News U Can Use
June 08, 2018
The Week that was…
04
th
June to 08
th
June
2
Indian Economy
• The Monetary Policy Committee (MPC), in its second bi-monthly policy review for FY19,
has increased the key policy repo rate by 25 basis points to 6.25% and retained its
“neutral” stance. Consequently, the reverse repo rate increased to 6.00% from 5.75%, and
the marginal standing facility (MSF) rate and bank rate each grew to 6.50% from 6.25%.
All the six policymakers were in favour of the policy rate increase of 25 bps.
• MPC expects inflation in the range of 4.8%-4.9% after taking into account the house rent
allowances (HRAs) in first half of FY19 as against previous expectation of 4.7%-5.1%.
Excluding HRA impact, inflation is expected to be 4.6% in the first half of FY19 as against
previous expectation of 4.4%-4.7%. In the second half, inflation is expected to be 4.7% as
against previous expectation of 4.4%, including as well as excluding HRA impact.
• MPC retained its expectation for Gross Domestic Product (GDP) growth at 7.4% in FY19.
It is expected in the range of 7.5% to 7.6% for the first half of FY19 as against previous
expectation of 7.3%-7.4% and in the range of 7.3%-7.4% for second half of the fiscal year
as against previous expectation of 7.3%-7.6%. The revision in the GDP for first and
second half indicates improving capacity utilisation and credit offtake. Additionally, global
demand has been buoyant, which is expected to encourage exports and provide a further
boost to investment. Rural as well as urban consumption remains healthy and is expected
to strengthen further. However, the sharp increase in petroleum product prices would likely
impact disposable incomes. Also, revision in GDP range reflects expectation that
manufacturing sector will marginally moderate in second quarter of FY19 due to
deterioration in the overall business situation and order book
.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 08-Jun-18 1 Week Return YTD Return
S&P BSE Sensex 35,443.67 0.61% 4.07%
Nifty 50 10,767.65 0.67% 2.25%
S&P BSE Mid-Cap 16,022.37 1.07% -10.10%
S&P BSE Small-Cap 16,887.13 -0.54% -12.19%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
04-Jun-18 292 1,530 0.19
05-Jun-18 308 1,533 0.20
06-Jun-18 1,221 588 2.08
07-Jun-18 1,439 387 3.72
08-Jun-18 1,015 777 1.31
Source: NSE
• Indian equity markets closed the
week on a positive note. Markets
rejoiced after the MPC maintained its
neutral stance and remained positive
towards the economic growth of the
country. Additionally, the MPC
upwardly revised expectations for
agriculture and allied activities on the
supply side. Expectations of good
monsoon rains supported buying
interest.
• However, market sentiment turned
sour after final reading of a private
survey showed that the domestic
services sector contracted in May.
• On the global front, investors
remained cautious due to trade
tensions ahead of a key G7 meeting
and upcoming monetary policy
meetings of major central banks
across the globe.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
22.91 27.27 34.9 93.07
P/B
2.94 3.7 2.69 2.32
Dividend Yield
1.15 1.23 0.91 0.74
Source: BSE, NSE Value as on Jun 08
, 2018
Indian Equity Market (contd.)
5
• On the BSE sectoral front, indices closed
on a mixed note. S&P BSE Healthcare
stood as the major gainer (3.70%),
followed by S&P BSE Metal (2.58%) and
S&P BSE Oil & Gas that grew 2.13%. S&P
BSE IT and S&P BSE Teck witnessed
gains of 1.73% and 1.66%, respectively.
• S&P BSE IT witnessed gains following a
weak rupee as the sector derives
substantial revenue from exports. S&P
BSE Power (-1.74%) stood as the major
loser followed by S&P BSE Capital Goods
(-1.03%) and S&P BSE Consumer
Durables (-0.79%).
Indian Derivatives Market Review
• Nifty Jun 2018 Futures were at 10,748.1 points, a discount of 19.55 points, below the spot
closing of 10,767.65. The turnover on NSE’s Futures and Options segment stood at Rs.
43.97 lakh crore as against Rs. 54.71 lakh crore on Jun 1.
• The Put-Call ratio stood at 0.85 compared with the previous week’s close of 0.83.
• The Nifty Put-Call ratio stood at 1.49 compared with the previous week’s close of 1.48.
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
24,960.05 1.32% -1.83%
S&P BSE
Bankex
29,592.59 -0.63% 0.78%
S&P BSE CD
20,412.96 -0.79% -8.92%
S&P BSE CG
18,501.86 -1.03% -3.47%
S&P BSE FMCG
11,203.76 -0.11% -0.07%
S&P BSE HC
13,424.64 3.70% -2.34%
S&P BSE IT
13,556.49 1.73% 3.73%
S&P BSE Metal
13,853.82 2.58% -0.79%
S&P BSE Oil & Gas
14,647.42 2.13% 0.84%
S&P BSE Power
2,052.73 -1.74% -6.95%
S&P BSE Teck
7,030.04 1.66% 2.31%
Source: Thomson Reuters Eikon
*Value as on June 08, 2018
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
6.02 5.98 5.86 5.90
91 Day T-Bill
6.50 6.45 6.25 6.11
7.80% 2021, (5 Yr GOI)
7.83 7.72 7.55 6.77
7.17% 2028, (10 Yr GOI)
7.95 7.85 7.58 7.09
Source: Thomson Reuters
Eikon
Value as on June 08, 2018
• Bond yields surged after the MPC
hiked key interest rate for the first
time since Jan 2014. MPC increased
repo rates by 25 basis points to
6.25%.
• However, short covering by investors
and demand for domestic bonds in
the weekly debt auction restricted the
losses.
• Yield on the 10-year benchmark
paper (7.17% GS 2028) rose 10 bps
to close at 7.95% from the previous
week’s close of 7.85% after trading in
a range of 7.82% to 8.00%.
• Data from Reserve Bank of India
(RBI) showed that India's foreign
exchange reserves fell for the
seventh consecutive week to $412.23
billion as on Jun 1 from $412.82
billion in the previous week.
7.80
7.90
8.00
4-Jun 5-Jun 6-Jun 7-Jun 8-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 7.19 8.54 135
3 Year 7.92 8.70 78
5 Year 8.14 8.73 60
10 Year 8.10 8.72 61
Source: Thomson Reuters Eikon
Value as on June 08, 2018
• Yields on gilt securities increased across
the maturities by up to 14 bps barring 1-
year paper that fell 1 bps.
• Corporate bond yields increased across
the maturities in the range of 2 bps to 15
bps. The maximum increase was
witnessed on 6 to 8 years’ maturities and
the minimum increase was witnessed on
1-year paper.
• Spread between AAA corporate bond
and gilt expanded across the maturities
by up to 7 bps barring 4- and 5-year
maturities that contracted 3 bps and 1
bps, respectively.
-2
8
18
6.30
7.30
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 08-Jun-18 01-Jun-18
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• The Reserve Bank of India (RBI) has increased the carve-out of liquidity coverage ratio
(LCR) from the statutory liquidity ratio (SLR) by 2% points of the net demand and time
liabilities (NDTL). Thus the total carve-out from SLR available to banks would be 13% of
their NDTL instead of the earlier 11%.
• RBI permitted banks the option to spread the mark-to-market (MTM) losses incurred on
investments held in Available for Sale (AFS) and Held for Trading (HFT) portfolio for the
quarter ending Jun 30, 2018, equally over a period of four quarters, commencing from the
quarter ending June 30, 2018. The move comes after RBI took into account the continuing
rise in yield of government securities and inadequate time available to banks to build an
Investment Fluctuation Reserve (IFR).
• RBI has decided that securities issued by each state government should be valued based
on observed prices. The valuation of traded state government securities shall be at the price
at which they have been traded in the market and for non-traded state government
securities, the valuation shall be based on the state-specific weighted average spread over
the yield of the central government securities of equivalent maturity.
Regulatory Updates in India (contd..)
• The Securities and Exchange Board of India (SEBI) has announced detailed norms for
listed Infrastructure Investment Trusts (InvITs) in relation to preferential issue of units to
institutional investors. According to the market regulator, preferential issues need to be
finalized within 12 months once the resolution by InvIT's unit holders has been passed.
Also, SEBI stated that in a financial year, the units in a preferential issue would be offered
and allotted to a minimum of two investors and a maximum of 1,000 investors.
• SEBI has increased the maximum investment by angel funds in venture capital
undertakings from Rs. 5 crore to Rs. 10 crore. This is being done to boost start-ups at early
stage and to provide more opportunities to angel funds.
• SEBI has levied 10% cap on cross-shareholding in credit rating agencies and increased
their net worth requirement to Rs. 25 crore from Rs. 5 crore. Additionally, the regulator
banned the practice of having a seat on the rival's board. The new norms will likely impact
global credit rating agencies that have direct presence and significant holdings in domestic
agencies.
9
Global News/Economy
• According to a report released by the Institute for Supply Management, the U.S. non-
manufacturing Purchasing Managers' Index (PMI) rose more than expected to 58.6 in May
2018 from 56.8 in Apr 2018. The more than expected rise was due to significant increase in
business activity index during the month.
• According to a report from the IHS Markit and Chartered Institute of Procurement & Supply,
U.K. construction Purchasing Managers' Index remained unchanged at 52.5 in May 2018.
The index was expected to decline to 51.8.
• A report from the Eurostat showed that eurozone’s Gross Domestic Product (GDP) grew
0.4% sequentially in the first quarter 2018, down from growth of 0.7% witnessed in fourth
quarter of 2017. GDP growth slowed to 2.5% on yearly basis as against 2.8% in the previous
quarter.
• A report from the IHS Markit showed that China’s Caixin composite output index remained
steady at 52.3 in May 2018. This indicates a steady and moderate pace of expansion.
Meanwhile, the services PMI also remained steady at 52.9 in May.
• A report from the General Administration of Customs showed that China’s exports grew
12.6% YoY in May 2018 as against market expectations of a growth of 11.1%. Meanwhile,
imports surged 26% YoY in May as against an expectation of 18.2% growth. Trade surplus
came in at $24.92 billion in May, which was below market expectations of $33.8 billion.
10
Global Equity Markets
11
Global Indices
Indices
08-Jun-18
1-Week
Return
YTD
Return
Dow Jones
25,316.53 2.77% 2.42%
Nasdaq 100
7,152.62 0.97% 11.82%
FTSE 100
7,681.07 -0.27% -0.09%
DAX Index
12,766.55 0.33% -1.17%
Nikkei Average
22,694.50 2.36% -0.31%
Straits Times
3,436.37 0.26% 0.98%
Source: Thomson Reuters Eikon
Value as on Jun 08, 2018
U.S.
• U.S. markets largely traded on a
positive note following upbeat economic
data for May 2018.
• Market also took positive cues after one
of the European Central Bank (ECB)
board members indicated that the
central bank is likely to discuss
withdrawing its bond purchasing
program in the coming meeting.
Europe
• Market participants remained nervous ahead of policy meeting of major central banks
across the globe along with G7 meeting and U.S.-North Korea summit. Further, investors
turned anxious of higher spending plans and other changes proposed by Italy’s new
coalition government, which might raise the debt burden of the country. Some respite was
seen after one of the key board members of ECB hinted the bank would discuss
withdrawing its bond-purchasing programme in the upcoming meeting.
Asia
• Asian markets traded mixed as investors remained cautious of the upcoming G-7 summit.
However, some respite was seen on improved Chinese services sector data for May 2018
and as private sector in Singapore continued to expand in May at a faster pace.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury bond
rose 4 bps to close at 2.94% from the
previous week’s close of 2.90%.
• U.S. Treasury prices fell as fears over
political turmoil in Italy and Spain eased.
Further, growing possibility that the ECB
would soon wind down the expansion of
its massive bond purchase program in
2018 added to the losses.
• Prices fell further as solid U.S. payrolls
report for May 2018 indicated an
optimistic outlook for faster domestic
growth and inflation, thereby increasing
the speculation of three more rate hikes
by the U.S. Federal Reserve in 2018.
However, tensions between the U.S.
and its major trade partners ahead of
the G-7 summit restricted further losses.
2.90
2.95
3.00
4-Jun 5-Jun 6-Jun 7-Jun 8-Jun
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)
74.20 74.48
Gold ($/Oz)
1,298.00 1,292.74
Gold (Rs/10 gm)
31,027 30,764
Silver ($/Oz)
16.74 16.35
Silver (Rs/Kg)
40,258 39,246
Source: Thomson Reuters
Eikon *Value as on Jun 08, 2018
Gold
• Gold prices rose as trade war fears
intensified over U.S. President’s plans to
bail out from the upcoming G-7 summit.
Meanwhile, gains were largely restricted
ahead of the Fed’s monetary policy
meeting, where the central bank is
widely expected to raise interest rates
by 25 bps.
Crude
• Brent crude prices fell on concerns
about surging U.S. output and falling
demand in China. However, optimism
over Organization of the Petroleum
Exporting Countries meeting in Vienna
on Jun 22 restricted further losses.
Baltic Dry Index
• The Baltic Dry Index gained 20.33% on
the back of improved capesize and
panamax activities.
9.00
9.50
10.00
10.50
9-May-18 19-May-18 29-May-18 8-Jun-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
- 0.38%
0.41%
2.35%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
67.52 67.18
Pound Sterling
90.60 89.14
EURO
79.58 78.41
100 JPY
61.60 61.56
Source: RBI Figures in INR , *Value as on Jun 08, 2018
Rupee
• The rupee weakened against the
greenback on concerns over foreign fund
outflow from the Indian economy and
worries that global crude oil prices may
remain at elevated levels.
Euro
• The euro rose against the greenback on
expectations that the ECB will indicate
about unwinding its vast bond-buying
program by the end of this year in its
monetary policy review due Jun 14.
Pound
• The pound rose against the greenback
after the service sector Purchasing
Managers' Index rose to a three-month
high in May 2018.
Yen
• Yen fell initially against the greenback on
concerns of more rate hikes in U.S.
However, losses were neutralised as
market participants remained cautious
ahead of a G7 meeting in Canada.
9.75
9.85
9.95
10.05
10.15
9-May-18 19-May-18 29-May-18 8-Jun-18
USD GBP Euro JPY
Source: RBI
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
0.50%
1.64%
1.49%
0.06%
15
The Week that was…
04
th
June to 08
th
June
The Week that was (June 04 – June 08)
16
Date Events Present Value Previous Value
Monday,
Jun 04, 2018
• U.K. Markit/CIPS UK Construction PMI (May) 52.5 52.5
• U.S. Factory Orders (Apr) -0.8% 1.7%
• Japan Overall Household Spending (YoY) (Apr) -1.3% -0.7%
Tuesday,
Jun 05, 2018
• Japan Nikkei PMI Composite (May) 51.7 53.1
• China Caixin PMI Composite (May) 52.3 52.3
• U.K. Markit/CIPS Composite PMI (May) 54.3 53.2
• Eurozone Retail Sales (YoY) (Apr) 1.7% 1.5%
• U.S. ISM Non-Manufacturing/Services Composite (May)
58.6
56.8
Wednesday,
Jun 06, 2018
• Japan Real Cash Earnings (YoY) (Apr)
0.0% 0.7%
• U.S. Trade Balance (Apr) -$46.2b -$47.2b
• U.S. MBA Mortgage Applications (1 Jun) 4.1% -2.9%
Thursday,
Jun 07, 2018
• Japan Leading Index CI (Apr P)
105.6 104.5
• Eurozone German Factory Orders n.s.a. (YoY) (Apr)
-0.1% 2.9%
• Eurozone Gross Domestic Product s.a. (YoY) (1Q F)
2.5% 2.5%
• U.S. Consumer Credit (Apr)
$9.26b $11.622b
• Japan Trade Balance - BOP Basis (Yen) (Apr)
¥573.8b ¥1190.7b
• Japan Gross Domestic Product Annualized s.a. (QoQ)
(1Q F)
-0.6% -0.6%
Friday,
Jun 08, 2018
• China Trade Balance (Mar) $24.92b $28.30b
• Japan Eco Watchers Survey Current (May) 47.1 49.0
• U.K. BoE/TNS Inflation Next 12 Mths (May) 2.9% 2.9%
17
The Week Ahead
11
th
June to 15
th
June
18
The Week Ahead
Day Event
Monday,
June 11, 2018
• Japan Machine Orders (YoY) (Apr)
• U.K. Trade Balance (Apr)
• U.K. Industrial Production (YoY) (Apr)
Tuesday,
June 12, 2018
• India Index of Industrial Production (Apr)
• India Consumer Price Index (May)
• U.K. ILO Unemployment Rate 3Mths (Apr)
• Eurozone ZEW Survey (Economic Sentiment) (Jun)
• U.S. Consumer Price Index (YoY) (May)
Wednesday,
June 13, 2018
• U.K. Consumer Price Index (YoY) (May)
• Eurozone Industrial Production w.d.a. (YoY) (Apr)
• U.S. FOMC Rate Decision
Thursday,
June 14, 2018
• India Wholesale Price Index (May)
• European Central Bank Rate Decision
• U.S. Retail Sales Advance (MoM) (May)
• Japan Industrial Production (YoY) (Apr F)
• China Retail Sales (YoY) (May)
• U.S. Initial Jobless Claims (Jun 09)
Friday,
June 15, 2018
• Japan Bank of Japan Rate Decision
• U.S. U. of Michigan. Sentiment (Jun P)
• Eurozone Consumer Price Index (YoY) (May F)
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19
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