News U Can Use
August 24, 2018
The Week that was…
20
th
August to 24
th
August
2
Indian Economy
• According to the commerce ministry, a National Logistics Portal is being developed to
ensure ease of trading in the international and domestic markets. The development comes
as India targets lowering the logistics cost from 14% of Gross Domestic Product (GDP) to
less than 10% by 2022. The portal that is being developed will link all the stakeholders of
export-import, domestic trade and all trade activities on a single platform. Besides,
generating jobs, this is expected to increase trade competitiveness and help the country
transform into a logistics hub.
• According to a major credit rating agency, India's current account deficit (CAD) could widen
to 2.5% of GDP in FY19 from 1.5% in FY18 because of higher oil prices and rupee
depreciation, experts and a leading global rating agency have said. Rupee has dipped to a
record low of 70.32 against the dollar in the week to Aug 17, 2018. CAD may increase due
to higher oil prices and strong non-oil import demand. Net oil imports made up 2.6% of
GDP in FY18 and could increase FY19.
• According to a Reserve Bank of India (RBI) report, Micro, Small and Medium Enterprises
(MSMEs) exports were hit more by issues around Goods and Services Tax (GST)
implementation than demonetisation. Delay in refund of upfront GST and input tax credit
affected cash-driven working capital requirements of MSME. MSMEs constitute around
40% of the overall shipments from India. The report said credit growth in the sector was
decelerating even before demonetisation and decreased even more during the note-ban.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 24-Aug-18 1 Week Return YTD Return
S&P BSE Sensex 38251.80 0.80% 12.32%
Nifty 50 11557.10 0.75% 9.75%
S&P BSE Mid-Cap 16552.74 1.51% -7.12%
S&P BSE Small-Cap 16864.43 -0.01% -12.30%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
20-Aug-18 1007 816 1.23
21-Aug-18 893 928 0.96
23-Aug-18 797 1010 0.79
24-Aug-18 717 1091 0.66
Source: NSE
• Indian equity markets edged higher
with benchmark indices touching
fresh closing highs during the week.
• Initial optimism seen ahead of the
highly anticipated U.S.-China trade
talks soon faded as no significant
breakthrough was achieved following
the meeting held towards the end of
the week. Some positive corporate
announcements from pharma majors
generated buying interest.
• Gains were also largely restricted by
speculation that the U.S. President's
political position may be jeopardised
by the legal woes of two former
advisors. Sentiments dampened
further as both U.S. and China
imposed fresh tariffs on each other’s
goods.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
24.63 28.06 33.49 118.61
P/B
3.16 3.76 2.80 2.52
Dividend Yield
1.16 1.16 0.93 0.76
Source: BSE, NSE Value as on
Aug 24, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
24468.58 0.38% 0.84%
S&P BSE Bankex
31444.02 -1.33% 4.97%
S&P BSE CD
21645.90 -1.83% 5.57%
S&P BSE CG
18713.95 4.80% 3.03%
S&P BSE FMCG
12553.70 0.63% 8.09%
S&P BSE HC
15480.86 3.11% 10.89%
S&P BSE IT
15053.31 -0.26% 2.62%
S&P BSE Metal
13204.34 2.52% 7.67%
S&P BSE Oil & Gas
15039.04 1.85% 3.43%
Source: Thomson Reuters Eikon
*Value as on Aug 24, 2018
• On the BSE sectoral front, majority of the
indices closed in the green. S&P BSE
Capital Goods was the top gainer, up
4.80%, followed by S&P BSE Power and
S&P BSE Healthcare, which went up
3.25% and 3.11%, respectively.
• Buying interest was seen in capital goods
sector after an industry major approved a
proposal to buy back up to 6 crore equity
shares (4.29% of the total paid-up equity
share capital), at a maximum price of Rs.
1,500 per equity share for an aggregate
amount of Rs. 9,000 crore.
Indian Derivatives Market Review
• Nifty August 2018 Futures closed at 11,595.4, a premium of 12.65 points, above the spot
closing of 11,582.75. The turnover on NSE’s Futures and Options segment stood at Rs.
30.76 lakh crore as against Rs. 37.55 lakh crore on Aug 17.
• The Put-Call ratio stood at 0.82 compared with the previous week’s close of 0.92.
• The Nifty Put-Call ratio stood at 1.73 against the previous week’s close of 1.66.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
6.39 6.44 6.27 5.90
91 Day T-Bill
6.82 6.80 6.65 6.32
7.80% 2021, (5 Yr GOI)
7.73 7.71 7.69 7.16
7.17% 2028, (10 Yr GOI)
7.87 7.86 7.78 7.67
Source: Thomson Reuters
Eikon
Value as on Aug 24, 2018
• Bond yields initially fell after the rupee
strengthened against the greenback.
Market participants also hoped that
trade talks between U.S. and China
would ease tensions between the two
countries.
• However, gains reversed and yields
rose following an increase in global
crude oil prices that fueled concerns
of a possible increase in domestic
inflationary pressures. Also, fall in
rupee against the greenback renewed
worries of foreign fund outflow.
• At the end, losses almost erased as
market participants bought shares
after yields rose in the earlier
session.
• Yield on the 10-year benchmark
paper (7.17% GS 2028) increased 1
bps to close at 7.87% from the
previous week’s close of 7.86%.
7.80
7.85
7.90
20-Aug 21-Aug 23-Aug 24-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 8.36 93
3 Year 7.88 8.56 67
5 Year 8.10 8.65 56
10 Year 8.03 8.74 72
Source: Thomson Reuters Eikon
Value as on Aug 24, 2018
• Yields on gilt securities fell on 4- and 7-
year maturities by 1 bps and 2 bps,
respectively. Yield increased across the
remaining maturities by up to 7 bps
barring 1-, 11- and 12-year papers that
closed steady.
• Corporate bond yields rose on 1- and 2-
year papers by 3 bps each and fell on
the remaining maturities by up to 10 bps.
• Spread between AAA corporate bond
and gilt expanded on 1- and 2-year
papers by 3 and 4 bps, respectively.
Spread contracted across the remaining
maturities in the range of 3 to 11 bps.
-2
0
2
4
6
8
6.50
7.00
7.50
8.00
8.50
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 24-Aug-18 16-Aug-18
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• Under the Pradhan Mantri Awas Yojna (PMAY) scheme, the Centre approved construction
of approximately 1.12 lakh more affordable houses for urban poor in eight states. According
to the Housing and Urban Affairs Ministry, so far, approximately 55 lakh houses are being
funded under the PMAY scheme (Urban) across the country.
• According to media reports, the U.S. levied preliminary anti-dumping duties of more than
50% on metal pipes that are being imported from India, China and four other countries. The
move is being seen as an aggressive tactic by the U.S. Administration to give protection to
the American industry. As per reports, the U.S. Administration has taken the move after six
pipe manufacturers in U.S. filed an antidumping complaint with the U.S. Commerce
Department in Jan 2018. Dumping is said to occur when a company of foreign sells an
imported product at an artificially low price.
• According to media reports, the government imposed standard environment clearing
conditions for as many as 25 sectors. Some of the sectors among these 25 are iron, steel,
cement, coal, petroleum refineries, industry, paper and pulp industries, hydro-electric
projects and industrial estates. These conditions need to be taken into account by the
Expert Appraisal Committee (EAC) while appraising the project proposals. EAC after due
diligence will have the authority to add, delete or modify on the basis of specific
requirements of the projects. The conditions have been imposed to bring in uniformity on
stipulated conditions and terms across the projects and sectors. Also, such conditions will
act as a guidance to the EAC.
Regulatory Updates in India (contd..)
• The Central Board of Direct Taxes (CBDT) was asked by the Bombay High Court to clear
the uncertainty over the Securities Transactions Tax (STT) rate on physical delivery of
shares in the equity derivatives segment. A petition filed by the Association of National
Exchanges Members of India against a circular issued by the National Stock Exchange on
Jul 17, 2018, was heard by a division of bench of justices. As per the circular, with effect
from Jul 26, the members in the equity derivatives segment have to collect the STT on
physical settlement of stock derivatives. Also, the Bombay High Court stated that the
exchange would recover such additional tax burden from the members, if the CBDT issued
any clarification or amendment on taxation of physically settled futures and options (F&O)
contracts.
• The mines ministry asked all states to begin the auction of mining leases expiring in the
next two years by Jul 2019. According to the ministry, this would help avoid any shortage of
minerals. Also, it would ensure seamless transition of mines from existing leaseholder to the
new leaseholder to whom lease will be granted through auction.
• According to the media reports, the Securities and Exchange Board of India (SEBI) held
back the applications for launch of petrol and diesel futures by commodity exchanges MCX
and ICEX. The move comes as SEBI has expressed concerns over the “sensitivity” of the
commodities given the sharp increase in global crude oil prices and high possibility of
intervention by the government. Also, media reports suggested that “sensitivity” of such
items may go up in the run up to an election year.
9
Global News/Economy
• U.S. durable goods orders fell 1.7% in Jul 2018 as against a gain of 0.7% in Jun 2018. The
decline reflects sharp fall in orders for transportation equipment, that fell 5.3% in Jul
compared to a gain of 1.8% in Jun.
• U.S. new home sales surprisingly fell 1.7% to an annual rate of 627,000 in Jul 2018 as
against a decline of 2.4% to a revised rate of 638,000 in Jun 2018. The decline reflects
sharp fall in new home sales in the Northeast and South. However, new home sales grew in
Midwest and West.
• A major global credit rating agency downgraded Turkey’s credit rating into junk category and
attributed the downgrade to a volatile Lira and wide current-account deficit. The global credit
rating agency noted that the weakening of the lira is putting pressure on the indebted
corporate sector which has considerably increased the funding risk for Turkey’s banks.
• According to flash data from IHS Markit, the composite output index for euro zone rose to
54.4 in Aug 2018 from 54.3 in Jul 2018. The services Purchasing Managers' Index (PMI)
also stood at 54.4 in Aug from 54.2 a month ago. Although, euro zone’s private sector
continued to expand in Aug, the rate of expansion was weakest seen past one and a half
year.
• According to flash data from IHS Markit, Germany’s services PMI rose to 55.2 in Aug 2018
from 54.1 in Jul 2018. The country’s composite output index also rose to 55.7 in Aug from
55.0 in Jul. However, manufacturing PMI slid to 56.1 from 56.9 in the previous month.
• Japan’s consumer prices were up 0.9% on year in Jul 2018 as against a gain of 0.7% in Jun
2018. Overall inflation was up 0.3% MoM and core inflation inched up 0.1%.
10
Global Equity Markets
11
Global Indices
Indices
24-Aug-18
1-Week
Return
YTD
Return
Dow Jones
25790.35 0.47% 4.33%
Nasdaq 100
7485.40 1.46% 17.02%
FTSE 100
7577.49 0.25% -1.43%
DAX Index
12394.52 1.51% -4.05%
Nikkei Average
22601.77 1.49% -0.72%
Straits Times
3213.00 0.11% -5.58%
Source: Thomson Reuters Eikon
Value as on Aug 24, 2018
U.S.
• U.S. markets got support after the U.S.
Federal Reserve (Fed) chairman, in
Jackson Hole speech, mentioned to
raise interest rates gradually if the
strong growth in income and jobs
continues. Additionally, a report by the
Labor Department indicated that U.S.
unemployment benefits fell modestly for
the week ended Aug 18.
• However, the U.S.-China trade talks
weighed on sentiment.
Europe
• European markets traded up following some improved economic data from the region that
includes expansion of Germany's economy in the second quarter and improvement in
euro area private sector in Aug 2018. Greece came out with its final bailout programme
helping the nation to raise funds for the first time in eight years. However, U.S.-China
trade tension kept the investors wary.
Asia
• Asian markets gained as a government report from Japan indicated that the country's
annual inflation stalled in Jul 2018, which raised speculation that the country’s central
bank might delay its exit from ultra-loose monetary policy. Expansion of Japan's
manufacturing sector for Aug 2018 also helped sentiments.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury bond
fell 5 bps to close at 2.82% from the
previous week’s close of 2.87%.
• U.S. Treasury prices rose initially amid
lack of market triggers and ahead of a
speech by the U.S. Federal Reserve
chief. Renewed political uncertainty in
the U.S. also boosted the haven appeal
of U.S. Treasuries.
• U.S. Treasury prices rose further after
the U.S. Federal Reserve chief
advocated for gradual rate hikes but did
not give any new indications on the
pace of rate increases.
• However, further losses were restricted
after a major global credit rating agency
extended the deadline for its review of
Italy's rating that provided some relief to
market participants who expected a
downgrade imminently.
2.80
2.83
2.86
20-Aug 21-Aug 22-Aug 23-Aug 24-Aug
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Last Closing* 1-Week Ago
Brent Crude($/Barrel)
73.60 69.33
Gold ($/Oz)
1205.55 1184.35
Gold (Rs/10 gm)
29561 29361
Silver ($/Oz)
14.80 14.76
Silver (Rs/Kg)
36640 36660
Source: Thomson Reuters
Eikon *Value as on Aug 24, 2018
Gold
• Gold prices surged as greenback
weakened against euro after U.S. Fed’s
chairman stated that gradual interest
rate hike plans would depend on
strength of the U.S. economy and labor
market. However, upside was limited on
hopes that U.S. and China might reach
a trade consensus as hinted by the
Chinese Foreign Ministry.
Crude
• Brent crude prices grew as data
indicated that crude oil inventories in the
U.S. fell for the week ended Aug 17
Additionally, concerns over supply
disruption following U.S. sanctions over
Iran has supported the prices.
Baltic Dry Index
• The Baltic Dry Index fell 1.74% on the
back of lower capesize and panamax
activities.
8.80
9.20
9.60
10.00
10.40
25-Jul-18 9-Aug-18 24-Aug-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
6.16%
1.79%
0.27%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
70.14 70.23
Pound Sterling
89.97 89.37
EURO
81.17 79.97
100 JPY
62.98 63.35
Source: RBI Figures in INR , *Value as on Aug 24, 2018
Rupee
• The rupee rose against the greenback
following gains in the domestic equity
market.
Euro
• The euro surged against the greenback
after the U.S. Fed chief advocated for
gradual rate hikes but did not give any
new indications on the pace of rate
hikes.
Pound
• The pound strengthened against the
greenback after the U.S. President
expressed concerns over increase in
interest rates by the U.S. Fed.
Yen
• The yen weakened against the
greenback after the U.S. Federal
Reserve’s meeting minutes increased
the possibility of a rate hike in Sep 2018.
9.70
10.00
10.30
25-Jul-18 9-Aug-18 24-Aug-18
USD GBP Euro JPY
Source: RBI
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
-0.58%
1.50%
0.67%
-0.13%
15
The Week that was…
20
th
August to 24
th
August
The Week that was (Aug 20 – Aug 24)
16
Date Events
Present
Value
Previous
Value
Monday,
August 20, 2018
• Germany Producer Price Index (YoY) (Jul) 3.00% 3.00%
Tuesday,
August 21, 2018
• Japan Nationwide Department Sales (YoY) (Jul) -6.10% 3.10%
• U.K. Public Finances (PSNCR) (Pounds) (Jul) -19.2b 13.4b
Wednesday,
August 22, 2018
• Japan All Industry Activity Index (MoM) (Jun) -0.80% 0.10%
• U.S. MBA Mortgage Applications (Aug 17) 4.20% -2.00%
• U.S. Existing Home Sales (MoM) (Jul) -0.70% -0.60%
Thursday,
August 23, 2018
• Japan National Consumer Price Index (YoY) (Jul) 0.90% 0.70%
• Japan Nikkei Japan PMI Manufacturing (Aug P) 52.50 52.30
• Germany Markit Composite PMI (Aug P) 55.70 55.00
• U.S. House Price Index (MoM) (Jun) 0.20% 0.40%
• U.S. Markit Composite PMI (Aug P) 55.00 55.70
• U.S. New Home Sales (MoM) (Jul) -1.70% -2.40%
• Eurozone Markit Composite PMI (Aug P) 54.4 54.3
• U.S. Initial Jobless Claims (Aug 18) 210k 212k
Friday,
August 24, 2018
• U.S. Durable Goods Orders (Jul P) -1.70% 0.70%
• Germany Gross Domestic Product (YoY) (2Q F) 2.30% 2.30%
17
The Week Ahead
27
th
August to 31
st
August
18
The Week Ahead
Day Event
Monday,
Aug 27, 2018
• Germany Retail Sales (YoY) (Jul)
• Germany IFO Expectations (Aug)
Tuesday,
Aug 28, 2018
• U.S. Advance Goods Trade Balance (Jul)
• U.S. Consumer Confidence Index (Aug)
• U.S. Wholesale Inventories (MoM) (Jul P)
Wednesday,
Aug 29, 2018
• U.S. Gross Domestic Product Price Index (2Q S)
• Japan Consumer Confidence Index (Aug)
• U.S. MBA Mortgage Applications (Aug 24)
• U.S. Pending Home Sales (YoY) (Jul)
• Japan Retail Trade (YoY) (Jul)
Thursday,
Aug 30, 2018
• Germany Unemployment Change (000's) (Aug)
• Germany Consumer Price Index (YoY) (Aug P)
• U.S. Personal Consumption Expenditure Core (YoY) (Jul)
• U.S. Initial Jobless Claims (Aug 25)
• Japan Jobless Rate (Jul)
Friday,
Aug 31, 2018
• India’s Index of Eight Core Industries (Jul 18)
• China Manufacturing PMI (Aug)
• Eurozone Consumer Price Index Estimate (YoY) (Aug)
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19
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