Mutual Fund News of the Week 28th May’18 to 1st June’18

News U Can Use

June 01, 2018

The Week that was…

May to 01

June

Indian Economy

• The Gross Domestic Product (GDP) at 2011-12 prices of the Indian economy witnessed a

growth of 7.7% on a yearly basis in the fourth quarter (Q4) of FY18, up from a growth of

5.6%, 6.3% and 7.0% respectively in the first three quarters Q1, Q2 and Q3 of FY18. India

thus surpassed China’s growth of 6.8% in the same time. For FY18, the Indian economy

grew 6.7% on a yearly basis. On the sectoral front, Agriculture, forestry & fishing,

manufacturing and construction witnessed a growth of 4.5%, 9.1% and 11.5% respectively.

The public administration, defense and other services witnessed a maximum growth of

13.3% while mining and quarrying sector witnessed a minimum growth of 2.7%. The

Economic Affairs Secretary added that FY19 growth forecast is 7.5%.

• The index of eight core industries witnessed a growth of 4.7% on a yearly basis in Apr

2018, up from 4.4% in the previous month and 2.6% in the same month of the previous

year. The cement sector witnessed the maximum growth of 16.6% on a yearly basis

followed by coal sector and natural gas sector that witnessed a growth of 16.0% and 7.4%

respectively.

• The Nikkei Manufacturing Purchasing Managers’ Index (PMI) fell to 51.2 in May 2018 from

51.6 in Apr 2018 due to weaker expansion in output, new orders and employment. This is

the 10th consecutive month when respective index came in above the threshold of 50.0.

• India’s fiscal deficit for FY18 accounted 3.53% of GDP. The revenue deficit accounted

2.65% of GDP while the effective revenue deficit accounted 1.50% of GDP. In absolute

terms, India’s fiscal deficit stood at Rs. 5.92 lakh crore or 99.5% of the budget estimates.

Indian Equity Market

Domestic Equity Market Indices

Indices 01-Jun-18 1 Week Return YTD Return

S&P BSE Sensex 35227.26 0.87% 3.44%

Nifty 50 10696.20 0.86% 1.57%

S&P BSE Mid-Cap 15852.51 -0.33% -11.05%

S&P BSE Small-Cap 16978.96 -1.01% -11.71%

Source: MFI Explorer

NSE Advance/Decline Ratio

Date Advances Declines

Advance/Decline Ratio

28-May-18 1295 508 2.55

29-May-18 832 967 0.86

30-May-18 760 1043 0.73

31-May-18 646 1146 0.56

01-Jun-18 439 1382 0.32

Source: NSE

• Indian equity markets closed in the

green in the week ended Jun 1,

2018. Surge in India’s gross domestic

product for the fourth quarter of FY18

and gains in auto stocks after sales

of two-wheelers and commercial

vehicles accelerated in May boosted

the indices. Decline in oil prices after

the Organization of the Petroleum

Exporting Countries (OPEC) and

non-OPEC country Russia indicated

to raise production level to meet the

shortfall in supply from Iran and

Venezuela added to the gains.

• However, decline in banking stocks

as losses of public sector banks

widened for the fourth quarter of

FY18 on higher bad loan provisions

capped the gains. Further, slowdown

in India's manufacturing sector

activity in May 2018 muted buying

interest.

Ratios

S&P BSE

Sensex

Nifty 50

S&P BSE

Mid Cap

S&P BSE

Small Cap

P/E

23.23 27.09 34.06 74.34

P/B

3.07 3.68 2.73 2.46

Dividend Yield

1.14 1.23 0.90 0.72

Source: BSE, NSE Value as on

Jun 01, 2018

Indian Equity Market (contd.)

Sectoral Indices

Indices

Last Returns (in %)

Closing* 1-Wk 1-Mth

S&P BSE Auto

24,635.29 1.83% -4.64%

S&P BSE Bankex

29,780.74 0.81% 3.94%

S&P BSE CD

20,574.51 -2.54% -8.07%

S&P BSE CG

18,694.89 0.48% -4.34%

S&P BSE FMCG

11,216.01 -0.07% -0.79%

S&P BSE HC

12,945.45 -0.76% -8.54%

S&P BSE IT

13,326.16 -1.65% -1.78%

S&P BSE Metal

13,506.00 0.06% -5.40%

S&P BSE Oil & Gas

14,342.30 2.90% -0.60%

Source: Thomson Reuters Eikon

*Value as on June 01, 2018

• On the BSE sectoral front, indices closed

on a mixed note. S&P BSE Consumer

Durables (-2.54%) stood as the major

loser followed by S&P BSE Information

Technology (-1.65%), S&P BSE Teck (-

1.53%), and S&P BSE Realty (-1.28%).

S&P BSE Oil & Gas Stocks stood as the

major gainer (2.90%), followed by S&P

BSE Auto (1.83%) and S&P BSE Bankex

that grew 0.81%.

• Gains in auto stocks were driven by strong

auto sales data for May 2018. Meanwhile,

oil and gas stocks gained amid falling oil

prices and growth in one of the industry

majors due to surge in profits.

Indian Derivatives Market Review

• Nifty May 2018 Futures settled at spot closing of 10,736.15 points. Nifty Jun 2018 Futures

were at 10,683.9 points, a discount of 12.30 points, below the spot closing of 10,696.20.

The turnover on NSE’s Futures and Options segment stood at Rs. 54.71 lakh crore as

against Rs. Rs. 44.43 lakh crore on May 25.

• The Put-Call ratio stood at 0.83 compared with the previous week’s close of 0.94.

Domestic Debt Market

Debt Indicators

(%)

Current

Value

1-Wk

Ago

1-Mth

Ago

6-Mth

Ago

Call Rate

5.98 5.93 6.02 5.89

91 Day T-Bill

6.45 6.39 6.20 6.13

7.80% 2021, (5 Yr GOI)

7.72 7.66 7.57 6.76

7.17% 2028, (10 Yr GOI)

7.85 7.79 7.77 --

Source: Thomson Reuters

Eikon

Value as on June 01, 2018

• Bond yields rose following sharp

decline in rupee on Tuesday amid

political uncertainty in Italy and as

increase in crude oil prices renewed

fears of rise in domestic inflation.

• Yields rose further following

increased possibility of rate hike by

the Monetary Policy Committee

(MPC) after strong gross domestic

product data for quarter ended Mar

2018 especially at a time when the

domestic inflation is at high rate.

• Yield on the 10-year benchmark

paper (7.17% GS 2028) rose 6 bps to

close at 7.85% from the previous

week’s close of 7.79% after trading in

a range of 7.72% to 7.88%.

7.70

7.79

7.88

28-May 29-May 30-May 31-May 1-Jun

Yield in %

10 -Yr Benchmark Bond ( % )

Source: CCIL

Domestic Debt Market (Spread Analysis)

Maturity

G-Sec Yield

(%)

Corporate Yield

(%)

Spread

bps

1 Year 7.19 8.46 126

3 Year 7.87 8.61 74

5 Year 7.99 8.64 64

10 Year 8.00 8.67 67

Source: Thomson Reuters Eikon

Value as on June 01, 2018

• Yields on gilt securities increased across

the maturities by up to 17 bps, barring 1-

and 15-year maturities that fell by up to 2

bps. Yield on 19-year paper closed steady.

• Corporate bond yields rose on 2 to 4 years’

maturities and 9 to 15 years’ papers in the

range of 4 bps to 9 bps. Yields was steady

on 8-year and fell across the remaining

maturities by up to 6 bps.

• Spread between AAA corporate bond and

gilt contracted across the maturities in the

range of 2 to 16 bps, barring 3-, 10- and

15-year maturities that expanded in the

range of 2 to 11 bps.

-5

6.00

6.50

7.00

7.50

8.00

8.50

3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs

India Yield Curve Shift (%) (W-o-W)

Change in bps 01-Jun-18 25-May-18

Yield in %

Change in bps

Source: Thomson Reuters Eikon

Regulatory Updates in India

• The Central Board of Indirect Taxes and Customs (CBIC) has directed its field offices to levy

goods and service tax (GST) on goods in customs warehouse during final clearance only.

This move will ensure ease of doing business for importers.

• The Securities and Exchange Board of India has permitted debt issuers to review ratings

given by agencies. The move is expected to limit the threat of 'rating shopping' and 'pick-

and-choose' approach in their actions. The move comes after several firms have showed

discontentment against credit rating agencies (CRAs) after ratings on their debt were

changed. With the permission given by SEBI, such firms may approach credit rating

agencies with more supporting documents for a better rating. This is also expected to

enhance the governance, accountability and functioning of credit rating agencies (CRAs).

• The Unique Identification Authority of India (UIDAI) has reduced the daily minimum Aadhaar

enrolment or updation target for stipulated bank branches by half to eight. This will be

effective from Jul 1, 2018, and has come as a major sigh of relief for banks.

Regulatory Updates in India (contd..)

• The trustees of Employees' Provident Fund Organisation (EPFO), in its meeting on Feb 21,

had decided to reduce the administrative charges to 0.50% from 0.65% of total wage paid

by employers following expanding business and high recovery of such fees. The decision

has now been notified and will be effective from Jun 1. Post this move, 5 lakh employers

altogether will save around Rs. 900 crore annually.

• The finance ministry has made it clear in a statement that renting or leasing of land by

farmers for agriculture, forestry, fishing or animal husbandry is excused from the goods and

service tax (GST). The statement also stated that agriculturists are exempted from GST

registration. Agriculturist here means an individual or an HUF (Hindu Undivided Family) who

indulges in cultivation of land by own labour or by the labour of family or by servants or

wages payable in cash or kind or by hired labour under personal supervision or the personal

supervision of any member of the family.

• According to an order by the Authority for Advance Ruling (AAR), sale of a going concern by

a business house will not attract Goods and Services Tax (GST). The AAR stated that as

per a notification from government, any transfer of a going concern comprises of a supply of

service and nil tax rate will be applicable on the same.

Global News/Economy

• U.S. non-farm payroll employment came in higher than market expectations and grew by

223,000 jobs in May 2018 as against an increase of downwardly revised 159,000 jobs

(addition of 164,000 jobs originally reported) in Apr 2018. The stronger than expected growth

reflects a continued uptrend in employment in several industries, including retail, healthcare,

and construction.

• A report from the Institute for Supply Management showed that U.S. purchasing managers

index came in higher than market expectations and surged to 58.7 in May 2018 from 57.3 in

Apr 2018. The surge partly reflects increase in the pace of production growth that grew to

61.5 in May 2018 from 57.2 in Apr 2018.

• A flash report from the Eurostat showed that Eurozone’s inflation came in higher than market

expectations and surged 1.9% in May 2018 as against a gain of 1.2% in Apr 2018.

Meanwhile, the European Central Bank targets 'below, but close to 2%' inflation. Core

inflation that excludes prices of energy, food, alcohol and tobacco surged to 1.1% in May as

against 0.7% in Apr.

• Official data showed China’s manufacturing PMI came in at 51.9 in May 2018 as against

51.4 in Apr 2018. Non-manufacturing PMI came in at 54.9 in May as against 54.8 in Apr.

• Japan's all industry activity remained unchanged in Mar 2018. The all industry activity index

was flat in Mar 2018 after rising 0.4% in Feb 2018. The indicator for construction activity fell

0.8% and that for tertiary industry activity fell 0.3%.

Global Equity Markets

Global Indices

Indices

01-Jun-18

1-Week

Return

YTD

Return

Dow Jones

24,635.21 -0.48% -0.34%

Nasdaq 100

7,083.925 1.77% 10.75%

FTSE 100

7,701.77 -0.37% 0.18%

DAX Index

12,724.27 -1.65% -1.50%

Nikkei Average

22,171.35 -1.24% -2.61%

Straits Times

3,427.51 -2.44% 0.72%

Source: Thomson Reuters Eikon

Value as on Jun 01, 2018

U.S.

• U.S. markets largely remained initially

weak in the wake of the latest

protectionist move adopted by the U.S.

President on the trade front.

• Markets reversed the trend later

following report that showed stronger

than expected U.S. job growth in May.

The data instilled confidence among

investors about the strength of the U.S.

economy to withstand further rate hikes.

Europe

• European markets remained weak initially amid concerns over political situations in Italy

and Spain. Later, sentiment improved following reports that Italy has managed to form a

new government, thereby averting the prospects of the snap election. Nonetheless, buying

interest remained subdued as final data from IHS Markit showed slowdown in the growth

of euro zone manufacturing sector in May.

Asia

• Asian markets too ended the week on a subdued note as speculations over a global trade

war resurfaced and the U.S. President underplayed the probability of reaching a quick

resolution with North Korea in the upcoming summit. The downturn was cushioned as the

final reading of a private survey showed that China's manufacturing activity expanded at a

steady pace in May.

Global Debt (U.S.)

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

fell 4 bps to close at 2.90% from the

previous week’s close of 2.94%.

• U.S. Treasury prices surged initially as

its safe haven appeal improved

following political turmoil in Italy. It

stoked concerns over the country’s

future in the euro zone, which rattled

global financial markets. Treasury prices

rose further after tariffs were imposed

on steel and aluminum imports from the

European Union, Canada and Mexico,

which rekindled fears of a global trade

war.

• However, most of the gains were wiped

out as the political crisis in Italy seemed

to cool down after the country sought to

end its turmoil with a plan for a new

government and following upbeat U.S.

jobs data for May 2018.

2.40

2.80

3.20

29-May 30-May 31-May 1-Jun

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)

74.48 77.14

Gold ($/Oz)

1,292.74 1,301.17

Gold (Rs/10 gm)

30,764 31,171

Silver ($/Oz)

16.35 16.48

Silver (Rs/Kg)

39,246 40,229

Source: Thomson Reuters

Eikon *Value as on Jun 01, 2018

Gold

• Gold prices fell over the week. Main

factors contributed to the fall are easing

concerns on political turmoil in Italy and

possibility of U.S. and North Korea’s

scheduled summit in Jun. Upbeat U.S.

non farm payroll data for May 2018,

increased losses. However, the

downside was limited on fears of

probable trade war of the U.S. with EU,

Canada and Mexico.

Crude

• Brent crude prices moved down after

the Organization of the Petroleum

Exporting Countries (OPEC) and non-

OPEC country Russia indicated to raise

production level to meet the shortfall in

supply from Iran and Venezuela.

Baltic Dry Index

• The Baltic Dry Index gained 1.21% on

the back of improved capesize and

panamax activities.

9.50

10.20

10.90

2-May-18 12-May-18 22-May-18 1-Jun-18

Global Commodity Movement

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

Global Commodity Prices

Rebased to 10

Source: Thomson Reuters Eikon

-3.45%

-0.65%

-0.78%

Currencies Markets

Movement of Rupee vs Other Currencies

Currency Last Closing* 1-Wk Ago

US Dollar

67.18 68.26

Pound Sterling

89.14 91.22

EURO

78.41 79.88

100 JPY

61.56 62.38

Source: RBI Figures in INR , *Value as on Jun 01, 2018

Rupee

• The Indian rupee gained against the

greenback following decline in global

crude oil prices and U.S. Treasury yields.

Selling of greenback by corporates and

exporters and upbeat domestic GDP for

Mar 2018 quarter, added to the gains.

Euro

• Euro initially fell against the greenback

on political uncertainty in Italy and strong

U.S. jobs data. However, the trend

reversed following news that major

parties in Italy would make a renewed

attempt to form a coalition government.

Pound

• Pound rose against the greenback amid

easing political concerns in Italy and

increase in U.K. manufacturing growth

for the first time in six months in May.

Yen

• Yen fell against the greenback after

upbeat U.S. non-farm payroll

employment data in May 2018.

9.70

10.00

10.30

2-May-18 12-May-18 22-May-18 1-Jun-18

USD GBP Euro JPY

Source: RBI

Currency Prices ( in terms of INR)

Rebased to 10

Currency Movement

-1.58%

-2.28%

-1.85%

-1.31%

The Week that was…

May to 01

June

The Week that was (May 28 – June 01)

Date Events

Present

Value

Monday,

May 28, 2018

• Japan Jobless Rate (Apr) 2.5% 2.5%

Tuesday,

May 29, 2018

• U.S. Consumer Confidence Index (May) 128.0 125.6

• Japan Retail Trade (YoY) (Apr) 1.6% 1.0%

• U.S. S&P/Case-Shiller US Home Price Index (YoY) (Mar)

6.5%

6.3%

Wednesday,

May 30, 2018

• Japan Consumer Confidence Index (May)

43.8 43.6

• Eurozone German Retail Sales (YoY) (Apr)

1.2% 1.7%

• Eurozone German Consumer Price Index (YoY) (May P) 2.2% 1.6%

• U.S. Gross Domestic Product Annualized (QoQ) (1Q S) 2.2% 2.3%

Thursday,

May 31, 2018

• China Manufacturing PMI (May)

51.9 51.4

• Eurozone Consumer Price Index Estimate (YoY) (May)

1.8% 1.8%

• U.S. Initial Jobless Claims (May 18)

221k 234k

• Japan Housing Starts (YoY) (Apr) 0.3% -8.3%

Friday,

June 01, 2018

• Eurozone Markit Manufacturing PMI (May F) 55.5 55.5

• U.S. Change in Non-farm Payrolls (May) 223k 159k

• U.S. Unemployment Rate (May) 3.8% 3.9%

• U.S. ISM Manufacturing (May) 58.7 57.3

• U.K. Markit PMI Manufacturing s.a. (May) 54.4 53.9

The Week Ahead

June to 08

June

The Week Ahead

Day Event

Monday,

June 04, 2018

• U.K. Markit/CIPS UK Construction PMI (May)

• U.S. Factory Orders (Apr)

• Japan Overall Household Spending (YoY) (Apr)

Tuesday,

June 05, 2018

• Japan Nikkei PMI Composite (May)

• China Caixin PMI Composite (May

• U.K. Markit/CIPS Composite PMI (May)

• Eurozone Retail Sales (YoY) (Apr)

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

Wednesday,

June 06, 2018

• Japan Real Cash Earnings (YoY) (Apr)

• U.S. Trade Balance (Apr)

• U.S. MBA Mortgage Applications (1 Jun)

Thursday,

June 07, 2018

• Eurozone German Factory Orders n.s.a. (YoY) (Apr)

• Eurozone Gross Domestic Product s.a. (YoY) (1Q F)

• U.S. Consumer Credit (Apr)

• Japan Trade Balance - BOP Basis (Yen) (Apr)

• Japan Gross Domestic Product Annualized s.a. (QoQ) (1Q F)

Friday,

June 08, 2018

• China Trade Balance (Mar)

• Japan Eco Watchers Survey Current (May)

• U.K. BoE/TNS Inflation Next 12 Mths (May)

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