The Week that was…
24
th
June to 28
th
June
2
Indian Economy
• Data from the Reserve Bank of India (RBI) showed that India’s current account deficit
(CAD) narrowed to $4.6 billion (0.7% of GDP) in Q4FY19 narrowed from $13.0 billion
(1.8% of GDP) in Q4FY18 and $17.7 billion (2.7% of GDP) in the previous quarter. CAD
narrowed on a yearly basis as trade deficit narrowed to $35.2 billion in Q4FY19 from $41.6
billion in the same period of the previous year. However, for FY19, CAD widened to 2.1%
of GDP from 1.8% of GDP in FY18 as India’s trade deficit widened to $180.3 billion in
FY19 from $160.0 billion in FY18.
• Data from RBI showed that non-food bank credit on a yearly basis grew 11.4% in May
2019 from 11.1% in May 2018. Credit to agriculture & allied activities rose 7.8% in May
2019 from 6.4% in May 2018. Credit to industry grew 6.4% in May 2019 from 1.4% in May
2018. However, credit growth to the services sector fell to 14.8% in May 2019 from 21.9%
in May 2018. Personal loans rose 16.9% in May 2019, lower than an increase of 18.6% in
May 2018.
• Data from RBI showed that India’s external debt at the end of Mar 2019 stood at $543.0
billion. This implied an increase of $13.7 billion from the same period of the previous year.
India’s external debt rose primarily due to the appreciation of the greenback against the
U.S. dollar. Commercial borrowings was the largest component of external debt, with a
share of 38.0% followed by NRI deposits which accounted 24.0% and short-term trade
credit which accounted 18.9% of India’s external debt
.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 28-Jun-19 1 Week Return YTD Return
S&P BSE Sensex 39,394.64 0.51% 9.22%
Nifty 50 11,788.85 0.55% 8.53%
S&P BSE Mid-Cap 14,808.34 1.26% -4.08%
S&P BSE Small-Cap 14,239.33 1.10% -3.18%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
24-Jun-19 761 1058 0.72
25-Jun-19 966 830 1.16
26-Jun-19 1083 705 1.54
27-Jun-19 1062 737 1.44
28-Jun-19 822 974 0.84
Source: NSE
• Indian equity markets closed on a
positive note post a volatile week.
Hopes amongst investors that the
Union Budget 2019-20 will have
measures to thrust the economy
forward boosted the indices. The
finance minister will present the budget
on Jul 5, 2019. Also, the U.S. Secretary
of State promising close cooperation
with India and pledging renewed focus
on improved trade and investment ties
supported sentiment.
• Investors remained cautious ahead of
the U.S.-China meet at the G20 summit
over the weekend. Though positive
signs have emerged from U.S. officials’
comments on the trade dealings, the
U.S. President has given mixed views.
Meanwhile, tensions in the Middle East
rose with the U.S. saying "significant"
sanctions on Iran would be announced
by Jul 1, 2019.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
28.46 28.98 31.24 36.30
P/B
3.01 3.71 2.49 2.03
Dividend Yield
1.19 1.24 1.00 0.99
Source: BSE, NSE Value as on June
28, 2019
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
17,904.15 0.88% -5.68%
S&P BSE Bankex
34,971.86 1.49% -1.76%
S&P BSE CD
26,128.00 1.98% 6.20%
S&P BSE CG
19,855.41 1.26% -1.33%
S&P BSE FMCG
11,361.92 0.46% -2.47%
S&P BSE HC
12,889.34 1.59% -3.60%
S&P BSE IT
15,654.11 -1.69% 1.91%
S&P BSE Metal
11,107.22 1.80% -0.24%
S&P BSE Oil & Gas
14,803.26 -0.35% -5.21%
S&P BSE Power
2,093.86 3.86% 3.30%
S&P BSE Realty
2,201.44 3.80% -0.64%
Source: Thomson Reuters Eikon
*
Value as on June
28, 2019
• S&P BSE Power was the major gainer that
grew 3.86% followed by S&P BSE Realty that
grew 3.80%. S&P BSE Consumer Durables
and S&P BSE Metal grew 1.98% and 1.80%,
respectively. S&P BSE Healthcare and S&P
BSE Bankex grew 1.59% and 1.49%,
respectively.
• However, S&P BSE IT was the major loser
that fell 1.69% followed by S&P BSE Tec k
that fell 1.56%. Gains in rupee kept the IT
stocks under pressure. Export-oriented
sectors like IT suffer when the rupee rises
and vice-versa.
Indian Derivatives Market Review
• Nifty Jul 2019 Futures stood at 11,841.50, a premium of 52.65 points, above the spot closing
of 11,788.85. The total turnover on NSE’s Futures and Options segment for the week stood
at Rs. 65.74 lakh crore as against Rs. 69.25 lakh crore for the week to June 21.
• The Put-Call ratio stood unchanged from the previous week’s close at 0.92.
• The Nifty Put-Call ratio stood at 1.29 against the previous week’s close of 1.34.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
5.94 5.78 5.87 6.57
91 Day T-Bill
6.01 5.97 6.22 6.67
07.32% 2024, (5 Yr GOI)
6.77 6.70 6.91 --
07.26% 2029, (10 Yr GOI)
6.88 6.86 7.15 --
Source: Thomson Reuters Eikon Value as on June 28, 2019
• Bond yields grew with surge in crude
oil prices owing to the U.S.-Iran
geopolitical tension. Further, market
participants turned cautious on
expectations of wider fiscal deficit
target compared with the target that
was set out at Feb 2019’s interim
budget. In addition, fresh supply
through state debt of Rs. 13.5 billion
also pushed the yields higher.
• However, resignation of deputy
governor of the RBI ahead of the
completion of his tenure led to gains.
This fuelled hope of more interest rate
cuts in the near term as he was
perceived as one of the most hawkish
members of the Monetary Policy
Committee (MPC).
• Yields on the 10-year benchmark
paper (7.26% GS 2029) grew 2 bps to
close at 6.88% compared with the
previous close of 6.86% after trading
in the range of 6.81% to 6.96%.
6.82
6.87
6.92
6.97
24-Jun 25-Jun 26-Jun 27-Jun 28-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 6.28 7.90 162
3 Year 6.68 7.89 122
5 Year 6.88 8.10 121
10 Year 7.00 8.40 140
Source: Thomson Reuters Eikon
Value as on June 28, 2019
• Yields on gilt securities increased across the
maturities in the range of 2 bps to 11 bps
barring 12 to 14 years’ maturities and 15-year
paper that fell by up to 7 bps, while yield on
11-year paper closed steady.
• Corporate bond yields increased across the
maturities in the range of 2 bps to 54 bps. The
maximum increase was witnessed on 15-year
paper and the minimum increase was
witnessed on 2-year paper.
• Difference in spread between AAA corporate
bond and gilt contracted across 1 to 6 years’
maturities in the range of 3 bps to 6 bps.
-9
-2
5
12
5.80
6.30
6.80
7.30
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 28-Jun-19 21-Jun-19
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• Capital market regulator Securities and Exchange Board of India (SEBI) approved the
framework for issuance of differential voting rights. SEBI mandated that companies with
superior voting rights shares (SR shares) could come out with Initial Public Offerings or
IPOs provided the issuer is a technology company or if the worth of the promoter group
holding the SR shares does not go beyond Rs. 500 crore. SEBI added that the SR shares
can be held for a period of five years since the date of listing. However, an extension of
another five years can be sought through a resolution. Such shares can have voting rights
with a minimum ratio of 2:1 and a maximum ratio of 10:1. SR shares will be considered as
regular shares post IPO when it exceeds 20% of the total share capital or 50% of the
promoter’s stake. There are other events as well under which SR shares can be considered
as common shares. They are namely when an independent auditor gets appointed or
removed, when the promoter decides to transfer control to another entity or when a third-
party transaction takes place or in case when there is a case for special resolution for
delisting or buyback of shares.
• SEBI tightened norms for disclosure of pledged shares by promoters. SEBI mandated that
any promoter whose pledged shares goes past 20% of the company shareholding or 50%
of the promoter shareholding need to come out with reasons for pledging shares. Also, the
audit panel of the company needs to be informed of any undisclosed pledging of shares.
SEBI also expanded the definition of pledged shares to ensure that all forms of
encumbrance are covered.
Regulatory Updates in India (contd..)
9
• SEBI mandated that asset management companies (AMCs) cannot have standstill
agreements with companies. It also added that action has been taken for those asset
management companies that have standstill agreement with companies. Under a standstill
agreement, there are conditions under which AMCs can sell or abstain from selling stocks
of companies. SEBI added that liquid funds can invest a maximum of 20% of their assets in
a single sector as against the current cap of 25% and must keep aside at least a fifth of
their assets in cash equivalents to meet sudden redemption pressures. The objective of the
move is to protect investors from credit risks that emanate from defaults by borrowers.
• SEBI came out with new norms for insider trading. Under the new norms, SEBI mandated
that trading window closure for listed companies will be applicable from end of every quarter
till 48 hours till the quarterly earning numbers are declared. However, this closure will not be
applicable for some transactions. These transactions are off-market inter-se transfer
between insiders, transaction through block deal window mechanism between insiders,
transaction arising out of statutory or regulatory obligations, exercising of stock options and
pledging of shares for bona fide transaction.
• SEBI mandated that royalty payments associated with usage of brand will require the
approval of shareholders if it exceeds 5% of annual consolidated turnover of a listed entity.
Earlier the threshold was 2%. The move is expected to benefit multinational companies that
operate in India.
Global News/Economy
• A Commerce Department report showed the pace of U.S. economic growth in the first
quarter was unrevised from the previous estimate. The Commerce Department said real
gross domestic product increased at an annual rate of 3.1% in the first quarter, unrevised
from the estimate released last month and in line with expectations. The unrevised rate of
GDP growth in the first quarter still reflects a significant acceleration from the 2.2% increase
seen in the fourth quarter of 2018.
• The U.S. Federal Reserve (Fed) chairman has reiterated that the central bank will "act as
appropriate" to sustain the U.S. economic expansion. Powell acknowledged in his prepared
remarks that crosscurrents have re-emerged since the Fed's May 2019 meeting but did not
appear to signal the imminent interest rate cut currently being priced in by the markets. The
Fed chief specifically cited apparent progress on trade turning to greater uncertainty and
incoming data raising renewed concerns about the strength of the global economy.
• Flash data from Eurostat showed euro zone consumer prices increased at a steady pace in
Jun 2019. Inflation came in at 1.2%, the same rate as seen in May 2019. The rate came in
line with expectations. Core inflation that excludes energy, food, alcohol and tobacco,
increased more than expected to 1.1% from 0.8% in May.
10
Global Equity Markets
11
Global Indices
Indices
28-Jun-19
1-Week
Return
YTD
Return
Russell 3000
1,282.04 -0.59% 20.64%
Nasdaq 100
7,671.08 -0.75% 21.19%
FTSE 100
7,425.63 0.24% 10.37%
DAX Index
12,398.80 0.48% 17.42%
Nikkei Average
21,275.92 0.08% 6.30%
Straits Times
3,321.61 0.01% 8.24%
Source: Thomson Reuters Eikon Value as on June 28, 2019
U.S.
• U.S. moved lower amid caution ahead
of the highly anticipated G20 meeting in
Japan. The U.S. President and Chinese
Premier are scheduled to meet during
the summit in an endeavour to resume
the stalled trade negotiations.
• Buying interest waned further as data
indicated that U.S. durable goods orders
and U.S. home sales tumbled in May
2019.
Europe
• European markets largely remained low as traders refrained from taking major bets ahead
of the G-20 summit. Investor sentiment dented with official survey showing eurozone
economic sentiment deteriorated more than expected in Jun 2019. Markets witnessed
additional selling pressure after the U.S. government slapped sanctions on Tehran.
Asia
• Asian markets largely remained positive over the week, bucking the global trend. Some bit
of optimism was generated following comments from U.S. Treasury Secretary suggesting
that both U.S. and China had nearly completed a deal before talks broke down in May
2019.
Global Debt (U.S.)
12
• Yields on the 10-year U.S. Treasury
bond fell 7 bps to 2.00% compared with
the previous week’s close of 2.07%.
• U.S. Treasury prices grew on concerns
that trade discussions between the U.S.
and China in the G-20 Summit would be
more complicated than previously
expected. According to media reports,
U.S. and China were laying out an
agreement that would help deter the
next round of tariffs on an additional
$300 billion of Chinese imports.
However, U.S. Treasury prices came
down temporarily on hopes that U.S. will
have to remove sanctions on China’s
telecoms equipment maker in order to
make a trade deal.
• U.S. Treasury prices rose further on
reports that White House economic
adviser has stated that Washington may
move ahead with additional tariffs on
Chinese products which boosted the
safe haven appeal of U.S. Treasuries.
1.90
2.00
2.10
24-Jun 25-Jun 26-Jun 27-Jun 28-Jun
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Commodities
Last Closing* 1-Week Ago
Brent Crude($/Barrel) 68.96 67.43
Gold ($/Oz) 1,409.10 1,398.65
Gold (Rs/10 gm) 33,947.00 3,3909
Silver ($/Oz) 15.31 15.35
Silver (Rs/Kg) 37,430.00 37,860.00
Source: Thomson Reuters Eikon *Value as on
June 28, 2019
Gold
• Gold prices gained and rose above the
multi-year high level to $1,400 an ounce
on expectations of policy rate cut by the
U.S. Fed and other major central banks.
Besides, the prolonged U.S.-China trade
feud and rising U.S.-Iran geopolitical
tension lifted the safe haven appeal.
Brent Crude
• Brent crude prices gained on rising U.S.-
Iran tension. The U.S. has imposed fresh
sanctions on Iran as a sign of retaliation
to the shooting of the drone. This is
expected to put further pressure on global
oil supply, particularly at a time when
OPEC and allies are considering
extending the production cut plan to the
second half of the year.
Baltic Dry Index
• The Baltic Dry Index registered a rise on
the back of improved capesize and
panamax activities.
8.70
9.60
10.50
11.40
28-May-19 8-Jun-19 19-Jun-19
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
2.27%
0.75%
-0.28%
28-Jun-19
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
68.92 69.63
Pound Sterling
87.35 88.37
EURO
78.36 78.59
100 Yen
63.97 64.90
Source: RBI Figures in INR , *
Value as on
June 28, 2019
Rupee
• The rupee strengthened against the
greenback as the latter weakened after
the U.S. Fed indicated of trimming policy
rates.
Euro
• The euro rose against the greenback
after the U.S. Fed indicated of a policy
rate cut, possibly as early as next month.
Pound
• The pound fell against the greenback as
investors were worried that the new
government may take Britain out of the
European Union with or without an
agreement.
Yen
• The yen fell against the greenback as
trade tensions eased following reports
that a trade deal between the U.S. and
China is almost complete. However,
geopolitical tension between U.S. and
Iran gave some support to the safe-
haven yen.
9.70
9.90
10.10
10.30
28-May-19 8-Jun-19 19-Jun-19
USD GBP Euro JPY
Source: Thomson Reuters Eikon
Currency Prices ( i n terms of INR)
Rebasedto 10
Currency Movement
-1.03%
-1.43%
-0.29%
-1.15%
28-Jun-19
15
The Week that was…
24
th
June to 28
th
June
The Week that was (June 24 – June 28)
16
Date Events Present Value Previous Value
Monday,
June 24, 2019
• Eurozone German IFO Current Assessment
(June)
100.8 100.7
• Japan Supermarket Sales (YoY) (May) 0.7% -1.0%
Tuesday,
June 25, 2019
• U.S. Consumer Confidence Index (June) 121.5 134.1
• U.S. New Home Sales (MoM) (May) -7.8% -3.7%
Wednesday,
June 26, 2019
• U.S. Durable Goods Orders (May P) -1.3% -2.8%
• U.S. Advance Goods Trade Balance (May) -$74.5b -$72.1b
• U.S. Wholesale Inventories (MoM) (May P) 0.4% 0.9%
• Japan Retail Trade (YoY) (May) 1.2% 0.4%
Thursday,
June 27, 2019
• Eurozone German Consumer Price Index
(YoY) (June P)
1.6% 1.4%
• U.S. Gross Domestic Product Annualized
(
QoQ) (1Q T)
3.1% 3.1%
• U.S. Pending Home Sales (YoY) (May) -0.8% 0.4%
• Japan Jobless Rate (May) 2.4% 2.4%
Friday,
June 28, 2019
• Eurozone Consumer Price Index (YoY) (June
A)
1.2% 1.2%
• U.K. Gross Domestic Product (YoY) (1Q F) 1.8% 1.8%
• Japan Housing Starts (YoY) (May) -8.7% -5.7%
17
The Week ahead
1
th
July to 5
th
July
18
The Week Ahead
Day Event
Monday,
Jul 1, 2019
• Caixin China PMI Manufacturing (June)
• Eurozone German Unemployment Change (000's) (June)
• U.S. ISM Manufacturing (June)
Tuesday,
Jul 2, 2019
• Markit/CIPS U.K. Construction PMI (June)
• Eurozone Producer Price Index (YoY) (May)
Wednesday,
Jul 3, 2019
• Markit Japan PMI Composite (June)
• Caixin China PMI Composite (June)
• U.K. Markit/CIPS Composite PMI (June)
• U.S. ADP Employment Change (June)
• U.S. Trade Balance (May)
Thursday,
Jul 4, 2019
• Eurozone Retail Sales (YoY) (May)
• Markit Germany Construction PMI (June)
• Japan Overall Household Spending (YoY) (May)
Friday,
Jul 5, 2019
• U.S. Change in Non-farm Payrolls (June)
• U.S. Unemployment Rate (June)
Disclaimer
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19
