News U Can Use
January 26, 2018
The Week that was…
22
nd
January to 26
th
January
2
Indian Economy
• According to the International Monetary Fund (IMF), India is expected to grow at 7.4% in 2018
as against 6.8% growth of China. This makes India one of the fastest growing countries
among emerging economies following slowdown due to demonetisation and the
implementation of the goods and service tax in 2017. Meanwhile, the economy is expected to
grow at a rate of 7.8% in 2019.
• The government announced it will deposit Rs. 88,000 crore of capital to 20 state-run banks in
FY18 and also prescribe a reforms package to make them more accountable. Of this, Rs.
80,000 crore will be through recapitalisation bonds and Rs. 8,139 crore as budgetary support.
Meanwhile, banks will raise Rs. 10,312 crore from the market.
• The Ministry of Finance announced registration of one crore tax payers under total revenue
collections under the goods and services tax (GST) so far till 24 Jan, 2018. Also, GST
collections gathered momentum in Dec 2017 after falling for two consecutive months, rising to
Rs. 86,703 crore from Rs. 80,808 crore in Nov 2017.
• As per the World Economic Forum, India stands at 62nd place among 103 emerging
economies on an Inclusive Development Index. The index considers the “living standards,
environmental sustainability and protection of future generations from further indebtedness”.
Despite its low score compared with its neighbouring countries, India is among the 10
emerging economies with 'advancing' trend.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 25-Jan-18 1 Week Return YTD Return
S&P BSE Sensex 36,050.44 1.52% 6.62%
Nifty 50 11,069.65 1.61% 6.08%
S&P BSE Mid-Cap 17,841.19 0.43% 0.03%
S&P BSE Small-Cap 19,342.18 -0.59% 0.32%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
22-Jan-18 983 799 1.23
23-Jan-18 865 928 0.93
24-Jan-18 542 1249 0.43
25-Jan-18 610 1188 0.51
Source: NSE
• Indian equity markets soared with
benchmark indices Sensex and Nifty
50 surpassing the coveted 36,000 and
11,000 mark during the week. Investor
sentiment improved after a report from
the International Monetary Fund (IMF)
showed that India could regain the title
as the world’s fastest growing major
economy in 2018-19. Investors also
took cues from positive quarterly
earnings of some industry majors.
Prospects of merger and acquisition
activities between index heavyweights
in the energy sector further supported
buying interest.
• Also, the U.S. Congress brought an
end to a three-day government
shutdown as Senate Democrats
adopted a short-term spending bill to
fund government operations.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
26.24 27.61 47.61 106.9
P/B
3.35 3.74 3.12 2.78
Dividend Yield
1.08 1.02 0.77 0.58
Source: BSE, NSE Value as on Jan
25, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing 1-Wk 1-Mth
S&P BSE Auto
25,670.02 -1.32% -3.65%
S&P BSE Bankex
31,082.14 2.00% 7.13%
S&P BSE CD
22,962.98 -2.60% 1.64%
S&P BSE CG
20,634.75 2.16% 7.40%
S&P BSE FMCG
10,936.49 0.68% 2.55%
S&P BSE HC
15,028.82 1.08% 3.33%
S&P BSE IT
12,688.49 3.63% 13.87%
S&P BSE Metal
15,682.99 2.74% 6.64%
S&P BSE Oil & Gas
16,241.08 2.25% -1.97%
Source: Thomson Reuters
Eikon Value as on Jan 25, 2018
• On the BSE sectoral front, S&P BSE IT
(3.63%) stood as the most preferred sector
followed by S&P BSE Metal (2.74%) and
S&P BSE Oil & Gas (2.25%). Nonetheless,
S&P BSE Consumer Durables (-2.60%)
stood as the major laggard followed by S&P
BSE Auto (-1.32%) and S&P BSE Power (-
0.65%).
• Meanwhile, the banking sector was
impacted after the finance ministry
announced certain banking reforms will be
introduced soon.
Indian Derivatives Market Review
• Nifty Jan 2018 Futures settled at spot closing of 11,069.65 points. Nifty Feb 2018 Futures
were at 11,062.6 points, a discount of 7.05 points, below the spot closing. The turnover on
NSE’s Futures and Options segment stood at Rs. 45.22 lakh crore as against Rs. 45.04 lakh
crore in the week to Jan 19.
• The Put-Call ratio stood at 0.84 compared with the previous week’s close of 0.96.
• The Nifty Put-Call ratio stood at 1.78 compared with the previous week’s close of 1.74.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
5.91 5.93 5.96 6.11
91 Day T-Bill
6.41 6.38 6.24 6.09
7.80% 2021, (5 Yr GOI)
7.04 7.07 6.93 6.50
6.79% 2027, (10 Yr GOI)
7.48 7.48 7.28 6.45
Source: Thomson Reuters
Eikon
Value as on Jan 25, 2018
• Bond yields fell after the government
stated that it will sell lower than
scheduled amount of debt at the
auction this week. Meanwhile, investor
sentiment improved since last week
after the government lowered its
additional borrowing for FY18.
• However, gains were erased as
increase in crude oil prices raised
concerns over inflation growth that
reduced expectations for an interest
rate reduction.
• Yield on the existing 10-year
benchmark bond (6.79% GS 2027)
stood at 7.48%, unchanged from the
previous week’s close.
• Yield on the new 10-year benchmark
paper (7.17% GS 2028) rose 2 bps to
close at 7.31% from the previous
week’s close of 7.29%.
7.38
7.42
7.46
7.50
22-Jan 23-Jan 24-Jan 25-Jan
Yield in %
10 -Yr Benchmark Bond ( % )
Source: CCIL
Domestic Debt Market (Spread Analysis)
7
Maturity
G-Sec Yield
(%)
Corporate Yield
(%)
Spread
bps
1 Year 6.72 7.49 77
3 Year 7.14 7.64 50
5 Year 7.39 7.78 39
10 Year 7.50 7.90 40
Source: Thomson Reuters
Eikon Value as on Jan 25, 2018
• Yields on gilt securities fell across
maturities by up to 18 bps, barring 1-, 6-,
7-, 11-, 12- and 30-year papers that
increased by up to 6 bps, while yield on
14-year paper was flat.
• Corporate bond yields fell on 4 to 10
years’ papers by up to 3 bps, while 1 to 3
years’ papers increased by up to 9 bps.
Yield on 15-year paper was steady.
• Spread between AAA corporate bond and
gilt expanded across the maturities by up
to 22 bps, leaving 1-, 6- and 7-year
papers that contracted 5 bps each, while
spread on 5-year paper was steady.
-20
-10
0
10
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 25-Jan-18 19-Jan-18
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• Securities and Exchange Board of India (SEBI) announced that the panel of the oversight
committee on 'product design' will be responsible for introduction of new contracts,
modifications of existing product and reviewing the design of the already approved and running
contracts. This is being done to bring uniformity with respect to the role of the oversight
committee. The move comes after SEBI noted that the commodity derivatives exchanges have
been adopting varied approach in terms of constitution and also the functioning of such
oversight committees.
• The Department of Industrial Policy and Promotion (DIPP) has notified of easing the Foreign
Direct Investment (FDI) rules for several sectors- including single brand retail, non- banking
financial companies and construction. It has also mentioned that allowing 100% FDI in single
brand retail under automatic route would attract more investments in production and marketing.
• The finance ministry has announced that certain banking reforms will be introduced soon. The
government will put loans above Rs. 250 crore under specialised monitoring to reduce the
number of non-performing assets after the recapitalisation plan. The government is also
planning to limit banks with minimum 10% of exposure only to become a part of the
consortium.
Regulatory Updates in India (contd..)
• The government is considering a plan to raise the equity investment limit for the Employees'
Provident Fund Organisation (EPFO) from 15% to 25%. Such a move could more than double
the provident fund money invested in exchange-traded funds (ETFs) over time. The move
comes on the wake of higher than expected return on equity while decline in debt, thereby
compelling the government to explore wider investment options to maximise returns.
• The government is set to amend the Goods and Services Tax (GST) law to explicitly state that
no transition credit can be availed in lieu of cesses paid under the previous tax regime. The
move comes after companies claimed hundreds of crores of rupees as transition credit in lieu
of Swachh Bharat Cess and Krishi Kalyan Cess. The government had cleared that no
transition credit would be available after implementation of the GST regime. However, some
companies claimed it in lack of clarity in law to claim credit against cesses.
9
Global News/Economy
• A report from the Commerce Department showed that U.S. real Gross Domestic Product
missed (GDP) market expectations for the fourth quarter 2017. It grew by 2.6% in the fourth
quarter as against 3.2% growth seen in the third quarter. The GDP growth reflects positive
contributions from consumer spending, non-residential fixed investment, exports, residential
fixed investment, and government spending. However, these positive contributions were partly
offset by a negative contribution from private inventory investment and an increase in imports.
• A report from the Commerce Department showed that U.S. durable goods orders surpassed
market expectations and surged 2.9% in Dec 2017 as against an upwardly revised gain of 1.7%
(1.3% gain originally reported) in Nov 2017. The strong growth reflects notable increase in
orders for transportation equipment that grew 7.4% in Dec as against a gain of 4.6% in Nov.
• The European Central Bank (ECB) kept its key interest rates and asset purchases steady at
record low. The bank reiterated its forward guidance that rates will remain at current level and to
increase the size as well as duration of asset buys, until inflation reaches its target. The main
refinance rate is at 0% and the deposit rate at -0.40%. The marginal lending facility rate is
0.25%. The president of ECB was concerned over euro exchange rate volatility and its causes
and asserted that an interest rate hike was unlikely this year.
• A preliminary report from the Office for National Statistics showed that U.K. GDP surpassed
market expectations and grew 0.5% sequentially in the fourth quarter 2017. However, GDP
growth for 2017 came in at 1.8% and marked the weakest growth since 2012.
10
Global Equity Markets
11
Global Indices
Indices
26-Jan-18
1-Week
Return
YTD
Return
Dow Jones
26,616.71 2.09% 7.22%
Nasdaq 100
7,022.971 2.76% 7.86%
FTSE 100
7,665.54 -0.84% 0.23%
DAX Index
13,340.17 -0.70% 3.64%
Nikkei Average
23,631.88 -0.74% 0.53%
Straits Times
3,567.14 0.47% 4.83%
Source: Thomson Reuters Eikon
Value as on Jan 26, 2018
U.S.
• U.S. markets rose after policymakers
managed to re-open the government
following a brief shutdown, passing a
stopgap bill funding the government
until Feb 8.
• Upbeat earnings of major companies
Positive U.S. GDP for the Dec quarter of
2017 and durables goods data for Dec
2017, added to the upside.
Europe
• European market fell following rally in euro and pound currency against the U.S. dollar.
Rally in both these currencies is negative for European exporters. Investors were hardly
convinced by the forward guidance of European Central Bank’s stance on stimulus
measures. However, losses trimmed as Germany's economic confidence improved to an
eight-month high and the assessment of current situation hit a record in Jan.
Asia
• Easing concerns over the U.S. government shutdown and political uncertainty in Germany
had positive impact on Asian markets. The Bank of Japan kept its massive monetary
stimulus programme unchanged, thereby easing worries that it might shift towards a
tighter policy. Also, market participants remained optimist of economic growth in China.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury
bond increased 2 bps to close at
2.66% from the previous week’s close
of 2.64%.
• U.S. Treasury prices fell initially after
U.S. lawmakers reached a deal to
reopen the federal government, three
days after the shutdown. However,
losses reversed as treasury prices
increased moving in tandem with rise
in Japanese government bond prices
after the Bank of Japan governor
stated that there is no immediate need
to raise rates or slow down the
purchases of exchange-traded funds
by banks.
• Treasury prices fell again at the end as
investors remained optimistic after U.S
economy grew 2.6% in the Dec
quarter of 2017.
2.60
2.65
2.70
22-Jan 23-Jan 24-Jan 25-Jan 26-Jan
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Last Closing 1-Week Ago
69.92 68.71
1,349.76 1,331.41
)*
30,489 29,958
17.39 17.00
Rs/Kg)*
39,700 38,714
Source: Thomson Reuters
Eikon Value as on Jan 26,
2018; * as on Jan 25, 2018
Gold
• Gold prices traded higher amid strength
in euro against the U.S. dollar. Also,
comments from the U.S. Treasury
Secretary further weighed on the U.S.
dollar. Gold prices continued with their
upward trend after ECB President’s
stimulus measures fell short of investor
expectations that the central bank is
poised to shift towards steeper
monetary policy measures.
Crude
• Brent crude prices rose following
comments from Saudi Arabia that
cooperation between oil producers who
have cut production to boost prices
would continue beyond 2018.
Baltic Dry Index
• The Baltic Dry Index rose on the back of
increasing capesize and panamax
activities.
9.70
10.10
10.50
10.90
27-Dec-17 6-Jan-18 16-Jan-18 26-Jan-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
1.76%
1.38%
2.29%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing 1-Wk Ago
US Dollar
63.50 63.72
Pound Sterling
90.92 88.64
EURO
79.07 78.14
100 JPY
58.36 57.49
Source: RBI Figures in INR , Value as on Jan 25, 2018
Rupee
• The Indian rupee went up against the
U.S. dollar amid comments from the U.S.
President stating that a strong dollar is
wanted, contradicting comments by U.S.
Treasury Secretary who backed a weaker
dollar to help boost America's global
trade.
Euro
• Euro rose against the greenback amid
euro zone’s strong consumer confidence
data for Jan 2018.
Pound
• Sterling gained against the U.S. dollar
amid growing optimism around Britain's
chances of securing a favourable Brexit
deal.
Yen
• Yen rose against the greenback amid
comments from the U.S. President that
strong dollar is wanted, contradicting
comments by U.S. Treasury Secretary
who backed a weaker dollar.
9.60
10.00
10.40
10.80
26-Dec-17 5-Jan-18 15-Jan-18 25-Jan-18
USD GBP Euro JPY
Source: RBI
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
- 0.35%
2.56%
1.18%
1.51%
15
The Week that was…
22
nd
January to 26
th
January
The Week that was (Jan 22 – Jan 26)
16
Date Events
Present
Value
Previous
Value
Monday,
Jan 22, 2018
• Japan Convenience Store Sales (YoY) (Dec)
-0.3% -0.3%
Tuesday,
Jan 23, 2018
• Bank of Japan Rate Decision
-0.1% -0.1%
• Eurozone ZEW Survey (Economic Sentiment) (Jan)
31.8 29.0
• U.K. Public Sector Net Borrowing (Dec)
1b 6.6b
Wednesday,
Jan 24, 2018
• Markit Eurozone Manufacturing PMI (Jan P)
59.6 60.6
• Markit Eurozone Services PMI (Jan P)
57.6 56.6
• Markit U.S. Manufacturing PMI (Jan P)
55.5 55.1
• Markit U.S. Services PMI (Jan P)
53.3 53.7
• Nikkei Japan PMI Manufacturing (Jan P)
54.4 54.0
• U.S. Existing Home Sales (Dec)
5.57m 5.78m
Thursday,
Jan 25, 2018
• European Central Bank Rate Decision
0.0% 0.0%
• U.S. New Home Sales (Dec)
625k 689k
• U.S. Leading Index (Dec)
0.6% 0.5%
• Japan National Consumer Price Index (YoY) (Dec) 1.0% 0.6%
Friday,
Jan 26, 2018
• U.K. Gross Domestic Product (YoY) (4Q A) 1.5% 1.7%
• U.S. Durable Goods Orders (Dec P) 2.9% 1.7%
• U.S. Gross Domestic Product Annualized (QoQ) (4Q A)
2.6% 3.2%
17
The Week Ahead
29
th
January to 02
rd
February
18
The Week Ahead
Day Event
Monday,
January 29, 2018
• U.S. Personal Spending (Dec)
• Japan Jobless Rate (Dec)
• Japan Retail Trade (YoY) (Dec)
Tuesday,
January 30, 2018
• Euro Zone Gross Domestic Product s.a. (YoY) (4Q A)
• U.S. Consumer Confidence Index (Jan)
• German Consumer Price Index (YoY) (Jan P)
• U.S. Consumer Confidence Index (Jan)
Wednesday,
January 31, 2018
• China Manufacturing PMI (Jan)
• China Non-manufacturing PMI (Jan)
• Euro Zone Consumer Price Index Estimate (YoY) (Jan)
• U.S. FOMC Rate Decision
• Euro-Zone Unemployment Rate (Dec)
Thursday,
February 01, 2018
• China Caixin China PMI Mfg (Jan)
• U.K. Markit UK PMI Manufacturing s.a. (Jan)
• U.S. ISM Manufacturing (Jan)
Friday,
February 02, 2018
• U.S. Change in Non-farm Payrolls (Jan)
• U.S. Unemployment Rate (Jan)
• U.K. Markit/CIPS UK Construction PMI (Jan)
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 (RNLAM) (formerly Reliance Capital Asset Management Limited) 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;
RNLAM 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 RNLAM’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.
19
Thank you for
your time.