News U Can Use
August 23, 2019
The Week that was…
19
th
August to 23
rd
August
2
Indian Economy
The government announced an additional liquidity support to the tune of Rs. 20,000 crore
for housing finance companies in order to improve their lending capacity. The move is
expected to help the real estate sector which is facing a slowdown in demand and liquidity
crunch.
The government proposed to set up an entity that will provide credit enhancement for
infrastructure and housing projects. The move is expected to increase fund flows towards
such projects. It also added that the department of expenditure and the performance will
monitor delayed payments from government and/or Central Public Sector Enterprises
(CPSEs) which in turn will be reviewed by the Cabinet Secretariat. The move is expected
to help clear all due payments of CPSEs which will help boost growth and create
employment.
The government has withdrawn the increased surcharge levied on foreign portfolio
investments on long- and short-term capital gains. Surcharge on domestic investors has
also been brought down to the pre-budget levels. The finance minister said that goods and
services tax regime will be simplified further and the government will release Rs. 70,000
crore capital upfront to public sector banks in order to boost credit to different sectors of
the economy.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices
23
-Aug-
19
1 Week Return
YTD Return
S&P BSE Sensex
36,701.16 -1.74% 1.75%
Nifty 50
10,829.35 -1.98% -0.31%
S&P BSE Mid
-Cap 13,202.08 -2.14% -14.49%
S&P BSE Small
-
Cap
12,186.11 -3.17% -17.14%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline
Ratio
19-Aug-19 955 889 1.07
20-Aug-19 641 1,185 0.54
21-Aug-19 452 1,398 0.32
22-Aug-19 348 1,521 0.23
23-Aug-19 1,044 802 1.30
Source: NSE
Indian equity markets declined mainly
because investor expectations of a
stimulus package were not met by the
government. Slowdown in certain
sectors, especially auto, persisting
foreign fund outflows due to
government’s decision to put surcharge
on the super-rich increased hopes of
announcement of measures to tackle the
situation.
Economic growth uncertainties and initial
rise in crude oil prices during the week
also hit domestic market. However,
sentiment got better ahead of finance
minister's media address, which was
scheduled after market hours on the last
day of the week. Investors expected the
minister to announce measures to revive
the economy, roll back the super-rich tax
on foreign portfolio investors, and
implement direct tax code.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
25.62 26.79 34.25 32.22
P/B
2.75 3.36 2.24 1.72
Dividend Yield
1.27 1.36 1.13 1.19
Source: BSE, NSE Value as on Aug 23, 2019
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
15,728.03 -0.11% -3.12%
30,444.16
-4.53%
-7.51%
22,820.98 1.01% -0.67%
16,446.86
-2.85%
-8.49%
10,706.36
-2.50%
-3.27%
12,460.77
-0.12%
-2.50%
15,969.15 3.14% 2.75%
8,485.98
-5.02%
-18.41%
12,817.10
-2.68%
-8.61%
1886.69
-7.75%
-11.47%
7782.51 2.52% 1.80%
Source: Thomson Reuters Eikon
*
Value as on Aug
23, 2019
S&P BSE Realty was the major loser, down
7.75%, followed by S&P BSE Metal and S&P
BSE Bankex that lost 5.02% and 4.53%. The
metal sector suffered as U.S.-China trade
relations continued their uncertain path and
kept investors anxious.
S&P BSE Capital Goods and S&P BSE Oil &
Gas lost 2.85% and 2.68%, respectively. S&P
BSE IT and S&P BSE Teck gained 3.14%
and 2.52%, respectively. IT sector gained
from losses in the Indian rupee, which
touched its lowest level in 2019 in one of the
sessions.
Indian Derivatives Market Review
Nifty Aug 2019 Futures stood at 10,842.70, a premium of 13.35 points above the spot
closing of 10,829.35. The total turnover on NSE’s Futures and Options segment for the
week stood at Rs. 68.20 lakh crore as against Rs. 21.94 lakh crore for the week to Aug 16.
The Put-Call ratio stood at 0.69 compared with the previous week’s close of 0.82 .
The Nifty Put-Call ratio stood at 1.02 against the previous week’s close of 1.21.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-
Wk
Ago
1-
Mth
Ago
6-
Mth
Ago
Call Rate
5.34 5.31 5.58 6.34
91 Day T
-Bill
5.41 5.48 5.76 6.43
07.32% 2024, (5 Yr GOI)
6.28 6.33 6.43 7.06
07.26% 2029, (10 Yr GOI)
6.57 6.54 6.46 7.41
Source: Thomson Reuters Eikon
Value as on Aug 23
, 2019
Bond yields rose as investors
resorted to note selling amid rising
concerns over the fiscal package,
which is expected to further widen the
fiscal deficit and breach the target.
Besides, depreciation in the local
currency and losses in domestic
equity market also weighed on
investors’ sentiment.
However, losses were restricted on
expectations that Monetary Policy
Committee might cut interest rates
again to boost the slowing economy.
Yields on the 10-year benchmark
paper (7.26% GS 2029) rose 3 bps to
close at 6.57% compared with the
previous close of 6.54% after trading
in the range of 6.53% to 6.63%.
6.52
6.55
6.58
6.61
19-Aug 20-Aug 21-Aug 22-Aug 23-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 5.87 7.41 154
3 Year 6.21 7.63 142
5 Year 6.47 7.68 120
10 Year 6.67 8.05 138
Source: Thomson Reuters Eikon
Value as on Aug 23
, 2019
Yields on gilt securities fell across the
maturities by up to 13 bps barring 10 and 15-
year papers which increased 3 bps and 5 bps
respectively while the yield on 2 and 12-year
papers closed steady.
Corporate bond yields fell across the
maturities in the range of 4 bps to 17 bps
barring 1-year paper which increased 8 bps
while the yield on 15-year paper closed
steady.
Difference in spread between AAA corporate
bond and gilt contracted across the maturities
in the range of 4 bps to 14 bps barring 1-year
paper which expanded 11 bps.
-14
-7
0
7
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 23-Aug-19 16-Aug-19
Yield
in %
Change
in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
The Reserve Bank of India (RBI) governor said linking of new loans to an external
benchmark like the central bank's repo rate will be formalised. This is being done as an
economic impetus is needed not just from monetary policy assistance but also through
transmission of rates, he said.
Reserve Bank of India (RBI) deputy governor has asked bankers to ensure timely resolution
of stressed assets under the new framework to get the best value. He underlined the need
for dealing only in "genuine" cases. RBI will release the final guidelines for private and
foreign bankers' compensation soon, he said. RBI's revised framework on resolution of
stressed assets introduced on Jun 7, 2019, is "less intrusive" as it gives banks the leeway to
draft their own resolution plans for a particular case, he added.
The Securities and Exchange Board of India (SEBI) has allowed credit rating agencies to
obtain details of clients’ existing and future debt. This will help them identify defaults in a
timely way in the middle of a severe credit crunch and economic slowdown. SEBI has
enabled rating agencies to get “explicit consent” from clients in rating agreements to secure
details on debt repayments and any delays or defaults from lenders or other organisations.
Rating agencies have often cited the lack of information shared by companies as a reason
for failing to identify potential defaults in time. The regulator has also been tightening
disclosure regulations to boost monitoring, accountability and transparency of rating
agencies.
Regulatory Updates in India (contd..)
9
SEBI has eased several regulations for foreign portfolio investors (FPIs). These include
simplifying registration procedures and eligibility criteria. The regulator also allowed mutual
funds to invest up to 10% of their total debt portfolio in unlisted non-convertible debentures
(NCDs) only if the instruments are rated and secured. SEBI had a few months ago said it
would limit mutual funds to listed NCDs.
The Central Board of Direct Taxes (CBDT) is seeking new ways to tax global tech
companies that invoice their revenues out of India and maintain operations in the country
with minimum profits. The tax department will consult the Organization for Economic Co-
operation and Development at a conference next month, media reports said quoted a senior
official. The move comes at a time when developed internet economies around the globe
are exploring fresh methods of taxing big technology firms.
Global News/Economy
The International Monetary Fund has warned that monetary policy easing is unlikely to
result in currency devaluations that are sufficient to bring about a continuous improvement
in the trade balance of a country. The IMF view comes at a time when the U.S. President
has accused China and the European Union of delving in currency manipulation to benefit
their exporters.
The minutes of U.S. Federal Reserve's latest monetary policy meeting held in Jul 2019
showed the central bank intends to remain flexible regarding future changes to interest
rates. This comes as there is a lack of clarity about when the risks to the U.S. economy will
be resolved, Fed said.
Final data from Eurostat showed Eurozone inflation eased more than initially estimated in
Jul 2019 to the lowest since late 2016. Headline inflation slowed to 1% in Jul from 1.3% in
Jun 2019. The initial estimate was 1.1%.
The Ministry of Internal Affairs and Communications said overall nationwide inflation in
Japan was up 0.5% YoY in Jul 2019. That was shy of forecasts and down from 0.7% in Jun
2019.
10
Global Equity Markets
11
Global Indices
Indices
23-Aug-19
1-Week
Return
YTD
Return
Russell 3000
1,260.43 -1.32% 18.61%
Nasdaq 100
7,465.00 -1.83% 17.93%
FTSE 100
7,094.98 -0.31% 5.45%
DAX Index
11,611.51 0.42% 9.97%
Nikkei Average
20,710.91 1.43% 3.48%
Straits Times
3,110.35 -0.15% 1.36%
Source: Thomson Reuters Eikon
Value as on
Aug 23, 2019
U.S.
U.S. markets remained weak as
concerns over probable recession
loomed large amid another inversion of
the yield curve. The yield on the two-
year note dropping below the yield on
the ten-year note. The ongoing U.S.-
China trade war took a worse turn with
Chinese Finance Ministry planning to
impose new tariffs on $75 billion worth
of U.S. imports.
Europe
European markets witnessed gains with buying interest getting support from the reports
on merger talks between two industry behemoths in the automobile sector. Investors also
cheered media reports suggesting that the German government had agreed a draft law
largely scrapping the solidarity surcharge on income tax with an objective to boost
Europe's largest economy.
Asia
Majority of the Asian markets managed to end the week in the green despite the Japan-
South Korea tension taking a worse turn. In the latest development, the South Korea has
decided to terminate its military intelligence-sharing agreement with the Japanese,
weakening an important source of information on North Korea and China.
Global Debt (U.S.)
12
Yields on the 10-year U.S. Treasury
bond inched down 1 bps to 1.53%
compared with the previous week’s
close of 1.54%.
U.S. Treasury prices fell earlier during
the week as risk sentiment improved
after People's Bank of China came out
with a reformatory measure to lower
borrowing cost for companies and on
hopes of fiscal stimulus in Germany.
Prices fell further after minutes of the
U.S. Federal Reserve’s monetary policy
review in Jul showed that most of the
participants were of the view that the
rate cut was a mid-cycle adjustment and
not a “pre-set course” for future cuts.
However, the trend reversed as the safe
haven appeal of U.S. Treasuries
improved after China unveiled retaliatory
tariffs against about $75 billion worth of
U.S. goods which fueled concerns of
escalating trade tensions between U.S.
and China.
1.48
1.52
1.56
1.60
1.64
19-Aug 20-Aug 21-Aug 22-Aug 23-Aug
Yield in %
US 10-Year Treasury Yield Movement
Source: Thomson Reuters EikonSource: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Commodities
Last Closing*
1-Week Ago
Brent Crude($/Barrel)
58.93 58.99
Gold ($/Oz)
1,526.10 1,513.75
Gold (Rs/10 gm)
37,599 37,466
Silver ($/Oz)
17.39 17.08
Silver (Rs/Kg)
43,708 43,624
Source: Thomson Reuters Eikon *
Value as on
Aug 23, 2019
Gold
Gold prices grew after China reportedly
announced that it will impose additional
tariffs on a total of $75 billion of U.S.
goods. Further, comments from the U.S.
Federal Reserve Chair that hinted on
interest rate cuts in the next meeting
boosted the safe haven appeal of the
bullion.
Brent Crude
Brent crude prices fell amid intensifying
U.S. and China trade war tensions after
China reportedly announced that it would
impose additional tariffs of 5% or 10% on
a total of 5,078 products originating from
U.S.
Baltic Dry Index
The Baltic Dry Index grew on the back of
improved capesize and panamax
activities.
8.00
9.00
10.00
11.00
23-Jul-19 2-Aug-19 12-Aug-19 22-Aug-19
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global
Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
-0.10%
0.82%
1.81%
23-Aug-19
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency
Last Closing*
1-Wk Ago
US Dollar
71.73 71.29
Pound Sterling
87.62 86.33
EURO
79.39 79.15
100 Yen
67.26 67.17
Source: RBI Figures in INR , *
Value as on
Aug 23, 2019
Rupee
The rupee weakened against the
greenback due to weakness in the
Chinese currency amid mounting trade
tensions and worries over Chinas
economic outlook.
Euro
The euro gained against the greenback
amid escalating U.S. and China trade
war tensions after U.S. President
ordered U.S. companies to look ways for
an alternative to China as Beijing
imposed more tariffs on U.S. goods.
Pound
The pound gained against the greenback
after investors undertook comments from
German Chancellor that a solution to the
Irish border problem could be found
before Brexit on Oct 31, 2019.
Yen
The yen surged against the greenback
due to escalating U.S. and China trade
war tensions.
9.00
9.50
10.00
10.50
11.00
23-Jul-19 2-Aug-19 12-Aug-19 22-Aug-19
USD GBP Euro JPY
Source: Thomson Reuters Eikon
Currency
Prices (
in terms of INR)
Rebased to 10
Currency Movement
0.62%
1.50%
0.31%
0.13%
23-Aug-19
15
The Week that was…
19
th
August to 23
rd
August
The Week that was (August 19 August 23)
16
Date Events
Present
Value
Previous
Value
Monday, 19 August, 2019
Euro Zone Consumer Price Index (MoM) (Jul) -0.5% 0.2%
Euro Zone Current Account s.a (Jun) 18.0b 30.2b
Tuesday, 20 August, 2019
Germany Producer Price Index (YoY) (Jul) 1.1% 1.2%
Euro Zone Construction Output w.d.a
(YoY) (Jun)
0.0 0.0
Wednesday, 21 August, 2019
U.S. Existing Home Sales Change (MoM) (Jul) 2.5% -1.3%
U.S. MBA Mortgage Applications (Aug 16) -0.9% 21.7%
U.K. Public Sector Net Borrowing (Jul) -2.0b 5.7b
Thursday, 22 August, 2019
U.S. Initial Jobless Claims (Aug 16) 209k 221k
Euro Zone Consumer Confidence (Aug) (P) -7.1 -6.6
U.S. Markit PMI Composite (Aug) (P) 50.9 52.6
Japan Nikkei Japan PMI Manufacturing (Aug P) 49.4 49.4
Euro Zone Markit PMI Composite (Aug) (P) 51.8 51.5
Germany Markit/BME Composite PMI (Aug P) 51.4 50.9
Japan National Consumer Price Index (YoY) (Jul)
0.5% 0.7%
Japan All Industry Activity Index (MoM) (Jun) -0.8% 0.5%
Friday, 23 August, 2019
U.S. New Home Sales Change (MoM) (Jul) -12.8% 20.9%
17
The Week Ahead
26
th
August to 30
th
August
18
The Week Ahead
Day Event
Monday,
August 26, 2019
German IFO Current Assessment (Aug)
U.S. Durable Goods Orders (Jul P)
Tuesday,
August 27, 2019
German Retail Sales (YoY) (Jul)
German Gross Domestic Product w.d.a. (YoY) (2Q F)
U.S. House Price Index (MoM) (JUN)
U.S. Consumer Confidence Index (Aug)
Wednesday,
August 28, 2019
German GfK Consumer Confidence (Sep)
U.S. DOE Crude Oil Inventories (Aug 23)
Thursday,
August 29, 2019
Euro Zone German Consumer Price Index (YoY) (Aug P)
U.S. Gross Domestic Product Annualized (QoQ) (2Q S)
U.S. Advance Goods Trade Balance (Jul)
U.S. Pending Home Sales (YoY) (Jul)
Japan Jobless Rate (Jul)
Japan Retail Trade (YoY) (Jul)
Friday,
August 30, 2019
Japan Housing Starts (YoY) (Jul)
Euro Zone Consumer Price Index Estimate (YoY) (Aug)
U.S. PCE Core (YoY) (Jul)
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19
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