News U Can Use
June 29, 2018
The Week that was…
25
th
June to 29
th
June
2
Indian Economy
Government data showed that India's fiscal deficit for the period from Apr to May of 2018
stood at Rs. 3.45 lakh crore or 55.3% of the budget estimate for FY19. However, this is
lower than 68.3% of the budget estimate for FY18 compared to the corresponding period
of the previous year. Total expenditure for the period from Apr to May of 2018 stood at Rs
4.73 lakh crore, or 19.4% of the budget estimate for FY19. Total receipts stood at Rs. 1.27
lakh crore or 7.0% of the budget estimate for FY19. Tax revenue was at Rs. 1.02 lakh
crore, or 6.9% of the full-year target. Capital expenditure accounted 21.3% of the FY19
target, compared to 17.0% in the corresponding period of the previous year.
According to the Financial Stability Report by the Reserve Bank of India (RBI), the Indian
banking sector will continue to remain under stress as gross non-performing advances
(GNPA) ratio will increase further. RBI estimated that GNPA of scheduled commercial
banks could rise to 12.2% by Mar 2019 from 11.6% in Mar 2018. RBI added that the
system-level capital to risk-weighted assets ratio (CRAR) may decline from 13.5% to
12.8% during the same period.
The Indian Meteorological Department (IMD) stated that the entire country has been
covered by monsoon 17 days before the normal schedule. IMD stated that the monsoon
covers the entire country by Jul 1, 2018 and reaches West Rajasthan later. However, this
year due to good easterly rains, monsoon reached the entire country early.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices
29-Jun-18
1 Week Return
YTD Return
S&P BSE Sensex
35,423.48 -0.75% 4.01%
Nifty 50
10,714.30 -0.99% 1.74%
S&P BSE Mid
-Cap 15,450.90 -2.45% -13.31%
S&P BSE Small
-Cap 16,032.15 -3.07% -16.63%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
25-Jun-18 478 1322 0.36
26-Jun-18 552 1237 0.45
27-Jun-18 271 1570 0.17
28-Jun-18 430 1356 0.32
29-Jun-18 1348 459 2.94
Source: NSE
Indian equity markets closed on a
lower note. Decline in oil & gas and
banking stocks weighed on the
indices. Stocks of oil marketing
companies fell due to rise in oil prices
amid risk of supply disruption.
Also, rupee touched a new low
because of higher inflation and
widening fiscal deficit.
On the global front, trade row
between U.S. and other major global
economies continued to weigh on
market sentiment. Worries that the
U.S. President’s approach towards
trading activities may prove to be
detrimental to global economic
growth muted buying interest.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
22.54 25.90 33.03 99.19
P/B
2.91 3.61 2.59 2.23
Dividend Yield
1.26 1.22 0.94 0.78
Source: BSE, NSE Value as on Jun 29, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
23,838.3
-2.97%
S&P BSE Bankex
29,250.6
-0.54%
S&P BSE CD
20,206.7
-3.63%
S&P BSE CG
17,488.2
-8.30%
S&P BSE FMCG
11,213.3 0.75% -0.22%
S&P BSE HC
14,003.6
5.98%
S&P BSE IT
13,920.1 2.17% 4.19%
S&P BSE Metal
13,064.5 0.54% -4.20%
S&P BSE Oil & Gas
13,659.5
-4.83%
S&P BSE Power
1946.6
-8.72%
S&P BSE Realty
2073.4
-8.15%
Source: Thomson Reuters Eikon
*Value as on June
29, 2018
On the sectoral front, S&P BSE Oil & Gas
(-5.05%) stood as the major loser followed
by S&P BSE Realty (-3.81%) and S&P
BSE Auto (-3.39%). S&P BSE Power and
S&P BSE Bankex fell (-2.96%) and (-
2.16%), respectively.
Decline in auto stocks reflects lingering
concerns over auto tariff threat by the U.S
and fall in oil & gas stocks reflects surging
oil prices. S&P BSE Information
Technology stood as the major gainer
(2.17%).
Indian Derivatives Market Review
Nifty Jun 2018 Futures settled at 10,589.10. Nifty Jul 2018 Futures were at 10,694.80, a
discount of 19.50 points, below the spot closing of 10,714.30. The turnover on NSE’s
Futures and Options segment stood at Rs. 53.45 lakh crore as against Rs. 44.92 lakh
crore on Jun 22.
The Put-Call ratio stood at 0.82 compared with the previous week’s close of 0.90.
The Nifty Put-Call ratio stood at 1.48 compared with the previous week’s close of 1.65.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-
Wk
Ago
1-
Mth
Ago
6-
Mth
Ago
Call Rate
6.21 6.25 5.89 6.10
91 Day T
-Bill
6.49 6.46 6.37 6.22
7.80% 2021, (5
Yr GOI)
7.75 7.68 7.57 6.96
7.17% 2028, (10
Yr GOI)
7.90 7.82 7.76 7.33
Source: Thomson Reuters
Eikon
Value as on June 29
, 2018
Bond yields rose following rally in the
global crude oil prices and weakening
domestic currency that raised worries
about faster pace of consumer
inflation growth rate going forward.
Media reports stating that the Union
cabinet may discuss raising minimum
support prices of some crops by up to
15% in its next meeting fuelled
concerns of increase in domestic
inflationary pressures, which also
weighed on market sentiment.
However, further losses were
restricted as market participants
resorted to short covering.
Yield on the 10-year benchmark
paper (7.17% GS 2028) increased 8
bps to close at 7.90% from the
previous week’s close of 7.82% after
trading in a range of 7.81% to 7.94%.
7.70
7.85
8.00
25-Jun 26-Jun 27-Jun 28-Jun 29-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 7.14 8.29 115
3 Year 7.90 8.65 75
5 Year 8.10 8.77 67
10 Year 8.06 8.78 72
Source: Thomson Reuters Eikon
Value as on June 29
, 2018
Yields on gilt securities increased across
the maturities by up to 11 bps.
Corporate bond yields increased across
the maturities in the range of 3 bps to 11
bps barring 15-year paper that fell 1 bps.
Spread between AAA corporate bond
and gilt contracted across 3 to 5 years’
maturities, 10- and 15-year papers by up
to 7 bps. Spread expanded across the
remaining maturities in the range of 2 to
4 bps barring 7-year paper that closed
steady.
0
5
10
15
6.00
7.30
8.60
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 29-Jun-18 22-Jun-18
Yield
in %
Change
in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
According to the vice-chairman of Niti Aayog, petroleum will unlikely be brought under the
purview of Goods and Services Tax (GST) any time soon. The vice chairman clarified that
the highest tax bracket under GST is 28% while the total state and Central taxes on petrol
put together at present are around 90%. Thus, no state will be ready to take such a huge
cut even if petroleum is bought after paying GST. He added that in such a case, a new GST
band will have to be opened which will be a cumbersome exercise. On a separate note, the
vice chairman opined that a better way to bring petroleum under GST will be to first start
rationalizing/reducing taxes on petroleum products.
According to media reports, the government clarified that firms that are into the business of
food product retail trading and have foreign investments should maintain separate books of
accounts and inventories in warehouses. This implies that business of food product retail
trading needs to be readily distinct and physically separated from any other business of the
investee company in the front end or in the warehouse.
According to media reports, the government is working to improve the regulations for
auditors and corporate professionals. The objective is to strengthen the "fabric of corporate
governance" in the country. The move assumes significance as till recently there has been
multiple instances of auditors resigning from companies on various grounds.
Regulatory Updates in India (contd..)
According to media reports, the government extended the ban on import of milk and its
products, including chocolates, chocolate products, candies, confectionary food
preparations with milk or milk solids as an ingredient for a time period of six months till Dec
23, 2018. The extension of ban came following worries that melamine might be present in
some of the milk consignments from China. Melamine is a toxic chemical which is used for
making fertilizers and plastics.
According to media reports, the Indian government decided to defer the implementation of
Tax Collection at Source (TCS) for three more months. The move is expected to give relief
to e-commerce service providers. TCS is an anti-evasion measure which is used to keep
track of transactions. The government is of the view that the imposition of TCS might
burden the GST Network (GSTN). The government wants to ensure that systems are fully
prepared to handle the added transactions before implementation.
Market regulator Securities and Exchange Board of India (SEBI) proposed that exchanges
compulsorily needs to recognize an independent polling agency for spot price polling. This
will improve transparency and credibility to the spot price polling mechanism in commodities
as the agency would be able to do the job independently for all the exchanges on a specific
commodity. The proposal was made as any discrepancy in the linkages between the spot
and future prices could have negative impact on the price in two markets i.e. derivatives
and spot.
9
Global News/Economy
According to the Commerce Department report, real Gross Domestic Product (GDP) rose
2.0% YoY in the Mar quarter of 2018, slower than market forecast and the previous estimate
of 2.2% rise. The slower rise is attributed to downward revision in private inventory
investment, consumer spending, and exports. In the Dec quarter of 2018, GDP rose 2.9%
YoY.
S&P Global Ratings has affirmed its 'AA+' sovereign credit ratings and 'stable' outlook on the
U.S. According to the rating agency, the rating reflects flexibility and diversity of the
economy, institutional strength, extensive flexibility of economic policy. Being the issuer of
the U.S. dollar, which is world's leading reserve currency also added to its merit.
According to the data published by the Office for National Statistics showed, the UK’s GDP
grew 0.2% QoQ in the Mar quarter of 2018, from 0.1% rise estimated previously, reflecting
improvement in construction output. Nonetheless, GDP growth is much slower than 0.4%
rise in Dec quarter of 2017. Construction output fell 0.8% compared with the previous
estimate of 2.7% fall in the last estimate.
Flash data from Eurostat showed, eurozone inflation increased 2% in Jun 2018, in line with
forecast, but higher than 1.9% in May 2018 due to oil prices. However, core inflation slowed
marginally to 1% during the reported month from 1.1% in May 2018.
10
Global Equity Markets
11
Global Indices
Indices
29-Jun-18
1-Week
Return
YTD
Return
Dow Jones
24,271.41 -1.26% -1.81%
Nasdaq 100
7,040.80 -2.18% 10.07%
FTSE 100
7,636.93 -0.59% -0.66%
DAX Index
12,306.00 -2.18% -4.73%
Nikkei Average
22,304.51 -0.94% -2.02%
Straits Times
3,268.70 -0.57% -3.94%
Source: Thomson Reuters
Eikon
Value as on Jun 29, 2018
U.S.
U.S. markets largely traded lower on
lingering concerns of global trade war
between the U.S. and other major
economies. Dull U.S. economic data
further dented sentiment including
weaker than expected economic growth
for the first quarter, fall in U.S. durable
goods order for May and higher than
expected rise in initial jobless claims for
the week ended Jun 23.
Europe
Concerns over global trade continued to weigh on investor sentiment. Weak economic
data further dented sentiment, including U.K. consumer sentiment and Eurozone
economic confidence data in Jun. Some respite was seen after China eased restrictions
on foreign investments in various sectors and the European Union (EU) summit reached a
consensus on immigration policy. Also, the People's Bank of China would lower the
reserve ratios for some banks.
Asia
Asian markets mostly traded low on persisting trade tensions between U.S. and China and
after the U.S. government hinted to block Chinese investment in U.S. technology firms.
Concerns over U.S. proposal to review foreign investments by a committee in the U.S.
and urging other nations to stop crude import from Iran further dented sentiment.
Global Debt (U.S.)
12
Yield on the 10-year U.S. Treasury bond
fell 5 bps to close at 2.85% from the
previous close of 2.90%.
U.S. Treasury prices grew as market
participants remained concerned over
escalating trade war tensions between
U.S. and China that boosted its safe
haven appeal. Market participants
remained wary that a global trade war
will harm economic growth.
Gains were extended following
downbeat U.S. consumer spending data
for May 2018. U.S. Treasury prices rose
further as month- and quarter-end
rebalancing added to buying of U.S.
Treasuries.
However, gains were capped on
expectations that the U.S. Federal
Reserve will continue to hike interest
rates in 2018.
2.80
2.85
2.90
25-Jun 26-Jun 27-Jun 28-Jun 29-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($/Barrel)
76.78 73.41
Gold ($/Oz)
1,252.25 1268.49
Gold (Rs/10 gm)
30,341 30,484
Silver ($/Oz)
16.08 16.43
Silver (Rs/Kg)
39,221 39,626
Source: Thomson Reuters
Eikon *Value as on Jun 29, 2018
Gold
Gold prices moved down over the week
on expectations of a faster pace of rate
hike by the U.S. Federal Reserve (Fed).
Meanwhile, the U.S. President has
proposed to review foreign investments
under the Committee on Foreign
Investment in the U.S.
Crude
Brent crude prices remained higher
following production problems at one of
Canada's largest oil sands facilities and
probable supply disruptions from
Venezuela and Libya. Additionally, the
U.S. Energy Information Administration
(EIA) said in its weekly report that crude
oil inventories fell by 9.891 million
barrels in the week ended Jun 22.
Baltic Dry Index
The Baltic Dry Index fell 0.89% on the
back of lower capesize and panamax
activities.
9.40
10.00
10.60
29-May-18 8-Jun-18 18-Jun-18 28-Jun-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global
Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
4.59%
-1.28%
-2.15%
29-Jun-18
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency
Last Closing*
1-Wk Ago
US Dollar
68.58 67.77
Pound Sterling
89.93 89.96
EURO
79.85 78.86
100 JPY
62.02 61.61
Source: RBI Figures in INR , *
Value as on Jun 29, 2018
Rupee
The rupee fell against the greenback and
breached the 69-level for the first time
ever following losses in the domestic
equity market.
Euro
The euro fell initially against the
greenback amid lingering concerns over
a global trade war. However, the trend
reversed later after European Union
leaders reached an agreement on
migration that eased concerns of a
political crisis in Germany.
Pound
The pound weakened against the
greenback amid uncertainty over the
impact of Brexit on the British economy.
Yen
The yen weakened against the
greenback after a moderation in the U.S.
administration's approach to Chinese
investment in the U.S.
9.70
9.95
10.20
29-May-18 8-Jun-18 18-Jun-18 28-Jun-18
USD GBP Euro JPY
Source: RBI
Currency
Prices (
in terms of INR)
Rebased to 10
Currency Movement
29-Jun-18
1.19%
-0.03%
1.26%
0.67%
15
The Week that was…
25
th
June to 29
th
June
The Week that was (June 25 June 29)
16
Date Events
Present
Value
Previous
Value
Monday,
June 25, 2018
• U.S. New Home Sales (MoM) (May)
6.70% -3.70%
Tuesday,
June 26, 2018
• U.S. Consumer Confidence Index (Jun)
126.4 128.8
Wednesday,
June 27, 2018
• U.S. Advance Goods Trade Balance (May)
-$64.8B
-$67.3B
• U.S. Durable Goods Orders (May P)
-0.60% -1.00%
• U.S. Pending Home Sales (YoY) (May)
-2.80% 0.30%
Thursday,
June 28, 2018
• Germany Consumer Price Index (YoY) (Jun P)
2.10% 2.20%
• U.S. Gross Domestic Product Annualized (
QoQ) (1Q T) 2.00% 2.20%
• U.K. GfK Consumer Confidence (Jun)
-9.00 -7.00
• Germany GfK Consumer Confidence (Jul)
10.7 10.7
• Japan Industrial Production (YoY) (May P)
4.20% 2.60%
• U.S. Personal Consumption (1Q T)
0.90% 1.00%
Friday,
June 29, 2018
• Japan Construction Orders (YoY) (May)
-18.70%
4.00%
• Japan Housing Starts (YoY) (May)
1.30% 0.30%
• Japan Consumer Confidence Index (Jun)
43.7 43.8
• Germany Unemployment Change (Jun)
-15K -11K
• Germany Retail Sales (YoY) (May)
-1.60% 1.00%
• U.K. Gross Domestic Product (YoY) (1Q F)
1.20% 1.30%
• Eurozone Consumer Price Index Estimate (YoY) (Jun)
2.00% 1.90%
17
The Week Ahead
2
nd
July to 6
th
July
18
The Week Ahead
Day Event
Monday,
Jul 2, 2018
India Index of Eight Core Industries (May)
India Nikkei Manufacturing PMI (Jun)
China Caixin Manufacturing PMI (Jun)
U.K. Markit Manufacturing PMI (Jun)
U.S. ISM Manufacturing PMI (Jun)
Tuesday,
Jul 3, 2018
U.K. Markit Construction PMI (Jun)
Eurozone Retail Sales (YoY) (Mar)
U.S. Factory Orders (May)
Wednesday,
Jul 4, 2018
India Nikkei Service PMI (Jun)
Japan Nikkei Composite PMI (Jun)
China Caixin Composite PMI (Jun)
U.S. MBA Mortgage Applications (Jun 29)
Thursday,
Jul 5, 2018
Germany Factory Orders (YoY) (Mar)
U.S. ISM Non-Manufacturing/Services Composite (Jun)
U.S. ADP Employment Change (Jun)
Friday,
Jul 6, 2018
U.S. Unemployment Rate (Jun)
Germany Industrial Production (YoY) (May)
U.S. Trade Balance (May)
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19
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