The Week that was…
03
rd
June to 07
th
June
2
Indian Economy
• The Nikkei India Manufacturing Purchasing Managers' Index (PMI) grew to 52.7 in May
2019 from 51.8 in Apr 2019. This marked a three-month high. The upside was driven by
improved output and new orders amid strengthening demand conditions, thereby leading
to further job creation in the sector. Manufacturing PMI has remained above the 50-point
mark for the 22nd consecutive month.
• The seasonally adjusted Nikkei India Services Business Activity Index fell from 51 in Apr
2019 to 50.2 in May 2019, thereby marking a 1-year low. The seasonally adjusted Nikkei
India Composite PMI Output Index that considers both the manufacturing sector and the
services sector came in at 51.7 in May 2019, thereby unchanged from Apr 2019.
Disruptions amid elections in the earlier part of May dampened growth of new work
intakes. New business inflows at service providers grew at the slowest pace in eight
months.
• The Monetary Policy Committee (MPC) unanimously lowered key policy repo rate by 25
bps for the third consecutive time in its second bi-monthly monetary policy review for
FY20. MPC also changed its stance on monetary policy from neutral to accommodative.
The key policy repo rate thus stands at a near 9-year low of 5.75%. The reverse repo thus
stands adjusted at 5.50% while the bank rate and the marginal standing facility rate stood
at 6.0%.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices
07-Jun-19
1 Week Return
YTD Return
S&P BSE Sensex
39,615.90 -0.25% 9.84%
Nifty 50
11,870.65 -0.44% 9.28%
S&P BSE Mid
-Cap 14,906.38 -1.26% -3.45%
S&P BSE Small
-Cap 14,657.09 -1.41% -0.34%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
03-Jun-19 892 935 0.95
04-Jun-19 781 1,060 0.74
06-Jun-19 469 1,382 0.34
07-Jun-19 710 1,125 0.63
Source: NSE
• Indian equity markets closed modestly
lower in the week to Jun 7, 2019.
Investors got cautious over the Reserve
Bank of India’s (RBI) cutting economic
growth forecast for FY20. Sentiment
was also hurt as there was no
announcement by RBI regarding
liquidity issues that have been bogging
the non-banking financial companies.
The MPC cut repo rate by 25 basis
points at its meeting, which was along
expected lines.
• Decline in crude oil prices amid
concerns of escalating trade war
tensions restricted the downturn as it
eased worries on fiscal deficit. Also,
market sentiment improved following
surge in Nikkei Manufacturing PMI to 3-
month high in May 2019 and reports
that government may infuse
approximately Rs. 40,000 crore into
state-run lenders in 2019-2020.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
28.16 29.36 27.57 164.31
P/B
3.02 3.79 2.44 2.09
Dividend Yield
1.21 1.23 1.00 0.96
Source: BSE, NSE Value as on June 07, 2019
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
18,490.22 0.24% -0.01%
S&P BSE Bankex
34,866.11
-1.13%
6.61%
S&P BSE CD
25,269.44 2.30% 9.67%
S&P BSE CG
19,552.77
-1.94%
9.04%
S&P BSE FMCG
11,531.67 0.12% 0.01%
S&P BSE HC
13,038.91
-2.00%
-7.09%
S&P BSE IT
15,738.57
-0.27%
0.36%
S&P BSE Metal
10,778.60 0.21% -3.03%
S&P BSE Oil & Gas
15,225.54
-3.23%
0.88%
S&P BSE Realty
2,162.42
-1.74%
9.00%
Source: Thomson Reuters Eikon
*Value as on June
07, 2019
• On the BSE sectoral front, S&P BSE Oil &
Gas was the major loser, down 3.23%,
followed by S&P BSE Healthcare that fell
2.00%. Reports that Director General of
Goods and Services Tax Intelligence has
booked cases against a couple of oil majors
due to evasion of excise duty kept the oil and
gas stocks under pressure.
• S&P BSE Capital Goods and S&P BSE
Realty fell 1.94% and 1.74%, respectively.
S&P BSE Bankex fell 1.13%. Stock of a non-
banking financial company significantly fell
after SEBI reportedly issued notice to five
Asset Management Companies alleging
insider trading in favour of the company.
Indian Derivatives Market Review
• Nifty Jun 2019 Futures were at 11,900.75, a premium of 30.10 points, above the spot closing
of 11,870.65. The total turnover on NSE’s Futures and Options segment for the week stood
at Rs. 60.83 lakh crore as against Rs. 63.15 lakh crore for the week to May 31.
• The Put-Call ratio stood at 0.85 compared with the previous week’s close of 0.87.
• The Nifty Put-Call ratio stood at 1.32 against the previous week’s close of 1.43.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-
Wk
Ago
1-
Mth
Ago
6-
Mth
Ago
Call Rate
5.69 5.92 5.94 6.41
91 Day T
-Bill
5.92 6.12 6.45 6.69
07.32% 2024, (5 Yr GOI)
6.79 6.85 7.28 --
07.26% 2029, (10
Yr
GOI)
6.97 7.03 7.38 --
Source: Thomson Reuters Eikon
Value as on June 07
, 2019
• Bond yields declined following plunge
in crude oil prices and slowdown in the
domestic economic growth. This
raised expectations of monetary
easing with the market anticipating a
rate cut at the upcoming monetary
policy meeting on Jun 6.
• Yields fell again as the MPC reduced
the key policy rate by 25 basis points
to 5.75% and changed the policy
stance to accommodative. This raised
speculations of further rate cuts in
coming times.
• However, gains were limited as market
participants resorted to profit booking
after recent rise in bond prices and
recovery in global crude oil prices.
• Yields on the 10-year benchmark
paper (7.26% GS 2029) fell 6 bps to
close at 6.97% compared with the
previous close of 7.03% after trading
in the range of 6.88% to 7.02%.
6.90
6.95
7.00
7.05
3-Jun 4-Jun 6-Jun 7-Jun
Yield in %
10 -Yr Benchmark Bond ( % )
Source: CCIL
Domestic Debt Market (Spread Analysis)
7
Maturity
G-
Sec Yield
(%)
Corporate Yield
(%)
Spread
bps
1 Year 6.24 7.74 150
3 Year 6.69 7.87 118
5 Year 6.90 7.91 101
10 Year 7.10 8.30 121
Source: Thomson Reuters Eikon
Value as on June 07, 2019
• Yield on gilt securities fell across maturities in
the range of 5 bps to 11 bps, barring 2-year
paper, which increased 1 bps.
• Corporate bond yields fell across maturities in
the range of 2 bps to 23 bps. The maximum
decline was witnessed on 1-year paper and
the minimum decline was witnessed on 3-year
paper.
• Difference in spread between AAA corporate
bond and gilt expanded across 2- to 4-year
maturities and 7-year paper by up to 7 bps.
Difference in spread between AAA corporate
bond and gilt contracted across the remaining
maturities in the range of 2 bps to 12 bps,
barring 10-year paper, which closed steady.
-24
-16
-8
0
5.70
6.30
6.90
7.50
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 07-Jun-19 31-May-19
Yield
in %
Change
in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• The Reserve Bank of India (RBI) mandated the minimum leverage ratio at 3.5% for all
Indian banks and 4% for systemically important banks. The objective of the move is to
maintain financial stability of the country and maintain synchronisation with Basel III
standards. Instructions regarding the same would be issued by the end of Jun-19.
• RBI is considering giving on tap licensing for small finance banks. Guidelines regarding the
same would be issued by the end of Aug-19. The objective of the move is to further the
cause of financial inclusion by giving banking facilities to small borrowers and improve
competition.
• RBI has decided to set up a working group who would review the regulatory guidelines and
supervisory framework that are applicable to core investment companies. The objective of
the move is to strengthen the corporate governance framework of the same.
• RBI has set up an internal working group to review the liquidity management framework in
order to simplify the same. The move comes as the liquidity position was assessed by
different market participants and their assessment was not in sync with the actual systemic
liquidity position in the economy.
Regulatory Updates in India (contd..)
9
• RBI is considering setting up a foreign exchange platform for retail participants which
includes individuals and small and medium enterprise exporters and importers. The
objective of the move is to create a market infrastructure for fair pricing of foreign exchange
users. The platform has been developed is currently under testing. Operational guidelines
regarding the same would be issued by the end of Jun-19.
• RBI has proposed to rationalise the present norms and regulations that encompasses
different money market instruments. The objective of the move is to improve the safety and
transparency of money markets.
• RBI has decided to give approval to specific stock exchanges which will act as facilitators
that will aggregate the bids of their stockbrokers and submit a single consolidated bid under
the non-competitive segment of the primary auctions of state development loans. The
objective of the move is to increase retail participation in the government security market.
• RBI decided to remove charges on National Electronic Fund Transfer (NEFT) and Real
Time Gross Settlement (RTGS) systems. The objective of the move is to promote digital
transactions as money transfer through RTGS and NEFT will be now cheaper.
Global News/Economy
• The World Bank announced that global growth is projected to ease to 2.6% in 2019 as
against previous expectation of growth of 2.9%. It is expected to increase 2.7% in 2020 as
against previous expectation of growth of 2.8%. The global growth outlook was downgraded
to the weakest pace in three years due to weak trade and investment, amid intensifying
trade disputes. In 2021, global growth is expected be 2.8%.
• According to the Labor Department, jobs growth in U.S. slowed substantially in May 2019.
The U.S. non-farm payroll employment rose by 75,000 in May, much less than expected,
after rising by a downwardly revised 224,000 jobs in Apr 2019. Meanwhile, unemployment
rate came in at 3.6% in May, unchanged from the previous month and in line with
expectations.
• The European Central Bank (ECB) left its key interest rate unchanged and expects interest
rates to remain at the present level at least through the first half of 2020. Interest rates for
eurozone were last raised in Jul 2011. The main refinance rate is currently at a record low
0% and the deposit rate at -0.40%. Meanwhile, the marginal lending facility rate is at 0.25%.
Additionally, ECB reiterated that it will continue to reinvest the proceeds from maturing
securities that it had acquired under its asset purchase programme.
10
Global Equity Markets
11
Global Indices
Indices
07-Jun-19
1-Week
Return
YTD
Return
Dow Jones
25,983.94 4.71% 11.39%
Nasdaq 100
7,417.29 4.06% 17.18%
FTSE 100
7,331.94 2.38% 8.97%
DAX Index
12,045.38 2.72% 14.08%
Nikkei Average
20,884.71 1.38% 4.35%
Straits Times
3,166.29 1.56% 3.18%
Source: Thomson Reuters Eikon
Value as on June 07, 2019
U.S.
• U.S. markets managed to overcome the
initial weakness and ended the week
with modest gains. Markets fell towards
the beginning of the week as tech
stocks came under selling pressure on
reports of antitrust investigations by
U.S. government involving several
major tech companies.
• However, investors soon shrugged off
the weakness after media reports
indicated that U.S. government's
proposed tariff imposition on Mexico
could be delayed.
Europe
• European markets too witnessed buying spree with investors taking cues from ECB’s rate
decision and growth outlook. The European Central Bank left its key interest rate
unchanged and expects interest rates to remain at the present level longer. Earlier, the
bank expected of keeping the rates unchanged at least through the end of this year.
Asia
• Majority of the Asian markets witnessed gains during the week. Investors set aside the
concerns over the U.S-China trade war and took positive cues from the U.S. Federal
Reserve’s (Fed) chief’s comments on taking appropriate action to sustain expansion.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury bond
fell 6 bps to 2.08% compared with the
previous week’s close of 2.14%.
• U.S. Treasury prices rose initially after
St. Louis Federal Reserve President
remarked that the U.S. Fed may soon
cut interest rates due to rising global
trade tensions and weak U.S. inflation.
• Gains were extended as the perception
that a rate-cut by the U.S. Fed might be
around the corner gathered strength
after the U.S. non-farm payroll
employment rose less than expected in
May 2019.
• However, further gains were capped
after the ECB refrained from lowering
interest rates and extended its rate-hike
deadline till the middle of 2020. Also, a
senior Republican U.S. senator
predicted that U.S. will not impose tariffs
on Mexican imports, which lowered the
safe haven appeal of U.S. Treasuries to
some extent.
2.05
2.08
2.11
2.14
3-Jun 4-Jun 5-Jun 6-Jun 7-Jun
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($/Barrel)
65.54 68.02
Gold ($/Oz)
1,340.30 1,305.25
Gold (Rs/10 gm)
32,607.00 32,056.00
Silver ($/Oz)
14.99 14.57
Silver (Rs/Kg)
36,937.00 36,357.00
Source: Thomson Reuters Eikon *
Value as on
June 07, 2019
Gold
• Gold prices gained after U.S. said it would
increase tariffs on Mexican imports to
restrict illegal immigration from the
country. Deepening trade differences
between the U.S. and China lifted the
safe-haven appeal of the precious metal.
U.S. Fed’s chairman’s indication of a rate-
cut soon also supported the dollar-
denominated commodity.
Brent Crude
• Brent crude prices moved down with
deepening trade differences between U.S.
and China. This raised concerns over
global growth and dampened the demand
outlook for oil. Conflict between U.S. and
Mexico also dented sentiment.
Baltic Dry Index
• The Baltic Dry Index registered a rise on
the back of improved capesize and
panamax activities.
8.70
9.40
10.10
10.80
7-May-19 17-May-19 27-May-19 6-Jun-19
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global
Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
-3.65%
2.69%
2.88%
7-Jun-19
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency
Last Closing*
1-Wk Ago
US Dollar
69.30 69.81
Pound Sterling
88.02 88.01
EURO
78.07 77.73
100 Yen
63.92 64.08
Source: RBI Figures in INR , *
Value as on
June 07, 2019
Rupee
• The rupee strengthened against the
greenback following fall in crude oil
prices and expectations of a rate-cut by
U.S Fed in 2019.
Euro
• The euro strengthened against the
greenback following weak U.S. jobs data
for May 2019 and growing possibility of a
rate-cut by the U.S. Fed in 2019.
Pound
• The pound gained against the dollar
following reports showing surge in U.K.
services PMI in May 2019. However,
worries of a no-deal Brexit kept the
sterling under pressure.
Yen
• The yen gained against the greenback
as the latter weakened following
downbeat U.S. jobs data for May 2019.
Expectations of a rate-cut by the U.S.
Fed in 2019 added to the gains.
9.50
9.80
10.10
10.40
7-May-19 17-May-19 27-May-19 6-Jun-19
USD GBP Euro JPY
Source: RBI
Currency
Prices (
in terms of INR)
Rebased to 10
Currency Movement
0.01%
0.44%
-0.25%
-0.72%
7-Jun-19
15
The Week that was…
03
rd
June to 07
th
June
The Week that was (June 03 – June 07)
16
Date Events
Present
Value
Previous
Value
Monday,
June 03, 2019
•
India Nikkei Manufacturing PMI (May) 52.70 51.80
•
U.S. ISM Manufacturing PMI (May) 52.10 52.80
•
Japan Monetary Base (YoY) (May) 3.60% 3.10%
•
China Caixin Manufacturing PMI (May) 50.20 50.20
Tuesday,
June 04, 2019
•
Eurozone Consumer Price Index Estimate (YoY) (May) 1.20% 1.70%
•
Eurozone Unemployment Rate (Apr) 7.60% 7.70%
•
U.S. Factory Orders (Apr) -1.00% 1.90%
Wednesday,
June 05, 2019
•
U.S. ISM Services PMI (May) 56.90 55.50
•
Japan Nikkei Composite PMI (May) 50.70 50.80
•
U.K. Markit Composite PMI (May) 50.70 50.90
Thursday,
June 06, 2019
•
India Nikkei Service PMI (May) 50.20 51.00
•
Germany Factory Orders (YoY) (Apr) -5.30% -5.90%
•
Eurozone Gross Domestic Product (YoY) (1Q F) 1.20% 1.20%
•
U.S. Trade Balance (Apr) ($50.8B)
($51.9B)
Friday,
June 07, 2019
•
U.S. Change in Non-farm Payrolls (May) 75K 224K
•
U.S. Unemployment Rate (May) 3.60% 3.60%
•
Germany Industrial Production (YoY) (Apr) -1.80% -0.90%
17
The Week ahead
10
th
June to 14
th
June
18
The Week Ahead
Day Event
Monday,
Jun 10, 2019
•
U.K. Trade Balance (Apr)
•
U.K. Industrial Production (YoY) (Apr)
•
U.K. Gross Domestic Product (MoM) (Apr)
•
China Trade Balance (May)
Tuesday,
Jun 11, 2019
•
U.K. Employment Change 3M/3M (Apr)
•
Japan Machine Orders (YoY) (Apr)
Wednesday,
Jun 12, 2019
•
India Index of Industrial Production (Apr)
•
India Consumer Price Index (YoY) (May)
•
China Consumer Price Index (YoY) (May)
•
U.S. Consumer Price Index (YoY) (May)
Thursday,
Jun 13, 2019
•
U.S. Export Price Index (YoY) (May)
•
Eurozone Industrial Production (YoY) (Apr)
Friday,
Jun 14, 2019
•
India Wholesale Price Index (YoY) (May)
•
U.S. University of Michigan Sentiment (Jun P)
•
U.S. Retail Sales Advance (MoM) (May)
•
U.S. Industrial Production (MoM) (May)s
•
China Industrial Production (YoY) (May)
Disclaimer
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19
