News U Can Use
July 6, 2018
The Week that was…
2
nd
July to 6
th
July
2
Indian Economy
• Government data showed that the index of eight core industries witnessed a growth of
3.6% on a yearly basis in May 2018, down from 4.6% in the previous month and 3.9% in
the same month of the previous year. The coal sector witnessed the maximum growth of
12.1% on a yearly basis followed by fertilizer sector and cement sector that witnessed a
growth of 8.4% and 5.2%, respectively. The refinery products sector, electricity sector and
steel sector witnessed yearly growth of 4.9%, 3.5% and 0.5%, respectively. However, the
crude oil sector and natural gas sector contracted 2.9% and 1.4% during the same time
period. Cumulative growth during Apr to May 2018-19 came in at 4.1%.
• The Nikkei India Manufacturing Purchasing Managers' Index (PMI), rose to 53.1 in Jun
2018 from 51.2 in May 2018. This is the strongest reading in 2018 so far. The increase
came due to strong growth in output and new orders that rose at the fastest rates in this
year so far.
• The Nikkei India Services Purchasing Managers' Index (PMI) climbed to 52.6 in Jun from
49.6 in May. This is the highest since Jun 2017. Further, the recovery in services firms'
activity, along with an improved manufacturing growth lifted the composite PMI to 53.3, its
highest level since Oct 2016.
• According to a statement by the Labor Ministry, consumer price inflation for industrial
workers stood at 3.96% in May 2018 as against 3.97% in Apr 2018 and 1.09% in May
2017. The food inflation based on CPI-IW (Consumer Price Index-Industrial Workers) rose
to 1.66% in May compared with 1.33% in Apr and fall of 1.63% during May 2017.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 06-Jul-18 1 Week Return YTD Return
S&P BSE Sensex 35,657.86 0.66% 4.70%
Nifty 50 10,772.65 0.54% 2.30%
S&P BSE Mid-Cap 15,391.62 -0.38% -13.64%
S&P BSE Small-Cap 16,059.94 0.17% -16.49%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
02-Jul-18 609 1,196 0.51
03-Jul-18 915 858 1.07
04-Jul-18 835 942 0.89
05-Jul-18 688 1,110 0.62
06-Jul-18 1,039 749 1.39
Source: NSE
• Indian equity markets closed on a
positive note. Private survey showing
improvement in domestic
manufacturing conditions along with
solid services PMI data for Jun 2018
boosted the market sentiment.
• Gains were extended amid reports of
good progress of monsoon rains and
optimism amongst investors ahead of
the earnings season. Further, gains
in energy stocks due to decline in oil
prices boosted the indices.
• Cabinet’s approval to raise minimum
support price for kharif crops were
welcomed by investors. However, a
section of investors remained worried
as raise in MSP may create
inflationary pressures.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
22.71 26.62 32.46 108.36
P/B
2.94 3.63 2.61 2.25
Dividend Yield
1.24 1.21 0.99 0.79
Source: BSE, NSE Value as on Jul 6
, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
24,702.0 3.62% -0.56%
S&P BSE Bankex
29,381.7 0.45% -0.27%
S&P BSE CD
19,585.0 -3.08% -3.91%
S&P BSE CG
17,524.6 0.21% -4.50%
S&P BSE FMCG
11,363.6 1.34% 1.90%
S&P BSE HC
14,046.0 0.30% 9.23%
S&P BSE IT
13,943.2 0.17% 4.79%
S&P BSE Metal
12,620.3 -3.40% -7.99%
S&P BSE Oil & Gas
13,694.7 0.26% -4.81%
Source: Thomson Reuters Eikon
*Value as on July 6, 2018
• On the BSE sectoral front, indices closed
on a higher note. S&P BSE Auto (3.62%)
stood as the major gainer followed by S&P
BSE FMCG (1.34%) and S&P BSE
Bankex (0.45%). S&P BSE Healthcare and
S&P BSE Oil & Gas grew 0.30% and
0.26% respectively.
• Expectation of higher sales in the rural
market post increase in MSP for kharif
crops boosted auto stocks. Further, reports
of good progress of monsoon rains
boosted the sector.
Indian Derivatives Market Review
• Nifty Jun 2018 Futures settled at spot closing of 10,589.10. Nifty Jul 2018 Futures were at
10,694.80, a discount of 19.50 points, below the spot closing of 10,714.30. The turnover
on NSE’s Futures and Options segment stood at Rs. 53.45 lakh crore as against Rs. 44.92
lakh crore on Jun 22.
• The Put-Call ratio stood at 0.82 compared with the previous week’s close of 0.90.
• The Nifty Put-Call ratio stood at 1.48 compared with the previous week’s close of 1.65.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
6.15 6.21 5.88 5.88
91 Day T-Bill
6.45 6.49 6.51 6.30
7.80% 2021, (5 Yr GOI)
7.75 7.75 7.73 6.98
7.17% 2028, (10 Yr GOI)
7.87 7.90 7.92 7.17
Source: Thomson Reuters
Eikon
Value as on July 6, 2018
• Bond yields fell on short covering by
market participants and as the central
government increased minimum
support prices which was largely in
line with market expectations.
• Yields fell further after robust demand
at the weekly auction of government
securities. However, gains were
limited due to plunge in domestic
currency.
• Yield on the 10-year benchmark
paper (7.17% GS 2028) fell 3 bps to
close at 7.87% from the previous
week’s close of 7.90% after trading in
a range of 7.84% to 7.92%.
• According to the Scheduled Bank's
Statement of Position in India as of
Jun 22, 2018, banks’ deposit and
credit growth stood at 7.6% and
12.8% YoY, respectively.
7.80
7.84
7.88
7.92
2-Jul 3-Jul 4-Jul 5-Jul 6-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 7.36 8.44 108
3 Year 7.90 8.68 78
5 Year 8.20 8.86 66
10 Year 8.02 8.79 77
Source: Thomson Reuters Eikon
Value as on July 6, 2018
• Yields on gilt securities fell on 6-, 10-,
13-, 19- and 30-year maturities by up to
3 bps, barring 3- and 14-year papers
that were steady. Yield on remaining
securities increased by up to 22 bps.
• Corporate bond yields increased across
the curve in the range of 3 to 9 bps,
barring 10- and 15-year papers that fell
1 and 17 bps, respectively.
• Spread between AAA corporate bond
and gilt contracted on 1-, 2-, 5- and 15-
year papers in the range of 3 to 18 bps
while remaining securities expanded in
the range of 3 to 12 bps.
-10
0
10
20
30
6.20
6.90
7.60
8.30
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 06-Jul-18 29-Jun-18
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• The Cabinet Committee on Economic Affairs has raised minimum support price (MSP) for
kharif crops for FY19. MSP for common variety of paddy has been increased by
approximately Rs. 200 per quintal and that of fine paddy from Rs. 1,550 in FY18 to Rs.
1,750. MSP has also been raised for urad from Rs. 5,400 per 100 kg to Rs. 5,600 per 100
kg. The announcement comes as relief for farmers.
• According to the market regulator, Securities and Exchange Board of India (SEBI), angel
funds can launch new schemes by filling a term sheet prepared by the regulator. The term
sheet has three categories of information related to investment and investee company,
compliance with SEBI's AIF regulation and "material change". The term sheet needs to be
filled with SEBI within 10 days of launching the scheme.
• SEBI after consulting the Reserve Bank of India increased the overseas investment limit of
alternative investment funds (AIFs) and venture capital funds (VCFs) to $750 million from
the current $500 million. The market regulator has also asked AIFs and VCFs to disclose
the utilisation of the such limits within 5 working days on the SEBI portal.
• The Insolvency and Bankruptcy Board of India (IBBI) has notified revised norms for
insolvency resolution process, thereby bringing relief for the home buyers. It has put in
place clear timelines to be followed by resolution professionals. Meanwhile, it has permitted
withdrawal of insolvency applications subject to certain conditions.
Regulatory Updates in India (contd..)
• The Reserve Bank of India (RBI) has tightened rules on statutory auditors of banks. RBI
has stated that it reserves the right of not approving appointments for a specified period of
such auditors whose audit quality was not found satisfactory. Further, it stated that if there
are any lapses in auditing process, it will take action against statutory auditors of banks.
The lapses would include instances such as misstatement of a bank's financial statement or
wrong information in audit report.
• The extension of recapitalisation scheme has been approved by the government for
Regional Rural Banks (RRBs) for next three years up to 2019-20. The scheme began in
2010-11 and was extended twice in 2012-13 and 2015-16 with last extension up to Mar
2017. The extension approval comes in the wake of strengthening the lending capacity. Out
of Rs. 1,450 crore, 1,107.20 crore as government’s share had been released to RRBs till
Mar 2017. The balance amount of Rs. 342.80 crore will be utilised to provide
recapitalisation support to RRBs whose Capital to Risk Weighted Assets Ratio is below 9%
during 2017-18, 2018-19 and 2019-20.
• SEBI has analysed the mechanism of dividend adjustment for stock options and has
permitted alteration in strike price. It stated that if dividend declared by a company is above
5% of the underlying stocks, adjustment in strike price will be carried out. SEBI also stated
that the adjustment in strike price will be done in all other cases of dividend, wherein listed
company has sought exemption from the timeline prescribed under listing and disclosure
regulations.
9
Global News/Economy
• A report from the Institute for Supply Management showed that U.S. purchasing managers
index surprisingly grew to 60.2 in Jun 2018 as against 58.7 in May 2018. The U.S. non-
manufacturing index surged to 59.1 in Jun 2018 as against 58.6 in May 2018.
• According to a report from the Labor Department, U.S. non-farm payroll employment rose by
213,000 jobs in Jun 2018 as against an upwardly revised increase of 244,000 jobs (223,000
jobs addition originally reported) in May 2018. However, the unemployment rate grew 4% in
Jun as against 3.8% in May.
• According to a report from IHS Markit, China’s factory Purchasing Managers' Index fell
slightly to 51.0 in Jun 2018 from 51.1 in May 2018. China’s services PMI unexpectedly rose
to 53.9 in Jun 2018 from 52.9 in May 2018. Meanwhile, China’s Caixin composite output
index rose to 53.0 in Jun from 52.3 in May.
• According to a report from the Eurostat, eurozone retail sales remained unchanged as
against a decline of 0.1% in Apr 2018. The increase in food sales was offset by a decline in
non-food products turnover. Retail sales growth slowed to 1.4% on yearly basis in May as
against a gain of 1.6% in Apr.
• According to a report from Destatis, Germany’s factory orders surpassed market
expectations and grew 2.6% MoM in May 2018 as against a revised decline of 1.6% in Apr
2018.
10
Global Equity Markets
11
Global Indices
Indices
06-Jul-18
1-Week
Return
YTD
Return
Dow Jones
24,456.5 0.76% -1.06%
Nasdaq 100
7,207.3 2.37% 12.68%
FTSE 100
7,617.7 -0.25% -0.91%
DAX Index
12,496.2 1.55% -3.26%
Nikkei Average
21,788.1 -2.32% -4.29%
Straits Times
3,191.8 -2.35% -6.20%
Source: Thomson Reuters Eikon
Value as on Jul 6, 2018
U.S.
• U.S. markets ended the week on a
positive note, backed by some upbeat
economic data for Jun 2018.
• Investors found slight relief from the
worries over global trade war following
reports that the U.S. President might
suspend threats to impose tariffs on
cars imported from European Union
(EU) if duties on U.S. cars are lifted by
the European bloc.
Europe
• European markets largely remained positive except U.K. markets. The U.K. market
underperformed following recent strength in pound in reaction to better-than-expected
U.K. services sector data for Jun. Buying interest was largely driven by auto sector, which
rose amid reports that the U.S. government might suspend plans to impose tariffs on cars
imported from EU if the block lifted duties on U.S. cars. Upbeat German factory order data
further generated positive vibes.
Asia
• Asian markets remained under selling pressure following weak Chinese manufacturing
data for Jun 2018. Concerns over U.S.- China trade war intensified after the U.S. decided
to block one of the Chinese telecommunication majors from entering the U.S. market on
national security grounds.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury bond
fell 2 bps to close at 2.83% from the
previous close of 2.85%.
• U.S. Treasury prices fell initially after the
official U.S. manufacturing Purchasing
Managers’ Index grew in Jun 2018 and
U.S. construction spending increased in
May 2018.
• However, the trend reversed as U.S.
equity markets came under pressure
temporarily following losses in
prominent technology stocks.
• Gains were extended as U.S. Treasury
prices rose after data showed that the
growth of average hourly earnings in
U.S. slowed in Jun 2018 even though
U.S. nonfarm payroll employment grew
more than expected in Jun.
2.82
2.84
2.86
2.88
2-Jul 3-Jul 4-Jul 5-Jul 6-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)
74.57 76.78
Gold ($/Oz)
1,254.20 1,252.25
Gold (Rs/10 gm)
30,540 30,341
Silver ($/Oz)
16.00 16.08
Silver (Rs/Kg)
39,264 39,221
Source: Thomson Reuters
Eikon *Value as on Jul 6, 2018
Gold
• Safe haven appeal of the yellow metal
improved on concerns that tariffs
imposed by the U.S. President and
retaliation by its partners would
adversely affect the global growth
prospects. Trade war concerns
intensified further after U.S. imposed
tariffs on Chinse goods worth $34 billion
effective from Jul 6.
Crude
• Brent crude prices fell over the week
after the Saudi Arabia hinted to raise oil
output that is likely to be around
2,000,000 barrels, as urged by the U.S.
President. However, supply disruptions
in Libya, Angola, Venezuela and
Canada limited the downside.
Baltic Dry Index
• The Baltic Dry Index gained 17.11% on
the back of higher capesize and
panamax activities.
9.40
9.73
10.05
10.38
10.70
6-Jun-18 16-Jun-18 26-Jun-18 6-Jul-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
-2.88%
0.16%
-0.50%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
68.88 68.58
Pound Sterling
91.14 89.93
EURO
80.63 79.85
100 JPY
62.25 62.02
Source: RBI Figures in INR , *Value as on Jul 6, 2018
Rupee
• The rupee fell against the U.S. dollar for
the second consecutive week following
ongoing trade disputes between the U.S.
and China.
Euro
• Euro rose against the U.S. dollar
following more than expected growth in
Germany’s industrial orders in May 2018.
Also, a slowdown in U.S. wage growth in
Jun further led to rise in euro.
Pound
• Sterling rose against the U.S. dollar
following more than expected rise in
U.K.’s services and construction activity
in Jun 2018 that fuelled expectations of
rate hike by the Bank of England.
Yen
• Yen rose against the U.S. dollar as
ongoing trade concerns between the
U.S. and China increased the demand of
safe-haven currency.
9.90
10.00
10.10
10.20
10.30
6-Jun-18 16-Jun-18 26-Jun-18 6-Jul-18
USD GBP Euro JPY
Source: RBI
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
0.44%
1.35%
0.98%
0.37%
15
The Week that was…
2
nd
July to 6
th
July
The Week that was (July 2 – July 6)
16
Date Events
Present
Value
Previous
Value
Monday,
July 2, 2018
• Japan Nikkei Manufacturing PMI (Jun) 53.0 53.1
• China Caixin Manufacturing PMI (Jun) 51.0 51.1
• Euro Zone Markit Manufacturing PMI (Jun) 54.9 55.0
• U.S. ISM Manufacturing PMI (Jun) 60.2 58.7
Tuesday,
July 3, 2018
• U.K. PMI Construction (Jun)
53.1 52.5
• Euro Zone Retail Sales (YoY) (May) 1.4% 1.6%
• U.S. Factory Orders (MoM) (May) 0.4% -0.4%
Wednesday,
July 4, 2018
• China Caixin Services PMI (Jun)
53.9 52.9
• Euro Zone Markit PMI Composite (Jun) 54.9 54.8
• U.K. Markit Services PMI (Jun) 55.1 54.0
Thursday,
July 5, 2018
• U.S. ISM Non-Manufacturing PMI (Jun)
59.1 58.6
• U.S. ADP Employment Change (Jun)
177K 189K
• Germany Factory Orders n.s.a. (YoY) (May)
4.4% -0.1%
• U.S. Initial Jobless Claims (Jun 30)
231K 228K
• U.S. EIA Crude Oil Stocks change (Jun 29)
1.245M -9.891M
Friday,
July 6, 2018
• U.S. Nonfarm Payrolls (Jun)
213K 244K
• U.S. Unemployment Rate (Jun)
4.0% 3.8%
• U.S. Average Hourly Earnings (MoM) (Jun)
0.2% 0.3%
• Japan Leading Economic Index (May) (P) 106.9 106.2
17
The Week Ahead
9
th
July to 13
th
July
18
The Week Ahead
Day Event
Monday,
Jul 9, 2018
• Germany Trade Balance s.a. (May)
• Euro Zone Sentix Investor Confidence (Jul)
• U.S. Consumer Credit Change (May)
Tuesday,
Jul 10, 2018
• China Producer Price Index (YoY) (Jun)
• China Consumer Price Index (MoM) (Jun)
• Japan Machine Tool Orders (YoY) (Jun) (P)
• U.K. Gross Domestic Product (MoM) (May)
Wednesday,
Jul 11, 2018
• U.S. Wholesale Inventories (May)
• U.S. Producer Price Index (YoY) (Jun)
• U.S. MBA Mortgage Applications (Jul 2)
Thursday,
Jul 12, 2018
• India Industrial Output (May)
• India Consumer Price Index Inflation (Jun)
• Euro Zone Industrial Production w.d.a. (YoY) (May)
• Japan Tertiary Industry Index (MoM) (May)
Friday,
Jul 13, 2018
• China Trade Balance (Jun)
• Japan Industrial Production (MoM) (May)
• U.S. Michigan Consumer Sentiment Index (Jul) (P)
• India Wholesale Price Index Inflation (Jun)
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19
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