Mutual Fund News of 27th July 2018 – Reliance Mutual Fund

News U Can Use

July 27, 2018

The Week that was…

July to 27

July

Indian Economy

• The Goods and Services Tax (GST) Council met on Jul 21, 2018, and reduced tax rate on

various items to boost consumption. Tax rate on ethanol for oil marketing companies

reduced from 18% to 5%, for consumer electronics reduced from 28% to 18%, 5% ceiling

on footwear increased from Rs. 500 to Rs. 1,000, for all leather items cut from 28% to

18%, among others. The council has simplified returns and approved quarterly returns for

enterprises that have turnover less than Rs. 5 crore. Tax payments, however, will continue

on a monthly basis.

• According to a report by a major multinational bank, 10 major Asian economies, including

India, will see robust growth and their real GDP on aggregate could cross $28 trillion by

2030. This would be more than U.S. $22.33 trillion by that time. The 10 Asian economies

are — China, Hong Kong, India, Indonesia, Malaysia, the Philippines, Singapore, South

Korea, Taiwan and Thailand.

• The GST Council has approved the setting up of a National Appellate Tribunal in Delhi. It

will have three regional benches and members from the judiciary and tax departments.

Under the GST regime, states have their own appellate authorities called Authority for

Advance Ruling (AAR). The national tribunal will hear appeals against the state appellate

authorities. The three regional benches will at Mumbai, Chennai and Kolkata. This step is

being considered to mitigate problems arising from contradictory orders of AAR in different

states.

Indian Equity Market

Domestic Equity Market Indices

Indices

27-Jul-18

1 Week Return

YTD Return

S&P BSE Sensex

37,336.85 2.30% 9.63%

Nifty 50

11,278.35 2.44% 7.10%

S&P BSE Mid

-Cap 15,912.62 4.71% -10.72%

S&P BSE Small

-Cap 16,450.20 4.64% -14.46%

Source: MFI Explorer

NSE Advance/Decline Ratio

Date Advances Declines

Advance/Decline Ratio

23-Jul-18 1093 681 1.60

24-Jul-18 1456 355 4.10

25-Jul-18 985 816 1.21

26-Jul-18 910 879 1.04

27-Jul-18 1175 610 1.93

Source: NSE

• Indian equity markets closed on a

higher note. Goods and Service Tax

(GST) rate cuts by the GST council

gave a boost to the indices.

According to media reports, the GST

council has cut the tax rates for 88

items with effect from Jul 27, 2018.

• Gains were extended after the ruling

party won the no-confidence motion

in the Lok Sabha on Jul 20, 2018.

• Optimism over corporate earnings,

surge in rupee against the greenback

and capital infusion by DIIs and FIIs

added to the gains.

• Further, U.S. President relaxing his

stand over trade tariffs with the

European Union improved market

sentiment.

Ratios

S&P BSE

Sensex

Nifty 50

S&P BSE

Mid Cap

S&P BSE

Small Cap

P/E

23.47 28.02 33.91 107.06

P/B

3.11 3.67 2.72 2.34

Dividend Yield

1.18 1.19 0.95 0.77

Source: BSE, NSE Value as on Jul 27

, 2018

Indian Equity Market (contd.)

Sectoral Indices

Indices

Last Returns (in %)

Closing* 1-Wk 1-Mth

S&P BSE Auto

24,269.32 1.07% 1.71%

S&P BSE Bankex

30,743.13 3.51% 4.89%

S&P BSE CD

20,630.06 3.29% 2.57%

S&P BSE CG

18,164.60 3.83% 6.26%

S&P BSE FMCG

11,892.60 4.87% 7.32%

S&P BSE HC

14,027.71 2.68% -0.38%

S&P BSE IT

14,516.97

-0.38%

4.92%

S&P BSE Metal

12,511.06 6.65% -1.36%

S&P BSE Oil & Gas

14,838.94 3.11% 8.84%

Source: Thomson Reuters Eikon

*Value as on July

27, 2018

• On the BSE sectoral front, indices closed

on a higher note. S&P BSE Metal stood as

the major gainer, 6.65%, followed by S&P

BSE FMCG that grew 4.87%.

• Gains in metal stocks were driven by a

series of steps taken by China, which

hinted that the country could shift to the

stimulus mode.

• S&P BSE Bankex and S&P BSE

Consumer Durables surged 3.51% and

3.29%, respectively. S&P BSE IT fell

0.38%.

Indian Derivatives Market Review

• Nifty July 2018 Futures settled at 11,167.30. Nifty August 2018 Futures closed at

11,306.70, a premium of 28.35 points, above the spot closing of 11,278.35. The turnover

on NSE’s Futures and Options segment stood at Rs. 46.62 lakh crore as against Rs. 48.68

lakh crore on Jul 20.

• The Put-Call ratio stood at 0.93 compared with the previous week’s close of 0.79.

• The Nifty Put-Call ratio stood at 1.71, unchanged from the previous week’s close.

Domestic Debt Market

Debt Indicators

(%)

Current

Value

Ago

Mth

Ago

Mth

Ago

Call Rate

6.14 6.20 6.14 5.91

91 Day T

-Bill

6.72 6.60 6.50 6.41

7.80% 2021, (5

Yr GOI)

7.67 7.54 7.70 7.04

7.17% 2028, (10

Yr GOI)

7.78 7.79 7.87 7.31

Source: Thomson Reuters

Eikon

Value as on July 27, 2018

• Bond yields moved in a range during

the week and closed little changed.

Rise in global crude oil prices and

surge in the U.S. Treasury yield, led

to a fall in bond prices.

• Mixed expectations over the outcome

of the third bi-monthly monetary

policy review due on Aug 1, 2018,

kept investors on the edge. However,

losses were neutralised due to

strength in rupee.

• Yield on the 10-year benchmark

paper (7.17% GS 2028) inched down

1 bps to close at 7.78% from the

previous week’s close of 7.79% after

trading in a range of 7.76% to 7.82%.

• Data from RBI showed that India's

foreign exchange reserves rose

marginally to $405.14 billion as on Jul

20 from $405.05 billion in the

previous week.

7.64

7.74

7.84

23-Jul 24-Jul 25-Jul 26-Jul 27-Jul

Yield in %

10 -Yr Benchmark Bond ( % )

Source: CCIL

Domestic Debt Market (Spread Analysis)

Maturity

G-

Sec Yield

(%)

Corporate Yield

(%)

Spread

bps

1 Year 7.38 8.41 103

3 Year 7.82 8.62 80

5 Year 8.08 8.73 65

10 Year 7.93 8.71 78

Source: Thomson Reuters Eikon

Value as on July 27

, 2018

• Yields on gilt securities witnessed a mixed

trend. It increased the most by 12 bps on

30-year paper, fell the most by 6 bps on 3-

year paper and closed steady on 4, 12, 13

and 15-year maturity.

• Corporate bond yields increased across 1

to 4-year maturities by up to 12 bps. Yields

fell 1 bps each on 6-, 7- and 15-year

maturity and closed steady on the

remaining maturities.

• Spread between AAA corporate bond and

gilt expanded across the maturities by up to

9 bps barring 10-year paper which closed

steady and 15-year paper which contracted

2 bps.

-6

6.00

7.20

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 27-Jul-18 20-Jul-18

Yield

in %

Change

in bps

Source: Thomson Reuters Eikon

Regulatory Updates in India

• According to the capital market regulator Securities and Exchange Board of India (SEBI),

investments in domestic capital market through participatory notes (P-notes) have

significantly fell to more than nine-year low of Rs. 83,688 crore in Jun 2018 from Rs. 93,497

crore in the end of May 2018. The drastic reduction was due to stringent norms taken by

SEBI to restrict black money.

• SEBI proposed easier rules for the simplification of existing framework on re-classification of

promoters as public shareholders. It has proposed that if a promoter plans to be re-

classified as a public shareholder, then the entity needs to first apply to the listed company.

Thereafter, the listed firm would seek the approval of the board of directors and the minority

shareholders on the resolution.

• According to media reports, SEBI is planning to limit the mutual fund distributor

commissions. This comes in the wake of checking mis-selling as customers are moved from

one scheme to the other scheme by the distributors in order to earn commissions. The

market regulator is planning to cap lifetime distributor commissions for fixed-income

schemes at 1.5%-2% and equity-oriented mutual fund schemes at 4-5%. The upfront

commissions are also expected to automatically come down with this capping of

commissions.

Regulatory Updates in India (contd..)

• The government by Jul 30 will put drafts of new forms for filing Goods and Services Tax

(GST) returns in public domain. This is being done for stakeholder consultation. Under the

new return filing system, taxpayers who don't have purchase or supplies in a quarter, can

just send an SMS and their returns will be filed. These are called ‘nil’ fillers. The GST

Council had cleared the new return filing form last week and it will replace GSTR-1 and

GSTR-3B returns.

Global News/Economy

• A U.S. Commerce Department report showed U.S. economic growth accelerated

significantly in the second quarter. Real gross domestic product increased 4.1% in the

second quarter after a 2.2% rise in the first quarter. Expectations were for a 4.2% rise. The

growth reflects increase in consumer spending and exports and federal government

spending.

• According to a National Association of Realtors report, U.S. existing home sales went down

for the third consecutive month in Jun 2018, defying expectations. Existing home sales

decreased 0.6% to an annual rate of 5.36 million in Jun from 5.41 million in May 2018.

Expectations were for a 0.5% rise.

• According to survey data from the market research group GfK, German consumer

confidence could drop in Aug 2018 led by continuously weakening economic expectations

due to trade war concerns. The forward-looking consumer sentiment index fell to 10.6 in

Aug, as against expectation of remaining unchanged at 10.7. However, the survey showed a

positive income expectations and tendency to buy.

• According to media reports, China plans to take fiscal and financial measures to combat the

challenges arising from trade dispute with the U.S. and propel growth. The steps will help the

economy to grow at a decent pace. Measures could include deeper tax cuts, additional

deductions to companies on research and development expenditure and issuing special

bonds to local government to fund infrastructure projects.

Global Equity Markets

Global Indices

Indices

27-Jul-18

1-Week

Return

YTD

Return

Dow Jones

25,451.06 1.57% 2.96%

Nasdaq 100

7,296.78 -0.73% 14.08%

FTSE 100

7,701.31 0.29% 0.18%

DAX Index

12,860.40 2.38% -0.44%

Nikkei Average

22,712.75 0.07% -0.23%

Straits Times

3,324.98 0.82% -2.29%

Source: Thomson Reuters

Eikon

Value as on Jul 27, 2018

U.S.

• U.S. markets were supported by media

reports that U.S. president and

European Commission president have

reached an agreement to work together

in eliminating trade barriers on industrial

goods. A set of mixed corporate

earnings capped the gains. Meanwhile,

the U.S. GDP data for the second

quarter of 2018 was unable to generate

significant buying interest.

Europe

• European markets largely remained positive because of optimism over upcoming

corporate earnings and easing concerns over global trade war. According to reports,

United States and the European Union have agreed to work towards zero tariffs, zero non-

tariff barriers and zero subsidies on non-auto goods. Meanwhile, a slew of mixed earnings

reports limited the upside.

Asia

• Asian markets too gained in tune with global peers as trade war worries eased to some

extent. Investor sentiment was boosted when Chinese Premier said that the government

would accelerate plans to reduce taxes by more than 1.1 trillion yuan and issue 1.35

trillion yuan in local government special bonds for infrastructure.

Global Debt (U.S.)

• Yield on the 10-year U.S. Treasury bond

rose 7 bps to close at 2.96% from the

previous close of 2.89%.

• U.S. Treasury prices fell on reports that

the Bank of Japan may scale back its

monetary stimulus program more

quickly than expected.

• Perception among market participants

that the U.S. Federal Reserve would

continue raising interest rates in 2018

despite the U.S. President’s criticism of

the same also weighed on market

sentiment.

• However, losses were restricted after

the U.S. economy grew at its fastest

pace in the second quarter of 2018 in

nearly four years , but was still below

market expectations. Strong demand at

a auction of 2-year debt securities also

trimmed losses.

2.92

2.96

3.00

23-Jul 24-Jul 25-Jul 26-Jul 27-Jul

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)

75.48 71.83

Gold ($/Oz)

1,222.97 1,231.37

Gold (Rs/10 gm)

29,722 29,849

Silver ($/Oz)

15.46 15.47

Silver (Rs/Kg)

37,774 37,885

Source: Thomson Reuters

Eikon *Value as on Jul 27, 2018

Gold

• Gold prices inched down after the U.S.

and the European Union agreed on

lowering trade tariffs. The downside was

limited as the U.S. President expressed

concerns over a stronger dollar and the

recent increase in interest rate by the

U.S. Fed.

Crude

• Brent crude prices surged after Saudi

Arabia decided to temporarily halt oil

shipments through the Red Sea and a

24-hour strike was called by the

offshore workers on three oil and gas

platforms in the British North Sea.

Baltic Dry Index

• The Baltic Dry Index gained 1.12%

following improved capesize and

panamax activities.

9.10

9.75

10.40

27-Jun-18 12-Jul-18 27-Jul-18

Global Commodity Movement

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

Global

Commodity Prices

Rebased to 10

Source: Thomson Reuters Eikon

5.08%

-0.68%

-0.10%

Currencies Markets

Movement of Rupee vs Other Currencies

Currency

Last Closing*

1-Wk Ago

US Dollar

68.70 68.85

Pound Sterling

89.99 89.67

EURO

79.98 80.31

100 JPY

61.84 61.27

Source: RBI Figures in INR , *

Value as on Jul 27, 2018

Rupee

• The rupee rose against the greenback

following gains in the domestic equity

market and easing of trade dispute as

U.S. and the EU committed to work on

reducing trade tariffs.

Euro

• The euro fell as the European Central

Bank adhered to its easy monetary policy

and indicated no change in its timetable

to end bond purchase program.

Pound

• The pound weakened against the

greenback following uncertainty over

Brexit negotiations.

Yen

• The yen strengthened against the

greenback after the growth of the U.S.

economy in the second quarter of 2018

came below market expectations.

9.70

9.95

10.20

27-Jun-18 12-Jul-18 27-Jul-18

USD GBP Euro JPY

Source: RBI

Currency

Prices (

in terms of INR)

Rebased to 10

Currency Movement

-0.21%

0.36%

-0.41%

0.93%

The Week that was…

July to 27

July

The Week that was (July 23 – July 27)

Date Events

Present

Value

Monday,

July 23, 2018

• Eurozone Consumer Confidence (JUL A)

-0.6 -0.6

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

-0.60%

-0.70%

Tuesday,

July 24, 2018

• Germany Markit Composite PMI (JUL P)

55.2 54.8

• Eurozone Composite PMI (JUL P)

54.3 54.9

• U.S. House Price Index (MoM) (MAY)

0.20% 0.20%

• U.S. Markit Composite PMI (JUL P)

55.9 56.2

Wednesday,

July 25, 2018

• U.S. New Home Sales (MoM) (JUN)

-5.30%

3.90%

• U.S. MBA Mortgage Applications (JUL 20)

-0.20%

-2.50%

• Germany IFO Business Climate (JUL)

101.7 101.8

• Germany IFO Expectations (JUL)

98.2 98.5

Thursday,

July 26, 2018

• European Central Bank Rate Decision

0.00% 0.00%

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

($68.3B)

($64.8B)

Friday,

July 27, 2018

• U.S. Gross Domestic Product Annualized (

QoQ) (2Q A) 4.10% 2.20%

• U.S. Personal Consumption (2Q A)

4.00% 0.50%

The Week Ahead

July to 3

August

The Week Ahead

Day Event

Monday,

July 30, 2018

•

Germany Consumer Price Index (YoY) (Jul P)

•

U.S. Pending Home Sales (YoY) (Jun)

Tuesday,

July 31, 2018

•

Bank of Japan Rate Decision

•

China Manufacturing PMI (Jul)

•

Germany Unemployment Change (Jul)

•

Eurozone Gross Domestic Product (YoY) (2Q A)

Wednesday,

August 1, 2018

•

U.S. FOMC Rate Decision

•

India’s Third Bi-monthly Monetary Policy Statement, 2018-19

•

India’s Nikkei Manufacturing PMI (Jul)

•

U.S. ISM Manufacturing (Jul)

•

U.S. ISM Employment (Jul)

Thursday,

August 2, 2018

•

Bank of England Rate Decision

•

U.S. Factory Orders (Jun)

Friday,

August 3, 2018

•

Japan’s Nikkei Composite PMI (Jul)

•

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

•

U.S. Unemployment Rate (Jul)

•

USD ISM Non-Manufacturing/Services Composite (JUL)

•

India’s Nikkei Service PMI (Jul)

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recommendations or as a professional guide for the readers. It may be noted that since Reliance Nippon Life Asset Management Company Limited (RNLAM)

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