News You Can Use of - 12 January 2018 | Nippon India Mutual Fund

News U Can Use

January 12, 2018

The Week that was…

January to 12

January

Indian Economy

• Government data showed that growth of Consumer Price Index (CPI) based inflation or retail

inflation surged to a 17-month high of 5.21% in Dec 2017 from 4.88% in the previous month

and 3.41% in the same period of the previous year. Retail inflation growth thus surpassed the

Reserve Bank of India’s (RBI) medium-term target of 4% for the second consecutive month.

The Consumer Food Price Index also grew 4.96% in Dec 2017 from 4.35% in the previous

month and 1.37% in the same period of the previous year.

• Government data showed that India’s Index of Industrial Production (IIP) grew 8.4% in Nov

2017 from downwardly revised 2.0% in Oct 2017 (2.2% originally reported) and 5.10% in the

same period of the previous year. This is the highest IIP level since Oct 2015. The

manufacturing sector also surged 10.2% in Nov 2017 from 4.0% in the same period of the

previous year. However, IIP growth for Apr to Nov 2017 slowed to 3.2% from 5.5% in the

same period of the previous fiscal.

• Data from Society of Indian Automobile Manufacturers (SIAM) showed that sales of domestic

passenger vehicles grew 5.22% to 2,39,712 units in Dec 2017 from 2,27,823 units in the

same month of the previous year. Domestic car sales fell marginally to 1,58,326 units as

against 1,58,617 units sold in Dec 2016. Sales of motorcycles grew 40.31% to 7,88,156 units

as against 5,61,710 units in the same period of the previous year. Sales of two-wheeler

vehicles grew 41.45% to 12,87,592 units compared with 9,10,276 units. Sales of commercial

vehicles grew 52.62% to 82,362 units. Sales of vehicles across the categories witnessed a

rise of 36.39% to 16,66,646 units in Dec 2017 from 12,21,969 units in Dec 2016.

Indian Equity Market

Domestic Equity Market Indices

Indices

12-Jan-18

1 Week Return

YTD Return

S&P BSE Sensex

34,592.39

1.28% 2.31%

Nifty 50

10,681.25

1.16% 2.35%

S&P BSE Mid

-Cap

18,137.03

0.37% 1.69%

S&P BSE Small

-Cap

19,993.19

1.46% 3.70%

Source: MFI Explorer

NSE Advance/Decline Ratio

Date Advances Declines

Advance/Decline Ratio

08-Jan-18 1107 729 1.52

09-Jan-18 761 1053 0.72

10-Jan-18 722 1071 0.67

11-Jan-18 976 813 1.20

12-Jan-18 761 1047 0.73

Source: NSE

• Indian equity markets closed in the

green amid optimism over corporate

earnings that shrugged off worries of

the government lowering its Gross

Domestic Product forecast for FY18.

Also, gains were extended led by

buying interest in the stocks of an

industry major in the energy sector

after it increased prices of non-coking

coal for power and non-power sectors

with immediate effect. The price hike is

expected to boost the company’s

revenue in the remaining part of FY18.

Gains in realty, information technology

and Teck and financial sector also

boosted the indices.

• However, investor sentiment remained

subdued ahead of the Union Budget

2018-19 to release on Feb 1, 2018.

Investors are somewhat concerned

that the government might unveil some

measures involving heavier spending

than in FY18.

Ratios

S&P BSE

Sensex

Nifty 50

S&P BSE

Mid Cap

S&P BSE

Small Cap

P/E

25.66 27.28 48.12 119.9

P/B

3.18 3.60 3.17 2.87

Dividend Yield

1.11 1.06 0.76 0.56

Source: BSE, NSE Value as on Jan

12,

2018

Indian Equity Market (contd.)

Sectoral Indices

Indices

Last Returns (in %)

Closing 1-Wk 1-Mth

S&P BSE Auto

26,485.63

-0.24%

4.74%

S&P BSE Bankex

29,097.58 0.56% 2.25%

S&P BSE CD

23,773.82 0.11% 8.74%

S&P BSE CG

20,046.02 0.80% 9.40%

S&P BSE FMCG

10,815.73 0.96% 2.84%

S&P BSE HC

14,967.80 0.38% 6.68%

S&P BSE IT

11,699.52 4.50% 7.45%

S&P BSE Metal

15,845.66 1.25% 15.84%

S&P BSE Oil & Gas

16,363.08 1.26% 2.32%

Source: Thomson Reuters

Eikon Value as on Jan 12,

2018

• On the BSE sectoral front, most of the

indices closed in the green. S&P BSE

Realty (5.5%) stood as the major gainer

followed by S&P BSE IT (4.5%), S&P BSE

Teck (2.9%), and S&P BSE Oil & Gas

(1.3%). Gains in S&P BSE Realty reflects

government's decision to allow 100%

foreign direct investment under the

automatic route in the real-estate broking

services.

• However, S&P BSE Power was the major

loser and fell 0.8% followed by S&P BSE

Auto that fell 0.2%.

Indian Derivatives Market Review

• Nifty Jan 2018 Futures were at 10,686.35, a premium of 5.10 points above the spot closing of

10,681.25. The turnover on NSE’s Futures and Options segment stood at Rs. 30.41 lakh

crore as against Rs. 27.97 lakh crore in the week to Jan 5.

• The Put-Call ratio stood at 1.07 compared with the previous week’s close of 0.88.

• The Nifty Put-Call ratio stood at 1.74 compared with the previous week’s close of 1.58.

Domestic Debt Market

Debt Indicators

(%)

Current

Value

Ago

Mth

Ago

Mth

Ago

Call Rate

5.91 5.88 5.82 6.05

91 Day T

-Bill

6.32 6.30 6.14 6.24

7.80% 2021, (5

Yr GOI)

7.06 6.98 6.86 6.57

6.79% 2027, (10

Yr GOI)

7.46 7.29 7.19 6.46

Source: Thomson Reuters

Eikon

Value as on Jan 12, 2018

• Bond yields rose as market

participants turned bearish amid

oversupply of government bonds

during FY18 and concerns over

government’s fiscal consolidation

drive. Yields rose further as increase in

global crude oil prices fueled concerns

of increase in domestic inflationary

pressures in the coming months that

may prevent the Monetary Policy

Committee from further easing its

monetary policy.

• Yields continue to rise tracking gains in

U.S. Treasury yields and rise in global

crude oil prices. U.S. Treasury prices

fell after the Bank of Japan said it will

trim purchases of Japanese

government bonds. The

announcement raised speculation that

the Japanese central bank may wind

down its monetary stimulus this year.

7.30

7.40

7.50

8-Jan 9-Jan 10-Jan 11-Jan 12-Jan

Yield in %

10 -Yr Benchmark Bond ( % )

Source: CCIL

Domestic Debt Market (Spread Analysis)

Maturity

G-

Sec Yield

(%)

Corporate Yield

(%)

Spread

bps

1 Year 6.59 7.33 74

3 Year 7.15 7.6 45

5 Year 7.40 7.74 34

10 Year 7.72 7.89 17

Source: Thomson Reuters

Eikon Value as on Jan 12,

2018

• Yields on gilt securities increased across

the maturities in the range of 5 bps to 19

bps, barring 19-year paper that closed

steady. Yield increased the most on the

14-year paper.

• Corporate bond yields increased across

the maturities in the range of 4 bps to 8

bps. Yield increased the most on 2-year

paper.

• Spread between AAA corporate bond and

gilt contracted across the maturities in the

range of 3 bps to 10 bps, barring 1-year

paper that expanded 6 bps.

6.10

6.70

7.30

7.90

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

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

Change in bps 12-Jan-18 05-Jan-18

Yield

in %

Change

in bps

Source: Thomson Reuters Eikon

Regulatory Updates in India

• The government has eased norms for investment in single brand retail, construction and power

exchanges. The government has approved 100% foreign direct investment (FDI) under

automatic route for single brand retail trading. Earlier also 100% FDI was allowed in the

segment, however, the same required approval of the government. The move would give boost

to foreign retailers. Also, the government has relaxed FDI policy for medical devices and audit

firms associated with companies that receive funds from overseas. This comes apart from the

government’s permission for 49% investment by foreign airlines in India’s national airline Air

India.

• Beginning Feb 1, 2018, transporters will not require separate transit passes for moving goods

from one state to another as the e-way bill issued to them will be valid throughout India.

Beginning Feb 1, 2018, inter-state movement of goods beyond 10 kms and with a value of Rs.

50,000 and above, will compulsorily require e-way bill under the GST rolled out in Jul 2017.

• The Union government has issued a draft notification which allow all sectors to offer fixed-term

contracts to workers. Therefore, the industries now can hire workers for short-term

assignments and terminate their services once the projects are completed. The move will

particularly benefit in boosting employment in seasonal jobs.

Regulatory Updates in India (contd..)

• The Unique Identification Authority of India (UIDAI) announced the creation of a "virtual ID" that

can be used in lieu of the 12-digit Aadhaar number at the time of authentication for any service.

UIDAI has brought in a system of virtual authentication for citizens enrolled on its database and

limited the access available to service providers. The move aims at alleviating widespread

concern over security breaches.

• The Directorate General of Safeguards has proposed the finance ministry to levy a 70%

safeguard duty on import of solar power equipment from countries like China for 200 days to

protect domestic industry from “serious injury”.

Global News/Economy

• The World Bank raised its global growth projections to 3.1% in 2018 from 2.9% predicted

earlier. The outlook for 2019 was raised to 3.0% from 2.9%. For 2020, the bank forecast 2.9%

expansion. According to the World Bank, boosting workforce participation, shared prosperity

and ending extreme poverty will help central banks to increase their countries' productivity.

• U.S. consumer price index missed market expectations in Dec 2017. However, it inched up by

0.1% in Dec as against a gain of 0.4% in Nov 2017. Meanwhile, core consumer prices,

(excluding food and energy prices) grew 0.3% in Dec as against a gain of 0.1% in Nov.

• Germany’s GDP grew 2.2% in 2017, fastest since 2011, as against 1.9% increase in 2016. The

growth came on the back of improved domestic and foreign demand. According to Destatis,

positive contributions to growth were primarily provided by the domestic demand in 2017.

• According to the minutes of the latest policy session, European Central Bank (ECB) could

change the tone of its monetary policy communication early in 2018 in order to reflect the

improvement in growth prospects. The ECB had left its key interest rates, asset purchase plan

and forward guidance unchanged in the meeting held in Dec 2017.

• China’s consumer price inflation rose less than expected to 1.8% in Dec 2017 as against 1.7%

in Nov 2017. Inflation was 1.6% in 2017, which was well below the government's target of

around 3%. Industrial producer price slowed to 4.9% in Dec from 5.8% in Nov.

Global Equity Markets

Global Indices

Indices

12-Jan-18

1-Week

Return

YTD

Return

Dow Jones

25,803.19 2.01% 3.94%

Nasdaq 100

6,758.54 1.58% 3.80%

FTSE 100

7,778.64 0.70% 1.71%

DAX Index

13,245.03 -0.56% 2.90%

Nikkei Average

23,653.82 -0.26% 0.63%

Straits Times

3,520.56 0.89% 3.46%

Source: Thomson Reuters

Eikon

Value as on Jan 12,

2018

U.S.

• U.S. markets gained over the week on

optimism about the improved corporate

earnings reports and after China

dismissed a media news report that

officials have recommended slowing or

halting purchases of U.S. debt.

• Slower than expected economic data

could not dent investor sentiment much

as they remained optimist on the U.S.

economy.

Europe

• Most of the European markets rose following some strong economic data from Germany and

better than expected U.K. industrial output data in Nov 2017. Eurozone economic confidence

improving in Dec also helped sentiment. Markets buoyed further as Germany looked closer to

forming a new government.

Asia

• Asian markets mostly traded higher on optimism over the ongoing talks between South Korea

and North Korea. China also ruled out the news of it lowering U.S. bond purchase.

Meanwhile, as per the People's Bank of China, Chinese foreign exchange reserves increased

for the 11th straight month in Dec 2017. However, Japanese market fell after the Bank of

Japan suddenly reduced its bond purchase amount.

Global Debt (U.S.)

• Yield on the 10-year U.S. Treasury

bond rose 7 bps to close at 2.55% from

the previous week’s close of 2.48%.

• U.S. Treasury prices fell initially

following a pick-up in U.S. monthly

wages in Dec 2017 that increased the

possibility of a rate hike by the U.S.

Federal Reserve in the near term.

• U.S. Treasury prices fell further after the

Bank of Japan (BoJ) said it will trim its

purchases of Japanese government

bonds which led to speculation that BoJ

may wind back its monetary stimulus

this year. Losses were extended on

reports that China may slow or halt its

purchases of U.S. Treasuries. However,

losses were contained to some extent

after the Chinese government denied

the same.

2.44

2.48

2.52

2.56

8-Jan 9-Jan 10-Jan 11-Jan 12-Jan

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)

70.46 68.50

Gold ($/Oz)

1338.34 1319.81

Gold (Rs/10 gm)

29838 29443

Silver ($/Oz)

17.25 17.22

Silver (Rs/Kg)

38732 38643

Source: Thomson Reuters

Eikon Value as on Jan 12, 2018

Gold

• Safe-haven appeal of the yellow metal

gained following downbeat U.S.

economic data like initial jobless claims

and producer prices. Additionally, dollar

weakened following BoJ’s sudden

decision to reduce the size of its long-

dated bond purchases.

Crude

• Brent crude prices remained at elevated

level following unrest in Iran and OPEC’s

effort to curb production. China also

reported that its crude oil imports in Dec

stood at 34 million tonne, and for the year

2017, crude imports rose 10.1% to 420

million tonne.

Baltic Dry Index

• The Baltic Dry Index fell 7.65% on the

back of lower capesize and panamax

activities.

9.40

10.00

10.60

11.20

13-Dec-17 23-Dec-17 2-Jan-18 12-Jan-18

Global Commodity Movement

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

Global

Commodity Prices

Rebased to 10

Source: Thomson Reuters Eikon

2.86%

1.40%

0.16%

Currencies Markets

Movement of Rupee vs Other Currencies

Currency

Last Closing 1-Wk Ago

US Dollar

63.53 63.38

Pound Sterling

86.05 86.02

EURO

76.53 76.50

100 JPY

57.09 56.06

Source: RBI Figures in INR ,

Value as on Jan 12,

2018

Rupee

• The Indian rupee fell against the U.S. dollar

following greenback purchases by state-run

banks and dollar demand from oil and other

importers.

Euro

• Euro rose against the greenback after the

ECB said it could change the tone of its

monetary policy communication stance in

early 2018, boosting expectations that

policymakers are preparing to reduce their

vast monetary stimulus programme.

Pound

• Sterling gained against the U.S. dollar on

media report that Netherlands and Spain

are open to a softer Brexit deal for Britain.

Yen

• Yen gained against the greenback after the

Bank of Japan trimmed its purchases of

long-dated government bonds in market

operations triggering speculation the

central bank could start reducing its huge

stimulus policy in 2018.

9.60

9.80

10.00

10.20

13-Dec-17 23-Dec-17 2-Jan-18 12-Jan-18

USD GBP Euro JPY

Source: RBI

Currency

Prices (

in terms of INR)

Rebased to 10

Currency Movement

1.84%

0.23%

0.04%

The Week that was…

January to 12

January

The Week that was (Jan 1 – Jan 5)

Date Events

Present

Value

Monday,

Jan 8, 2018

•

Germany Factory Orders (YoY) (NOV) 8.70% 7.20%

•

U.S. Consumer Credit (NOV) $27.951b $20.532b

•

Eurozone Retail Sales (YoY) (NOV) 2.80% 0.20%

Tuesday,

Jan 09, 2018

•

Japan Consumer Confidence Index (DEC) 44.7 44.9

•

Germany Industrial Production (YoY) (NOV) 5.60% 2.80%

•

Germany Trade Balance (NOV) 23.7b 18.9b

•

Eurozone Unemployment Rate (NOV) 8.70% 8.80%

Wednesday,

Jan 10, 2018

•

China Consumer Price Index (YoY) (DEC) 1.80% 1.70%

•

U.K. Industrial Production (YoY) (NOV) 2.50% 4.30%

•

U.K. Trade Balance (NOV) -£2,804 -£2,270

•

U.S. MBA Mortgage Applications (JAN 05) 8.30% -1.60%

Thursday,

Jan 11, 2018

•

Germany Gross Domestic Product (YoY) (2017) 2.20% 1.90%

•

Japan Leading Index CI (NOV P) 108.6 106.5

•

Eurozone Industrial Production (YoY) (NOV) 3.20% 3.90%

•

U.S. Initial Jobless Claims (JAN 06) 261k 250k

Friday,

Jan 12, 2018

•

U.S. Retail Sales Advance (MoM) (DEC) 0.40% 0.90%

•

U.S. Consumer Price Index (YoY) (DEC) 2.10% 2.20%

•

China New Yuan Loans CNY (DEC) 584.4b 1120.0b

The Week Ahead

January to 19

January

The Week Ahead

Day Event

Monday,

January 15, 2018

• Japan Machine Tool Orders (YoY) (DEC P)

Tuesday,

January 16, 2018

• U.K. Consumer Price Index (YoY) (DEC)

• Japan Tertiary Industry Index (MoM) (NOV)

• Germany Consumer Price Index (YoY) (DEC F)

• U.K. House Price Index (YoY) (NOV)

• Japan Machine Orders (YoY) (NOV)

Wednesday,

January 17, 2018

• Eurozone Consumer Price Index (YoY) (DEC F)

• U.S. MBA Mortgage Applications (JAN 12)

• U.S. Industrial Production (MoM) (DEC)

• U.S. NAHB Housing Market Index (JAN)

Thursday,

January 18, 2018

• China Gross Domestic Product YTD (YoY) (4Q)

• China Retail Sales YTD (YoY) (DEC)

• U.S. Housing Starts (MoM) (DEC)

• U.S. Initial Jobless Claims (JAN 13)

• China Industrial Production YTD (YoY) (DEC)

Friday,

January 19, 2018

• U.S. University of Michigan Sentiment (JAN P)

• U.K. Retail Sales Ex Auto Fuel (YoY) (DEC)

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