News U Can Use
June 15, 2018
The Week that was…
11
th
June to 15
th
June
2
Indian Economy
• The Consumer Price Index (CPI)-based inflation or retail inflation grew 4.87% in May 2018,
up from 4.58% in Apr 2018 and from 2.18% in May 2017. This marked a four-month high.
The increase reflects increase in prices of fruits and vegetables by 12.33% and 8.04%,
respectively. However, prices of pulses and products, sugar and confectionery, declined
11.57% and 8.12%, respectively. The retail inflation growth remained above the Reserve
Bank of India’s medium-term target of 4% for the seventh consecutive month.
• India’s Index of Industrial Production (IIP) grew 4.9% in Apr 2018 as against upwardly
revised growth of 4.6% (4.4% originally reported) in Mar 2018 and 3.2% in Apr 2017. The
manufacturing sector surged 5.2% in Apr 2018 as against 2.9% growth in Apr 2017.
Meanwhile, the mining sector surged 5.1% in Apr 2018 following 3.0% growth in Apr 2017.
• Government data showed that India’s Wholesale Price Index-based inflation (WPI) sharply
rose to 4.43% in May 2018 from a provisional 3.18% in Apr 2018 and 2.26% in May 2017.
This marked a 14-month high. The WPI Food Index also increased to 1.12% in May 2018
from 0.67% in Apr 2018. The inflation for fuel items surged to 11.22% in May 2018 from
7.85% in Apr 2018.
• According to the preliminary numbers released by the Reserve Bank of India (RBI),
Current Account Deficit (CAD), rose to $ 13.0 billion or 1.9% of GDP in Q4 of 2017-18, up
from $2.6 billion or 0.4% of GDP in Q4 of 2016 -17. In Q3 FY18, it stood at $13.7 billion or
2.1% of GDP.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices
15-Jun-18
1 Week Return
YTD Return
S&P BSE Sensex
35,622.14 0.50% 4.60%
Nifty 50
10,817.7 0.46% 2.73%
S&P BSE Mid
-Cap 16,001.2 -0.13% -10.22%
S&P BSE Small
-Cap 16,961.16 0.44% -11.80%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
11-Jun-18 1048 749 1.40
12-Jun-18 1038 752 1.38
13-Jun-18 856 940 0.91
14-Jun-18 817 955 0.86
15-Jun-18 682 1099 0.62
Source: NSE
• Indian equity markets closed the
week on a positive note. Initially,
market got support following the
U.S.-North Korea summit in
Singapore ending on a positive note
and expectations of a more cordial
relationship between the nations.
Improved industrial production data
for Apr 2018 further provided support.
• However, increase in domestic
inflationary pressures in May 2018
raised concerns of more rate hikes by
the central bank in the coming days.
• Renewed concerns over trade war
between U.S. and China also kept
investors wary. Further, fears over
foreign fund outflow reignited after
the U.S. Federal Reserve (Fed)
raised interest rates and adopted a
hawkish stance by forecasting two
more rate hikes in the remaining part
of 2018.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
23.23 27.44 34.06 95.85
P/B
2.97 3.72 2.69 2.35
Dividend Yield
1.15 1.22 0.91 0.74
Source: BSE, NSE Value as on Jun 15, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
24,849.93
-0.07%
S&P BSE Bankex
29,557.61
-0.50%
S&P BSE CD
20,517.95 0.51% -4.15%
S&P BSE CG
18,288.89
-3.80%
S&P BSE FMCG
11,216.66 0.12% 0.51%
S&P BSE HC
14,301.44 6.53% 7.59%
S&P BSE IT
13,951.11 2.91% 5.37%
S&P BSE Metal
13,406.34
-4.61%
S&P BSE Oil & Gas
14,397.31
-2.28%
S&P BSE Power
2,016.65
-5.87%
S&P BSE Teck
7,184.87 2.20% 4.36%
Source: Thomson Reuters Eikon
*Value as on June
15, 2018
• On the BSE sectoral front, indices closed
on a mixed note. S&P BSE Metal (-3.23%)
stood as the major loser followed by S&P
BSE Power (-1.76%) and S&P BSE Oil &
Gas (-1.71%). Meanwhile, S&P BSE HC
(6.53%) surged followed by S&P BSE IT
(2.91%) and S&P BSE Teck (2.20%).
• Auto sector posted loss although as per
the Society of Indian Automobile
Manufactures (SIAM) data, domestic
passenger vehicle sales grew 19.65% YoY
to 3,01,238 units in May 2018 from
2,51,764 units in May 2017.
Indian Derivatives Market Review
• Nifty Jun 2018 Futures were at 10,814.65 points, a discount of 3.05 points, below the spot
closing of 10,817.70. The turnover on NSE’s Futures and Options segment stood at Rs.
38.64 lakh crore as against Rs. 43.97 lakh crore on Jun 8.
• The Put-Call ratio stood at 0.91 compared with the previous week’s close of 0.85.
• The Nifty Put-Call ratio stood at 1.57 compared with the previous week’s close of 1.49.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-
Wk
Ago
1-
Mth
Ago
6-
Mth
Ago
Call Rate
6.10 6.02 5.87 5.99
91 Day T
-Bill
6.52 6.50 6.29 6.16
7.80% 2021, (5
Yr GOI)
7.72 7.83 7.70 6.83
7.17% 2028, (10
Yr GOI)
7.89 7.95 7.90 7.14
Source: Thomson Reuters
Eikon
Value as on June 15
, 2018
• Bond yields fell following drop in
global crude oil prices. Oil prices fell
from multi-year highs ahead of a
meeting of the Organization of the
Petroleum Exporting Countries next
week in which Saudi Arabia and
Russia indicated they were prepared
to increase production. Yields
dropped further on likely short
covering by foreign banks.
• However, gains were restricted as
India’s retail inflation touched 4-
month high in May 2018 and the U.S.
Federal Reserve increased interest
rates for the second time in 2018.
• Yield on the 10-year benchmark
paper (7.17% GS 2028) fell 6 bps to
close at 7.89% from the previous
week’s close of 7.95% after trading in
a range of 7.88% to 8.00%.
7.60
7.80
8.00
11-Jun 12-Jun 13-Jun 14-Jun 15-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 7.16 8.37 121
3 Year 7.87 8.64 77
5 Year 8.07 8.78 71
10 Year 8.04 8.75 71
Source: Thomson Reuters Eikon
Value as on June 15
, 2018
• Yields on gilt securities fell across the
maturities in the range of 2 bps to 15
bps barring 2-year paper that increased
1 bps and 14-year paper that increased
3 bps. The 12-year paper closed steady.
• Corporate bond yields fell across 1 to 3
years’ maturities and 9 to 15 years’
papers in the range of 2 bps to 10 bps.
• Spread between AAA corporate bond
and gilt expanded across 3 to 9 years’
maturities in the range of 2 bps to 9 bps.
Spread contracted across the remaining
maturities by up to 5 bps barring 2-year
paper that closed steady.
-16
-4
8
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 15-Jun-18 08-Jun-18
Yield
in %
Change
in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• Under Credit Linked Subsidy Scheme, the government has raised the carpet area of
houses eligible for subsidy by 33% for the Middle-Income Group (MIG) segment. This
comes as a major boost to affordable housing. The carpet area has been increased from up
to 120 square metre to up to 160 square metre for MIG I, and from up to 150 square metre
to up to 200 square metre for MIG II. The raise is expected to permit more MIG customers
to qualify for subsidy and avail the benefits provided under Pradhan Mantri Awas Yojana
(Urban).
• The Reserve Bank of India has released draft guidelines on loan system for delivery of bank
credit. This comes in the wake of improving discipline among larger borrowers who take
working capital facility from the banking system. The draft instructs a minimum level of 'loan
component' in fund based working capital finance. It also stipulates a compulsory Credit
Conversion Factor for the undrawn portion of cash credit/ overdraft limits availed by large
borrowers.
• The Union Human Resource Development Minister announced that the government has
decided to revise the pension of retired faculty and other non-teaching staff in central
universities and colleges. This comes under the recommendations of the Seventh Pay
Commission. The pensioners will get benefits in the range of Rs. 6,000-Rs. 18,000.
Regulatory Updates in India (contd..)
• National Stock Exchange has launched 'Tri-Party Repo Market' platform in its debt
segment. The platform is expected to facilitate repurchase (repo) of corporate debt
securities. The platform is a kind of repo contract, wherein a third entity known as tri-party
agent (apart from the borrower and lender) will act as an intermediary and enable services
like collateral selection and payment and settlement.
• The Governor of the Reserve Bank of India has mentioned to a panel of Parliamentary
Standing Committee on Finance, that no central bank nominee should be on the boards of
public sector banks (PSBs) to avoid any conflict of interest. Also, the governor stated that
the main role of any director on the bank's board, including nominee director, is to ensure
that the bank is managed efficiently and professionally.
• The government has brought in a new system where taxpayers can update email and
mobile number in the Goods and Services Tax system. The finance ministry stated that this
was done post complaints that the intermediaries doing the process of registration used
their own email and mobile number.
• The Central Board of Direct Taxes (CBDT) has given proposal for amendments in two forms
and one rule under the Income Tax Rules, 1962. It has proposed amendments in Form
No.36 for filing an appeal to the Income Tax Appellate Tribunal and in Form 36A, which is a
memorandum of cross-objections to the Income Tax Appellate Tribunal (ITAT).
9
Global News/Economy
• The U.S. Federal Reserve (Fed) raised its key interest rate by 25 basis points to a range of
1.75% to 2.00%. Meanwhile, it expects four interest rate hikes in 2018 as against previous
expectation of three rate hikes. Additionally, three rate hikes are expected in 2019. According
to Fed, labor market has continued to strengthen and economic activity has been rising at a
solid rate. It expects unemployment rate to fall to 3.5% in 2019 and 2020. It expects gross
domestic product growth of 2.4% and 2.0% in 2019 and 2020, respectively.
• Despite strong headwinds that have surrounded the outlook for Eurozone, the European
Central Bank (ECB) plans to begin exiting its massive quantitative easing by the end of
2018. After Sep 2018, ECB expects to halve its monthly bond purchases to EUR 15 billion
and finally end them in Dec 2018.
• The Bank of Japan kept its monetary stimulus unchanged. It decided to hold its target of
raising the amount of outstanding JGB holdings at an annual pace of approximately JPY 80
trillion. Government bonds will be purchased by the bank so that the yield of 10-year JGBs
will remain at around 0%. Also, the board decided to maintain the -0.1% interest rate on
current accounts that financial institutions maintain at the bank. The bank lowered its
expectation of inflation and expects consumer prices to rise in the range of 0.5%-1% as
against previous expectation of inflation to move around 1%. It expects economy to continue
to expand moderately.
10
Global Equity Markets
11
Global Indices
Indices
15-Jun-18
1-Week
Return
YTD
Return
Dow Jones
25,090.48 -0.89% 1.50%
Nasdaq 100
7,255.76 1.44% 13.43%
FTSE 100
7,633.91 -0.61% -0.70%
DAX Index
13,010.55 1.91% 0.72%
Nikkei Average
22,851.75 0.69% 0.38%
Straits Times
3,356.73 -2.32% -1.36%
Source: Thomson Reuters
Eikon
Value as on Jun 15, 2018
U.S.
• U.S. markets largely remained under
pressure as trade war concerns
renewed when U.S. President
announced plans to impose a 25 % tariff
on $50 billion worth of Chinese imports.
China pledged to strike back if the U.S.
enacts protectionist measures that harm
the country's interests.
• The U.S. Fed’s latest policy meeting too
contributed to the weakness.
Europe
• Majority of the European markets took positive cues after the European Central Bank
(ECB) revealed plans to wrap up its bond purchases at the end of the year. However, the
ECB chief warned of growing risk from global factors such as protectionism. Concerns
over probable exit of Italy from euro zone eased after the Italian economy minister said
that the new government has no plans to leave the euro area.
Asia
• Most of the Asian markets witnessed selling pressure as concerns over trade war
resurfaced with U.S. imposing hefty tariffs on import of Chinese goods. The Fed’s decision
to raise interest rates in its meeting held during the week, coupled with its hawkish stance
of two more rate hikes in 2018 further kept the bourses under pressure.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury bond
fell 2 bps to close at 2.92% from the
previous week’s close of 2.94%.
• U.S. Treasury prices grew after the U.S.
imposed trade sanctions on China,
which raised fears of trade wars that
could impact the economic growth of the
country.
• U.S. Treasury prices grew further after
the European Central Bank stated that
interest rates would stay unchanged
until mid of 2019 even though it
announced its decision to end its bond-
purchase program by the end of 2018
which marked a longer than expected
period of low rates.
• However, increase in rates by the U.S.
Federal Reserve and indication of two
more rate hikes in 2018 capped the
gains.
2.90
2.95
3.00
11-Jun 12-Jun 13-Jun 14-Jun 15-Jun
Yield in %
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Commodities
Last Closing*
1-Week Ago
Brent Crude($/Barrel)
71.11 74.20
Gold ($/Oz)
1,279 1,298
Gold (Rs/10 gm)
31,068 31,027
Silver ($/Oz)
16.51 16.74
Silver (Rs/Kg)
41,364 40,258
Source: Thomson Reuters
Eikon *Value as on Jun 15, 2018
Gold
• Gold prices remained weak following the
U.S. Federal Reserve’s decision to raise
interest rate and forecast of two more
rate hikes in 2018. Positive takeaways
from the U.S. – North Korea summit
also reduced the safe haven appeal of
the bullion.
Crude
• Brent crude prices came under pressure
because of the possibility of increased
oil supply. Organization of the
Petroleum Exporting Countries (OPEC)
and Russia countries will meet on Jun
22 to discuss supply increase of one
million barrels per day.
Baltic Dry Index
• The Baltic Dry Index rose on the back of
improved capseize and panamax
activities.
8.80
9.40
10.00
10.60
15-May-18 25-May-18 4-Jun-18 14-Jun-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global
Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
-4.16%
-1.46%
-1.33%
15-Jun-18
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency
Last Closing*
1-Wk Ago
US Dollar
67.97 67.52
Pound Sterling
90.00 90.60
EURO
78.61 79.58
100 JPY
61.34 61.60
Source: RBI Figures in INR , *
Value as on Jun 15, 2018
Rupee
• The rupee weakened against the
greenback following upbeat U.S. retail
sales data for May 2018. The U.S. Fed’s
indication in its monetary policy review of
raising interest rates two more times this
year strengthened the greenback further.
Euro
• The euro plunged against the greenback
after the ECB in its monetary policy
review indicated that it planned to keep
interest rates at record levels into late of
2019.
Pound
• The pound weakened against the
greenback after British manufacturing
output fell more than expected in Apr.
Yen
• The yen weakened against the
greenback as the latter strengthened
after the U.S. Fed indicated two more
rate hikes in 2018.
9.60
9.80
10.00
10.20
15-May-18 25-May-18 4-Jun-18 14-Jun-18
USD GBP Euro JPY
Source: RBI
Currency
Prices (
in terms of INR)
Rebased to 10
Currency Movement
0.67%
-0.67%
-1.23%
-0.42%
15-Jun-18
15
The Week that was…
11
th
June to 15
th
June
The Week that was (June 11 – June 15)
16
Date Events
Present
Value
Previous
Value
Monday,
June 11, 2018
• U.K. Trade Balance (APR)
-£5,280 -£3,220
• U.K. Manufacturing Production (YoY) (APR)
1.40% 2.90%
Tuesday,
June 12, 2018
• Germany ZEW Survey Expectations (JUN)
-16.1 -8.2
• Eurozone ZEW Survey (Economic Sentiment) (JUN)
-12.6 2.4
• China New Yuan Loans CNY (MAY)
1150.0B
1180.0B
• U.S. Consumer Price Index (YoY) (MAY)
2.80% 2.50%
• U.K. ILO Unemployment Rate 3Mths (APR)
4.20% 4.20%
Wednesday,
June 13, 2018
• India's Current Account Deficit (May) (P)
-$13.00B
-$2.60B
• U.S. FOMC Rate Decision (Upper Bound) (JUN 13)
2.00% 1.75%
• U.K. Consumer Price Index (YoY) (MAY)
2.40% 2.40%
• Eurozone Employment (YoY) (1Q)
1.40% 1.60%
Thursday,
June 14, 2018
• India Wholesale Price Index (May 18)
4.43% 3.18%
• European Central Bank Rate Decision (JUN 14)
0.00% 0.00%
• U.S. Retail Sales Advance (MoM) (MAY)
0.80% 0.40%
• China Retail Sales YTD (YoY) (MAY)
9.50% 9.70%
Friday,
June 15, 2018
• India Trade Deficit (May 18)
-$14.62B
-$13.72B
• Bank of Japan Rate Decision (JUN 15)
-0.10% -0.10%
• U.S University of Michigan Sentiment (JUN P)
99.3 98
17
The Week Ahead
18
th
June to 22
nd
June
18
The Week Ahead
Day Event
Monday,
June 18, 2018
•
U.S. NAHB Housing Market Index (JUN)
Tuesday,
June 19, 2018
•
U.S. Housing Starts (MoM) (MAY)
•
U.S. Building Permits (MoM) (MAY)
•
Bank of Japan Minutes of Policy Meeting
Wednesday,
June 20, 2018
•
U.S. Existing Home Sales (MoM) (MAY)
•
U.S. MBA Mortgage Applications (JUN 15)
Thursday,
June 21, 2018
•
U.K. Bank of England Bank Rate (JUN 21)
•
Japan National Consumer Price Index (YoY) (MAY)
•
U.K. Public Finances (PSNCR) (Pounds) (MAY)
•
U.S. Initial Jobless Claims (JUN 16)
•
U.S. House Price Index (MoM) (APR)
Friday,
June 22, 2018
•
Japan Nikkei Manufacturing PMI (JUN P)
•
Japan All Industry Activity Index (MoM) (APR)
•
Eurozone Markit Composite PMI (JUN P)
•
U.S. Markit Composite PMI (JUN P)
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19
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