The Week that was…
01
st
July to 05
th
July
2
Indian Economy
• The government while presenting the Union Budget adhered to the fiscal consolidation
roadmap as it lowered its fiscal deficit target to 3.3% of GDP for FY20 from 3.4% of GDP
for FY19. The government expects the gross tax revenue to grow 9.5% in FY20 on the
back of an increase in dividend receipts. It also hopes that the central government debt as
a % of GDP will come down to 48.0% of GDP in FY20 from 48.4% in FY19 on the back of
a benign inflation regime which will help reduce the cost of borrowing. The central
government debt as a % of GDP is expected to come down further to 46.2% in FY21 and
44.4% in FY22.
• Government data showed that the growth in the index of eight core industries grew to
5.1% in May 2019 from a revised 6.3% in Apr 2019 (2.6% growth originally reported), and
4.1% in the same period of the previous year. The growth came as electricity output
increased 7.2% compared with 5.9% in the previous month. The steel sector witnessed the
maximum growth of 19.9% followed by electricity and cement, which grew 2.8%.
• The Nikkei India Manufacturing Purchasing Managers' Index (PMI) slowed to 52.1 in Jun
2019 from 52.7 in May 2019. The slowdown came as a softer increase in new work intakes
led to slower rise in output and employment.
• The seasonally adjusted Nikkei India Services Business Activity Index fell from 50.2 in May
2019 to 49.6 in Jun 2019, thereby marking a 16-months low. Broadly stagnant sales
resulted in first decline in business activity over a period of 1 year.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices
05-Jul-19
1 Week Return
YTD Return
S&P BSE Sensex
39,513.39 0.30% 9.55%
Nifty 50
11,811.15 0.19% 8.73%
S&P BSE Mid
-Cap 14,725.65 -0.56% -4.62%
S&P BSE Small
-Cap 14,141.83 -0.68% -3.84%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
01-Jul-19 909 908 1.00
02-Jul-19 836 951 0.88
03-Jul-19 958 813 1.18
04-Jul-19 920 863 1.07
05-Jul-19 468 1,317 0.36
Source: NSE
• Indian equity markets closed modestly
higher in the week ended Jul 5, 2019.
Reports that the country’s current
account deficit for the quarter ended
Mar 2019 has narrowed boosted the
indices. Falling crude oil prices and
surge in rupee added to the gains.
• Hopes of announcement of fiscal
measures to support economic growth
in the Union Budget scheduled on Jul
5, 2019, added to the gains. However,
proposal in budget to increase the
minimum public shareholding in listed
companies from 25% to 35% led to
liquidity concerns among investors and
pulled the market down. Increase in
surcharge on the high-income group
also dented market sentiment.
• On the global front, investors remained
focused on reports that U.S. and China
are planning to recommence talks in
the week ended Jul 12, 2019.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
28.62 29.04 31.14 37.19
P/B
3.03 3.72 2.48 2.00
Dividend Yield
1.18 1.24 1.00 1.01
Source: BSE, NSE Value as on July
05, 2019
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
17,692.26
-1.18%
-5.61%
S&P BSE Bankex
35,340.51 1.05% -0.40%
S&P BSE CD
25,358.98
-2.94%
0.93%
S&P BSE CG
19,675.59
-0.91%
-2.09%
S&P BSE FMCG
11,505.35 1.26% -0.97%
S&P BSE HC
12,719.23
-1.32%
-4.31%
S&P BSE IT
15,249.96
-2.58%
-2.96%
S&P BSE Metal
10,601.47
-4.55%
-3.43%
S&P BSE Oil & Gas
14,487.13
-2.14%
-7.97%
BSE Realty
2,172.96
-1.29%
-1.89%
BSE Teck
7,528.37
-1.90%
-2.75
Source: Thomson Reuters Eikon
*Value as on July 05, 2019
• S&P BSE FMCG was the major gainer and
grew 1.26%, followed by S&P BSE Bankex
that grew 1.05%. However, S&P BSE Metal
was the major loser that fell 4.55% followed
by S&P BSE Consumer Durables that fell
2.94%. It was proposed in Union budget to
increase custom duty on gold and other
precious metals from 10% to 12.5%.
• S&P BSE Teck fell 1.90% followed by S&P
BSE Healthcare and S&P BSE Realty that
fell 1.32% and 1.29%, respectively. One of
the real estate builders defaulted on
scheduled interest payments on a Rs. 1,200
crore loan to a private lender.
Indian Derivatives Market Review
• Nifty Jul 2019 Futures stood at 11,820.95, a premium of 9.80 points, above the spot closing
of 11,811.15. The total turnover on NSE’s Futures and Options segment for the week stood
at Rs. 55.55 lakh crore as against Rs. 65.74 lakh crore for the week to June 28.
• The Put-Call ratio stood at 0.79 compared with the previous week’s close of 0.92.
• The Nifty Put-Call ratio stood at 1.09 against the previous week’s close of 1.29.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-
Wk
Ago
1-
Mth
Ago
6-
Mth
Ago
Call Rate
5.56 5.94 5.87 6.31
91 Day T
-Bill
5.89 6.01 6.07 6.61
07.32% 2024, (5 Yr GOI)
6.62 6.77 6.88 --
07.26% 2029, (10
Yr
GOI)
6.70 6.88 7.02 --
Source: Thomson Reuters Eikon
Value as on July 05, 2019
• Bond yields fell as crude oil prices
declined amid worries of global
economic slowdown, which triggered
demand concerns for the commodity.
Fall in crude prices raised optimism on
lower inflation and further rate cuts.
• By the end of the week, gains were
extended as worries over widening
fiscal deficit alleviated. In addition,
government official’s remark on
borrowings from overseas market
raised expectations of foreign fund
inflows and lifted the market
sentiment.
• Yields on the 10-year benchmark
paper (7.26% GS 2029) plunged 18
bps to close at 6.70% compared with
the previous close of 6.88% after
trading in the range of 6.58% to
6.93%.
6.60
6.72
6.84
6.96
1-Jul 2-Jul 3-Jul 4-Jul 5-Jul
Yield in %
10 -Yr Benchmark Bond ( % )
Source: CCIL
Domestic Debt Market (Spread Analysis)
7
Maturity
G-
Sec Yield
(%)
Corporate Yield
(%)
Spread
bps
1 Year 6.15 7.88 173
3 Year 6.53 7.81 128
5 Year 6.73 7.89 116
10 Year 6.81 8.26 146
Source: Thomson Reuters Eikon
Value as on July 05, 2019
• Yields on gilt securities fell across the
maturities in the range of 12 bps to 26 bps.
The maximum decline was witnessed on 15-
year paper and the minimum decline was
witnessed on 19-year paper.
• Corporate bond yields fell across the
maturities in the range of 7 bps to 27 bps. The
maximum decline was witnessed on 7-year
paper and the minimum decline was
witnessed on 1-year paper.
• Difference in spread between AAA corporate
bond and gilt contracted on 2-year paper and
5 to 7 years’ maturities in the range of 2 bps to
11 bps, while it expanded across the
remaining segment by up to 12 bps.
-21
-14
-7
0
5.70
6.20
6.70
7.20
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 05-Jul-19 28-Jun-19
Yield
in
%
Change
in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• The government in the Union Budget proposed further recapitalization of state-run banks to
the tune of Rs. 70,000 crore. It also proposed to give a one-time six-month partial credit
guarantee to public sector banks (PSB) for the first loss of up to 10% in order to tide over
the liquidity crisis in the non-banking financial segment. It also put forward the suggestion of
creating a Debenture Redemption Reserve (DRR) which will help non-banking financial
companies to raise fund through public issues.
• The government in the Union Budget allocated Rs. 65,837 crore for the railway sector. The
government also allocated the highest ever outlay for capital expenditure to the tune of Rs.
1.60 lakh crore. It added that railway infrastructure would need an investment of Rs. 50
crore between 2018 and 2030. The government also proposed to use the Public-Private
Partnership for the development of Indian railways.
• The government in the Union Budget set the disinvestment target at Rs. 1.05 lakh crore for
FY20. Acknowledging that exchange traded funds as a good instrument for India’s
divestment program and to boost long term investment in central public sector enterprises,
the finance minister added that investment option in exchange traded funds on the lines of
Equity Linked Savings Scheme will be offered.
Regulatory Updates in India (contd..)
9
• The finance minister while presenting the Union Budget urged the capital market regulator
Securities and Exchange Board of India (SEBI) to increase the minimum public
shareholding in the listed companies to 35% from 25%. Underling the importance of
corporate debt market, the finance minister added that steps will be taken to enable stock
exchanges to allow AA-rated bonds as collaterals and to get retail investors to invest in
government securities and treasury bills issued by the government. The finance minister
also proposed to rationalise the existing Know Your Customer (KYC) norms for foreign
portfolio investors to make India an investor friendly nation.
• The finance minister proposed to take steps for setting up a social stock exchange which
will be regulated by SEBI. The objective of the move is to help listing of social enterprises
and voluntary organizations so that they can raise capital as equity, debt or as units like a
mutual fund. This will help to meet various social welfare objectives which will help to bring
about inclusive growth and financial inclusion.
• The finance minister while presenting the Union Budget opined that India’s sovereign
external debt to GDP is less than 5% and is one of the lowest across the globe. The
minister added that a part of its gross borrowings would be raised in overseas markets. The
finance minister also proposed to raise the annual turnover limit for companies from Rs. 250
crore to Rs. 400 crore for availing a lower corporate tax rate of 25%.
Global News/Economy
• According to a report by the Labor Department, U.S. non-farm payroll rose more than
expected by 224,000 jobs in Jun 2019 after edging up by a downwardly revised 72,000 jobs
in May 2019. The unemployment rate inched up to 3.7% in Jun from 3.6% in May.
• Eurostat data showed euro area unemployment rate dropped to the lowest since Jul 2008,
despite the ongoing contraction in the manufacturing sector. The unemployment rate fell to
7.5% in May 2019 from 7.6 % in Apr 2019. The rate was forecast to remain unchanged.
• Data from the Cabinet Office showed Japan's consumer confidence weakened to the lowest
level in four-and-a-half years in Jun 2019. The consumer confidence index for households
with two or more persons fell to a seasonally adjusted 38.7 in Jun from 39.4 in May 2019.
• A report from the Institute for Supply Management showed that U.S. Purchasing Managers’
Index (PMI) fell to 51.7 in Jun 2019 as against 52.1 in May 2019. This marked the lowest
level since a matching reading in Oct 2016. The slowdown came in as new orders were
unchanged as against a growth for 41 consecutive months.
• IHS Markit data showed China's manufacturing activity contracted for the first time in four
months in Jun 2019 as trade tensions caused renewed declines in sales, export orders and
production. The Caixin manufacturing PMI fell to 49.4 in Jun from 50.2 in May 2019.
10
Global Equity Markets
11
Global Indices
Indices
05-Jul-19
1-Week
Return
YTD
Return
Russell 3000
1,307.29 1.97% 23.02%
Nasdaq 100
7,841.30 2.22% 23.88%
FTSE 100
7,553.14 1.72% 12.26%
DAX Index
12,568.53 1.37% 19.03%
Nikkei Average
21,746.38 2.21% 8.65%
Straits Times
3,366.81 1.36% 9.71%
Source: Thomson Reuters Eikon
Value as on July 05, 2019
U.S.
• U.S. markets gained during the
truncated week. Optimism over interest
rate cut in the near-term by the U.S.
Federal Reserve (Fed) amid a slew of
weak U.S. economic data supported the
gains.
• However, renewed uncertainty about
global trade after the U.S. proposed
new tariffs on more European goods
capped the gains.
Europe
• European markets moved up on reports that top representatives from U.S. and China are
planning to recommence talks in the week ended Jul 12, 2019. Further, European
Commission reportedly decided to withhold disciplinary action against Italy over its fiscal
policy, thereby boosting the market sentiment.
Asia
• Asian markets gained as the U.S. and China agreed to restart trade talks and avoid
imposition of additional tariffs on each other's products. Investors also became hopeful of
a rate-cut soon by the U.S. Fed following weak U.S. economic data.
Global Debt (U.S.)
12
• Yields on the 10-year U.S. Treasury
bond rose 4 bps to 2.04% compared
with the previous week’s close of 2.00%.
• U.S. Treasury prices grew initially on
renewed safe-haven demand due to
concerns over slowing global economic
growth and reduced optimism about the
restart on U.S.-China trade talks.
• Prices rose further following decline in
U.K. yields as comment by the Bank of
England (BoE) governor on the risks
from Brexit and trade conflicts indicated
that the BoE may lower interest rates in
the next 12 months.
• However, the trend reversed following
more than expected increase in U.S.
non-farm payroll data for the month of
Jun 2019 alleviating concerns over
current U.S. economic expansion.
1.90
2.00
2.10
1-Jul 2-Jul 3-Jul 4-Jul 5-Jul
Yield in %
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Commodities
Last Closing*
1-Week Ago
Brent Crude($/Barrel)
64.82 68.96
Gold ($/Oz)
1,399.55 1,409.10
Gold (Rs/10 gm)
34,571.00 34,006.00
Silver ($/Oz)
14.97 15.31
Silver (Rs/Kg)
37,461.00 37,425.00
Source: Thomson Reuters Eikon *
Value as on July 05, 2019
Gold
• Gold prices fell amid rise in global stock
markets. Though there was no concrete
result of the U.S.-China trade meet at the
G20 summit, the two economies gave
assurance of advancing talks, thereby
adding to the losses.
Brent Crude
• Brent crude prices fell on weak U.S and
German factory orders numbers in May
2019. The feeble data set raised concerns
over the commodity’s demand outlook.
However, reports that OPEC and allies
have decided to extend production cut
through Mar 2020 restricted the losses.
Baltic Dry Index
• The Baltic Dry Index grew on the back of
improved capesize and panamax
activities.
9.70
10.10
10.50
10.90
5-Jun-19 15-Jun-19 25-Jun-19 5-Jul-19
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global
Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
-6.00%
-0.68%
-2.20%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency
Last Closing*
1-Wk Ago
US Dollar
68.75 68.92
Pound Sterling
86.50 87.35
EURO
77.52 78.36
100 Yen
63.70 63.97
Source: RBI Figures in INR , *
Value as on July 05, 2019
Rupee
• The rupee strengthened against the
greenback as crude oil prices eased.
Optimism over possible foreign fund
inflows and productive trade talks
between the U.S. and China added to
the gains.
Euro
• The euro weakened against the
greenback following upbeat U.S. non-
farm payroll data for Jun 2019. Further,
fall in the German 10-year bund yield on
expectations of stimulus measures from
the ECB added to the losses.
Pound
• The pound fell against the greenback on
weak U.K. composite purchasing
managers' index data in Jun 2019.
Yen
• The yen fell against the greenback
following more than expected increase in
U.S. non-farm payroll data for Jun 2019.
9.80
9.90
10.00
10.10
10.20
5-Jun-19 15-Jun-19 25-Jun-19 5-Jul-19
USD GBP Euro JPY
Source: Thomson Reuters Eikon
Currency
Prices (
in terms of INR)
Rebased to 10
Currency Movement
-0.24%
-0.97%
-1.07%
-0.42%
15
The Week that was…
01
st
July to 05
th
July
The Week that was (July 01 – July 05)
16
Date Events
Present
Value
Previous
Value
Monday,
July 01, 2019
•
India Nikkei Manufacturing PMI (Jun) 52.1 52.7
•
India Index of Eight Core Industries (May) 5.10% 6.30%
•
Germany Unemployment Change (000's) (Jun) -1K 60K
•
U.S. ISM Manufacturing (Jun) 51.7 52.1
•
Japan Consumer Confidence Index (Jun) 38.7 39.4
•
U.K. Mortgage Approvals (May) 65.4K 66.0K
Tuesday,
July 02, 2019
•
U.K. Nationwide House Price Index (YoY) (Jun) 0.50% 0.60%
•
U.K. Markit/CIPS UK Construction PMI (Jun) 43.1 48.6
Wednesday,
July 03, 2019
•
India Nikkei Services PMI (Jun) 49.6 50.2
•
U.S. ISM Non-Manufacturing/Services PMI (Jun) 55.1 56.9
•
Japan Markit Composite PMI (Jun) 50.8 50.7
•
China Caixin Composite PMI (Jun) 50.6 51.5
•
U.S. Factory Orders (May) -0.70% -1.2%
Thursday,
July 04, 2019
•
Eurozone Retail Sales (YoY) (May) 1.30% 1.80%
•
Germany Markit Construction PMI (Jun) 50 51.4
Friday,
July 05, 2019
•
U.S. Change in Non-farm Payrolls (Jun) 224K 72K
•
U.S. Unemployment Rate (Jun) 3.70% 3.60%
•
Germany Factory Orders (YoY) (May) -8.6% -5.3%
17
The Week ahead
08
th
July to 12
th
July
18
The Week Ahead
Day Event
Monday,
Jul 8, 2019
•
Japan Eco Watchers Survey Current (Jun)
•
Germany Industrial Production (YoY) (May)
•
U.S. Consumer Credit (May)
Tuesday,
Jul 9, 2019
•
Japan Machine Tool Orders (YoY) (Jun P)
Wednesday,
Jul 10, 2019
•
U.S. FOMC Meeting Minutes (Jun 19)
•
China Consumer Price Index (YoY) (Jun)
•
U.K. Gross Domestic Product (MoM) (May)
•
U.K. Industrial Production (YoY) (May)
•
U.K. Manufacturing Production (YoY) (May)
Thursday,
Jul 11, 2019
•
U.S. Consumer Price Index (YoY) (Jun)
•
U.K. Bank of England Financial Stability Report
•
U.S. Monthly Budget Statement (Jun)
Friday,
Jul 12, 2019
•
India Consumer Price Index (YoY) (Jun)
•
India Index of Industrial Production (May)
•
China Trade Balance (Jun)
•
Japan Industrial Production (YoY) (May F)
Disclaimer
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19
