone Consumer Price Index Estimate (YoY) (Jul) 2.1% 2.0%
Eurozone Gross Domestic Product s.a. (YoY) (2Q A) 2.1% 2.5%
U.S. Personal Consumption Expenditure Core (YoY) (Jun) 1.9% 1.9%
August 01, 2018
U.S. FOMC Rate Decision 2.0% 2.0%
India’s Third Bi-monthly Monetary Policy Statement, 2018-19 6.50% 6.25%
India’s Nikkei Manufacturing PMI (Jul) 52.3 53.1
U.S. ISM Manufacturing (Jul) 58.1 60.2
August 02, 2018
Bank of England Rate Decision 0.75% 0.50%
U.S. Factory Orders (Jun) 0.7% 0.4%
August 03, 2018
India’s Nikkei Services PMI (Jul) 54.2 52.6
U.S. Change in Non-farm Payrolls (Jul) 157k 248k
U.S. Unemployment Rate (Jul) 3.9% 4.0%
USD ISM Non-Manufacturing/Services Composite (Jul) 55.7 59.1
The Week Ahead
August to 10
The Week Ahead
Day Event
Aug 06, 2018
Euro zone German Factory Orders n.s.a. (YoY) (Jun)
Japan Overall Household Spending (YoY) (Jun)
Aug 07, 2018
Japan Real Cash Earnings (YoY) (Jun)
Euro zone German Industrial Production (YoY) (Jun)
U.S. Consumer Credit (Jun)
Japan Trade Balance - BOP Basis (Yen) (Jun)
Aug 08, 2018
China Trade Balance (Jun)
Japan Eco Watchers Survey Current (Jun)
Japan Machine Orders (YoY) (Jun)
Aug 09, 2018
China Consumer Price Index (YoY) (Jun)
China Producer Price Index (YoY) (Jun)
Japan Machine Tool Orders (YoY) (Jun P)
Japan Gross Domestic Product Annualized s.a. (QoQ) (2Q P)
Aug 10, 2018
India’s Index of Industrial Production (Jun)
U.K. Industrial Production (YoY) (Jun)
U.K. Gross Domestic Product (YoY) (2Q P)
U.S. Consumer Price Index (YoY) (Jun)
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