News U Can Use
June 22, 2018
The Week that was…
18
th
June to 22
nd
June
2
Indian Economy
• According to minutes of Monetary Policy Committee’s (MPC) second monetary policy
meeting for FY19, interest rate increase in Jun 2018 reflects rising inflation due to high oil
prices. Members raised concerns over rising inflationary pressures. The members who had
voted for rate hike in Jun 2018 kept the stance as “neutral” as they chose to wait for more
clarity on the inflationary impact of government’s decision to increase minimum purchase
price of food grains and the direction of oil prices.
• According to data from the Export Promotion Council for EoUs and SEZs (EPCES),
exports from special economic zones (SEZs) grew 38% in May 2018 to Rs. 29,236 crore.
EPCES stated that biotech, chemicals, pharmaceuticals, computers, electronics, non-
conventional energy, plastic, rubber, trading and services sectors mainly contributed to the
growth.
• According to a major credit rating agency, retail non-banking finance companies (NBFCs)
will face challenges in FY19 due to higher borrowing costs and lowering options to raise
funds. The agency stated that NBFCs are looking to raise Rs. 3.8 to Rs. 4 lakh crore of
debt for financing of 20% growth in loan portfolio. It expects the weighted average cost of
funds for NBFCs to surge to approximately 9.3%-9.5% in FY19 as against 8.4%-8.5% in
FY18.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 22-Jun-18 1 Week Return YTD Return
S&P BSE Sensex 35,689.60 0.19% 4.79%
Nifty 50 10,821.85 0.04% 2.76%
S&P BSE Mid-Cap 15,839.61 -1.01% -11.13%
S&P BSE Small-Cap 16,539.84 -2.48% -13.99%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
18-Jun-18 560 1238 0.45
19-Jun-18 420 1381 0.30
20-Jun-18 897 878 1.02
21-Jun-18 470 1308 0.36
22-Jun-18 824 938 0.88
Source: NSE
• Indian equity markets closed
marginally higher. Gains in banking
stocks boosted the indices. Lack of
any positive triggers on the domestic
front capped the gains.
• Further, minutes of the MPC’s latest
policy meeting held early in Jun 2018
gave no indication of policymakers’
stance on future rate hikes, citing
uncertainties over oil and food prices.
• Weak global cues neutralised the risk
appetite of investors as China
continued to retaliate against U.S.’
protectionist move. U.S. President
threatened additional tariffs on
Chinese goods worth $200 billion,
weighing on market sentiment.
• Decline in metal and oil and gas
stocks amid trade conflicts negatively
impacted the indices.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
23.04 26.63 34.37 100.90
P/B
2.98 3.72 2.70 2.33
Dividend Yield
1.24 1.22 0.91 0.74
Source: BSE, NSE Value as on
Jun 22, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
24,674.6 -0.71% 1.56%
S&P BSE Bankex
29,896.6 1.15% 3.36%
S&P BSE CD
20,215.7 -1.47% -4.55%
S&P BSE CG
17,802.3 -2.66% -3.35%
S&P BSE FMCG
11,130 -0.77% -0.92%
S&P BSE HC
14,298.5 -0.02% 11.45%
S&P BSE IT
13,623.9 -2.35% 2.96%
S&P BSE Metal
12,994.2 -3.07% -4.53%
S&P BSE Oil & Gas
14,386.1 -0.08% 0.93%
Source: Thomson Reuters Eikon
*Value as on Jun 22, 2018
• On the BSE sectoral front, indices closed
on a negative note. S&P BSE Metal (-
3.07%) stood as the major loser followed
by S&P BSE Capital Goods (-2.66%) and
S&P BSE Information Technology (-
2.35%). S&P BSE Teck and S&P BSE
Consumer Durables fell (-2.12%) and (-
1.47%), respectively.
• Significant fall in S&P BSE Metal and S&P
BSE Capital Goods is due to the heat of
escalating trade dispute between the U.S.
and China. S&P BSE Bankex stood as the
only gainer (1.15%).
Indian Derivatives Market Review
• Nifty Jun 2018 Futures were at 10,833.95 points, a premium of 12.10 points, above the
spot closing of 10,821.85. The turnover on NSE’s Futures and Options segment stood at
Rs. 44.92 lakh crore as against Rs. 38.64 lakh crore on Jun 15.
• The Put-Call ratio stood at 0.90 compared with the previous week’s close of 0.91.
• The Nifty Put-Call ratio stood at 1.65 compared with the previous week’s close of 1.57.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
6.25 6.10 5.97 5.97
91 Day T-Bill
6.46 6.52 6.32 6.20
7.80% 2021, (5 Yr GOI)
7.68 7.72 7.48 6.90
7.17% 2028, (10 Yr GOI)
7.82 7.89 7.81 --
Source: Thomson Reuters
Eikon
Value as on Jun 22, 2018
• Bond yields fell following decline in
global crude oil prices that eased
concerns over rising domestic
inflationary pressures. Prices rose
further after the Reserve Bank of
India (RBI) announced to buy
government securities to the tune of
Rs. 10,000 crore through an open
market operation (OMO), to inject
liquidity into the banking system.
• Demand for bonds boosted after
minutes of the Monetary Policy
Committee’s latest policy meeting
came in line with the Jun 2018 policy
review. However, further gains were
capped as investors remained
cautious ahead of the key meeting of
the Organization of the Petroleum
Exporting Countries and other oil
producers.
7.70
7.80
7.90
18-Jun 19-Jun 20-Jun 21-Jun 22-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 7.10 8.30 120
3 Year 7.83 8.61 79
5 Year 8.00 8.72 72
10 Year 7.97 8.75 78
Source: Thomson Reuters Eikon
Value as on Jun 22, 2018
• Yields on gilt securities fell across the
maturities in the range of 2 bps to 10 bps
barring 2-year paper that increased 1 bps.
Yield on 11-year paper closed steady.
• Corporate bond yields fell across the
maturities in the range of 2 to 14 bps. The
maximum decline was witnessed on 1-year
paper and the minimum on 10-year paper.
• Spread between AAA corporate bond and
gilt expanded 3 bps and 5 bps on 2- and
10-year maturities, respectively. Spread
closed steady on 5- and 15-year papers
and contracted by up to 9 bps on remaining
maturities.
-14
-7
0
5.80
7.10
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 22-Jun-18 15-Jun-18
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• The Ministry of Environment, Forests and Climate Change has notified that import of used
plant machinery having residual life of at least five years for manufacturing electronics and
electrical items would not need explicit approval from the 'hazardous and other waste
committee'. The announcement is expected to make manufacturing of mobile phones and
equipment easier for companies in India.
• As per a notification by the finance ministry, the government has decided to raise customs
duty on several goods, including Bengal gram, lentils and artemia, along with certain kind of
nuts, iron and steel products, apples, pears, flat rolled products of stainless steel, other
alloy steel, tube and pipe fittings, and screws, bolts and rivets. The import duty hike would
be effective from Aug 4, 2018.
• The time for the announcement of price band for initial public offers (IPOs) has been cut to
two days from five days by the Securities and Exchange Board of India (SEBI). Also, SEBI
has tweaked buyback norms and aims to ease regulations for foreign portfolio investors and
mutual funds. The buyback period has also been redefined by SEBI.
Regulatory Updates in India (contd..)
• The government has asked exporters, mainly from the food and agriculture sectors, to
strictly obey the global norms for quality and standards. The government has stated that if
they do not comply with the norms, they might lose their export market share to other
countries.
• The income-tax department has proposed timelines by which any additional amount
evaluated by transfer pricing officials higher than the amount declared by associated
enterprises of multinational corporations has to be brought in India. These timelines relate
to advance pricing agreements (APAs) and mutual agreement procedures (MAPs). The
department has suggested that the additional amount should be returned within 90 days of
signing of APAs and MAPs.
• According to the media reports, the Reserve Bank of India has been asked by the digital
payments industry to postpone the implementation of stringent customer verification rules
until mobile wallet providers are allowed to access the Aadhaar database for user
authentication. As per the media reports, Payments Council of India told RBI that the
payment companies would be committed to the KYC guidelines once they receive global
authentication agency licences that will allow them to authenticate customers using
Aadhaar.
9
Global News/Economy
• Policymakers of Bank of England (BoE) kept the key interest rate unchanged at 0.50%.
Members voted 6-3 to maintain the benchmark rate. However, all members agreed that any
future increases could be at a slow pace and to a limited extent. Also, all members voted to
maintain quantitative easing at GBP 435 billion. The monetary policy committee does not
intend to lower the current stock of purchased assets until bank rate reaches around 1.5%
compared with the previous guidance of approximately 2%. Also, the bank stated that any
reduction in the stock of purchased assets will be done at a gradual and predictable pace.
• According to a report from the National Association of Home Builders, U.S. NAHB/Wells
Fargo Housing Market Index missed market expectations and fell to 68 in Jun 2018 from 70
in May 2018. The decline reflects fall in all three of the components that make up the index,
namely current sales conditions, component gauging expectations and metric charting buyer
traffic.
• U.S. housing starts surpassed market expectations and grew 5% to an annual rate of 1.350
million in May 2018 as against a decline of 3.1% to a revised rate of 1.286 million (1.287
million originally reported) in Apr 2018. This marked the highest annual rate since Jul 2007.
The increase reflects significant increases in both single-family and multi-family starts.
• A flash report from the IHS Markit showed that euro zone’s composite output index
surprisingly surged to 54.8 in Jun 2018 as against 54.1 in May 2018. The services
Purchasing Managers' Index (PMI) in the currency bloc grew to 55.0 in Jun from 53.8 in May.
However, the factory PMI declined to 55.0 in Jun from 55.5 in May.
10
Global Equity Markets
11
Global Indices
Indices
22-Jun-18
1-Week
Return
YTD
Return
Dow Jones
24,580.89 -2.03% -0.56%
Nasdaq 100
7,197.51 -0.80% 12.52%
FTSE 100
7,682.27 0.63% -0.07%
DAX Index
12,579.72 -3.31% -2.62%
Nikkei Average
22,516.83 -1.47% -1.09%
Straits Times
3,287.40 -2.07% -3.39%
Source: Thomson Reuters Eikon
Value as on Jun 22, 2018
U.S.
• U.S. markets remained lacklustre
following lingering trade dispute
concerns. Investor sentiment soured
after a report from the Philadelphia
Federal Reserve showed bigger than
expected slowdown in the pace of
growth in regional manufacturing activity
in Jun. Meanwhile, investors remained
cautious ahead of the outcome of the
OPEC meeting, which commenced on
Jun 22.
Europe
• European markets were largely weighed down by the recent instance of trade war
between U.S. and China. The BoE’s latest policy meeting dented market sentiment.
However, sentiment improved to some extent after euro zone nations agreed on the plan
to get Greece out of its eight-year bailout programme and make its massive debt more
manageable.
Asia
• Asian markets were no exception to the global weakness resulting from the trade war
between U.S. and China. In the latest development, the U.S. President directed U.S. trade
representative to identify $200 billion worth of Chinese goods for additional tariffs at 10%.
Further, the U.S. President said that the tariffs will go into effect if China refuses to change
its unfair trade practices and insists on going forward with recently announced tariffs.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury bond
fell 2 bps to close at 2.90% from the
previous week’s close of 2.92%.
• U.S. Treasury prices grew as its safe
haven appeal improved after the U.S.
President threatened to impose a 10%
tariff on $200 billion worth Chinese
goods while Beijing warned that it would
also retaliate.
• U.S. Treasury prices also rose after the
government of Italy elected two vocal
euro-skeptics to key posts in the
nation’s parliament. One of them opined
that leaving the euro zone would solve
many of Italy’s problems but there’s no
majority for it among lawmakers.
• However, most of the gains were
neutralized on growing possibility that
the U.S. Federal Reserve will continue
to hike interest rates in 2018.
2.87
2.88
2.89
2.90
2.91
2.92
2.93
2.94
18-Jun 19-Jun 20-Jun 21-Jun 22-Jun
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Commodities
Last Closing* 1-Week Ago
Brent Crude($/Barrel)
73.41 71.11
Gold ($/Oz)
1,268.49 1,279.00
Gold (Rs/10 gm)
30,484 31,068
Silver ($/Oz)
16.43 16.51
Silver (Rs/Kg)
39,626 41,364
Source: Thomson Reuters
Eikon *Value as on Jun 22, 2018
Gold
• Gold prices fell on concerns over rise in
interest rates in the U.S. after the Fed
chairman hinted that the bank would
continue to raise rates. The People’s
Bank of China suggested that
policymakers are prepared for outside
shocks and would take necessary
measures to stabilise the nation’s stock
markets if required.
Crude
• Brent crude gained after the OPEC and
its allies decided for a modest level of
rise in oil production effective from Jul 1.
Investors expect most of the member
countries to take time to raise
production level. Lower output from
Venezuela and Libya also helped gains.
Baltic Dry Index
• The Baltic Dry Index fell 7.20% on the
back of lower capesize and panamax
activities.
8.60
9.55
10.50
23-May-18 7-Jun-18 22-Jun-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
3.23%
-0.82%
-0.48%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
67.77 67.97
Pound Sterling
89.96 90.00
EURO
78.86 78.61
100 JPY
61.61 61.34
Source: RBI Figures in INR , *Value as on Jun 22, 2018
Rupee
• The rupee rose against the U.S. dollar
following selling of the greenback by
exporters, foreign banks and intervention
by the Reserve Bank of India.
Euro
• The euro rose against the greenback
after preliminary data showed that
business activity in both Germany and
France accelerated in Jun 2018 and the
Philadelphia Fed business conditions
index fell to a one-and-a-half-year low in
Jun 2018.
Pound
• The pound gained marginally against the
greenback on expectations of a rate hike
by the Bank of England in Aug 2018.
Yen
• The yen rose against the greenback as
its safe haven appeal improved following
escalation in trade tensions between
U.S. and China.
9.70
9.80
9.90
10.00
10.10
10.20
10.30
23-May-18 2-Jun-18 12-Jun-18 22-Jun-18
USD GBP Euro JPY
Source: RBI
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
-0.30%
-0.04%
0.32%
0.44%
15
The Week that was…
18
th
June to 22
nd
June
The Week that was (June 18 – June 22)
16
Date Events Present Value
Previous
Value
Monday,
June 18, 2018
• U.S. NAHB Housing Market Index (Jun) 68 70
Tuesday,
June 19, 2018
• U.S. Housing Starts (MoM) (May) 5.0% -3.1%
• Eurozone Current Account s.a. (euros) (Apr) 28.4b 32.0b
• U.S. Building Permits (MoM) (May) 1301k 1364k
Wednesday,
June 20, 2018
• U.S. Existing Home Sales (MoM) (May) -0.4% -2.7%
• U.S. MBA Mortgage Applications (Jun 15) 5.1% -1.5%
Thursday,
June 21, 2018
• U.K. Bank of England Bank Rate (Jun 21) 0.5% 0.5%
• Japan National Consumer Price Index (YoY) (May) 0.7% 0.6%
• U.K. Public Finances (PSNCR) (Pounds) (May) 4.51b -9.7b
• U.S. Initial Jobless Claims (Jun 16) 218k 221k
• U.S. House Price Index (MoM) (Apr) 0.1% 0.2%
Friday,
June 22, 2018
• Japan Nikkei Manufacturing PMI (Jun P) 53.1 52.8
• Japan All Industry Activity Index (MoM) (Apr) 1.0% 0.0%
• Germany Markit/BME Composite PMI (Jun P) 54.2 53.4
• Eurozone Markit Composite PMI (Jun P) 54.8 54.1
• U.S. Markit Composite PMI (Jun P) 56.0 56.6
17
The Week Ahead
25
th
June to 29
th
June
18
The Week Ahead
Day Event
Monday,
June 25, 2018
• Eurozone German IFO Current Assessment (Jun)
• U.S. New Home Sales (MoM) (May)
Tuesday,
June 26, 2018
• U.S. S&P/Case-Shiller US Home Price Index (YoY) (Apr)
• U.S. Consumer Confidence Index (Jun)
Wednesday,
June 27, 2018
• U.S. Durable Goods Orders (May P)
• U.S. Pending Home Sales (YoY) (May)
• Japan Retail Trade (YoY) (May)
• Eurozone German Retail Sales (YoY) (May)
• U.S. Wholesale Inventories (MoM) (May P)
Thursday,
June 28, 2018
• Eurozone German Consumer Price Index (YoY) (Jun P)
• U.S. Gross Domestic Product Annualized (QoQ) (1Q T)
• Japan Industrial Production (YoY) (May P)
• U.S. Initial Jobless Claims (Jun 23)
Friday,
June 29, 2018
• Japan Construction Orders (YoY) (May)
• Eurozone German Unemployment Change (000's) (Jun)
• Eurozone Consumer Price Index Estimate (YoY) (Jun)
• U.S. PCE Core (YoY) (May)
• U.K. Gross Domestic Product (YoY) (1Q F)
Disclaimer
The information herein is meant only for general reading purposes and contains all factual and statistical information pertaining to Industry and markets
which have been obtained from independent third party sources and which are deemed to be reliable. The information provided cannot be considered
as guidelines, recommendations or as a professional guide for the readers. It may be noted that since Reliance Nippon Life Asset Management
Company Limited (RNLAM) (formerly Reliance Capital Asset Management Limited) has not independently verified the accuracy or authenticity of such
information or data, or for that matter the reasonableness of the assumptions upon which such data and information has been processed or arrive data;
RNLAM does not in any manner assures the accuracy or authenticity of such data and information. Some of the statements & assertions contained in
these materials may reflect RNLAM’s views or opinions, which in turn may have been formed on the basis of such data or information. The Sponsor(s),
the Investment Manager, the Trustee or any of their respective directors, employees, affiliates or representatives do not assume any responsibility for,
or warrant the accuracy, completeness, adequacy and reliability of such data or information. Whilst no action has been solicited based upon the
information provided herein, due care has been taken to ensure that the facts are accurate and opinions given are fair and reasonable, to the extent
possible. This information is not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument. Recipients of this
information should rely on information/data arising out of their own investigations. Before making any investments, the readers are advised to seek
independent professional advice, verify the contents in order to arrive at an informed investment decision. None of the Sponsor(s), the Investment
Manager, the Trustee, their respective directors, employees, affiliates or representatives shall be liable in any way for any direct, indirect, special,
incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material.
All information contained in this document has been obtained by ICRA Online Limited from sources believed by it to be accurate and reliable. Although
reasonable care has been taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any kind, and
ICRA Online Limited or its affiliates or group companies and its respective directors, officers, or employees in particular, makes no representation or
warranty, express or implied, as to the accuracy, suitability, reliability, timelines or completeness of any such information. All information contained
herein must be construed solely as statements of opinion, and ICRA Online Limited, or its affiliates or group companies and its respective directors,
officers, or employees shall not be liable for any losses or injury, liability or damage of any kind incurred from and arising out of any use of this
document or its contents in any manner, whatsoever. Opinions expressed in this document are not the opinions of our holding company, ICRA Limited
(ICRA), and should not be construed as any indication of credit rating or grading of ICRA for any instruments that have been issued or are to be issued
by any entity.
19
Thank you for
your time.
