News You Can Use of - 16 March 2018 | Nippon India Mutual Fund

News U Can Use

March 16, 2018

The Week that was…

March to 16

March

Indian Economy

• The Consumer Price Index (CPI) based inflation or retail inflation grew 4.44% in Feb 2018,

down from 5.07% in the previous month and up from 3.65% in the same month of the

previous year. Though retail inflation growth subdued, it surpassed Reserve Bank of

India’s medium-term target of 4% for the fourth consecutive month. The Consumer Food

Price Index also grew 3.26% in Feb 2018, down from 4.70% in the previous month and up

from 2.01% in the same month of the previous year.

• India’s Index of Industrial Production (IIP) grew 7.5% in Jan 2018 as against growth of

7.1% in Dec 2017 and 3.5% in the same period of the previous year. The manufacturing

sector also surged 8.7% in Jan 2018 from 2.5% growth in the same period of the previous

year. However, IIP growth for Apr to Jan 2018 slowed to 4.1% from 5.0% in the same

period of the previous fiscal.

• India’s export during the month of Feb 2018 increased 4.48% YoY to $25.83 billion from

$24.73 billion in Feb 2017. Similarly, import grew 10.4% YoY to $37.81 billion from $34.25

billion in the same period of the previous year. Trade deficit widened to $12.0 billion as

against $9.52 billion in Feb 2017. However, it narrowed against $16.30 billion in Jan 2018.

• Government data showed that India’s Wholesale Price Index-based inflation (WPI) slowed

to a seven-month low of 2.48% in Feb 2018 from 2.84% in the previous month and 5.51%

in the same month of the previous year. Wholesale inflation grew at a slower pace due to

softer rise in food and fuel prices. The WPI Food Index also decreased from 1.65% in Jan

2018 to 0.07% in Feb 2018.

Indian Equity Market

Domestic Equity Market Indices

Indices 16-Mar-18 1 Week Return YTD Return

S&P BSE Sensex 33176.00 -0.39% -1.88%

Nifty 50 10195.15 -0.31% -2.30%

S&P BSE Mid-Cap 16219.13 1.45% -9.06%

S&P BSE Small-Cap 17576.44 1.56% -8.84%

Source: MFI Explorer

NSE Advance/Decline Ratio

Date Advances Declines

Advance/Decline Ratio

12-Mar-18 984 832 1.18

13-Mar-18 1215 579 2.10

14-Mar-18 868 896 0.97

15-Mar-18 1100 674 1.63

16-Mar-18 534 1263 0.42

Source: NSE

• Indian equity markets closed in the red

as investigative agencies registered a

fresh case of another fraud at a state-

owned bank, thereby raising persisting

concerns over public-sector banks.

Meanwhile, the information technology

sector fell after a big privately held

company sold its stake in a technology

major. Also, global trade war concerns

muted buying interest.

• However, losses were capped amid

positive cues from global peers which

moved up on the back of strong U.S.

jobs report for Feb 2018. Encouraging

industrial output data for Jan 2018 and

easing of wholesale price inflation for

the third consecutive month in Feb

2018 further supported buying interest.

Also, announcement of continuation of

a government subsidy for urea that

would give boost to the agriculture

sector boosted indices.

Ratios

S&P BSE

Sensex

Nifty 50

S&P BSE

Mid Cap

S&P BSE

Small Cap

P/E

22.93 24.87 38.82 113.69

P/B

3.04 3.44 2.8 2.52

Dividend Yield

1.18 1.28 0.89 0.66

Source: BSE, NSE Value as on Mar

16, 2018

Indian Equity Market (contd.)

Sectoral Indices

Indices

Last Returns (in %)

Closing 1-Wk 1-Mth

S&P BSE Auto

24207.8 -0.19% -2.28%

S&P BSE Bankex

27610.3 0.96% -2.77%

S&P BSE CD

21781.8 2.05% 3.91%

S&P BSE CG

18367.9 -0.52% -4.34%

S&P BSE FMCG

10298.3 0.19% -2.27%

S&P BSE HC

13505.8 0.42% -5.34%

S&P BSE IT

12317.8 -0.69% 1.81%

S&P BSE Metal

13918.7 -0.56% -7.97%

S&P BSE Oil & Gas

14995.9 -0.37% -3.54%

Source: Thomson Reuters

Eikon Value as on Mar 16, 2018

• On the BSE sectoral front, indices closed on

a negative note. S&P BSE Information

Technology (-0.69%) stood as the major

loser followed by S&P BSE Metal (-0.56%),

S&P BSE Capital Goods (-0.52%), and S&P

BSE Oil & Gas (-0.37%).

• S&P BSE Metal continued to decline amid

persistent concerns over the imposition of

tariff on steel and aluminium by the U.S.

President. S&P BSE Teck and S&P BSE

FMCG fell 0.23% and 0.19%, respectively.

S&P BSE Consumer Durables (2.05%)

stood as the major gainer followed by S&P

BSE Bankex that grew 0.96%.

Indian Derivatives Market Review

• Nifty Mar 2018 Futures were at 10,232.5 points, a premium of 37.35 points, above the spot

closing of 10,195.15. The turnover on NSE’s Futures and Options segment stood at Rs. 41.71

lakh crore against Rs. 42.24 lakh crore on Mar 9.

• The Put-Call ratio stood at 0.86 compared with the previous week’s close of 0.78.

• The Nifty Put-Call ratio stood at 1.09 compared with the previous week’s close of 1.14.

Domestic Debt Market

Debt Indicators

(%)

Current

Value

1-Wk

Ago

1-Mth

Ago

6-Mth

Ago

Call Rate

5.97 5.89 5.96 5.85

91 Day T-Bill

6.19 6.25 6.34 6.37

7.80% 2021, (5 Yr GOI)

7.12 7.22 7.10 6.48

7.17% 2028, (10 Yr GOI)

7.56 7.67 7.58 --

Source: Thomson Reuters

Eikon

Value as on Mar 16, 2018

• Bond yields fell on hopes that retail

inflation would ease in Feb 2018,

which might delay the chances of a

rate hike by the Monetary Policy

Committee in its upcoming monetary

policy review in Apr 2018. Retail

inflation came better than market

expectation and also touched four

month low. .

• However, market participants preferred

to book profits from the recent bond

rally and on concerns over higher

global interest rates.

• At the end, yields plunged amid media

reports that government might raise

foreign investment limit for government

bonds.

• Yield on the 10-year benchmark paper

(7.17% GS 2028) fell 11 bps to close at

7.56% from the previous week’s close

of 7.67% after trading in a range of

7.56% to 7.71%.

7.52

7.61

7.70

12-Mar 13-Mar 14-Mar 15-Mar 16-Mar

Yield in %

10 -Yr Benchmark Bond ( % )

Source: CCIL

Domestic Debt Market (Spread Analysis)

Maturity

G-Sec Yield

(%)

Corporate Yield

(%)

Spread

bps

1 Year 6.61 7.51 90

3 Year 7.24 7.68 44

5 Year 7.52 7.94 42

10 Year 7.86 8.32 46

Source: Thomson Reuters

Eikon Value as on Mar 16, 2018

• Yields on gilt securities fell across the

maturities by up to 13 bps. The maximum

fall was witnessed on 9-year and 19-year

papers.

• Corporate bond yields fell across the

maturities in the range of 4 bps to 21 bps.

The minimum fall was witnessed on 7-

year paper and the maximum on 3-year

paper.

• Spread between AAA corporate bond and

gilt expanded across 4-year paper and 7

to 15 years’ maturities by up to 7 bps.

Spread contracted across the remaining

maturities in the range of 3 bps to 11 bps.

-15

-8

6.00

7.10

8.20

3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs

India Yield Curve Shift (%) (W-o-W)

Change in bps 16-Mar-18 09-Mar-18

Yield in

Change in bps

Source: Thomson Reuters Eikon

Regulatory Updates in India

• The Reserve Bank of India (RBI) has decided to scrap quasi bank guarantee instruments

like the Letter of Undertaking (LoU) and Letter of Comfort, etc. This is expected to improve

banks’ due diligence in trade credit. However, it can continue to issue guarantees and letter

of credit for trade purposes which are the international norm, and also have features that

makes the claim on the issuer strong.

• The Securities and Exchange Board of India (SEBI) has announced that collective

investment vehicles of private banks investing their money through the foreign portfolio

investor (FPI) route cannot have non-resident Indian as beneficial owners. As per the

circular, the client or the investor should have fulfilled know your client norms. Also, the

beneficial owners of client/investor of bank should be identified in accordance with Rule 9 of

Prevention of Money Laundering Rules. Meanwhile, SEBI has provided clarity regarding

investment by some category II foreign portfolio investors.

• The cabinet has decided to continue urea subsidy to ensure adequate quantity of the

fertiliser is available to farmers at controlled prices. It approved the proposal of department

of fertilisers to continue urea subsidy scheme from 2017 up to 2020 at a total estimated cost

of Rs. 1,64,935 crore. Also, it has decided to implement direct benefit transfer (DBT) in the

sector to reduce diversion and plug leakages.

Regulatory Updates in India (contd..)

• A parliamentary panel has asked the government to assess the Employees Pension

Scheme 1995 and consider a revision of the minimum monthly pension of Rs. 1,000.

According to the panel, the social security benefit is too meagre to fulfil even the basic

needs. Meanwhile, the trade unions have been demanding for a very long time that

minimum pension may be raised to Rs. 3,000 a month. Government has been

recommended to conduct an assessment of the pension scheme with particular reference

to the right to sustenance of the pensioners and based on the findings, consider a revision

of the amount.

• The Union cabinet has decided to clear a double taxation avoidance agreement between

India and Iran. The agreement will promote investment and technology flow, from India to

Iran and vice versa, and will prevent double taxation.

• The Supreme Court has extended the deadline for Aadhaar linking with mobile or bank

accounts until the disposal of Aadhaar case. Earlier, the deadline to link Aadhaar with

various services was set for Mar 31, 2018. This development comes as a major relief for

those who have not yet linked their Aadhaar. However, the order is not applicable to the

deadline for subsidies and benefits under Section 7, which means that the order will not

apply in cases where subsidies are given by the government.

Global News/Economy

• According to a report from the labour department, U.S. consumer price index came in line

with market expectations and grew 0.2% in Feb 2018 as against a gain of 0.5% in Jan 2018.

Meanwhile, core consumer prices, which exclude food and energy prices, also grew 0.2% in

Feb as against an increase of 0.3% in Jan.

• According to data from the Commerce Department, U.S. retail sales fell for third consecutive

month by 0.1% in Feb 2018, similar to Jan 2018 that was upwardly revised.

• According to data from Eurostat, eurozone industrial production fell for the first time in four

months to 1% MoM in Jan 2018 from 0.4% rise in Dec 2017. All components barring capital

and non-durable consumer goods fell in Jan. On a yearly basis, industrial production growth

slowed to 2.7% in Jan from 5.3% in Dec.

• According to data from Eurostat, Germany's consumer price inflation slowed for the third

consecutive month to 1.4% YoY in Feb 2018 from 1.6% in Jan 2018. On monthly basis,

consumer prices rose 0.5% mainly due to higher prices of package holidays.

• According to the Ministry of Economy, Trade and Industry, Japan’s tertiary industry activity

index fell 0.6% MoM in Jan 2018 as against Dec 2017 that remained flat. This marked the

first decline since Sep 2017. Meanwhile, broad-ranging personal services inched down 0.1%

and broad-ranging business services fell 0.8% in Jan. On a yearly basis, tertiary industry

activity growth surged 1.6% in Jan as against a gain of 1.3% in Dec.

Global Equity Markets

Global Indices

Indices

16-Mar-18

1-Week

Return

YTD

Return

Dow Jones

24946.51 -1.54% 0.49%

Nasdaq 100

7019.95 -1.14% 7.81%

FTSE 100

7164.14 -0.84% -6.33%

DAX Index

12389.58 0.35% -3.74%

Nikkei Average

21676.51 0.97% -7.78%

Straits Times

3512.14 0.76% 3.21%

Source: Thomson Reuters Eikon

Value as on Mar 16,

2018

U.S.

• U.S. markets fell over the week on

concerns that trade tensions between

the U.S. and China could increase after

the U.S. government asked China to

reduce its trade surplus with the U.S. by

$100 billion and decided to put heavy

tariffs on Chinese imports. Political

concerns also dented sentiment after

the U.S. President decided to replace

U.S. Secretary of State.

Europe

• European markets mostly traded in the green because of positive economic data of

eurozone and Germany. Meanwhile, the Organisation for Economic Co-operation and

Development (OECD) has stated in its latest Interim Economic Outlook that the global

economy will grow 3.9% in 2018 as well as 2019 as against previous expectation for

growth of 3.7% for 2018 and 3.6% for 2019.

Asia

• Most of the Asian markets gained after geopolitical tension eased as the North Korean

leader offered to halt nuclear and missile tests. Some of the positive economic data also

helped sentiment as China's industrial production expanded more than expected in the

first two months of the year while core machine orders in Japan rose a seasonally

adjusted 8.2% in Jan.

Global Debt (U.S.)

• Yield on the 10-year U.S. Treasury bond

fell 5 bps to close at 2.85% from the

previous week’s close of 2.89%.

• U.S. Treasury prices rose initially as its

safe-haven appeal improved over rising

diplomatic tension between Britain and

Russia. Gains were extended following

fall in U.S. retail sales in Feb 2018 and

concerns over U.S. political and trade

issues.

• However, gains were capped on

growing possibility that the U.S. Federal

Reserve might increase interest rates in

its monetary policy review due next

week.

2.80

2.85

2.90

12-Mar 13-Mar 14-Mar 15-Mar 16-Mar

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)

64.32 65.28

Gold ($/Oz)

1313.00 1323.64

Gold (Rs/10 gm)

30299 30369

Silver ($/Oz)

16.30 16.60

Silver (Rs/Kg)

37980 38313

Source: Thomson Reuters

Eikon Value as on Mar 16, 2018

Gold

• Gold prices fell on expectations that the

U.S. Federal Reserve will increase

interest rates in the upcoming policy

meeting. Better than expected economic

data also lowered the safe-haven

appeal of the metal.

Crude

• Brent crude prices moved down as

investors remained cautious after the

International Energy Agency said in its

monthly report that U.S. crude oil

production jumped above 10 million

barrels per day (bpd) at the end of 2017

and separately, the U.S. Energy

Information Administration mentioned

that U.S. shale production is expected

to rise by 131,000 bpd in Apr from the

previous month to a record 6.95 million

bpd.

Baltic Dry Index

• The Baltic Dry Index fell on the back of

lower capesize and panamax activities.

9.50

10.00

10.50

11.00

16-Feb-18 2-Mar-18 16-Mar-18

Global Commodity Movement

Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)

Global Commodity Prices

Rebased to 10

Source: Thomson Reuters Eikon

-1.47%

-0.80%

-1.78%

Currencies Markets

Movement of Rupee vs Other Currencies

Currency Last Closing 1-Wk Ago

US Dollar

64.87 65.08

Pound Sterling

90.49 89.85

EURO

79.91 80.16

100 JPY

61.27 60.97

Source: RBI Figures in INR , Value as on Mar 16, 2018

Rupee

• The Indian rupee strengthened against

the greenback as slower U.S. wage

growth data minimized concerns of

acceleration in U.S. inflation, which

lowered chances of faster than expected

pace of U.S. interest rate hikes.

Euro

• Euro weakened against the greenback

following concerns of a possible rate hike

by the U.S. Federal Reserve in its

upcoming meeting next week.

Pound

• Pound strengthened against the

greenback after the British Prime Minister

upgraded growth forecasts and trimmed

his budget deficit expectations.

Yen

• Yen strengthened against the greenback

amid concerns over suspected cronyism

scandal in Japan involving the sale of

state-owned land.

9.70

9.90

10.10

10.30

16-Feb-18 2-Mar-18 16-Mar-18

USD GBP Euro JPY

Source: RBI

Currency Prices ( in terms of INR)

Rebased to 10

Currency Movement

-0.31%

0.70%

0.49%

-0.31%

The Week that was…

March to 16

March

The Week that was (Mar 12 – Mar 16)

Date Events Present Value Previous Value

Monday,

Mar 12, 2018

• India Consumer Price Index (Feb) 4.4% 5.1%

• India Index of Industrial Production (Jan) 7.5% 7.1%

• Japan Machine Tool Orders (YoY) (Feb P) 2.9% -5.0%

Tuesday,

Mar 13, 2018

• U.S. Consumer Price Index (YoY) (Feb) 2.2% 2.1%

• Japan Machine Orders (YoY) (Jan) 2.9% -5.0%

• Japan Tertiary Industry Index (MoM) (Jan) -0.6% -0.2%

Wednesday,

Mar 14, 2018

• India Wholesale Price Index (Feb) 2.5% 2.8%

• U.S. Retail Sales Advance (MoM) (Feb) -0.1% -0.1%

• China Retail Sales YTD (YoY) (Feb) 9.7% 10.2%

• China Industrial Production YTD (YoY) (Feb) 7.2% 6.6%

• Eurozone Industrial Production (YoY) (Jan) 2.7% 5.3%

• U.S. Business Inventories (Jan) 0.6% 0.6%

Thursday,

Mar 15, 2018

• U.S. Export Price Index (YoY) (Feb) 3.3% 3.4%

• U.S. Initial Jobless Claims (Mar 10) 226k 230k

Friday,

Mar 16, 2018

• U.S. University of Michigan Sentiment (Mar P) 102.0 99.7

• U.S. Housing Starts (MoM) (Feb) 1.236M 1.329M

• U.S. Industrial Production (MoM) (Feb) 1.1% -0.3%

The Week Ahead

March to 23

March

The Week Ahead

Day Event

Monday,

March 19, 2018

• U.K. Rightmove House Prices (YoY) (Mar)

Tuesday,

March 20, 2018

• U.K. Consumer Price Index (YoY) (Feb)

• German ZEW Survey Expectations (Mar)

• Euro zone Consumer Confidence (Mar A)

Wednesday,

March 21, 2018

• U.S. FOMC Interest Rate Decision

• U.K. Public Sector Net Borrowing (Feb)

• U.K. ILO Unemployment Rate 3Mths (Jan)

• U.S. Existing Home Sales (MoM) (Feb)

Thursday,

March 22, 2018

• Japan Nikkei Japan PMI Manufacturing (Mar P)

• Japan All Industry Activity Index (MoM) (Jan)

• Markit Eurozone Manufacturing PMI (Mar P)

• U.S. Markit US Manufacturing PMI (Mar P)

• Markit/BME Germany Manufacturing PMI (Mar P)

• Japan National Consumer Price Index (YoY) (Feb)

• U.K. Bank of England Interest Rate Decision

Friday,

March 23, 2018

• U.S. Durable Goods Orders (Feb P)

• U.S. New Home Sales (Feb)

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