Mutual Fund News of 4th January 2019

News U Can Use

January 4, 2019

The Week that was…

December to 4

January

Indian Economy

• The growth of index of eight core industries came in at 3.5% in Nov 2018 as against

growth of 4.8% in Oct 2018. Cement industry witnessed the maximum growth of 8.8%

(though it declined as against the previous month), followed by steel and electricity that

surged 6.0% and 5.4%, respectively. Fertilizer sector witnessed the maximum decline of

8.1% and crude oil went down 3.5%.

• The Nikkei India Manufacturing Purchasing Managers' Index (PMI) came in at 53.2 in Dec

2018 as against 54.0 in Nov 2018. Though the score eased as against Nov 2018, the rise

in production was among the quickest witnessed in 2018. The decline reflects moderated

growth in new orders and output.

• The Nikkei India Services PMI fell to 53.2 in Dec 2018 from 53.7 in Nov 2018. The

downside reflects moderated pace of new work orders and business activity compared

with Nov 2018, though job creation saw a significant uptick. Seasonally adjusted Nikkei

India Composite PMI Output Index fell to 53.6 in Dec 2018 as against 54.5 in Nov 2018

because of weaker rise in private sector output. This happened because slowdown in

growth of services activity was accompanied by a softer increase in manufacturing

production.

• The government injected Rs. 10,882 crore in four public sector banks. This is part of the

Rs. 28,615 crore capital infusion the government will do in about half a dozen public sector

lenders. The government pumped in Rs. 28,615 crore into seven public sector banks

through recapitalisation bonds. The government had announced an infusion of Rs. 65,000

crore in 2018-19, of this Rs. 23,000 crore has already been disbursed.

Indian Equity Market

NSE Advance/Decline Ratio

Date Advances Declines

Advance/Decline Ratio

31-Dec-18 1078 728 1.48

01-Jan-19 997 732 1.36

02-Jan-19 545 1212 0.45

03-Jan-19 569 1199 0.47

04-Jan-19 883 893 0.99

Source: NSE

• Indian equity markets ended the first

week of 2019 in the negative terrain on

account of weakness in global peers,

ongoing U.S. government shutdown.

Uncertainty ahead of 2019 general

elections in India along with upcoming

corporate earnings, scheduled to be

release from the second week of Jan

2019, kept investors on the sidelines.

• Weak economic data added to the

woes as core sector numbers were

lower than the previous month. The

growth of index of eight core industries

was at 3.5% in Nov 2018 as against

growth of 4.8% in Oct 2018. Also, the

Nikkei India Manufacturing and Service

PMI fell in Dec 2018 as against the

previous month.

• Some respite was seen as the

government injected Rs. 10,882 crore

in four public sector banks.

Ratios

S&P BSE

Sensex

Nifty 50

S&P BSE

Mid Cap

S&P BSE

Small Cap

P/E

23.43 25.84 32.46 -95.69

P/B

3.01 3.34 2.61 2.17

Dividend Yield

1.17 1.26 0.96 0.87

Source: BSE, NSE Value as on Jan

4, 2019

Domestic Equity Market Indices

Indices

04-Jan-19

1 Week

Return

YTD

Return

S&P BSE Sensex

35,695.1 -1.06% -1.03%

Nifty 50

10,727.35 -1.22% -1.24%

S&P BSE Mid

-Cap 15,147.6 -1.38% -1.88%

S&P BSE Small

-Cap 14,592.41 -0.09% -0.78%

Source: MFI Explorer

Indian Equity Market (contd.)

Sectoral Indices

Indices

Last

Closing*

Returns (in %)

1-Wk 1-Mth

S&P BSE Auto

19,894.2

-4.48%

-4.27%

S&P BSE Bankex

30,438.1 0.36% 1.80%

S&P BSE CD

20,568.9 0.08% 0.10%

S&P BSE CG

18,383.8

-2.16%

-1.26%

S&P BSE FMCG

11,710.5

-1.06%

0.59%

S&P BSE HC

13,822.9

-0.05%

-2.38%

S&P BSE IT

13,894.8

-1.12%

-5.02%

S&P BSE Metal

11,240.2

-3.70%

-7.25%

S&P BSE Oil & Gas

13,510.7

-1.96%

0.78%

S&P BSE Realty

1825.2 1.23% -0.1%

Source: BSE

Value as on January 4, 2019

• On the BSE sectoral front, all the indices

closed in the red barring S&P BSE Realty

(1.23%), S&P BSE Bankex (0.36%) and S&P

BSE CD (0.08%). S&P BSE Auto (-4.48%)

was the major loser followed by S&P BSE

Metal (-3.70%) and S&P BSE CG (-2.16%).

• Metal stocks declined over disappointing

Chinese manufacturing data. Also, decline in

one of the major metal stocks following

reports that Tamil Nadu government has

moved the Supreme Court for closure of the

company's copper plant in Thoothukudi

weighed on the sector.

Indian Derivatives Market Review

• Nifty Jan 2019 Futures were at 10,777.60, a premium of 50.25 points, over the spot closing

of 10,727.35. The total turnover on NSE’s Futures and Options segment for the week

stood at Rs. 30.17 lakh crore as against Rs. 46.24 lakh crore for the week to Dec 28.

• The Put-Call ratio stood at 0.84 compared with the previous week’s close of 0.90.

• The Nifty Put-Call ratio stood at 1.34 against the previous week’s close of 1.54.

Domestic Debt Market

Debt Indicators

(%)

Current

Value

Ago

Mth

Ago

Mth

Ago

Call Rate

6.31 6.57 6.35 6.09

91 Day T

-Bill

6.61 6.67 6.76 6.39

7.80% 2021, (5

Yr GOI)

6.92 6.86 7.46 7.73

7.17% 2028, (10 Yr GOI)

7.45 7.39 7.57 7.85

Source: Thomson Reuters Eikon

Value as on Jan 4, 2019

• Bond yields rose for the second

consecutive week as market

participants were worried that the

government might miss its fiscal

deficit target of 3.3% of Gross

Domestic Product (GDP) for this

fiscal. Concerns of a possible fiscal

slippage have come to the forefront

on speculation that the government

might announce a relief package to

support farm and rural sectors.

• Surge in global crude oil prices over

the week and higher than anticipated

borrowing plan by state governments

for the period from Jan to Mar of

2019 added to the pain. However,

bargain hunting restricted further

losses.

7.30

7.39

7.48

31-Dec 1-Jan 2-Jan 3-Jan 4-Jan

Yield in %

10 -Yr Benchmark Bond ( % )

Source: CCIL

Domestic Debt Market (Spread Analysis)

Maturity

G-

Sec Yield

(%)

Corporate Yield

(%)

Spread

bps

1 Year 6.96 8.49 154

3 Year 7.23 8.52 129

5 Year 7.46 8.38 92

10 Year 7.59 8.48 89

Source: Thomson Reuters Eikon

Value as on Jan 4, 2019

• Yields on gilt securities increased across

the maturities by up to 16 bps barring 12-

year paper that fell 1 bps. The maximum

increase was witnessed on 14-year

paper.

• Corporate bond increased across the

maturities in the range of 3 bps to 13 bps.

The maximum increase was witnessed

on 5- and 6-year papers and the

minimum on 3-year paper.

• Difference in spread between AAA

corporate bond and gilt expanded across

the maturities by up to 6 bps barring 10-

year paper that closed steady.

-10

6.00

6.90

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 04-Jan-19 28-Dec-18

Yield

in %

Change

in bps

Source: Thomson Reuters Eikon

Regulatory Updates in India

• The Securities and Exchange Board of India (SEBI) allowed debt mutual funds to segregate

their portfolios and carve out bad securities. SEBI said in case where the credit rating of an

instrument held by a debt fund gets downgraded to "below investment grade" (below BBB-

rating) then fund houses can choose to segregate such bad securities. After this, investors

can continue to buy or sell the good portion of the scheme and the segregated portfolio will

not allow any fresh investments until the fund recovers the dues from bad assets. The

option of segregating is with the fund houses, but they will not be able to do this

immediately as they need to first mention it in their scheme information documents.

• SEBI announced that it has decided to implement mandatory physical settlement for all

stock derivatives by Oct 2019. The market regulator stated that beginning Apr 2019, the

new system will be implemented in three phases. According to SEBI, the stocks that are

currently being cash settled, shall be ranked in descending order based on average daily

market capitalisation of the company during Dec 2018. By Apr 2019, bottom 50 companies

will be moved to mandatory physical settlement, followed by the next 50 bottom companies

which will be moved by Jul 2019 and the remaining stocks will be moved to physical

settlement by Oct 2019.

• India will not impose anti-dumping duty on coated paper from China, European Union and

the U.S. This has happened after the commerce ministry's investigation arm Directorate

General of Trade Remedies did not find any impact on the domestic industry because of the

alleged dumped imports.

Regulatory Updates in India (contd..)

• The Central Board of Indirect Taxes and Customs stated that the government has

abandoned late fees for non-filers of summary and final sales returns for the period Jul

2017-Sep 2018. The late fees have been waived for businesses registered under the Goods

and Services Tax (GST). However, it stated that 15-month period returns will have to be

filed by these businesses by Mar 31, 2019.

• The GST anti-profiteering authority has issued orders against nine businesses. These

businesses were found to have not passed on rate cut benefits of Rs. 559.88 crore to

borrowers. Minister of State for Finance said the GST Council has recommended goods

and services tax rate reduction in respect of 400 groups of goods and 96 groups of

services.

• The Reserve Bank of India (RBI) formed an expert committee under a former chairman of

the SEBI for the micro, small and medium enterprises (MSME) sector. The panel will

suggest long-term solutions for the economic and financial sustainability of the MSME

sector. The eight-member committee will also look into factors affecting the timely and

adequate availability of finance to the sector.

Global News/Economy

• According to the Labor Department, employment in the U.S. spiked by much more than

estimated in Dec 2018. The Labor Department said non-farm payroll employment soared by

312,000 jobs in Dec 2018 after climbing by 176,000 jobs in Nov 2018.

• Institute for Supply Management data showed a notable slowdown in the pace of growth in

U.S. manufacturing activity in Dec 2018. The ISM Purchasing Managers’ Index (PMI)

decreased to 54.1 in Dec 2018 after rising to 59.3 in Nov 2018, lowering to its lowest level

since touching 53.4 in Nov 2016.

• According to a report from the Federal Employment Agency, Germany's unemployment fell

more than market expectations and number of employed fell by 14,000 in Dec 2018.

Meanwhile, the seasonally adjusted jobless rate was 5% in Dec 2018 that remained

unchanged from Nov 2018.

• According to the National Bureau of Statistics, manufacturing sector in China fell into

contraction in Dec 2018 with a PMI score of 49.4. That is less than the no-change mark of

50.0 in Nov 2018. A score of above 50 indicates expansion. The bureau’s non-manufacturing

PMI increased to 53.8 from 53.4 in the previous month. The bureau's composite index came

in at 52.6, down from 52.8 a month ago.

• A report from the IHS Markit showed that China’s headline Caixin Factory PMI (seasonally

adjusted) declined to 49.7 in Dec 2018 from 50.2 in Nov 2018. The total new work witnessed

decline for the first time since Jun 2016.

Global Equity Markets

Global Indices

Indices

04-Jan-19

1-Week

Return

YTD

Return

Dow Jones

23,433.16

1.61% 0.45%

Nasdaq 100

6,422.67

2.19% 1.46%

FTSE 100

6,837.42

1.54% 1.62%

DAX Index

10,767.69

1.98% 1.98%

Nikkei Average

19,561.96

-2.26% -2.26%

Straits Times

3,059.23

0.19% -0.31%

Source: Thomson Reuters Eikon

Value as on Jan 4, 2019

U.S.

• U.S. markets traded in the green during

the first week of 2019 driven by

optimism about a potential U.S.-China

trade deal following comments from the

U.S. President. Markets found additional

strength from non-farm payroll

employment and U.S. private sector job

growth in Dec.

Europe

• European markets went up led by optimism over long-term U.S.-China trade deal after

both the nations scheduled fresh trade talks in the upcoming week. Additionally, private

survey showing growth in the Chinese services sector to a six-month high in Dec eased

global growth worries. Gains were restricted by uncertainty over Brexit deadline after

media reports stated that the same may be pushed back if the U.K. Prime Minister's deal

fails to get approved by Parliament in Jan 2019

Asia

• Asian equity markets were mostly high except for Japan. Investor sentiment was buoyed

by strong Chinese services data and progress on U.S.-China trade front. However, Japan

fell as yen strengthened against the U.S. dollar.

Global Debt (U.S.)

• Yields on the 10-year U.S. Treasury

bonds fell 8 bps to close at 2.66% from

the previous close of 2.74%.

• U.S. Treasury prices rose amid ongoing

U.S. government partial shutdown and

concerns about a global growth

slowdown. Disappointing Chinese

manufacturing activity and significant

decline in U.S. manufacturing activity for

Dec 2018 improved the safe haven

appeal of U.S. Treasuries.

• Further, reports showing that a U.S

technology major lowered its revenue

forecast for first quarter 2019 led to sell-

off in the equity markets, thereby adding

to the gains. However, reports showing

much more than expected increase in

U.S. employment in Dec 2018 restricted

the gains.

2.50

2.55

2.60

2.65

2.70

31-Dec 1-Jan 2-Jan 3-Jan 4-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 ($/bbl)

55.23 50.51

Gold ($/Oz)

1,284.83 1,280.67

Gold (Rs/10 gm)

3,1769 3,1547

Silver ($/Oz)

15.69 15.34

Silver (Rs/Kg)

3,8775 3,8133

Source: Thomson Reuters

Eikon *Value as on Jan 4, 2019

Gold

• Gold prices traded higher after China's

manufacturing activity fell in Dec 2018.

The precious metal also gained on

uncertainty of global stock and currency

markets, concerns over Brexit and

political unrest at U.S. However, reports

that the U.S. and China might hold talks

on trade matters restricted the upside.

Brent Crude

• Brent crude prices traded higher as

market participants awaited the supply-

cut to begin soon, as announced by the

oil cartel in early Dec 2018. However,

gains were restricted on concerns over

demand outlook.

Baltic Dry Index

• The Baltic Dry Index witnessed a fall of

0.87% on the back of lower capesize

and panamax activities

8.00

9.70

11.40

5-Dec-18 20-Dec-18 4-Jan-19

Global Commodity Movement

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

Global

Commodity Prices

Rebased to 10

Source: Thomson Reuters Eikon

9.34%

0.32%

2.29%

Currencies Markets

Movement of Rupee vs Other Currencies

Currency

Last Closing*

1-Wk Ago

US Dollar

69.87 69.98

Pound Sterling

88.26 88.66

EURO

79.57 80.18

JPY(per 100 Yen)

64.60 63.28

Source: RBI Figures in INR , *

Value as on Jan 4, 2019

Rupee

• The Indian rupee strengthened against

the U.S. dollar amid progress in U.S.-

China trade talks. Speculations over

slowdown in pace of interest rate hikes by

the U.S. Fed and concerns over U.S.

economic growth dampened greenback.

Euro

• The euro fell against the greenback

following weak manufacturing PMI from

most of the euro area in Dec 2018. More

than expected rise in U.S. non-farm

payroll data in Dec 2018 further

dampened euro.

Pound

• The pound fell against the dollar on fears

of slower global growth and uncertainty

about Brexit negotiations.

Yen

• The yen surged against the U.S. dollar as

investors worried slowing of global growth

and volatile equity markets that boosted

its safe-haven appeal.

9.70

10.20

10.70

5-Dec-18 15-Dec-18 25-Dec-18 4-Jan-19

USD GBP Euro JPY

Source: RBI

Currency

Prices (

in terms of INR)

Rebased to 10

Currency Movement

- 0.77%

- 0.16%

- 0.45%

2.09%

The Week that was…

December to 4

January

The Week that was (Dec 31 – Jan 4)

Date Events

Present

Value

Monday,

December 31, 2018

• India Eight Core Industries YoY (Nov)

3.5% 4.8%

• China Non

-manufacturing PMI (Dec) 53.8 53.4

• China Manufacturing PMI (Dec)

49.4 50.0

Tuesday,

January 01, 2019

• India Nikkei Manufacturing PMI (

Dec) 53.2 54

Wednesday,

January 02, 2019

• U.S. Markit US Manufacturing PMI (F) (Dec)

53.8 53.9

• Markit Eurozone Manufacturing PMI (F) (Dec)

51.4 51.4

• U.K. Markit Manufacturing PMI (Dec)

54.2 53.1

Thursday,

January 03, 2019

• U.S. ISM Manufacturing PMI (Dec)

54.1 59.3

• U.S. ADP Employment Change (Dec)

271k 157k

• U.K. Markit Construction PMI (Dec)

52.8 53.4

Friday,

January 04, 2019

• Germany Unemployment Change (Dec)

-14k -16k

• Eurozone Consumer Price Index Estimate (YoY) (A) (Dec)

1.0% 1.0%

• Nikkei India Services Business Activity Index (Dec)

53.2 53.7

• U.S. Change in Non

-farm Payrolls (Dec) 312 K 155k

• U.S. Unemployment Rate (Dec)

3.9% 3.7%

The Week Ahead

January to 11

January

The Week Ahead

Day Event

Monday,

January 7, 2018

•

U.S. Advance Goods Trade Balance (Nov)

•

U.S. New Home Sales (MoM) (Nov)

•

Japan Nikkei Japan PMI Composite (Dec)

•

Eurozone German Factory Orders n.s.a. (YoY) (Nov)

Tuesday,

January 8, 2018

•

U.S. ISM Manufacturing (Aug)

•

U.K. Markit/CIPS UK Construction PMI (Aug)

Wednesday,

January 9, 2018

•

Japan Nikkei PMI Composite (Aug)

•

China Caixin PMI Composite (Aug)

•

Eurozone Retail Sales (YoY) (Jul)

•

U.S. Trade Balance (Jul)

Thursday,

January 10, 2018

•

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

•

German Factory Orders n.s.a. (YoY) (Jul)

•

U.S. ADP Employment Change (Aug)

•

U.S. Factory Orders (Jul)

Friday,

January 11, 2018

•

Japan Real Cash Earnings (YoY) (Jul)

•

German Industrial Production n.s.a. and w.d.a. (YoY) (Jul)

•

U.S. Change in Non-farm Payrolls (Aug)

•

U.S. Unemployment Rate (Aug)

Disclaimer

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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 (RNAM) has not

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