News U Can Use

February 01, 2019

The Week that was…

January to 01

February

Indian Economy

• The government in the Union Budget pegged the fiscal deficit for both FY19 (revised

estimates) and FY20 (budget estimates) at 3.4% of GDP which is slightly higher than the

targeted 3.3% of GDP for FY19 and 3.1% of GDP for FY20. However, the government

projected fiscal deficit at 3.0% of GDP for both FY21 and FY22 as it is of the view that

India’s debt to GDP ratio would be bought down to 40% by FY25 from 46.5% in FY18.

• The Nikkei India Manufacturing Purchasing Managers' Index (PMI) rose to 53.9 in Jan

2019 from 53.2 in Dec 2018, indicating stronger improvement in the health of the goods

producing sector. The growth came as companies continued to increase production and

employment on the back of fastest rise in factory orders since Dec 2017. Favourable

economic conditions, strengthening demand and sales growth aided the growth in Jan. A

reading of over 50 indicates expansion and otherwise contraction.

• According to the Ministry of Commerce and Industry, India’s core output (eight sectors)

grew 2.6% in Dec 2018, slower than 3.5% in Nov 2018. Slower growth was on account of

negative growth in crude oil, refinery products and fertilisers. On the other hand, coal,

natural gas and steel output increased 0.9%, 4.2% and 13.2%, respectively. Cumulative

growth during Apr-Dec of 2018 stood at 4.8%, better than 3.9% in the corresponding

period of the previous financial year.

• According to the assessment by the National Sample Survey Office conducted between

Jul 2017-Jun 2018, India's unemployment rate reached 6.1% during 2017-2018, which is

45-year high (since 1972-73). The report also showed that unemployment stood at 7.8% in

urban areas compared with 5.3% in rural areas.

Indian Equity Market

Domestic Equity Market Indices

Indices 01-Feb-19 1 Week Return YTD Return

S&P BSE Sensex 36,469.43 1.23% 1.11%

Nifty 50 10,893.65 1.05% 0.29%

S&P BSE Mid-Cap 14,641.38 -0.28% -5.16%

S&P BSE Small-Cap 13,950.45 -0.36% -5.14%

Source: MFI Explorer

NSE Advance/Decline Ratio

Date Advances Declines

Advance/Decline Ratio

28-Jan-19 352 1,481 0.24

29-Jan-19 806 985 0.82

30-Jan-19 984 811 1.21

31-Jan-19 1,024 760 1.35

01-Feb-19 819 962 0.85

Source: NSE

• Indian equity markets initially

remained subdued as a number of

events – the U.S. Federal Reserve’s

(Fed) FOMC meeting, U.S.-China

trade talks, a key Brexit vote in U.K.

parliament, Jan 31’s F&O expiry and

the interim budget – kept investors

anxious.

• Although, sentiment buoyed post the

announcement of the interim budget

2019-20. The budget laid out

measures to boost domestic

consumption through income tax

reliefs for almost 30 million low-

income taxpayers and 120 million

marginal farmers. It also gave sops to

several sectors such as automobiles,

consumer staples & durables, real

estate, building materials, home

improvement and retail-focused

banks & financials.

Ratios

S&P BSE

Sensex

Nifty 50

S&P BSE

Mid Cap

S&P BSE

Small Cap

P/E

23.70 26.40 31.19 -101.78

P/B

3.03 3.39 2.50 2.07

Dividend Yield

1.17 1.24 1.01 0.93

Source: BSE, NSE Value as on Feb

01, 2019

Indian Equity Market (contd.)

Sectoral Indices

Indices

Last Returns (in %)

Closing* 1-Wk 1-Mth

S&P BSE Auto

18,985.17 1.94% -8.40%

S&P BSE Bankex

30,412.15 0.11% -0.66%

S&P BSE CD

21,412.99 2.20% 3.02%

S&P BSE CG

17,462.98 1.68% -7.40%

S&P BSE FMCG

11,748.28 0.78% -0.42%

S&P BSE HC

13,997.30 0.35% 0.26%

S&P BSE IT

15,433.98 4.39% 9.13%

S&P BSE Metal

10,542.63 -1.80% -10.29%

S&P BSE Oil & Gas

13,633.78 -0.95% -1.31%

Source: Thomson Reuters Eikon

*Value as on Feb 01, 2019

• On the BSE sectoral front, most of the

indices closed in the green barring S&P

BSE Metal (-1.80%) and S&P BSE Oil &

Gas (-0.95%). S&P BSE IT (4.39%) was

the major gainer. S&P BSE CD was up

2.20% and S&P BSE Auto was up 1.94%

during the week.

• Consumer Goods sector is expected to be

benefitted with reduced GST in most of

daily use items for poor and middle class

as mentioned by the stand-in Finance

Minister.

Indian Derivatives Market Review

• Nifty Jan 2019 Futures settled at spot closing of 10,830.95. Nifty Feb 2019 Futures were at

10,914.05, a premium of 20.40 points, over the spot closing of 10,893.65. The total

turnover on NSE’s Futures and Options segment for the week stood at Rs. 57.52 lakh

crore as against Rs. 35.67 lakh crore for the week to Jan 25.

• The Put-Call ratio stood at 0.86 compared with the previous week’s close of 0.94.

• The Nifty Put-Call ratio stood at 1.63 against the previous week’s close of 1.37.

Domestic Debt Market

Debt Indicators

(%)

Current

Value

1-Wk

Ago

1-Mth

Ago

6-Mth

Ago

Call Rate

6.43 6.41 6.34 6.17

91 Day T-Bill

6.55 6.58 6.67 6.71

7.80% 2021, (5 Yr GOI)

6.92 7.02 7.26 7.60

7.17% 2028, (10 Yr GOI)

7.61 7.55 7.42 7.70

Source: Thomson Reuters Eikon

Value as on Feb 01, 2019

• Bond yield fell initially following

indication by the U.S. Federal

Reserve on taking a patient approach

on future rate hike decisions.

• However, the trend reversed and

yields rose after the government in

the Union Budget for FY20

announced increase in its borrowing

target for the current financial year

and laid its expectation of a higher

than expected fiscal deficit for the

next financial year.

• Yield on the 10-year benchmark

paper (7.17% GS 2028) rose 6 bps to

close at 7.61% from the last week’s

close at 7.55%, after trading in a

range of 7.43% to 7.65%.

7.40

7.52

7.64

28-Jan 29-Jan 30-Jan 31-Jan 1-Feb

Yield in %

10 -Yr Benchmark Bond ( % )

Source: CCIL

Domestic Debt Market (Spread Analysis)

Maturity

G-Sec Yield

(%)

Corporate Yield

(%)

Spread

bps

1 Year 6.94 8.38 144

3 Year 7.13 8.54 141

5 Year 7.43 8.49 106

10 Year 7.69 8.61 92

Source: Thomson Reuters Eikon Value as on Feb 01, 2019

• Yields on gilt securities increased across

maturities by up to 8 bps barring 1-year

and 15-year papers that fell 4 bps and 6

bps, respectively, and 19-year paper that

stood steady.

• Corporate bond yields increased across

maturities in the range of 2 bps to 9 bps

barring 1-year paper that fell by 11 bps.

• Difference in spread between AAA

corporate bond and gilt expanded across

the maturities in the range of 2 bps to 9

bps barring 1-, 5-, 7- and 10-year paper

that contracted by up to 6 bps.

-5

6.50

7.00

7.50

8.00

3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs

India Yield Curve Shift (%) (W-o-W)

Change in bps 01-Feb-19 25-Jan-19

Yield in %

Change in bps

Source: Thomson Reuters Eikon

Regulatory Updates in India

• The government while unveiling the Union Budget announced a slew of measures for the

distressed farm sector. The government launched a historic programme namely “Pradhan

Mantri Kisan Samman Nidhi (PM KISAN)” while unveiling the Union Budget. Under this

programme, vulnerable landholding farmer families, having cultivable land up to 2 hectares,

will be provided direct income support at the rate of Rs. 6,000 per year. The government

proposed an outlay of Rs. 75,000 crore for PM-KISAN for the FY20.

• The government announced the facility of extension of Kisan Credit Card scheme to Animal

Husbandry and Fisheries farmers. The government proposed to provide the benefit of 2%

interest subvention to the farmers pursuing the activities of animal husbandry and fisheries,

who avail loan through Kisan Credit Card. Further, in case of timely repayment of loan, they

will also get an additional 3% interest subvention.

• The government in the Union Budget proposed to launch a mega pension yojana namely

'Pradhan Mantri Shram-Yogi Maandhan' for the unorganised sector workers with monthly

income up to Rs. 15,000. A sum of Rs. 500 crore has been allocated for the Scheme.

Additional funds will be provided as needed. The scheme will also be implemented from the

current year.

• The government in the Union Budget allocated Rs. 64,587 crore for railways in 2019-20

(BE). The Operating Ratio is expected to improve from 98.4% in 2017-18 to 96.2% in 2018-

19 (RE) and further to 95% in 2019-20 (BE). Allocation for defence has also surpassed Rs.

3,00,000 crore for the first time in 2019-20.

Regulatory Updates in India (contd..)

• The government in the Union Budget informed that tax collection has increased significantly

from Rs. 6.38 Lakh crore in 2013-14 to almost Rs. 12 lakh crore this year. Number of tax

payers increased from 3.79 crore to 6.85 crore during the period. For A/Y 2018-19, 99.54%

of income tax returns were accepted as filed.

• Exemptions from Goods and Services Tax (GST) for small businesses in the Union Budget

has been doubled from Rs. 20 lakh to Rs. 40 lakh. Small businesses having turnover up to

Rs. 1.5 crore have been given an attractive composition scheme wherein they pay only 1%

flat rate and have to file one annual return only. Small service providers with turnover upto

Rs. 50 lakhs can now opt for composition scheme and pay GST at 6% instead of 18%.

Businesses comprising over 90% of GST payers will be allowed to file quarterly return.

• Central Public Sector Enterprises (CPSEs) will implement the 10% reservation quota

announced recently for economically weaker sections in all direct recruitment vacancies

from Feb 1. There are 339 CPSEs employing 10.88 lakh people, excluding casual and

contractual workers, in 2017-18 compared with 11.55 lakh in the previous fiscal. An order

regarding the implementation of the reservation was issued by the Department of Public

Sector Enterprises.

Global News/Economy

• The U.S. Federal Reserve (Fed) kept interest rates on hold as expected as it decided to

maintain the target range for the federal funds rate in the range of 2.25%-2.50%.

Additionally, the U.S. Fed taking stock of the present global economic and financial

developments and subdued inflationary pressures added that it will be patient with respect to

increase in interest rates going forward. The central bank further stated it still expects a

sustained expansion of economic activity, strong labour market conditions, and inflation

nearing its 2% objective mark.

• According to a report by the Labor Department, U.S. non-farm payroll employment rose

more than expected by 304,000 jobs in Jan 2019 as against downwardly revised of 222,000

jobs in Dec 2018. However, the unemployment rate unexpectedly inched up 4.0% in Jan

2019 from 3.9% in Dec 2018.

• According to a preliminary report from Eurostat, eurozone’s gross domestic product (GDP)

rose 0.2% in the fourth quarter 2018 as against the third quarter 2019. GDP grew 1.2% YoY

in the fourth quarter as against an increase of 1.6% in third quarter of 2018. The risks faced

by eurozone mainly in the second half of 2018 included trade tensions, troubles in the

German automobile industry, and the uncertainties surrounding Brexit.

• A report from the National Bureau of Statistics showed that China’s manufacturing

Purchasing Managers’ Index (PMI) came in at 49.5 in Jan 2019 as against a score of 49.4 in

Dec 2018. China’s non-manufacturing PMI came in at 54.7 in Jan 2019 as against 53.8 in

Dec 2018.

Global Equity Markets

Global Indices

Indices

01-Feb-19

1-Week

Return

YTD

Return

Dow Jones

25,063.89 1.32% 7.44%

Nasdaq 100

6,875.52 1.30% 8.62%

FTSE 100

7,020.22 3.10% 4.34%

DAX Index

11,180.66 -0.90% 5.89%

Nikkei Average

20,788.39 0.07% 3.87%

Straits Times

3,188.68 -0.42% 3.91%

Source: Thomson Reuters Eikon

Value as on Feb 01, 2019

U.S.

• U.S. markets edged higher during the

week with investors taking positive cues

from the U.S. Federal Reserve chief’s

decision to leave interest rates

unchanged. He also indicated that the

central bank will remain patient

regarding future rate hikes. Buying

interest found additional support from

the Labour Department report showing

stronger than expected jobs growth in

Jan 2019.

Europe

• Majority of the European markets ended the week on a positive note despite lingering

uncertainty over Brexit. In the latest development, the members of the Parliament have

voted against a proposal to delay Brexit in order to prevent the U.K. leaving without a deal.

Market sentiment was driven by the dovish stance of the U.S. Fed on future interest rate

hike.

Asia

• Asian markets largely remained positive amid optimism about U.S.-China trade talks.

Nonetheless, gains were restricted by weak manufacturing data from China which

renewed concerns over prolonged economic slowdown. Japanese markets finished

marginally higher as investors digested mixed economic readings.

Global Debt (U.S.)

• Yields on the 10-year U.S. Treasuries

fell 6 bps to close at 2.69% from the

previous close of 2.75%.

• U.S. Treasury prices grew after U.S.

Federal Reserve held interest rates

steady and stated that it would be

patient in raising interest rates in 2019

amid rising uncertainty about the U.S.

economic outlook. Disappointing

Chicago Purchasing Managers’ Index

for Jan 2019 and surge in initial jobless

claims for the week ended Jan 26, 2019

boosted the safe haven appeal of the

U.S. Treasuries. Strong demand for new

debt during the auction also added to

the gains.

• However, more than expected growth in

ADP’s U.S. private sector employment

and strong non-farm payroll

employment data for Jan 2019,

restricted the gains.

2.59

2.66

2.72

2.79

28-Jan 29-Jan 30-Jan 31-Jan 1-Feb

US 10-Year Treasury Yield Movement

Source: Thomson Reuters Eikon

Commodities Market

Performance of various commodities

Commodities

Last Closing* 1-Week Ago

Brent Crude($/Barrel) 62.30 61.93

Gold ($/Oz) 1,317.93 1,303.14

Gold (Rs/10 gm) 33,262 32,303

Silver ($/Oz) 15.91 15.74

Silver (Rs/Kg) 40,439 38,826

Source: Thomson Reuters Eikon *Value as on Feb 01, 2019

Gold

• Gold prices increased as dollar

remained under pressure after the U.S.

Federal Reserve kept rates on hold and

stated that it would be patient with

respect to rate hikes in 2019. Fall in

Chinese industrial profits for Dec 2018

and European Central Bank’s warning

regarding a slowdown in the euro zone,

further boosted prices.

Brent Crude

• Brent crude prices moved up following

U.S. sanction on Venezuela's state-

owned company to put the current

president under pressure and surrender

his power to the rival.

Baltic Dry Index

• The Baltic Dry Index fell on the back of

lower capesize and panamax activities.

9.50

10.00

10.50

11.00

11.50

12.00

12.50

1-Jan-19 16-Jan-19 31-Jan-19

Global Commodity Movement

Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)

Global Commodity Prices

Rebased to 10

Source: Thomson Reuters Eikon

0.60%

1.13%

1.06%

1-Feb-19

Currencies Markets

Movement of Rupee vs Other Currencies

Currency Last Closing* 1-Wk Ago

US Dollar

71.11 71.11

Pound Sterling

93.17 93.24

EURO

81.34 80.50

100 JPY

65.31 64.74

Source: RBI Figures in INR , *Value as on Feb 01, 2019

Rupee

• The Indian rupee eased on worries of

fiscal slippage raising tension over

foreign fund outflow. This wiped off the

gains from the U.S. Fed cautious stance

on future interest rate hikes.

Euro

• Euro gained against the U.S. dollar after

the U.S. Fed in its policy meeting

remained cautious on its outlook for the

economy and future rate hikes.

Pound

• Pound fell against the greenback after

British lawmakers voted against a

proposal which could have given

parliament the power to delay Brexit.

Yen

• Yen rose marginally against the

greenback after the U.S. Fed remained

cautious on future rate hikes. However,

gains almost reversed following strong

U.S. non-farm payroll data in Jan 2019.

9.80

10.00

10.20

10.40

10.60

1-Jan-19 16-Jan-19 31-Jan-19

USD GBP Euro JPY

Source: RBI

Currency Prices ( in terms of INR)

Rebased to 10

Currency Movement

0.01%

-0.08%

1.05%

0.88%

1-Feb-19

The Week that was…

January to 01

February

The Week that was (Jan 28 – Feb 01)

Date Events

Present

Value

Monday,

January 28, 2019

• Eurozone M3 Money Supply (YoY) (Dec) 4.1% 3.7%

Tuesday,

January 29, 2019

• U.S. Consumer Confidence Index (Jan) 120.2 126.6

• U.S. S&P/Case-Shiller US Home Price Index (YoY) (Nov) 5.2% 5.3%

• Japan Retail Trade (YoY) (Dec) 1.3% 1.4%

Wednesday,

January 30, 2019

• Japan Consumer Confidence Index (Jan) 41.9 42.7

• German GfK Consumer Confidence (Feb) 10.8 10.4

• German Consumer Price Index (YoY) (Jan P) 1.4% 1.7%

• U.S. FOMC Rate Decision 2.5% 2.5%

• U.S. Pending Home Sales (YoY) (Dec) -9.5% -7.8%

Thursday,

January 31, 2019

• China Manufacturing PMI (Jan) 49.5 49.4

• China Non-Manufacturing PMI (Jan) 54.7 53.8

• German Unemployment Change (000's) (Jan) -2K -14k

• Eurozone Gross Domestic Product s.a. (YoY) (4Q A) 1.2% 1.6%

• Japan Jobless Rate (Dec) 2.4% 2.5%

Friday,

February 01, 2019

• Eurozone Consumer Price Index Estimate (YoY) (Jan) 1.4% 1.6%

• India Nikkei Manufacturing PMI (Jan)

53.9 53.2

• U.S. Change in Non-farm Payrolls (Jan) 304K 312k

• U.S. Unemployment Rate (Jan) 4.0% 3.9%

• U.S. ISM Manufacturing (Jan) 56.6 54.1

The Week Ahead

February to 08

February

The Week Ahead

Day Event

Monday,

February 04, 2019

• China Caixin PMI Composite (Jan)

• U.S. PCE Core (YoY) (Dec)

• U.K. Markit/CIPS Construction PMI (Jan)

• U.S. Factory Orders (Dec)

Tuesday,

February 05, 2019

• India Nikkei Services PMI (Jan)

• Japan Nikkei PMI Composite (Jan)

• U.K. Markit/CIPS Composite PMI (Jan)

• Eurozone Retail Sales (YoY) (Dec)

• U.S. ISM Non-Manufacturing/Services Composite (Jan)

Wednesday,

February 06, 2019

• German Factory Orders (YoY) (Dec)

• U.S. DOE Crude Oil Inventories (Feb 1)

Thursday,

February 07, 2019

• Japan Leading Index CI (Dec P)

• U.K. Bank of England Bank Rate

• U.S. Consumer Credit (Dec)

Friday,

February 08, 2019

• Japan Eco Watchers Survey Current (Jan)

• Japan Labor Cash Earnings (YoY) (Dec)

• German Trade Balance (Dec)

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