News U Can Use
July 20, 2018
The Week that was…
16
th
July to 20
th
July
2
Indian Economy
• Government data showed that India’s Wholesale Price Index-based inflation (WPI) rose to
5.77% in Jun 2018 as prices of vegetables and fuel items increased. Wholesale price
inflation was at 4.43% in May 2018 and at 0.90% in Jun 2017. Inflation in food articles
came in at 1.80% in Jun against 1.60% in May. Inflation in vegetables increased to 8.12%
in Jun from 2.51% in May. ‘Fuel and power' inflation went up to 16.18% in Jun from
11.22% in May because of rising global crude oil prices. The WPI Food Index also
increased to 1.56% in Jun 2018 from 1.12% in May 2018.
• The International Monetary Fund (IMF) lowered India’s Gross Domestic Product (GDP)
growth forecast by 10 basis points to 7.3% in the year 2018. For 2019, the bank lowered
the GDP forecast by 30 basis points to 7.5%. IMF revised the forecast as it expects the
Reserve Bank of India to tighten the country’s monetary policy at a faster pace. Also, rising
global crude oil prices and fears of a trade war between China and U.S. are factors that
could affect India’s GDP negatively.
• According to media reports, the finance ministry approved capital infusion of Rs. 11,336
crore in five public sector banks. This was done to help these banks meet regulatory
capital requirements.
• The Central Board of Indirect Taxes and Custom (CBIC) notified that import duty has been
doubled on more than 50 textile products, such as carpets and suits. The duty on these
products now stands at 20%. This is being done to promote domestic manufacturing
activities.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 20-Jul-18 1 Week Return YTD Return
S&P BSE Sensex 36,496.37 -0.12% 7.16%
Nifty 50 11,010.20 -0.08% 4.55%
S&P BSE Mid-Cap 15,196.46 -1.52% -14.73%
S&P BSE Small-Cap 15,721.43 -2.93% -18.25%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
16-Jul-18 295 1,527 0.19
17-Jul-18 1,056 761 1.39
18-Jul-18 499 1,299 0.38
19-Jul-18 497 1,309 0.38
20-Jul-18 811 975 0.83
Source: NSE
• Indian equity markets inched down
during the week under review.
Wholesale price index-based inflation
shot up to 5.77% in Jun on increasing
prices of vegetables and fuel items,
thereby weighing on market
sentiment. Investor sentiment
dampened further as a report by a
global investment bank and financial
services provider stated that a likely
rise in global crude oil prices,
upcoming general elections and an
upward pressure on inflation may
prompt the Monetary Policy
Committee to go for interest hike
rates.
• However, further losses were
restricted after the finance ministry
approved capital infusion of Rs.
11,336 crore in five public sector
banks.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
22.90 27.36 32.15 103.31
P/B
3.02 3.59 2.57 2.22
Dividend Yield
1.21 1.22 1.00 0.81
Source: BSE, NSE Value as on Jul 20
, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
24,012.6 -2.26% -3.09%
S&P BSE Bankex
29,701.2 -0.29% -0.03%
S&P BSE CD
19,972.6 1.05% -1.59%
S&P BSE CG
17,494.6 -1.71% -2.63%
S&P BSE FMCG
11,340.7 -1.26% 2.12%
S&P BSE HC
13,661.3 -2.82% -4.28%
S&P BSE IT
14,572.2 1.30% 6.76%
S&P BSE Metal
11,730.5 -5.94% -10.41%
S&P BSE Oil & Gas
14,391.8 1.68% 0.23%
Source: Thomson Reuters Eikon
*Value as on July 20, 2018
• On the BSE sectoral front, indices closed
on a softer note. S&P BSE Metal stood as
the major loser (-5.94%) as a slowdown in
China’s GDP in the second quarter of 2018
led to decline in metal stocks.
• S&P BSE Oil & Gas (1.68%) stood as the
major gainer followed by S&P BSE IT
(1.30%) and S&P BSE Consumer
Durables (1.05%). Gains in Oil & Gas
stocks were driven by fall in global crude
oil prices. Further, weakness in rupee led
to gains in IT stocks since a weaker rupee
boosts revenue of IT companies as a big
part of the sector’s sales come from
exports.
Indian Derivatives Market Review
• Nifty Jul 2018 Futures were at 11,024.85, a premium of 14.65 points, above the spot
closing of 11,010.20. The turnover on NSE’s Futures and Options segment stood at Rs.
48.68 lakh crore as against Rs. 40.98 lakh crore on Jul 13.
• The Put-Call ratio stood at 0.79 compared with the previous week’s close of 0.90.
• The Nifty Put-Call ratio stood at 1.71 compared with the previous week’s close of 1.79.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
6.20 6.16 6.24 5.93
91 Day T-Bill
6.60 6.54 6.47 6.38
7.80% 2021, (5 Yr GOI)
7.54 7.75 7.67 7.07
7.17% 2028, (10 Yr GOI)
7.79 7.79 7.83 7.29
Source: Thomson Reuters
Eikon
Value as on July 20, 2018
• Bond yields fell as decline in crude oil
prices eased concerns of a rise in
domestic inflationary pressures to
some extent. Open market bond
purchases conducted by the Reserve
Bank of India (RBI) also boosted the
domestic bond market.
• However, gains were nullified
following rise in U.S. Treasury yields
and significant decline in rupee after
the U.S. Federal Reserve chief in his
testimony indicated continued rate
hikes moving ahead and played down
risks that may emanate from
escalating trade tensions between
U.S. and China.
• Yield on the 10-year benchmark
paper (7.17% GS 2028) stood
unchanged at 7.79% from the
previous week’s close after trading in
a range of 7.72% to 7.85%.
7.70
7.76
7.82
16-Jul 17-Jul 18-Jul 19-Jul 20-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 7.34 8.27 93
3 Year 7.88 8.59 71
5 Year 8.09 8.72 63
10 Year 7.94 8.75 82
Source: Thomson Reuters Eikon
Value as on July 20, 2018
• Yields on gilt securities increased on 2- and
15-year maturities by 1 bps and 2 bps,
respectively. Yield fell across the remaining
maturities up to 8 bps barring 1-year paper
that closed steady.
• Corporate bond yields fell across 2 to 6 years’
papers by up to 5 bps and remained
unchanged for 7- and 8-year papers. Yield on
1-, 9-, 10- and 15-year papers rose by 3 bps, 2
bps, 4 bps and 15 bps, respectively.
• Spread between AAA corporate bond and gilt
contracted on 3-, 4- and 5- year papers by 1
bps or 2 bps. Spread of the remaining
maturities expanded by up to 13 bps.
-8
0
8
6.20
7.30
8.40
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 20-Jul-18 13-Jul-18
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• The government approved amendments to the Insolvency and Bankruptcy Code (IBC) and
now lenders will have to adhere to an additional step in finalising resolution plans. The plans
would now have to be cleared by the Competition Commission of India (CCI) before the
Committee of Creditors (COC) finalises it. This will help avoid litigation that could hinder
resolution at an advanced stage.
• According to media reports, the finance ministry might approach the Securities and
Exchange Board of India (SEBI) to seek relaxation on the minimum 25% public
shareholding norm for some public-sector banks (PSBs). There are 13 PSBs in which the
government holding is more than 75%.
• According to media news, the GST Council could cut tax on many items such as sanitary
napkins, handicrafts and handloom goods. The council is scheduled to meet on Jul 21. The
body could think of imposing ‘agriculture cess’ on some luxury items.
• The Cabinet Committee on Economic Affairs decided to raise fair and remunerative price
(FRP) of sugarcane by Rs. 20 to Rs. 275 per quintal. This is the price that sugar mills will
have to pay to farmers. It will be applicable for the marketing year starting from Oct 2018.
Regulatory Updates in India (contd..)
• As per media reports, Central government employees and pensioners could get another
salary hike as the government is going to change the index and base year for calculating
dearness allowance (DA). Proposal is afloat to change the base year every six years to
better reflect the increase in living expenses. DA was increased by 2% from Mar 2018
under the recommendations of the Pay Commission. Consumer price index for industrial
workers (CPI-IW) is used to arrive at DA and the labour ministry is busy creating a new
series of CPI-IW. DA is paid to government employees, public sector employees and
pensioners to adjust the cost of living and is a percentage of the basic salary.
• The Directorate General of Trade Restrictions (DGTR) decided to impose safeguard duty on
solar panels and modules imported from China and Malaysia. The duty would be imposed
for two years – 25% for the first year, 20% for the first half of the second year and 15% for
the second half. This is being done to protect the interests of domestic manufacturers of
solar panels.
• According to a media report, SEBI would soon finalise the guidelines to allow mutual funds
(MF) to invest in commodity derivatives segment. This will increase institutional participation
in the commodity segment.
9
Global News/Economy
• Data from the U.S. Commerce Department showed that retail sales in the U.S. grew 0.5% in
Jun 2018 after growing by a revised 1.3% in May 2018 (0.8% increase originally reported).
The increase in retail sales can be partly attributed to a jump in sales by motor vehicle and
parts dealers, with jumped 0.9% in Jun after climbing by 0.8% in May.
• According to Labor Department, first-time claims for U.S. unemployment benefits decreased
unexpectedly in the week to Jul 14. Initial jobless claims went down to 207,000, compared
with the previous week's 215,000, while expectations for a rise to 220,000. This is the lowest
level since Dec 1969.
• Eurostat data showed euro area annual inflation beat expectations and increased to 2% in
Jun 2018. It had been at 1.9% in May 2018. The biggest contributors were energy, services,
food, alcohol and tobacco.
• Data from the National Bureau of Statistics showed that Gross Domestic Product (GDP) of
the Chinese economy grew 6.7% on a yearly basis in the three months to Jun 2018 after
growing 6.8% in the first quarter of 2017. Meanwhile, retail sales rose an annual 9.0% in Jun
up from 8.5% in May 2018. Industrial production grew 6.0% on a yearly basis in Jun, down
from 6.8% in the previous month.
10
Global Equity Markets
11
Global Indices
Indices
20-Jul-18
1-Week
Return
YTD
Return
Dow Jones
25,058.12 0.15% 1.37%
Nasdaq 100
7,350.23 -0.35% 14.91%
FTSE 100
7,678.79 0.22% -0.12%
DAX Index
12,561.42 0.16% -2.76%
Nikkei Average
22,697.88 0.44% -0.29%
Straits Times
3,297.83 1.15% -3.09%
Source: Thomson Reuters Eikon
Value as on Jul 20, 2018
U.S.
• U.S. markets traded mixed during the
week under review. Market sentiment
was boosted after the U.S. Federal
Reserve Chief maintained an optimistic
outlook of the U.S. economy. However,
investors turned cautious as the U.S.
President raised concerns over the rate
hike decision of the U.S. Federal
Reserve and stated that gradual rate
hike decision might adversely impact
the recent economic progress of the
nation.
Europe
• European markets closed on a mixed note during the week under review. Market
sentiment was boosted following upbeat economic data as Germany's producer prices
climbed at the fastest pace in nine months in Jun and eurozone's construction output
growth improved for the third straight month. However, concerns over the ongoing global
trade war capped the gains.
Asia
• Asian markets followed other global peers as concerns over the ongoing U.S.-China trade
row overshadowed corporate earnings optimism. Some respite was seen after China's
central bank lowered its currency to its lowest level in a year.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury bond
rose 6 bps to close at 2.89% from the
previous close of 2.83%.
• U.S. Treasury prices fell as domestic
retail sales for Jun 2018 came in line
with market expectations and marked
growth for the fifth straight month,
thereby indicating solid economic
growth in the second quarter 2018.
• Further, upbeat data on the jobs market
as initial jobless claims fell to lowest
level in five decades in the week ended
Jul 14 and the U.S. Federal Reserve
chairman’s upbeat remarks on the
economy raised the possibility of a rate
hike by the U.S. Federal Reserve.
• However, losses were restricted over
U.S. President’s policy over China and
other U.S. trade partners.
2.84
2.87
2.90
16-Jul 17-Jul 18-Jul 19-Jul 20-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($/Barrel)
71.83 73.80
Gold ($/Oz)
1,231.37 1,241.00
Gold (Rs/10 gm)
29,849 30,080
Silver ($/Oz)
15.47 15.78
Silver (Rs/Kg)
37,885 38,649
Source: Thomson Reuters
Eikon *Value as on Jul 20, 2018
Gold
• Gold prices traded low after the U.S.
Federal Reserve chief’s comments
increased the possibility of gradual rate
hikes. Later the U.S. President raised
concerns over the rate hike decision of
the U.S. Fed which restricted further
losses. The downside was also limited
on persisting trade tensions between
U.S. and China.
Crude
• Brent crude prices fell on concerns over
the ongoing trade tensions between
U.S. and China. Also, Libya reopened
its crude oil production facility. Some
respite was seen when Saudi Arabia
said it could reduce output by about
100,000 barrels per day in Aug.
Baltic Dry Index
• The Baltic Dry Index gained 1.38% on
the back of higher capesize and
panamax activities.
9.35
9.75
10.15
10.55
20-Jun-18 30-Jun-18 10-Jul-18 20-Jul-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
-2.67%
-0.78%
-1.96%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
68.85 68.41
Pound Sterling
89.67 90.07
EURO
80.31 79.76
100 JPY
61.27 60.77
Source: RBI Figures in INR , *Value as on Jul 20, 2018
Rupee
• The rupee fell against the greenback on
concerns of continued rate hikes by the
U.S. Federal Reserve.
Euro
• The euro rose against the greenback
after the U.S. President expressed
concerns regarding the recent increase
in interest rates by the U.S. Federal
Reserve.
Pound
• The pound weakened against the
greenback after the British government
narrowly won a vote on a trade bill before
the British parliament, which fueled
concerns as to how the British
government will push through Brexit
negotiations.
Yen
• The yen rose against the greenback after
the U.S. President complained about
raising of interest rates in the U.S.
9.80
9.90
10.00
10.10
10.20
10.30
20-Jun-18 30-Jun-18 10-Jul-18 20-Jul-18
USD GBP Euro JPY
Source: RBI
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
0.64%
-0.45%
0.69%
0.82%
15
The Week that was…
16
th
July to 20
th
July
The Week that was (July 16 – July 20)
16
Date Events Present Value Previous Value
Monday,
July 16, 2018
5.77% 4.43%
6.7% 6.8%
0.5% 1.3%
9.0% 8.5%
6.0% 6.8%
Tuesday,
July 17, 2018
1.11% 0.80%
4.2% 4.2%
0.6% 0.5%
68 68
Wednesday,
July 18, 2018
2.4% 2.4%
2.0% 1.9%
1173k 1337k
¥721.4b -¥578.3b
Thursday,
July 19, 2018
0.7% 0.7%
207k 215k
Friday,
July 20, 2018
1.0% 1.0%
1046 1054
17
The Week Ahead
23
rd
July to 27
th
July
18
The Week Ahead
Day Event
Monday,
July 23, 2018
• Euro zone Consumer Confidence (Jul A)
• U.S. Existing Home Sales (MoM) (Jun)
Tuesday,
July 24, 2018
• Japan Nikkei Japan PMI Manufacturing (Jul P)
• Markit Eurozone Manufacturing PMI (Jul P)
• Markit/BME Germany Composite PMI (Jul P)
• U.S. Markit US Manufacturing PMI (Jul P)
Wednesday,
July 25, 2018
• U.S. New Home Sales (MoM) (Jun)
• U.S. MBA Mortgage Applications (Jul 20)
• Euro zone German IFO Current Assessment (Jul)
Thursday,
July 26, 2018
• European Central Bank Interest rate Decision
• U.S. Durable Goods Orders (Jun P)
• Euro zone German GfK Consumer Confidence (Aug)
• Japan PPI Services (YoY) (Jun)
Friday,
July 27, 2018
• Euro zone German Retail Sales (YoY) (Jun)
• U.S. Gross Domestic Product Annualized (QoQ) (2Q A)
• U.S. University of Michigan Sentiment (Jul F)
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19
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