News You Can Use of - 19 January 2018 | Nippon India Mutual Fund

News U Can Use

January 19, 2018

The Week that was…

January to 19

January

Indian Economy

• Government data showed that growth of India’s Wholesale Price Index (WPI)-based inflation

slowed to 3.58% in Dec 2017 from 3.93% in the previous month. However, it increased from

2.10% during the corresponding month of the previous fiscal. The WPI food price index also

slowed to 2.91% in Dec from 4.10% in the previous month. WPI for vegetables slowed to

56.46% in Dec from 59.80% in Nov.

• Government data showed that India’s trade deficit expanded to $14.88 billion in Dec 2017

from $10.55 billion in the same period of the previous year and $13.83 billion in the previous

month. Exports grew 12.36% to $27.03 billion in Dec as against an increase of 30.55% to

$26.20 billion in the previous month. India’s exports in the same period of the previous year

stood at $24.06 billion. India’s imports in Dec grew 21.12% to $41.91 billion from $34.60

billion in the same period of the previous year.

• RBI deputy governor Viral Acharya said the central bank won’t intervene to protect banks from

fluctuation in interest rates. The remark comes after RBI lowered the prices of select

government securities as bond yields surged after the government breached its fiscal deficit

target. Some state-run banks had approached RBI and sought exemption from recognizing

mark to market losses and instead requested the central bank to allow them to spread these

losses over two quarters.

• The Goods and Services Tax (GST) Council in its meeting put 29 handicraft items in 0% slab.

GST rates have also been reduced on few agricultural products and 53 categories of

services. The new rates are applicable from Jan 25, 2018.

Indian Equity Market

Domestic Equity Market Indices

Indices 19-Jan-18 1 Week Return YTD Return

S&P BSE Sensex 35,511.58 2.66% 5.02%

Nifty 50 10,894.70 2.00% 4.40%

S&P BSE Mid-Cap 17,765.00 -2.05% -0.40%

S&P BSE Small-Cap 19,456.16 -2.69% 0.91%

Source: MFI Explorer

NSE Advance/Decline Ratio

Date Advances Declines

Advance/Decline Ratio

15-Jan-18 905 898 1.01

16-Jan-18 340 1491 0.23

17-Jan-18 890 908 0.98

18-Jan-18 331 1502 0.22

19-Jan-18 910 886 1.03

Source: NSE

• Indian equity markets surged over the

week with Sensex surpassing the

coveted 35,000 mark for the first time.

Initially, investors cheered as the

industrial activity in India increased to

25-month high in Nov.

• Sentiment got further boost after the

government lowered the additional

borrowing requirement for the current

fiscal to Rs. 20,000 crore from Rs.

50,000 crore estimated earlier, easing

fiscal deficit worries.

• Additionally, media reported that the

government is considering raising the

foreign investment ceiling in private

banks to 100% and in public lenders to

49%.

• However, the upside was limited as

retail price based inflation moved to

17-month high in Dec following

increase in food prices.

Ratios

S&P BSE

Sensex

Nifty 50

S&P BSE

Mid Cap

S&P BSE

Small Cap

P/E

26.06 27.44 47.09 113.93

P/B

3.29 3.68 3.10 2.80

Dividend Yield

1.08 1.04 0.77 0.58

Source: BSE, NSE Value as on Jan 19

, 2018

Indian Equity Market (contd.)

Sectoral Indices

Indices

Last Returns (in %)

Closing 1-Wk 1-Mth

S&P BSE Auto

26,013.48 -1.78% -2.73%

S&P BSE Bankex

30,473.35 4.73% 4.88%

S&P BSE CD

23,574.93 -0.84% 4.21%

S&P BSE CG

20,197.60 0.76% 8.79%

S&P BSE FMCG

10,862.79 0.44% 2.00%

S&P BSE HC

14,868.23 -0.67% 4.14%

S&P BSE IT

12,243.69 4.65% 12.79%

S&P BSE Metal

15,264.51 -3.67% 6.50%

S&P BSE Oil & Gas

15,883.20 -2.93% -3.21%

S&P BSE Realty

2,622.57 -5.11% 8.76%

S&P BSE Teck

6,786.74 3.11% 9.78%

Source: Thomson Reuters

Eikon Value as on Jan 19, 2018

• On the BSE sectoral front, S&P BSE

Bankex (4.73%) stood as the most preferred

sector followed by S&P BSE IT (4.65%) and

S&P BSE Teck (3.11%).

• Buying interest was seen in banking stocks

following reports that the government plans

to increase foreign direct investment in the

banking sector. Meanwhile, S&P BSE

Realty (-5.11%) stood as the major loser

followed by S&P BSE Metal (-3.67%) and

S&P BSE Oil & Gas (-2.93%).

Indian Derivatives Market Review

• Nifty Jan 2018 Futures were at 10,573.20, a premium of 14.35 points above the spot closing

of 10,558.85. The turnover on NSE’s Futures and Options segment stood at Rs. 27.97 lakh

crore as against Rs. 30.58 lakh crore in the week to Dec 29.

• The Put-Call ratio stood at 0.88 compared with the previous week’s close of 0.90.

• The Nifty Put-Call ratio stood at 1.58 compared with the previous week’s close of 1.62.

Domestic Debt Market

Debt Indicators

(%)

Current

Value

1-Wk

Ago

1-Mth

Ago

6-Mth

Ago

Call Rate

5.93 5.91 6.02 6.08

91 Day T-Bill

6.38 6.32 6.25 6.16

7.80% 2021, (5 Yr GOI)

7.07 7.06 6.85 6.51

6.79% 2027, (10 Yr GOI)

7.48 7.46 7.18 6.45

Source: Thomson Reuters

Eikon

Value as on Jan 19, 2018

• Bond yields rose initially after the

deputy governor of the Reserve Bank

of India (RBI) stated that the central

bank will not intervene to protect banks

from fluctuation in interest rates and

advised them to use hedging

instruments to manage their interest

rate risk and shield themselves against

large movement in bond yields.

• However, most of the losses were

neutralized as bond yields plummeted

and witnessed the biggest single

session fall in two months after the

government reduced its additional

borrowing plan for this fiscal year by

more than half to Rs. 20,000 crore

from the earlier Rs. 50,000 crore.

• Yield on the 10-year benchmark bond

(6.79% GS 2027) inched up 2 bps to

close at 7.48% from the previous

week’s close of 7.46% after trading in

a range of 7.37% to 7.59%.

7.30

7.45

7.60

15-Jan 16-Jan 17-Jan 18-Jan 19-Jan

Yield in %

10 -Yr Benchmark Bond ( % )

Source: CCIL

Domestic Debt Market (Spread Analysis)

Maturity

G-Sec Yield

(%)

Corporate Yield

(%)

Spread

bps

1 Year 6.58 7.4 82

3 Year 7.17 7.63 47

5 Year 7.40 7.79 39

10 Year 7.73 7.91 18

Source: Thomson Reuters

Eikon Value as on Jan 19, 2018

• Yields on gilt securities increased across

maturities by up to 8 bps, barring 1-, 3-

and 24-year papers that fell by up to 3

bps. Yield on 30-year paper was

unchanged.

• Corporate bond yields rose across the

curve by up to 8 bps. Yield rose the most

on 2-year paper and the least rise was on

15-year paper.

• Spread between AAA corporate bond and

gilt expanded across the maturities by up

to 8 bps, leaving 15-year paper that

contracted 3 bps while 9-year paper was

steady.

-4

6.10

6.95

7.80

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

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

Change in bps 19-Jan-18 12-Jan-18

Yield in %

Change in bps

Source: Thomson Reuters Eikon

Regulatory Updates in India

• The Unique Identification Authority of India (UIDAI) has introduced face authentication along

with fingerprints, iris and one-time-password. This comes in the wake of providing more

choices to citizens authenticating Aadhaar. The measure that is expected to be implemented

by Jul 2018 would increase security by adding another layer of verification.

• The Securities and Exchange Board of India (SEBI) has permitted commodity bourse NCDEX

to launch options trading in non-farm items such as nickle and aluminium. The managing

director and chief executive officer of SEBI stated that the exchange is keen on options trading

in more agri-commodities as it is encouraged by the results of guarseed option that was

launched last week.

• The Insolvency and Bankruptcy Board of India (IBBI) came out with stricter norms for

insolvency professionals. According to the norms mandated by IBBI, insolvency professionals

need to disclose their relationship with all associated parties including the corporate borrower

and lenders within three days of appointment.

• To enhance coverage, the Housing and Urban Affairs Ministry has amended the guidelines of

housing scheme for urban areas under Pradhan Mantri Awas Yojana. According to the

amended guidelines, areas under the jurisdiction of affiliated bodies and earmarked for urban

planning and regulations shall also be included under Pradhan Mantri Awas Yojana (Urban).

Regulatory Updates in India (contd..)

• The Ministry of Commerce has advocated to bring down import duty on gold in the upcoming

Union Budget on Feb 1, 2018. The objective of the move is to promote exports of gold

jewellery. The Gems and Jewellery Export Promotion Council has sought reduction in import

duty on gold to 4% from the current 10%. According to media reports, India is the world's

second biggest gold consumer after China.

• The Ministry of Defence has simplified “Make II” procedure, which is a framework used by

defence firms to develop and build equipment for the military. The objective of the move is to

make the procedure more industry friendly with minimal government control. The first change

was to broaden the playing field by allowing multiple vendors to participate compared with the

earlier norms where only two vendors could be shortlisted. Also, the vendor will not be required

to submit any detailed project report. In addition, the government has eased the eligibility

criteria by doing away with conditions and criteria related to credit rating and financial net

worth.

Global News/Economy

• A report from the Organization for Economic Cooperation and Development (OECD) showed

that jobless rate in OECD area remained stable in Nov 2017. The jobless rate came in at 5.6%

in Nov, unchanged from Oct 2017. The jobless rate among youth aged below 24 grew to 11.9%

in Nov from 11.8% in Oct. The overall unemployment rate fell to 8.7% in Nov in the eurozone.

Meanwhile, jobless rate in Canada and Japan fell to 5.9% and 2.7%, respectively. However, the

rate remained stable at 4.1% in the U.S.

• A report from the Commerce Department showed that U.S. housing starts fell more than market

expectations in Dec 2017. It fell 8.2% to an annual rate of 1.192 million in Dec as against the

revised estimate of 1.299 million (1.297 million originally reported) in Nov 2017. The higher than

expected decline reflects steep drop in single-family starts that fell 11.8% to 8,36,000 in Dec.

However, multi-family starts grew 1.4% to 3,56,000 in Dec.

• Data from the National Bureau of Statistics showed that China's economy expanded at a steady

pace at the end of 2017. Gross Domestic Product (GDP) grew 6.8% on a yearly basis in the

fourth quarter of 2017, the same pace of growth as seen in the third quarter. In 2017, the

economy expanded at a faster pace of 6.9% after rising 6.7% in 2016.

• A report from the Office for National Statistics showed that U.K. inflation came in line with

market expectations at 3% in Dec 2017 as against 3.1% in Nov 2017. The central bank expects

inflation to slow to 2.4% by the fourth quarter of 2018. Core inflation (excluding energy, food,

alcoholic beverages and tobacco) came in at 2.5% in Dec as against 2.7% in Nov.

Global Equity Markets

Global Indices

Indices

19-Jan-18

1-Week

Return

YTD

Return

Dow Jones

26,071.72 1.04% 5.03%

Nasdaq 100

6,834.33 1.12% 4.96%

FTSE 100

7,730.79 -0.62% 1.08%

DAX Index

13,434.45 1.43% 4.37%

Nikkei Average

23,808.06 0.65% 1.28%

Straits Times

3,550.36 0.85% 4.33%

Source: Thomson Reuters Eikon

Value as on Jan 19, 2018

U.S.

• U.S. markets gained over the week

amid truncated trading session. Positive

economic data buoyed market

sentiment as the Federal Reserve’s

(Fed) Beige Book indicated that the U.S.

economy continued to expand in Dec

and early Jan -- initial jobless claims fell

to the lowest level in nearly 45 years in

the week ended Jan 13 and industrial

output expanded in the fourth quarter.

Europe

• Most of the European markets rose following upbeat economic data as the euro area

trade surplus increased in Nov, Germany's Consumer Price Inflation (CPI) accelerated to

a five-year high in 2017 and eurozone construction output increased in Nov. Positive

corporate earnings and higher than expected Chinese GDP data also helped sentiment.

Asia

• Asian markets gained over the week following improved economic data from China -

Chinese GDP stood at 6.9% in 2017, marking the first expansion in seven years; property

market remained stable in Dec 2017 and industrial output accelerated during the same

month. Additionally, producer prices in Japan went up 0.2% in Dec and tertiary activity

index increased for the second straight month in Nov 2017.

Global Debt (U.S.)

• Yield on the 10-year U.S. Treasury

bond rose 9 bps to close at 2.64%

from the previous week’s close of

2.55%.

• U.S. Treasury prices rose initially amid

reports that the European Central

Bank might not end its bond buying

program in its monetary policy review

due next week as it may take more

time to assess the outlook for the

economy and the euro.

• However, the trend reversed on

growing perception that the U.S. Fed

will continue to increase interest rates

this year. Losses were extended after

growth of China’s economy in the

fourth quarter of 2017 accelerated for

the first time in seven years.

2.51

2.58

2.65

16-Jan 17-Jan 18-Jan 19-Jan

Yield in %

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)

68.71 70.46

Gold ($/Oz)

1,331.41 1,338.34

Gold (Rs/10 gm)

29,958 29,838

Silver ($/Oz)

17.00 17.25

Silver (Rs/Kg)

38714 38732

Source: Thomson Reuters

Eikon Value as on Jan 19, 2018

Gold

• Gold prices inched down amid growing

speculations that the U.S. Fed may hike

interest rates in Mar and second round

of rate-hike may happen in Jun.

Crude

• Brent crude prices fell over the week on

concerns over supply glut after the

International Energy Agency mentioned

that rising U.S. crude oil production

might offset the Organization of

Petroleum Exporting Countries’ effort to

rebalance the crude oil market. The

U.S. Energy Information Administration

(EIA) mentioned that the country's oil

output is likely to rise in Feb 2018 and

U.S. crude output is expected to cross

10 million bpd soon.

Baltic Dry Index

• The Baltic Dry Index fell 10.95% on the

back of lower capesize and panamax

activities.

9.80

10.60

11.40

19-Dec-17 29-Dec-17 8-Jan-18 18-Jan-18

Global Commodity Movement

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

Global Commodity Prices

Rebased to 10

Source: Thomson Reuters Eikon

-2.48%

-0.52%

-1.46%

19-Jan-18

Currencies Markets

Movement of Rupee vs Other Currencies

Currency Last Closing 1-Wk Ago

US Dollar

63.72 63.53

Pound Sterling

88.64 86.05

EURO

78.14 76.53

100 JPY

57.49 57.09

Source: RBI Figures in INR , Value as on Jan 19, 2018

Rupee

• The Indian rupee weakened against the

U.S. dollar after India’s trade deficit

widened in Dec 2017 and global crude oil

prices continued to remain at elevated

levels.

Euro

• Euro strengthened against the greenback

on perception that the ECB could end its

bond purchase program soon if the

economy and inflation develop as

expected.

Pound

• Sterling strengthened against the U.S.

dollar on optimism that Britain will reach a

favourable deal with the European Union

on Brexit.

Yen

• Yen strengthened against the greenback

after the Bank of Japan governor said that

the country's economy could continue to

expand at a moderate pace.

9.80

10.10

10.40

19-Dec-17 29-Dec-17 8-Jan-18 18-Jan-18

USD GBP Euro JPY

Source: RBI

Currency Prices ( in terms of INR)

Rebased to 10

Currency Movement

0.30%

3.01%

2.11%

0.70%

19-Jan-18

The Week that was…

January to 19

January

The Week that was (Jan 15 – Jan 19)

Date Events Present Value

Previous Value

Monday,

Jan 15, 2018

• India’s Wholesale Price Index (WPI)-based inflation (DEC) 3.58% 3.93%

• India’s trade deficit (DEC) $14.88 bn $10.55 bn

• Japan Machine Tool Orders (YoY) (DEC P) 48.30% 46.80%

Tuesday,

Jan 16, 2018

• U.K. Consumer Price Index (YoY) (DEC) 3.00% 3.10%

• Japan Tertiary Industry Index (MoM) (NOV) 1.10% 0.20%

• Germany Consumer Price Index (YoY) (DEC F) 1.70% 1.70%

• Japan Machine Orders (YoY) (NOV) 4.10% 2.30%

Wednesday,

Jan 17, 2018

• Eurozone Consumer Price Index (YoY) (DEC F) 1.40% 1.50%

• U.S. MBA Mortgage Applications (JAN 12) 4.10% 8.30%

• U.S. Industrial Production (MoM) (DEC) 0.90% -0.10%

• U.S. NAHB Housing Market Index (JAN) 72 74

Thursday,

Jan 18, 2018

• China Gross Domestic Product (YoY) (4Q) 6.80% 6.80%

• China Retail Sales YTD (YoY) (DEC) 10.20% 10.30%

• China Industrial Production (YoY) (DEC) 6.20% 6.10%

• U.S. Initial Jobless Claims (JAN 13) 220k 261k

• U.S. Housing Starts (MoM) (DEC) -8.20% 3.00%

Friday,

Jan 19, 2018

• U.S. University of Michigan Sentiment (JAN P) 94.4 95.9

• U.K. Retail Sales Ex Auto Fuel (YoY) (DEC) 1.30% 1.50%

The Week Ahead

January to 26

January

The Week Ahead

Day Event

Monday,

January 22, 2018

• Japan Convenience Store Sales (YoY) (DEC)

Tuesday,

January 23, 2018

• Bank of Japan Rate Decision (JAN 23)

• Germany ZEW Survey Expectations (JAN)

• Eurozone ZEW Survey (Economic Sentiment) (JAN)

• Eurozone Consumer Confidence (JAN A)

• Japan Trade Balance (DEC)

Wednesday,

January 24, 2018

• Japan Nikkei Manufacturing PMI (JAN P)

• Germany Markit/BME Composite PMI (JAN P)

• Eurozone Markit Composite PMI (JAN P)

• U.S. Markit Composite PMI (JAN P)

• U.S. Existing Home Sales (MoM) (DEC)

Thursday,

January 25, 2018

• European Central Bank Rate Decision (JAN 25)

• U.S. Advance Goods Trade Balance (DEC)

• Japan National Consumer Price Index (YoY) (DEC)

• U.S. New Home Sales (MoM) (DEC)

Friday,

January 26, 2018

• U.K. Gross Domestic Product (YoY) (4Q A)

• U.S. Gross Domestic Product Annualized (QoQ) (4Q A)

• U.S. Durable Goods Orders (DEC P)

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