News U Can Use
February 23, 2018
The Week that was…
19
th
February to 23
rd
February
2
Indian Economy
• Minutes of the latest Monetary Policy Committee (MPC) meeting held on Feb 7 showed that
policymakers were concerned about rising domestic inflationary pressures in the country.
According to the Reserve Bank of India governor, the economic recovery of the country is at a
nascent stage and hence underlined the importance of a cautious approach at this juncture.
• The latest quarterly survey on employment in eight key sectors conducted by the Labour
Bureau showed that there has been an addition of only 64,000 jobs across sectors during the
period between Apr and Jun 2017. Of the 64,000 jobs that were added, 51,000 went to
women and 13,000 to men. On the contrary, the manufacturing sector lost 87,000 jobs.
Education was the biggest job creator as it added 99,000 jobs during the period under review.
• Data from the Data of Industrial Policy & Promotion showed that foreign direct investment
(FDI) in the country grew 0.27% to $35.94 billion during the period from Apr to Dec of 2017.
The FDI inflows were $35.84 billion during the same period of the previous year. The major
sectors which attracted FDI during the period are services ($4.62 billion), telecommunications
($6.14 billion), computer software and hardware ($5.15 billion) and construction activities
($2.54 billion).
• The Union cabinet approved the methodology for auctioning coal mines to private companies.
The objective of the move is to open coal mining for private players, both Indian and foreign.
The move is expected to boost competition that would help improve efficiency for all the
players. The quality of the coal is also expected to improve which would help subsequently
bring down imports.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 23-Feb-18 1 Week Return YTD Return
S&P BSE Sensex 34142.15 0.39% 0.97%
Nifty 50 10491.05 0.37% 0.53%
S&P BSE Mid-Cap 16562.03 -0.24% -7.14%
S&P BSE Small-Cap 17996.22 -0.22% -6.66%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
19-Feb-18 392 1415 0.28
20-Feb-18 792 965 0.82
21-Feb-18 673 1097 0.61
22-Feb-18 577 1184 0.49
23-Feb-18 1361 435 3.13
Source: NSE
• Indian equity markets closed on a flat
note after gaining in the beginning of
the week. Gains in the banking sector
as stocks of a major private sector
commercial bank increased boosted
indices. The bank’s board approved
proposal to buy 26% stake in a full-
service investment bank. Meanwhile,
decline in U.S. government debt yields
from multiyear highs helped ease
investor worries over inflation and
interest rates. Also, gains in IT,
banking, FMCG and metal stocks lifted
markets.
• Gains were capped as investors
remained wary of the long-term impact
of a major public-sector bank’s
fraudulent transaction case. This has
weighed on other public-sector banks
too as some of them had exposure to
the banking scam. Also, inflation
concerns muted buying interest.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
23.66 25.75 39.33 113.65
P/B
3.15 3.54 2.83 2.55
Dividend Yield
1.16 1.13 0.88 0.64
Source: BSE, NSE Value as on Feb
23, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing 1-Wk 1-Mth
S&P BSE Auto
24,327.53 -1.80% -6.96%
S&P BSE Bankex
28,535.80 0.49% -8.30%
S&P BSE CD
20,968.96 0.04% -11.44%
S&P BSE CG
18,890.97 -1.61% -8.71%
S&P BSE FMCG
10,562.66 0.24% -3.42%
S&P BSE HC
14,225.36 -0.30% -5.83%
S&P BSE IT
12,504.85 3.35% -1.07%
S&P BSE Metal
15,327.90 1.35% -2.92%
S&P BSE Oil & Gas
15,382.45 -1.06% -5.48%
Source: Thomson Reuters
Eikon Value as on Feb 23, 2018
• On the BSE sectoral front, indices closed on
a mixed note. S&P BSE Information
Technology (3.4%) stood as the major
gainer followed by S&P BSE Teck (2.9%),
S&P BSE Metal (1.3%), and S&P BSE
Bankex (0.5%). S&P BSE FMCG and S&P
BSE Consumer Durables grew 0.2% and
0.04%, respectively.
• Metal stocks gained after a major global
credit rating agency revised its steel industry
outlook to stable for FY19 from negative in
FY18 owing to healthy domestic and global
demand growth along with ongoing capacity
rationalisation in China.
Indian Derivatives Market Review
• Nifty Feb 2018 Futures settled at spot closing of 10,382.70 points on Feb 22. Nifty Mar 2018
Futures were at 10,504.55 points, a premium of 13.50 points, over the spot closing of
10,491.05. The turnover on NSE’s Futures and Options segment stood at Rs. 31.23 lakh
crore against Rs. 33.38 lakh crore to Feb 16.
• The Put-Call ratio stood at 0.83 compared with the previous week’s close of 0.82.
• The Nifty Put-Call ratio stood at 1.43 compared with the previous week’s close of 1.07.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
5.90 5.96 5.89 5.92
91 Day T-Bill
6.32 6.34 6.38 6.13
7.80% 2021, (5 Yr GOI)
7.16 7.10 7.02 6.44
7.17% 2028, (10 Yr GOI)
7.67 7.58 7.25 --
Source: Thomson Reuters
Eikon
Value as on Feb 23, 2018
• Bond yields rose as banks sold
domestic papers amid higher U.S.
Treasury yields. Fresh supply of
papers through an auction of state
government debt also weighed on
investor’s sentiment.
• Yields rose further as minutes of the
latest Monetary Policy Committee’s
meeting showed that members were
concerned about rising inflation,
thereby increasing the possibility of a
rate hike in near term. However, losses
were restricted as investors resorted to
value buying in the later part of the
week.
• Yield on the 10-year benchmark paper
(7.17% GS 2028) rose 9 bps to close
at 7.67% from the previous week’s
close of 7.58% after trading in a range
of 7.60% to 7.82%.
7.60
7.70
7.80
20-Feb 21-Feb 22-Feb 23-Feb
Yield in %
10 -Yr Benchmark Bond ( % )
Source: CCIL
Domestic Debt Market (Spread Analysis)
7
Maturity
G-Sec Yield
(%)
Corporate Yield
(%)
Spread
bps
1 Year 6.70 7.76 106
3 Year 7.27 7.89 62
5 Year 7.62 7.98 36
10 Year 7.93 8.24 31
Source: Thomson Reuters
Eikon Value as on Feb 23, 2018
• Yields on gilt securities rose across all
maturities in the range of 5 to 13 bps,
barring 1-year paper that stood
unchanged. The maximum increase was
witnessed on 15-year paper and minimum
on 19- and 24-year papers.
• Corporate bond yields increased in the
range of 10 to 15 bps across all
maturities. The maximum increase was
witnessed on 2-year paper.
• Spread between AAA corporate bond and
gilt expanded on 1 to 8 years’ maturities
by up to 16 bps and contracted by up to 3
bps on 9-, 10- and 15-year papers.
-5
0
5
10
6.15
6.85
7.55
8.25
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-Feb-18 16-Feb-18
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• Securities and Exchange Board of India (SEBI) has allowed firms to meet norms via open
market sale and Qualified Institutional Placements (QIPs). This comes in a bid to further
facilitate listed companies to comply with the Minimum Public Shareholding (MPS)
requirements. SEBI stated that the promoters or promoter group can sell up to 2% of the total
paid-up equity share capital of the listed company in the open market. However, the market
regulator stated that such a sale will be subjected to up to five times the average monthly
trading volume of the stock.
• SEBI has given approval to National Stock Exchange and Bombay Stock Exchange to trade in
cross currency derivatives. The move is expected to help increase liquidity in the market and
thereby expand scope for currency futures and options market.
• The Pension Fund Regulatory and Development Authority is considering increasing the limit on
equity investments for private sector subscribers of National Pension System (NPS) from a
maximum of 50% to 75% of one's investment. The objective of the move is to take advantage
of the potential of domestic equity market that will help in generating higher inflation-adjusted
return over other asset classes in the long term.
Regulatory Updates in India (contd..)
• The Union cabinet gave its approval to introduce the Chit Funds (Amendment) Bill, 2018 in
Parliament. The objective of the move is to help bring about orderly growth of the chit funds
sector by eliminating bottlenecks faced by the industry and provide more financial products to
investors.
• The Reserve Bank of India has put in place a team which will review bad-loan estimates and
systemic gaps. The move comes as the central bank noted significant gaps in asset
classification and provisioning in the credit portfolio of banks as well as the increasing number
of frauds in the Indian banking system. The central bank has also asked banks to strengthen
the SWIFT (Society for Worldwide Interbank Financial Telecommunication) operating
environment to prevent manipulation of the same.
• SEBI is planning to tighten norms governing Alternative Investment Funds (AIFs). SEBI is also
planning to conduct regulatory audits on the AIFs for examining the fund sourcing
arrangements in order to ensure that the present regulations are not violated. The objective of
the move is to monitor the source of funding and its end usage.
9
Global News/Economy
• According to the minutes of the U.S. Federal Reserve’s (Fed) most-recent meeting, the bank
still plans to raise interest rates three times in 2018. The first of these modest rate hikes is
expected to be done in Mar 2018. Fed had raised its projection for inflation from anemic levels
in the recent meeting. Also, it had stated that core personal consumption expenditure index
would increase notably faster in 2018 as against rate of 1.5% in Dec 2017.
• Survey results from the Mannheim-based think tank ZEW showed that Germany's economic
confidence declined less-than-expected in Jan 2018. The ZEW Indicator of Economic
Sentiment dropped to 17.8 points in Feb 2018 from 20.4 in Jan 2018. The score was above the
expected level of 16.0. The current conditions index fell to 92.3 from 95.2 in the previous month.
The economic sentiment index for the euro area dropped 2.5 points to 29.3 in Feb 2018.
• A second estimate report from the Office for National Statistics showed that U.K.’s gross
domestic product grew 0.4% sequentially as against 0.5% in the third quarter. Also, it came
slightly lower than initial expectations due to a downward revision to production output. The
economy grew 1.4% YoY in the fourth quarter as against initial expectation of 1.5%.
• A flash report from the IHS Markit showed that Japan’s Nikkei manufacturing Purchasing
Managers' Index declined to 54.0 in Feb 2018 as against 54.8 in Jan 2018. Both output and
new orders expanded at the slowest pace since Oct 2017. Meanwhile, employment growth
accelerated to an 11-year high.
10
Global Equity Markets
11
Global Indices
Indices
23-Feb-18
1-Week
Return
YTD
Return
Dow Jones
25,309.99 0.36% 1.96%
Nasdaq 100
6,896.60 1.86% 5.92%
FTSE 100
7,244.41 -0.69% -5.28%
DAX Index
12,483.79 0.26% -3.01%
Nikkei Average
21,892.78 0.79% -6.86%
Straits Times
3,533.22 2.61% 3.83%
Source: Thomson Reuters Eikon
Value as on Feb 23, 2018
U.S.
• U.S. markets initially fell with investor
sentiment dented by the recent volatility
and uncertainty around the near-term
outlook for the markets.
• The minutes of U.S. Federal Reserve’s
latest policy meeting were unable to
generate buying interest. However, at
the end losses reversed and market
gained after the U.S. treasury yields
went below the four year high level.
Europe
• European markets largely rose with buying interest supported by some encouraging
corporate earnings reports. Nonetheless, the minutes of Fed’s latest policy meeting and
weaker than expected German business confidence data restricted the gains. U.K.
markets remained weak as official data showed that the nation’s economy grew lower than
estimated in the fourth quarter, largely due to a downward revision of production output.
Asia
• Asian markets rose albeit lower trading volume in Hang Seng and Chinese markets owing
to public holidays. Japanese markets gained on the back of encouraging trade deficit data
for Jan 2018. Further, weakness in yen against the U.S. dollar helped offset flash Japan's
manufacturing data that grew at a slightly slower pace in Feb.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury
bond fell 1 bps to close at 2.87% from
the previous week’s close of 2.88%.
• U.S. Treasury prices rose as
uncertainty due to recent stock market
volatility helped boost demand for the
bonds. Investors preferred the safe-
haven route amid volatility in the
direction of stock movement.
• However, gains were capped as
minutes of the U.S. Federal Reserve’
latest policy meeting affirmed
expectations of further rate increases
in 2018, with economic growth seen
accelerating.
2.84
2.88
2.92
2.96
20-Feb 21-Feb 22-Feb 23-Feb
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Last Closing 1-Week Ago
66.98 63.54
1,328.87 1,347.78
30,390 30,693
16.54 16.67
38,343 38,709
Source: Thomson Reuters
Eikon Value as on Feb 23, 2018
Gold
• Gold prices fell over the week as
investors remained cautious of probable
rise in U.S. fiscal deficit following the
recent announcement of infrastructure
spending and lowering corporate tax
rate. Expectations of economic growth
and better than expected U.S.
homebuilding data also raised investors’
appetite for riskier asset.
Crude
• Brent crude prices surged after U.S.
Energy Information Administration
reported that crude oil inventories fell by
1.6 million barrels in the week ended
Feb 16. Prices got support following the
shutdown of the El Feel oilfield in Libya.
Baltic Dry Index
• The Baltic Dry Index gained on the back
of higher capesize and panamax
activities.
8.50
9.00
9.50
10.00
10.50
24-Jan-18 3-Feb-18 13-Feb-18 23-Feb-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
5.41%
-1.40%
-0.79%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing 1-Wk Ago
US Dollar
64.82 63.91
Pound Sterling
90.40 90.31
EURO
79.76 80.17
100 JPY
60.59 60.46
Source: RBI Figures in INR , Value as on Feb 23, 2018
Rupee
• The rupee weakened against the
greenback amid reports that offshore
borrowing norms could be tightened for
domestic firms.
Euro
• The euro weakened against the
greenback as market participants resorted
to bargain hunting and bought dollar at
lower price levels.
Pound
• The pound dropped against the
greenback after Britain's unemployment
rate rose unexpectedly for the first time in
almost two years in the three months to
Dec 2017.
Yen
• The yen fell against the greenback as
market participants resorted to bargain
hunting and bought dollar at lower price
levels.
9.60
10.00
10.40
10.80
24-Jan-18 3-Feb-18 13-Feb-18 23-Feb-18
USD GBP Euro JPY
Source: RBI
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
1.43%
0.10%
0.22%
-0.50%
15
The Week that was…
19
th
February to 23
rd
February
The Week that was (Feb 19 – Feb 23)
16
Date Events Present Value Previous Value
Monday,
Feb 19, 2018
• U.K. Rightmove House Prices (YoY) (FEB) 1.50% 1.10%
Tuesday,
Feb 20, 2018
• Germany ZEW Survey Expectations (FEB) 17.80 20.40
• Eurozone Consumer Confidence (FEB A) 0.10 1.40
Wednesday,
Feb 21, 2018
• Japan Nikkei Manufacturing PMI (FEB P) 54.00 54.80
• Japan All Industry Activity Index (MoM) (DEC) 0.50% 1.00%
• Germany Markit/BME Composite PMI (FEB P) 57.40 59.00
• U.K. Public Sector Net Borrowing (JAN) -11.6b 0.3b
• U.K. Jobless Claims Change (JAN) -7.2k 6.2k
• U.S. Markit Composite PMI (FEB P) 55.90 53.80
• Eurozone Markit Composite PMI (FEB P) 57.50 58.80
Thursday,
Feb 22, 2018
• U.K. Gross Domestic Product (YoY) (4Q P) 1.40% 1.50%
• Japan National Consumer Price Index (YoY) (JAN) 1.40% 1.00%
• Germany IFO Business Climate (FEB) 115.40 117.60
• U.S. Leading Index (JAN) 1.00% 0.60%
• U.S. Initial Jobless Claims (17 FEB) 222k 229k
Friday,
Feb 23, 2018
• Eurozone Consumer Price Index (YoY) (JAN F) 1.30% 1.40%
• Germany Gross Domestic Product (YoY) (4Q F) 2.30% 2.20%
17
The Week Ahead
26
th
February to 02
nd
March
18
The Week Ahead
Day Event
Monday,
February 26, 2018
• U.K. BBA Loans for House Purchase (JAN)
Tuesday,
February 27, 2018
• Germany Consumer Price Index (YoY) (FEB P)
• U.S. Durable Goods Orders (JAN P)
• U.S. Consumer Confidence Index (FEB)
• Japan’s Retail Trade (YoY) (JAN)
• Germany Retail Sales (YoY) (JAN)
Wednesday,
February 28, 2018
• India’s GDP growth data for quarter ended Dec
• China Manufacturing PMI (FEB)
• Germany Unemployment Claims Rate (FEB)
• Eurozone Consumer Price Index Estimate (YoY) (FEB)
• U.S. Gross Domestic Product Price Index (4Q S)
Thursday,
March 01, 2018
• U.S. ISM Manufacturing (FEB)
• U.S. ISM Employment (FEB)
• China Caixin Manufacturing PMI (FEB)
• Japan Consumer Confidence Index (FEB)
Friday,
March 02, 2018
• U.K. Markit/CIPS Construction PMI (FEB)
• U.S. University Michigan Sentiment (FEB F)
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19
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