Mutual Fund News of 29th June 2018 – Reliance Mutual Fund

News U Can Use

June 29, 2018

The Week that was…

June to 29

June

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.

Indian Equity Market

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.)

Sectoral Indices

Indices

Last Returns (in %)

Closing* 1-Wk 1-Mth

S&P BSE Auto

23,838.3

-3.39%

-2.97%

S&P BSE Bankex

29,250.6

-2.16%

-0.54%

S&P BSE CD

20,206.7

-0.04%

-3.63%

S&P BSE CG

17,488.2

-1.76%

-8.30%

S&P BSE FMCG

11,213.3 0.75% -0.22%

S&P BSE HC

14,003.6

-2.06%

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

-5.05%

-4.83%

S&P BSE Power

1946.6

-2.96%

-8.72%

S&P BSE Realty

2073.4

-3.81%

-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

Debt Indicators

(%)

Current

Value

Ago

Mth

Ago

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)

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.

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

• 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.

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.

Global Equity Markets

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.)

• 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

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

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%

The Week that was…

June to 29

June

The Week that was (June 25 – June 29)

Date Events

Present

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%

The Week Ahead

July to 6

July

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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