News U Can Use
August 17, 2018
The Week that was…
13
th
August to 17
th
August
2
Indian Economy
• Government data showed that growth of India’s Consumer Price Index-based inflation
(CPI) or retail inflation fell to 4.17% in Jul 2018 from 4.92% in Jun 2018. However, it
increased as against 2.36% in Jul 2017. The growth in Consumer Food Price Index came
in at 1.37% in Jul 2018 compared with 2.91% in Jun 2018 and -0.36% in the same month
of the previous year. Among the key components, housing grew 8.30% in Jul as against a
growth of 8.45% in Jun. Inflation in clothing and footwear came in at 5.28% in Jul
compared with 5.67% in Jun. Fuel and light inflation grew 7.96% in Jul from 7.14% in the
previous month.
• Government data showed that India’s Wholesale Price Index-based inflation (WPI)
decreased to 5.09% in Jul 2018 from 5.77% in Jun 2018 as prices of food articles, mainly
fruits and vegetables, came down. Wholesale price inflation was at 1.88% in Jul 2017.
Inflation in food articles fell to 2.16% from an increase of 1.80% in Jun. Inflation in
vegetables decreased to 14.07% in Jul from a rise of 8.12% in Jun. Fruit inflation fell to
8.81% in Jul from an increase of 3.87% in Jun. ‘Fuel and power' inflation went up to
18.10% in Jul from 16.18% in Jun. The WPI Food Index came in at -0.86% in Jul against
1.56% in Jun.
• India’s trade deficit in Jul 2018 increased to more than 5-year high at $18.02 billion as
against $16.60 billion in Jun 2018. The rise was on the back of increase in oil imports that
stood at $12.35 billion, a 57.41% jump. Merchandise exports increased 14.32% YoY to
$25.77 billion and imports rose 28.81% to $43.79 billion.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 17-Aug-18 1 Week Return YTD Return
S&P BSE Sensex 37,947.88 0.21% 11.43%
Nifty 50 11,470.75 0.36% 8.93%
S&P BSE Mid-Cap 16,306.44 0.59% -8.51%
S&P BSE Small-Cap 16,866.21 0.49% -12.30%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
13-Aug-18 571 1,252 0.46
14-Aug-18 892 902 0.99
16-Aug-18 706 1,102 0.64
17-Aug-18 1,113 667 1.67
Source: NSE
• The domestic market witnessed
marginal gains during the truncated
trading week as drop in inflation
numbers soothed investor nerves.
CPI fell to 9-month low and WPI
decreased too in Jul 2018. Investors
cheered the numbers as a contained
inflation could mean that the
Monetary Policy Committee may not
raise rates any time soon.
• Further, industrial output recorded a
five-month high growth rate of 7% in
Jun because of higher output in
mining, manufacturing and power
generation segments. But gains were
capped as India’s trade deficit
widened to more than five-year high
in Jul 2018. On the global front,
concerns over trade tension between
U.S. and China added to the woes.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
24.69 28.11 33.30 -119.34
P/B
3.17 3.74 2.80 2.55
Dividend Yield
1.16 1.17 0.93 0.75
Source: BSE, NSE Value as on Aug 17
, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
24,376.2 0.58% -0.38%
S&P BSE Bankex
31,866.5 0.37% 6.51%
S&P BSE CD
22,048.3 0.46% 12.07%
S&P BSE CG
17,856.0 -1.29% 0.92%
S&P BSE FMCG
12,475.6 2.37% 9.75%
S&P BSE HC
15,013.6 5.33% 9.03%
S&P BSE IT
15,091.8 2.78% 4.17%
S&P BSE Metal
12,879.4 -1.06% 5.23%
S&P BSE Oil & Gas
14,765.8 -2.18% 3.19%
S&P BSE Power
1,977.4 -0.55% 3.19%
Source: Thomson Reuters Eikon
*Value as on Aug 17, 2018
• On the BSE sectoral front, most of the
indices closed in green barring S&P BSE
Oil & Gas (-2.18%), S&P BSE CG (-
1.29%), S&P BSE Metal (-1.06%) and S&P
BSE Power (-0.55%). S&P BSE HC
(5.33%) stood as the major gainer followed
by S&P BSE IT (2.78%) and S&P BSE
FMCG (2.37%).
• Under the banking sector, the government
has asked the Reserve Bank of India (RBI)
to consider diluting the Prompt Corrective
Action (PCA) framework.
Indian Derivatives Market Review
• Nifty August 2018 Futures closed at 11,488.45, a premium of 17.70 points, above the spot
closing of 11,470.75. The turnover on NSE’s Futures and Options segment stood at Rs.
37.55 lakh crore as against Rs. 43.20 lakh crore on Aug 10.
• The Put-Call ratio stood at 0.92 compared with the previous week’s close of 0.99.
• The Nifty Put-Call ratio stood at 1.66 against the previous week’s close of 1.75.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
6.44 6.37 6.12 5.96
91 Day T-Bill
6.80 6.70 6.55 6.34
7.80% 2021, (5 Yr GOI)
7.71 7.61 7.70 7.10
7.17% 2028, (10 Yr GOI)
7.86 7.75 7.75 7.58
Source: Thomson Reuters
Eikon
Value as on Aug 16, 2018
• Bond yields surged as rupee declined
to a record low against the greenback
after the Turkish lira plunged against
the U.S. dollar affecting emerging
economies.
• Geopolitical risks and concerns that
India’s current account deficit may
widen in Jul 2018 added to the
losses.
• Yield on the 10-year benchmark
paper (7.17% GS 2028) rose 11 bps
to close at 7.86% from the previous
week’s close of 7.75% after trading in
a range of 7.79% to 7.88%.
• According to the Scheduled Bank's
Statement of Position in India as of
Aug 3, 2018, banks’ deposit and
credit growth stood at 8.20% and
12.70% YoY, respectively.
7.75
7.80
7.85
7.90
13-Aug 14-Aug 16-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 7.43 8.28 85
3 Year 7.86 8.54 68
5 Year 8.08 8.70 62
10 Year 8.02 8.80 78
Source: Thomson Reuters Eikon
Value as on Aug 16, 2018
• Yields on gilt securities increased across
maturities by up to 15 bps. The maximum
increase was witnessed on 4-year paper.
• Corporate bond yields increased across
maturities in the range of 7 bps to 13 bps.
The maximum increase was witnessed on
8 to 10-year maturities and the minimum on
1 and 4-year papers.
• Spread between AAA corporate bond and
gilt contracted across 1 to 5-year maturities
by up to 8 bps barring 2-year paper which
closed steady. Spread expanded across
the remaining securities by up to 4 bps.
0
7
14
6.4
7.3
8.2
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 16-Aug-18 10-Aug-18
Yield in %
Change in
bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• The Insurance Regulatory and Development Authority of India (IRDAI) has asked insurance
companies to cover treatment of mental illnesses under health insurance. According to the
Mental Healthcare Act, 2017, it is compulsory for insurance companies to offer medical
cover for mental illness treatments just like treatment of physical illness. Presently, nearly all
insurance companies exclude the treatment for mental illnesses from health insurance.
• According to Monetary Policy Committee’s third monetary policy meeting minutes, inflation
risks remain because of factors such as Minimum Selling Price (MSP), crude oil, monsoon,
and Goods and Services Tax (GST). The Reserve Bank of India’s deputy governor said
retail inflation could resume upward movement during the Oct 2018-Mar 2019 period. All the
members except one voted for hike in rates. However, all the members agreed to maintain
the ‘neutral’ stance. The committee feels there is uncertainty over domestic inflation outlook
and it needs to be carefully monitored in the next few months. Global developments are
also a concern because rising trade protectionism poses risk to near-term and long-term
global growth prospects.
• The finance ministry asked the Reserve Bank of India (RBI) to review its dividend and
capital conservation norms. This is being done as the government wants a clearer policy on
the payouts RBI gives to the government. The government has also requested the central
bank to look at some of its decisions particularly around liquidity management.
Regulatory Updates in India (contd..)
• According to media reports, the Securities and Exchange Board of India (SEBI) will assess
the applicable expenses ratio for mutual fund schemes and undertake a go-green initiative
by supporting digital transactions as a measure to bring cost efficiency. Among others, the
market regulator will also consider examining practices including governance, risk
management, due diligence method and distribution channel of the industry.
• According to media reports, SEBI is evaluating the introduction of covered calls in the Indian
mutual fund industry. In a recent meeting of Mutual Fund Advisory Committee (MFAC), the
capital market regulator constituted a sub-committee to explore the covered calls strategy in
mutual funds. In the covered calls strategy, a fund manager writes a call option contract if
he has neutral view on a stock. The covered call strategy will help investors generate
marginal returns even during flat market conditions.
• The government framed rules for utilisation of Rs. 66,000 crore by states and Union
Territories for afforestation and conservation. This will help expand India’s flora and fauna.
The rules also pertain to setting up of authorities to monitor the fund’s use. The step has
come two years after a law was enacted on these lines. The fund has been accumulated
over the past 10 years through compensation for using forest land for non-forest purposes,
including industries and infrastructure.
9
Global News/Economy
• According to a flash report from Eurostat, Eurozone’s Gross Domestic Product (GDP) grew
0.4% sequentially in the second quarter as against the same pace of upwardly revised
increase (0.3% increase originally reported) in the first quarter. GDP growth came in at 2.2%
on yearly basis in the second quarter as against upwardly revised growth of 2.5% (2.1%
originally reported) in the first quarter.
• A report from Destatis showed that Germany’s economy grew 0.5% sequentially in the
second quarter as against an increase of 0.4% in the first quarter. GDP grew 2.3% on yearly
basis in the second quarter as against an increase of 1.4% in the first quarter.
• According to a Labor Department report, first-time claims for U.S. unemployment benefits
declined in the week ended Aug 11, 2018. Initial jobless claims came in at 212,000, a dip of
2,000 from the previous week's 214,000 and street’s expectations.
• According to the Commerce Department, U.S. retail sales increased more than expected in
Jul 2018. Retail sales went up 0.5% in Jul compared surpassing estimates. The department
downwardly revised Jun 2018 figure to 0.2% from 0.5% reported earlier. The increase in Jul
was helped by modest rise in sales by motor vehicle and parts dealers.
• Office for National Statistics data showed U.K. inflation increased for the first time in eight
months in Jul 2018 because of rise in energy prices. Factory-gate inflation moderated.
Consumer prices went up 2.5% YoY in Jul 2018. Inflation had stayed at 2.4% for the past
three months.
10
Global Equity Markets
11
Global Indices
Indices
17-Aug-18
1-Week
Return
YTD
Return
Dow Jones
25,669.32 1.41% 3.84%
Nasdaq 100
7,377.54 -0.42% 15.34%
FTSE 100
7,558.59 -1.41% -1.68%
DAX Index
12,210.55 -1.72% -5.47%
Nikkei Average
22,270.38 -0.12% -2.17%
Straits Times
3,209.44 -2.29% -5.69%
Source: Thomson Reuters Eikon
Value as on Aug 17, 2018
U.S.
• U.S. markets witnessed selling pressure
initially because of concerns over
escalating tensions between the U.S.
and Turkey .
• However, the trend reversed on reports
that China and the U.S. will hold a new
round of trade talks later this month that
triggered optimism over easing trade
tensions between the two countries.
Europe
• The concerns over Turkey contributed to the sell-off in European markets following
announcement of tariff hike on U.S. goods by the Turkish government. The move
intensified the dispute between the two nations, which recently dragged the Turkish lira
down to a record low. Nonetheless, the downturn was restricted by optimism on reports
that China and the U.S. will hold a new round of trade talks later this month.
Asia
• Asian markets too felt the heat of the intensifying tension between U.S. and Turkey.
Chinese markets fell amid worries about an economic slowdown in China. Losses were
restricted by media reports suggesting that China and the U.S. will hold a new round of
trade talks later this month.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury bond
inched up 1 bps to close at 2.87% from
the previous week’s close of 2.86%.
• U.S. Treasury prices fell earlier during
the week as concerns about the impact
of the ongoing currency crisis in Turkey
eased to some extent after the central
bank of Turkey came out with measures
to stabilize the plunging lira.
• U.S. Treasury prices fell further on
reports that China and the U.S will hold
a new round of trade talks later this
month that fuelled hopes of easing trade
tensions between the two countries.
• However, persisting concerns about
fallout of the ongoing currency crisis in
Turkey hitting other emerging markets
restricted further losses.
2.84
2.87
2.90
13-Aug 14-Aug 15-Aug 16-Aug 17-Aug
Yield in %
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) 69.33 70.19
Gold ($/Oz) 1,184.35 1,210.85
Gold (Rs/10 gm) 29,361 29,477
Silver ($/Oz) 14.76 15.27
Silver (Rs/Kg) 36,660 37,763
Eikon *Value as on Aug 17, 2018
Gold
• Bullion prices were hit by growing
demand for U.S. dollar amid Turkish Iira
crisis. The bullion was not able to
capitalize on the rising geopolitical
stress owing to the broad dollar strength
that drew market participants to the
safety of the currency.
Crude
• Brent crude prices lowered amid
concerns over rising U.S. oil inventories.
Market participants also remained
concerned over currency crisis in Turkey
and the global economic outlook in the
wake of escalating trade disputes
between the United States and its major
trading partners.
Baltic Dry Index
• The Baltic Dry Index gained 1.89% on
the back of improved capesize and
panamax activities.
9.00
9.50
10.00
10.50
11.00
18-Jul-18 28-Jul-18 7-Aug-18 17-Aug-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
-1.23%
-2.19%
-3.35%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
70.23 68.95
Pound Sterling
89.37 88.19
Euro
79.97 79.00
100 JPY
63.35 62.15
Source: RBI Figures in INR , *Value as on Aug 16, 2018
Rupee
• The rupee weakened against the
greenback after the domestic trade
deficit widened to a more than 5-year
high in Jul 2018.
Euro
• The euro rose against the greenback on
optimism following reports that China
and the U.S. will hold a new round of
trade talks later this month.
Pound
• The pound weakened against the
greenback amid uncertainty as to
whether Britain would secure a trade
deal with the European Union before it
exits euro zone.
Yen
• Yen strengthened against a globally
weak greenback on reports that China
and the U.S. will hold a new round of
trade talks later this month.
9.70
9.90
10.10
10.30
10.50
17-Jul-18 27-Jul-18 6-Aug-18 16-Aug-18
USD GBP Euro JPY
Source: RBI
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
1.85%
1.33%
1.23%
1.93%
15
The Week that was…
13
th
August to 17
th
August
The Week that was (Aug 13 – Aug 17)
16
Date Events
Present
Value
Previous Value
Monday,
August 13, 2018
• India’s Consumer Price Index (Jul 18) 4.17% 4.92%
• China New Yuan Loans CNY (Jul) 1450.0b 1840.0b
Tuesday,
August 14, 2018
• India's Wholesale Price Index (Jul 18) 5.09% 5.77%
• India’s trade deficit (July 18) -$18.02 bn -$16.60 bn
• Germany Gross Domestic Product (YoY) (2Q P) 2.30% 1.60%
• Germany ZEW Survey Expectations (Aug) -13.7 -24.7
• Eurozone ZEW Survey (Economic Sentiment) (Aug) -11.1 -18.7
• Eurozone Gross Domestic Product (YoY) (2Q P) 2.20% 2.10%
Wednesday,
August 15, 2018
• U.K. Consumer Price Index (YoY) (Jul) 2.50% 2.40%
• U.S. Retail Sales Advance (MoM) (Jul) 0.50% 0.20%
• Japan Trade Balance (Jul) -¥231.2b ¥720.8b
• U.S. Business Inventories (Jun) 0.10% 0.30%
• China New Home Prices (MoM) (Jul) 1.21% 1.11%
Thursday,
August 16, 2018
• U.S. Initial Jobless Claims (Aug 11) 212k 214k
• U.S. Housing Starts (MoM) (Jul) 0.90% -12.90%
• U.S. Building Permits (MoM) (Jul) 1.50% -0.70%
Friday,
August 17, 2018
• U.S. University of Michigan Sentiment (Aug P) 95.3 97.9
• Eurozone Consumer Price Index (YoY) (Jul F) 2.10% 2.00%
17
The Week Ahead
20
th
August to 24
th
August
18
The Week Ahead
Day Event
Monday,
August 20, 2018
• Eurozone Construction Output (YoY) (Jun)
Tuesday,
August 21, 2018
• U.K. Public Finances (PSNCR) (Pounds) (Jul)
Wednesday,
August 22, 2018
• U.S. FOMC Meeting Minutes (Aug 1)
• Japan All Industry Activity Index (MoM) (Jun)
• U.S. Existing Home Sales (MoM) (Jul)
• U.S. MBA Mortgage Applications (Aug 17)
Thursday,
August 23, 2018
• Japan National Consumer Price Index (YoY) (Jul)
• Japan Nikkei Manufacturing PMI (Aug P)
• Germany Markit/BME Composite PMI (Aug P)
• Eurozone Markit Composite PMI (Aug P)
• U.S. Initial Jobless Claims (Aug 18)
• U.S. Markit Composite PMI (Aug P)
• U.S. New Home Sales (MoM) (Jul)
Friday,
August 24, 2018
• U.S. Durable Goods Orders (Jul P)
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19
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