News U Can Use
August 31, 2018
The Week that was…
27
th
August to 31
st
August
2
Indian Economy
• Government data showed that the Gross Domestic Product (GDP) at 2011-12 prices of the
Indian economy witnessed a growth of 8.2% on a yearly basis in the first quarter of FY19,
mainly on the back of manufacturing growth. GDP growth in Jun 2017 was 5.6% as
companies were preparing for the start of the Goods and Services Tax (GST) regime. On
the sectoral front, manufacturing and public administration, defence & other services
surged 13.5% and 9.9%, respectively. Construction and electricity, gas, water supply &
other utility services grew 8.7% and 7.3%, respectively.
• India’s fiscal deficit for Apr-Jul 2018 came in at Rs. 5.40 lakh crore, or 86.5% of the
budgeted target for FY19 against 92.4% in the year-ago period. Net tax receipts were Rs.
2.92 lakh crore or 19.8% of the budget estimate for FY19 compared with 21.0% in the
corresponding period of the previous year. The government’s total expenditure for the
period from Apr to Jul of 2018 stood at Rs. 8.89 lakh crore or 36.4% of the budget estimate
for FY19 compared with 37.7% in the corresponding period of the previous year.
• The growth of index of eight core industries in India came in at 6.6% in Jul 2018 as against
an upwardly revised growth of 7.6% (6.7% originally reported) in Jun 2018. Refinery
products witnessed the maximum growth of 12.3%, followed by cement and coal sectors
that surged 10.8% and 9.7%, respectively. However, crude oil sector witnessed the
maximum decline of 5.4%, marking a decrease for the eighth consecutive month. Natural
gas also registered a decline of 5.2%, marking the third consecutive monthly fall.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices
31-Aug-18
1 Week Return
YTD Return
S&P BSE Sensex
38,645.1 1.03% 13.47%
Nifty 50
11,680.5 1.07% 10.92%
S&P BSE Mid
-Cap 16,881.3 1.99% -5.28%
S&P BSE Small
-Cap 17,193.2 1.95% -10.60%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
27-Aug-18 987 829 1.19
28-Aug-18 750 1050 0.71
29-Aug-18 845 953 0.89
30-Aug-18 963 846 1.14
31-Aug-18 949 854 1.11
Source: NSE
• The domestic market gained over the
week and touched all-time highs in
one of the sessions. Initially, the
market started moving up after the
Federal Reserve (Fed) chairman
hinted at gradual rate hikes going
forward if the strong growth in income
and jobs continues.
• Further, the U.S. and Mexico reached
a preliminary trade pact and Canada
announced to re-join the North
American Free Trade Agreement
(NAFTA) talks.
• However, caution ahead of the GDP
data for the first quarter of FY19,
which was released on Aug 31 post
market hours, kept investors wary.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
24.85 28.40 34.13 -126.65
P/B
3.19 3.76 2.86 2.57
Dividend Yield
1.15 1.15 0.91 0.74
Source: BSE, NSE Value as on Aug
31,
2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
24,716.5 1.01% 0.90%
S&P BSE Bankex
31,741.9 0.95% 2.37%
S&P BSE CD
21,696.4 0.23% 3.80%
S&P BSE CG
18,996.8 1.51% 3.83%
S&P BSE FMCG
12,771.7 1.74% 6.32%
S&P BSE HC
15,945.2 3.00% 12.24%
S&P BSE IT
15,548.5 3.29% 7.03%
S&P BSE Metal
13,821.3 4.67% 9.18%
S&P BSE Oil & Gas
15,079.0 0.27% 0.37%
S&P BSE Power
2,140.7 4.85% 8.38%
*Value as on Aug 31,
• On the BSE sectoral front, all the indices
closed in the green and S&P BSE Power
(4.85%) stood as the major gainer followed
by S&P BSE Metal (4.67%), S&P BSE IT
(3.29%) and S&P BSE Healthcare
(3.00%).
• Rally was witnessed in pharma and IT
companies after the rupee depreciated to
its lowest level against the U.S. dollar.
Indian Derivatives Market Review
• Nifty August 2018 Futures settled at 11,676.8 on Aug 30. Nifty Sep 2018 Futures settled at
11,735.30, a premium of 58.50 points, above the spot closing of 11,680.50. The turnover
on NSE’s Futures and Options segment stood at Rs. 53.44 lakh crore as against Rs. 30.76
lakh crore on Aug 24.
• The Put-Call ratio stood at 0.91 compared with the previous week’s close of 0.82.
• The Nifty Put-Call ratio stood at 1.55 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
6.41 6.39 6.16 5.93
91 Day T
-Bill
6.81 6.82 6.71 6.32
7.80% 2021, (5
Yr GOI)
7.79 7.73 7.67 7.17
7.17% 2028, (10
Yr GOI)
7.95 7.87 7.77 7.73
Source: Thomson Reuters
Eikon
Value as on Aug 31, 2018
• Bond yields rose as rupee plunged to
a record low against the greenback.
Besides, the consistent surge in
crude oil prices following reports of
falling U.S. crude inventories
continued to dampen market
sentiment.
• These factors have raised fears over
foreign fund outflow from the
domestic debt market and
aggravated domestic inflationary
concern in the coming months, which
might lead the Monetary Policy
Committee undertake measures on
additional monetary tightening.
• Yield on the 10-year benchmark
paper (7.17% GS 2028) rose 8 bps to
close at 7.95% from the previous
week’s close of 7.87% after trading in
a range of 7.86% to 7.96%.
7.85
7.91
7.97
27-Aug 28-Aug 29-Aug 30-Aug 31-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 7.48 8.57 109
3 Year 7.95 8.62 67
5 Year 8.17 8.78 61
10 Year 8.11 8.82 72
Source: Thomson Reuters Eikon
Value as on Aug 31,
2018
• Yields on gilt securities increased across all
maturities by up to 11 bps. Highest rise was
seen on 15-year paper while lowest was
seen on 2-year paper.
• Corporate bond yields rose across
maturities in the range of 7 bps to 20 bps.
Highest rise was seen on 1-year paper and
lowest increase was on 3-year paper.
• Spread between AAA corporate bond and
gilt rose across the maturities by up to 16
bps, barring 2-, 10- and 15-year papers
that fell by 5 bps, 1 bps and 3 bps,
respectively.
-2
4
10
6.50
7.50
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 31-Aug-18 24-Aug-18
Yield
in %
Change
in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• The Union cabinet approved an extra 2% hike in Dearness Allowance (DA) and Dearness
Relief (DR). This move will benefit around 1.1 crore Central government employees and
pensioners. It would pinch the exchequer by Rs. 6,112.20 crore per annum for DA and Rs.
4,074.80 crore for DR in 2018-19. The hike will come into effect from Jul 1, 2018.
• The government has put restrictions on bio-fuels exports after imposing similar conditions
on its imports. A licence is needed for both exports and imports of bio-fuels. Bio-fuels
include ethyl alcohol, petroleum oil and oils obtained from bituminous minerals, bio-diesel
and mixtures. Previously, exports of these were allowed without any limitations.
• The Department of Industrial Policy and Promotion (DIPP) does not want foreign direct
investment (FDI) in inventory-based ecommerce. DIPP said there is need for a regulator to
supervise the sector. The department of commerce had planned up to 49% FDI in
inventory-based ecommerce for goods made 100% locally.
• The Securities and Exchange Board of India (SEBI) could allow ‘on tap public issue of
bonds’, according to media reports. ‘Bond tap’ gives companies the flexibility to time the
market, cut cost and reduce paperwork for raising money. It will allow corporates to sell
bonds via stock exchanges directly to investors, including retail investors. Companies could
through bond tap sell any time and as many times during a fiscal after filing a prospectus. A
corporate can plan when to enter the market after filing the tap bond issue prospectus.
Regulatory Updates in India (contd..)
• NITI Aayog will review the progress of standardisation and indigenisation of Metro rail
systems across the country. According to the Ministry of Housing and Urban Affairs, this will
help promote the 'Make-in India' initiative. The ministry has standardised provisions of
rolling stock, telecom systems and signalling for Metro rails.
• The Reserve Bank of India (RBI) plans to review marginal cost of funds based lending rate
(MCLR) norms. The central bank could do away with the mechanism for lending rate
calculation. MCLR was launched less than three years ago. RBI said in its 2017-18 annual
report that it would review MCLR guidelines and subsidiarisation of foreign banks “for the
purpose of fostering competition and re-orienting the banking structure in India.” Bankers
are of the view that this was coming because the system had not reflected the changes in
rates, according to media reports.
• Reserve Bank of India’s newly- appointed director is in favour of adopting a public co-
operative model. He said replacing the public private partnership (PPP) model will balance
development and growth. The director is of the opinion that the PPP model, adopted after
liberalisation in 1991, has not led to the desired impact.
9
Global News/Economy
• A report released by the Conference Board showed that the consumer confidence index in
the U.S. surged to 133.4 in Aug 2018 from an upwardly revised reading of 127.9 in Jul 2018
(127.4 originally reported). The expectations index also rose to 107.6 in Aug 2018 after
falling to 102.4 in the previous month.
• A Commerce Department report showed U.S. economic activity grew modestly more than
estimated initially in the second quarter. According to the report, real gross domestic product
increased 4.2% in the second quarter compared with the earlier reported 4.1% rise.
• A report released by the Commerce Department showed both personal income and
spending in the U.S. increased in Jul 2018 and was in line with market’s expectations.
Personal income rose 0.3% after moving up by 0.4% in Jun 2018. Personal spending grew
0.4% in Jul 2018, similar with the increase in the previous month.
• Flash data from Eurostat showed euro zone inflation slowed unexpectedly in Aug 2018 due
to oil prices but was above the European Central Bank’s target of "below, but close to 2
percent" inflation. Inflation eased to 2% in Aug from 2.1% in Jul 2018.
• Cabinet Office survey showed Japan's consumer confidence deteriorated further in Aug
2018. It came in at the lowest level in a year. The seasonally adjusted consumer confidence
index decreased to 43.3 in Aug from 43.5 in Jul 2018. This is the lowest score since Aug
2017.
10
Global Equity Markets
11
Global Indices
Indices
17-Aug-18
1-Week
Return
YTD
Return
Dow Jones
25,964.8 0.68% 5.04%
Nasdaq 100
7,654.6 2.26% 19.67%
FTSE 100
7,432.4 -1.91% -3.32%
DAX Index
12,364.1 -0.25% -4.29%
Nikkei Average
22,865.2 1.17% 0.44%
Straits Times
3,213.5 0.01% -5.57%
Source: Thomson Reuters Eikon
Value as on Aug 31,
2018
U.S.
• U.S. markets traded higher initially,
driven by positive outcome of the trade
talks between the U.S. and Mexico.
However, gains were restricted later as
the meeting between U.S. and Canada
on a trade deal concluded on Aug 31
without a resolution.
• Buying interest also found support from
the official data showing U.S. economic
activity grew by more than initially
estimated in the second quarter of 2018.
Europe
• European markets remained under pressure amid uncertainty surrounding Brexit and U.S.
trade policy. Investors are expecting a probable disorderly exit of the United Kingdom from
the European Union, which may lead to a new financial crisis in Europe.
Asia
• Majority of the Asian markets saw buying interest on optimism over trade talks between
the U.S. and Canada. The talks were a sign that the three-nation North American Free
Trade Agreement (NAFTA) may preserve. Investors took positive cues from Chinese
official manufacturing PMI for Aug 2018, which came in higher than market expectations.
However, gains were largely restricted by growing U.S.– China trade row.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury bond
rose 2 bps to close at 2.85% from the
previous close of 2.83%.
• U.S. Treasury prices fell initially as fears
of a global trade war abated after the
U.S. and Mexico agreed on an overhaul
of the North America Free Trade
Agreement (NAFTA). Also, fair demand
at auction for $37 billion of 5-year notes
added to the losses.
• However, reports of U.S. President’s
plan to impose tariffs on $200 billion
worth of Chinese goods in Sep 2018
restricted the losses. Losses trimmed
further after Argentina's central bank
raised interest rates 15 percentage
points to 60% and on news that Canada
and the U.S. failed to reach an
agreement on the NAFTA before the
deadline on Aug 31.
2.84
2.87
2.90
27-Aug 28-Aug 29-Aug 30-Aug 31-Aug
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Commodities
Last Closing*
1-Week Ago
Brent Crude($/Barrel)
77.01 73.60
Gold ($/Oz)
1,200.71 1,205.55
Gold (Rs/10 gm)
30,226 29,561
Silver ($/Oz)
14.50 14.80
Silver (Rs/Kg)
37,096 36,640
Source: Thomson Reuters
Eikon *Value as on Aug 31, 2018
Gold
• Gold prices fell as the greenback’s
rebound continued with the Federal
Reserve expected to raise interest
rates. Positive outcome of U.S.-Mexico
trade negotiations added to the losses.
Crude
• Brent Crude prices grew after Energy
Information Administration reported that
U.S. crude inventories declined by 2.6
million barrels in the Aug 24 week.
Further, indication from OPEC that oil
producing countries are maintaining
their compliance to reduce oil
production and output has reduced by
9% in Jul added to the gains.
Baltic Dry Index
• The Baltic Dry Index fell 5.56% on the
back of lower capesize and panamax
activities.
8.70
9.55
10.40
31-Jul-18 10-Aug-18 20-Aug-18 30-Aug-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global
Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
4.63%
-0.40%
-2.03%
31-Aug-18
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency
Last Closing*
1-Wk Ago
US Dollar
70.93 70.14
Pound Sterling
92.35 89.97
Euro
82.84 81.17
100 JPY
63.91 62.98
Source: RBI Figures in INR , *
Value as on Aug 31,
2018
Rupee
• The rupee plummeted to a record low
against the greenback due to month-end
dollar demand from oil importers.
Euro
• Euro fell on concerns over escalating
trade conflict between the U.S. and the
European Union.
Pound
• Pound rose against the U.S. dollar after
the European Union's chief negotiator
indicated an accommodative stance
towards the U.K. on ongoing ‘Brexit’
negotiations.
Yen
• Yen rose marginally after moving in a
range against the U.S. dollar as risk
aversion triggered demand for the safe
haven currency.
9.60
10.10
10.60
31-Jul-18 10-Aug-18 20-Aug-18 30-Aug-18
USD GBP Euro JPY
Source: RBI
Currency
Prices (
in terms of INR)
Rebased to 10
Currency Movement
1.12%
2.65%
2.06%
1.48%
31-Aug-18
15
The Week that was…
27
th
August to 31
st
August
The Week that was (Aug 27 – Aug 31)
16
Date Events
Present
Value
Previous
Value
Monday,
August 27, 2018
•
China Industrial Profits (YoY) (Jul) 16.2% 20.0%
•
Germany IFO Expectations (Aug) 98.4 98.2
Tuesday,
August 28, 2018
•
U.S. Advance Goods Trade Balance (Jul) -
$72.2b
-$67.9b
•
U.S. Consumer Confidence Index (Aug) 133.4 126.6
•
U.S. Wholesale Inventories (MoM) (Jul P) 0.7% 0.1%
Wednesday,
August 29, 2018
•
U.S. Gross Domestic Product Annualized (QoQ) (2Q S) 4.2% 4.1%
•
Japan Consumer Confidence Index (Aug) 43.3 43.5
•
U.S. MBA Mortgage Applications (Aug 24) -1.7% 4.2%
•
U.S. Pending Home Sales (YoY) (Jul) -0.5% -4.0%
•
Japan Retail Trade (YoY) (Jul) 1.5% 1.8%
Thursday,
August 30, 2018
•
Germany Unemployment Change (000's) (Aug) -8K -6k
•
Germany Consumer Price Index (YoY) (Aug P) 2.0% 2.0%
•
U.S. Personal Consumption Expenditure Core (YoY) (Jul) 2.0% 1.9%
•
U.S. Initial Jobless Claims (Aug 25) 213k 210k
•
Japan Jobless Rate (Jul) 2.5% 2.4%
Friday,
August 31, 2018
•
India’s Index of Eight Core Industries (Jul 18) 6.6% 7.6%
•
China Manufacturing PMI (Aug) 51.3 51.2
•
India’s Gross Domestic Product growth (Q1FY19)
8.2% 7.7%
•
Eurozone Consumer Price Index Estimate (YoY) (Aug) 2.0% 2.1%
17
The Week Ahead
3
rd
September to 7
th
September
18
The Week Ahead
Day Event
Monday,
September 3, 2018
•
Japan Nikkei PMI Manufacturing (Aug F)
•
China Caixin PMI Manufacturing (Aug)
•
U.K. Markit PMI Manufacturing s.a. (Aug)
Tuesday,
September 4, 2018
•
U.S. ISM Manufacturing (Aug)
•
U.K. Markit/CIPS UK Construction PMI (Aug)
Wednesday,
September 5, 2018
•
Japan Nikkei PMI Composite (Aug)
•
China Caixin PMI Composite (Aug)
•
Eurozone Retail Sales (YoY) (Jul)
•
U.S. Trade Balance (Jul)
Thursday,
September 6, 2018
•
U.S. ISM Non-Manufacturing/Services Composite (Aug)
•
German Factory Orders n.s.a. (YoY) (Jul)
•
U.S. ADP Employment Change (Aug)
•
U.S. Factory Orders (Jul)
Friday,
September 7, 2018
•
Japan Real Cash Earnings (YoY) (Jul)
•
German Industrial Production n.s.a. and w.d.a. (YoY) (Jul)
•
U.S. Change in Non-farm Payrolls (Aug)
•
U.S. Unemployment Rate (Aug)
•
Japan Leading Index CI (Jul P)
Disclaimer
The information herein is meant only for general reading purposes and contains all factual and statistical information pertaining to Industry and markets which
have been obtained from independent third party sources and which are deemed to be reliable. The information provided cannot be considered as guidelines,
recommendations or as a professional guide for the readers. It may be noted that since Reliance Nippon Life Asset Management Company Limited (RNAM) has not
independently verified the accuracy or authenticity of such information or data, or for that matter the reasonableness of the assumptions upon which such data
and information has been processed or arrive data; RNAM does not in any manner assures the accuracy or authenticity of such data and information. Some of the
statements & assertions contained in these materials may reflect RNAM’s views or opinions, which in turn may have been formed on the basis of such data or
information. The Sponsor(s), the Investment Manager, the Trustee or any of their respective directors, employees, affiliates or representatives do not assume any
responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such data or information. Whilst no action has been solicited based upon the
information provided herein, due care has been taken to ensure that the facts are accurate and opinions given are fair and reasonable, to the extent possible. This
information is not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument. Recipients of this information should rely
on information/data arising out of their own investigations. Before making any investments, the readers are advised to seek independent professional advice,
verify the contents in order to arrive at an informed investment decision. None of the Sponsor(s), the Investment Manager, the Trustee, their respective directors,
employees, affiliates or representatives shall be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages,
including on account of lost profits arising from the information contained in this material.
All information contained in this document has been obtained by ICRA Online Limited from sources believed by it to be accurate and reliable. Although reasonable
care has been taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any kind, and ICRA Online Limited or
its affiliates or group companies and its respective directors, officers, or employees in particular, makes no representation or warranty, express or implied, as to the
accuracy, suitability, reliability, timelines or completeness of any such information. All information contained herein must be construed solely as statements of
opinion, and ICRA Online Limited, or its affiliates or group companies and its respective directors, officers, or employees shall not be liable for any losses or injury,
liability or damage of any kind incurred from and arising out of any use of this document or its contents in any manner, whatsoever. Opinions expressed in this
document are not the opinions of our holding company, ICRA Limited (ICRA), and should not be construed as any indication of credit rating or grading of ICRA for
any instruments that have been issued or are to be issued by any entity.
Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.
19
Thank you for
your time.