News U Can Use
August 10, 2018
The Week that was…
6
th
August to 10
th
August
2
Indian Economy
• Government data showed that the Index of Industrial Production (IIP) grew to a 5-month
high of 7% YoY in Jun 2018 from a revised 3.93% (3.20% originally reported) in the
previous month. In the year-ago period, IIP had seen a decline of 0.3% YoY. The growth of
IIP from Apr to Jun accelerated to 5.2% YoY from 1.9% in the same period of the previous
year. The manufacturing sector grew to 6.9% in Jun from a decline of 0.7% in in the same
month of the previous year.
• According to data from the Society of Indian Automobile Manufacturers (SIAM), domestic
passenger vehicle sales decreased 2.71% to 2,90,960 units in Jul 2018 compared with
2,99,066 units in the year-ago period. Domestic car sales came down slightly to 1,91,979
units in Jul against 1,92,845 in the same period previous year.
• The Lok Sabha approved a gross additional expenditure of Rs. 11,697.92 crore under the
first batch of supplementary demands for grants for the current fiscal. The government will
seek Parliament's approval to spend Rs. 1,791.62 crore under the agriculture ministry, Rs.
1,500 crore under textiles ministry, Rs. 1,057.84 crore under the defence ministry and Rs.
1,708 crore for the petroleum ministry.
• According to media reports, public sector and private banks collected a substantial amount
in the form of penalty on customers for not maintaining minimum balance with the banks.
Twenty-one public sector banks and three major private sector lenders have collected Rs.
5,000 crore in 2017-18, according to banking data.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices
10-Aug-18
1 Week Return
YTD Return
S&P BSE Sensex
37,869.23 0.83% 11.19%
Nifty 50
11,429.50 0.60% 8.54%
S&P BSE Mid
-Cap 16,210.78 0.02% -9.04%
S&P BSE Small
-Cap 16,784.20 -0.29% -12.72%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
06-Aug-18 1056 793 1.33
07-Aug-18 792 1021 0.78
08-Aug-18 880 895 0.98
09-Aug-18 924 882 1.05
10-Aug-18 622 1183 0.53
Source: NSE
• Indian equity markets closed in the
green with Sensex surpassing the
38,000 mark for the first time in one
of the sessions. Announcement by
the Reserve Bank of India to pay
dividend of Rs. 50,000 crore to the
government, in line with the Union
Budget provisions, boosted the
indices.
• Additionally, uninterrupted foreign
and domestic fund inflows and
optimism over domestic corporate
earnings added to the gains. Decline
in oil prices supported the markets.
• However, gains were capped due to
lingering trade war concerns.
Investors remained cautious after the
U.S. administration indicated to
impose 25% tariffs on $16 billion
Chinese imports starting on Aug 23.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
24.23 27.83 33.27 97.99
P/B
3.14 3.72 2.75 2.38
Dividend Yield
1.16 1.18 0.93 0.76
Source: BSE, NSE Value as on Aug 10, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
24,234.7 0.47% -3.40%
S&P BSE Bankex
31,748.2 2.15% 6.43%
S&P BSE CD
21,947.8 2.69% 11.27%
S&P BSE CG
18,089.7
-1.18%
0.86%
S&P BSE FMCG
12,186.5 0.24% 6.00%
S&P BSE HC
14,253.9
-2.87%
0.47%
S&P BSE IT
14,683.5 0.54% 4.25%
S&P BSE Metal
13,017.5 1.67% 0.30%
S&P BSE Oil & Gas
15,095.5
-0.73%
7.87%
Source: Thomson Reuters Eikon
*Value as on Aug
10, 2018
• BSE sectoral indices closed on a mixed
note. S&P BSE Consumer Durables stood
as the major gainer with gains of 2.69%
followed by S&P BSE Bankex that grew
2.15%. Gains in banking stocks reflect
announcement by RBI to pay dividend of
Rs. 50,000 crore to the government.
• S&P BSE Healthcare stood as the major
loser, down 2.87%. Decline in healthcare
sector reflects decline in share price in one
of the pharma majors after its consolidated
profit for the quarter ended Jun 30, 2018,
witnessed significant decline.
Indian Derivatives Market Review
• Nifty Aug 2018 Futures closed at 11,439.25, a premium of 9.75 points, above the spot
closing of 11,429.50. The turnover on NSE’s Futures and Options segment stood at Rs.
43.20 lakh crore as against Rs. 38.77 lakh crore on Aug 3.
• The Put-Call ratio stood at 0.99 compared with the previous week’s close of 0.97.
• The Nifty Put-Call ratio stood at 1.75 against the previous week’s close of 1.73.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-
Wk
Ago
1-
Mth
Ago
6-
Mth
Ago
Call Rate
6.37 6.37 6.15 5.89
91 Day T
-Bill
6.70 6.77 6.48 6.39
7.80% 2021, (5
Yr GOI)
7.61 7.65 7.79 7.09
7.17% 2028, (10
Yr GOI)
7.75 7.76 7.90 7.49
Source: Thomson Reuters
Eikon
Value as on Aug 10, 2018
• Bond yields were little changed after
moving in a narrow range during the
week due to lack of fresh domestic
triggers. Initially, yields rose following
weakness in the domestic currency
and rise in crude oil prices after Iran
received a sanction from the U.S.,
which is anticipated to tighten global
oil supply. Further, fresh supply of
government bonds worth around Rs.
12,700 crore through the auction by
11 Indian states kept the yield at an
elevated level.
• Yields retreated after crude oil prices
dropped easing worries of increase in
domestic inflationary pressures.
• Yield on the 10-year benchmark
paper (7.17% GS 2028) fell 1 bps to
close at 7.75% from the previous
week’s close of 7.76% after trading in
a range of 7.74 to 7.79%.
7.70
7.76
7.82
6-Aug 7-Aug 8-Aug 9-Aug 10-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 7.35 8.25 90
3 Year 7.76 8.47 71
5 Year 7.96 8.61 65
10 Year 7.90 8.69 79
Source: Thomson Reuters Eikon
Value as on Aug 10
, 2018
• Yields on gilt securities increased by up to
4 bps on 2-, 15- and 30-year papers and
stood unchanged for 11- and 19-year
papers. Yield on all other remaining papers
fell by up to 4 bps.
• Corporate bond yields fell on 1 to 9 years’
papers by up to 8 bps. Yields rose on 10-
and 15-year papers by 1 bps and 8 bps,
respectively.
• Spread between AAA corporate bond and
gilt expanded by up to 7 bps on 5-, 7-, 10-
and 15-year papers. Spread contracted by
up to 6 bps on 2-, 3- and 4-year papers and
remained unchanged for 1- and 6-year
papers.
-10
-5
0
5
6.50
7.10
7.70
8.30
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 10-Aug-18 03-Aug-18
Yield
in %
Change
in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• As per media reports, the government may increase import duty from the level of 5%-10%
to 20% on around 300 textile products. This is being done to improve domestic
manufacturing and create employment opportunities. Government may also ease foreign
direct investment norms for the sector. Products on which imports duties are expected to
increase includes some fabrics, garments and man-made fibres.
• The government is all set to launch a new industrial policy that will aim to fasten regulatory
reforms and lower power tariffs. This will make businesses more competitive and create
more jobs. The Department of Industrial Policy and Promotion (DIPP) is in the final stages
and will present the new policy to the cabinet for its approval in the next two weeks.
• In the wake of its ongoing talks with the U.S. on the trade front, India has decided to defer
imposition of retaliatory tariff on 29 U.S. products by 45 days or till Sep 18, 2018. The earlier
date set for tariffs to take effect was Aug 4, 2018. The tariffs would impact imports of
American apples, almonds, walnuts, iron and steel products, flat rolled products of stainless
steel.
• The Goods and Services Tax meeting held on Aug 4 decided to initiate a pilot project to
boost digital payment in the country. As per the project, the consumers will get cashback of
20% or maximum of Rs. 100 on all UPI and USSD transactions and also transactions done
via RuPay card and BHIM app.
Regulatory Updates in India (contd..)
• The Ministry of Corporate Affairs has issued “preliminary notices” to 272 companies for
allegedly not complying with corporate social responsibility (CSR) provisions. The provisions
come under the Companies Law. According to the Companies Act, 2013, entities falling
under a certain class need to spend at least 2% of their three-year average net profit on
corporate social responsibility activities.
• The next draft of ecommerce policy may be brought within the next 10 days by the
government. The first draft was tabled by the department of commerce last week. The draft
includes a proposal to allow 49% foreign direct investment in inventory model on the
condition that Indian goods are sold.
• In order to relax capital rules for banks, the government will hold a discussion with the
Reserve Bank of India. The rules will be brought in line with the less stringent Basel III
guidelines. This can free up around Rs. 60,000 crore of capital at state-owned banks and
will allow them to shore up lending.
9
Global News/Economy
• According to a report from the Labor Department, Consumer Price Index (CPI) in the U.S.
increased by 0.2% in Jul 2018 after inching up by 0.1% in Jun 2018. The increase in prices
matched economist estimates. Excluding food and energy prices, core CPI edged up 0.2%
in Jul, similar with the increases seen in the two previous months.
• Data from the U.S. Labor Department showed that initial jobless claims in U.S. for the week
ended Aug 4 fell 6,000 to 213,000 from the previous week's revised level of 219,000
(218,000 originally reported for the previous week).
• Office for National Statistics’ initial quarterly estimate showed U.K. economic growth doubled
in the second quarter. The rise was led by stronger growth in services and construction
sectors. Gross Domestic Product (GDP) increased 0.4%, compared with 0.2% expansion in
the first quarter, and was as per Bank of England projections.
• According to the Cabinet Office’s preliminary reading, Japan's GDP expanded a seasonally
adjusted 0.5% in the second quarter of 2018. It was more than expectations for an 0.3%
increase. On an annualized basis, GDP increased more than expectations to 1.9%.
• Data from the National Bureau of Statistics showed that China’s consumer price inflation
grew 2.1% on a yearly basis in Jul 2018 from 1.9% in Jun 2018. However, inflation continues
to remain well below the government's full year-target of around 3%. Core inflation excluding
volatile food and energy prices held steady at 1.9% during the same month.
10
Global Equity Markets
11
Global Indices
Indices
10-Aug-18
1-Week
Return
YTD
Return
Dow Jones
25,313.14 -0.59% 2.40%
Nasdaq 100
7,408.30 0.17% 15.82%
FTSE 100
7,667.01 0.10% -0.27%
DAX Index
12,424.35 -1.52% -3.82%
Nikkei Average
22,298.08 -1.01% -2.05%
Straits Times
3,284.78 0.58% -3.47%
Source: Thomson Reuters Eikon
Value as on Aug
10, 2018
U.S.
• Most of the U.S. markets rose on
upbeat corporate earnings and some
positive economic data including
unexpected fall in initial jobless claims
data for the week ended Aug 4.
• However, trade war concerns kept
investors wary as the U.S. announced
25% tariff on Chinese goods worth $16
billion and China retaliated by raising
tariff on U.S. goods.
Europe
• European markets mostly traded lower as trade tensions between U.S. and China
intensified after China retaliated to 25% tariff on $16 billion of U.S. goods. Concerns
regarding Brexit negotiations also weighed on sentiment. Additionally, the European
Central Bank (ECB) expressed concerns over the impact of a weak Turkish currency on
European banks and uncertainties related to global factors.
Asia
• Asian markets mostly traded up on upbeat economic data across the region including
expansion of Japanese GDP data for second quarter of 2018 and higher than expected
Japanese producer prices data for Jul. However, trade war concerns intensified after
China announced counter tariffs against U.S.’ move to raise duty on Chinese imports.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury bond
plunged 9 bps to close at 2.86% from
the previous week’s close of 2.95%.
• U.S. Treasury prices rose initially as
escalating trade tensions between U.S.
and China boosted the safe haven
appeal of U.S. debt after the Chinese
state media criticized U.S. President’s
trade policies.
• However, the trend reversed temporarily
following gains in global equity markets
as market participants grew optimistic of
fresh spending by the Chinese
government.
• U.S. Treasury prices surged again and
its safe haven appeal improved at the
penultimate day of the week as market
participants were worried that Turkey's
financial problems may spill over to
other emerging economies and thereby
adversely affect the growth prospects of
the global economy.
2.80
2.85
2.90
2.95
3.00
6-Aug 7-Aug 8-Aug 9-Aug 10-Aug
Yield (%)
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Commodities
Last Closing*
1-Week Ago
Brent Crude($/Barrel)
70.19 73.12
Gold ($/Oz)
1,210.85 1,213.03
Gold (Rs/10 gm)
29,477 29,428
Silver ($/Oz)
15.27 15.38
Silver (Rs/Kg)
37,763 37,653
Source: Thomson Reuters
Eikon *Value as on Aug 10, 2018
Gold
• Gold prices inched down on growing
possibility of continued rate hikes by the
U.S. Federal Reserve and improved
corporate earnings from some major
companies. The downside was limited
on European Central Bank’s concern
over banks in Spain, Italy and France.
Crude
• Brent crude prices moved down on
lower demand from China as data
indicated that crude oil imports for China
in Jul were at the third-lowest level.
However, the downside was restricted
by U.S.’s sanction against Iran and
reports showing fall in U.S. crude
inventories.
Baltic Dry Index
• The Baltic Dry Index fell 4.62% on the
back of weak capesize and panamax
activities.
8.70
9.20
9.70
10.20
10-Jul-18 20-Jul-18 30-Jul-18 9-Aug-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global
Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
-4.01%
-0.18%
-0.70%
10-Aug-18
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency
Last Closing*
1-Wk Ago
US Dollar
68.95 68.79
Pound Sterling
88.19 89.52
Euro
79.00 79.67
100 JPY
62.15 61.58
Source: RBI Figures in INR , *
Value as on
Aug 10, 2018
Rupee
• The rupee weakened against the U.S.
dollar due to ongoing trade war tensions
between the U.S. and China and
greenback demand from oil importers.
Euro
• Euro weakened against the U.S. dollar
following Germany’s disappointing
industrial data in Jun 2018.
Pound
• Pound plunged against the U.S. dollar
amid concerns that Britain may leave the
European Union without an agreement
on its future relationship with the
eurozone economy.
Yen
• Yen strengthened against the U.S. dollar
as ongoing trade war tension between
the U.S. and China increased the
demand of safe-haven currency.
9.60
9.80
10.00
10.20
10-Jul-18 20-Jul-18 30-Jul-18 9-Aug-18
USD GBP Euro JPY
Source: RBI
Currency
Prices (
in terms of INR)
Rebased to 10
Currency Movement
0.23%
-1.48%
-0.85%
0.93%
10-Aug-18
15
The Week that was…
6
th
August to 10
th
August
The Week that was (Aug 6 – Aug 10)
16
Date Events
Present
Value
Previous
Value
Monday,
August 06, 2018
• Germany Factory Orders (YoY) (JUN)
-0.80% 4.40%
• Germany Markit Construction PMI (JUL)
50 53
• Japan Overall Household Spending (YoY) (JUN)
-1.20% -3.90%
Tuesday,
August 7, 2018
• Japan
Labor Cash Earnings (YoY) (JUN) 3.60% 2.10%
• Japan Leading Index CI (JUN P)
105.2 106.9
• Germany Industrial Production (YoY) (JUN)
2.50% 3.10%
• U.S. Consumer Credit (JUN)
$10.211b
$24.259b
Wednesday,
August 08, 2018
• China Trade Balance CNY (JUL)
227.1b 261.88b
• Japan Machine Orders (YoY) (JUN)
0.30% 16.50%
• Japan Eco Watchers Survey Current (JUL)
46.6 48.1
Thursday,
August 09, 2018
• China Consumer Price Index (YoY) (JUL)
2.10% 1.90%
• Japan Gross Domestic Product Annualized
s.a. (QoQ) (2Q P) 1.90% -0.60%
• U.S. Initial Jobless Claims (AUG 4)
213k 219k
Friday,
August 10, 2018
• India's Index of Industrial Production (Jun 18)
7.00% 3.93%
• U.K. Trade Balance (JUN)
-£1860 -£3140
• U.K. Manufacturing Production (YoY) (JUN)
1.50% 1.50%
• U.K. Gross Domestic Product (YoY) (2Q P)
1.30% 1.20%
• U.S. Consumer Price Index (YoY) (JUL)
2.90% 2.90%
17
The Week Ahead
13
th
August to 17
th
August
18
The Week Ahead
Day Event
Monday,
August 13, 2018
•
India’s Consumer Price Index (July 18)
Tuesday,
August 14, 2018
•
India's Wholesale Price Index (July 18)
•
Germany Gross Domestic Product (YoY) (2Q P)
•
Eurozone Gross Domestic Product (YoY) (2Q P)
•
Eurozone ZEW Survey (Economic Sentiment) (AUG)
•
China Retail Sales (YoY) (JUL)
Wednesday,
August 15, 2018
•
U.K. Core Consumer Price Index (YoY) (JUL)
•
U.S. Retail Sales Advance (MoM) (JUL)
•
U.K. House Price Index (YoY) (JUN)
•
U.S. Industrial Production (MoM) (JUL)
•
U.S. Business Inventories (JUN)
•
Japan Trade Balance (JUL)
Thursday,
August 16, 2018
•
U.K. Retail Sales Ex Auto Fuel (YoY) (JUL)
•
U.S. Initial Jobless Claims (AUG 11)
•
U.S. Housing Starts (MoM) (JUL)
Friday,
August 17, 2018
•
U.S. University of Michigan Sentiment (AUG P)
•
Eurozone Consumer Price Index (YoY) (JUL F)
•
U.S. Leading Index (JUL)
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19
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