News You Can Use of - 2 March 2018 | Nippon India Mutual Fund

News U Can Use

March 2, 2018

The Week that was…

February to 2

March

Indian Economy

• Government data showed that India’s Gross Domestic Product (GDP) grew 7.2% YoY in the

third quarter of FY18, better than upwardly revised growth of 6.5% (6.3% originally reported)

in the previous quarter driven by pick up in manufacturing and spending. On Gross Value

Added (GVA) basis, the economy rose 6.7%, better than upwardly revised growth of 6.2%

(6.1% originally reported) rise in the quarter ended Sep 2017.

• The Nikkei India Manufacturing Purchasing Managers' Index (PMI) slightly fell to 52.1 in Feb

2018 from 52.4 in Jan 2018. The slight decline reflects slower pace of growth for factory

output and new business orders. Meanwhile, this is the seventh consecutive month during

which the manufacturing PMI came in above 50, indicating expansion. The expansion

reflected significant rise in manufacturing production and improved underlying demand, with

domestic and external sources driving new business gains.

• Government data showed that India's fiscal deficit during Apr to Jan 2018 stood at Rs. 6.77

lakh crore or 113.7% of the budgeted target for FY18. During the corresponding period last

year, fiscal deficit was at 105.6% of the Budget Estimate. Total receipts were Rs. 11.63 lakh

crore or 71.7% of the Budget Estimate, while revenue expenditure amounted to Rs. 15.76

lakh crore or 81.0% of the financial year estimates.

• Government data showed that the index of eight core industries grew 6.7% in Jan 2018 from

upwardly revised 4.2% in the previous month (4.0% originally reported) and 3.4% in the same

period of the previous year. The increase in pace of growth reflects 20.7% and 11% growth in

cement and refinery products.

Indian Equity Market

Domestic Equity Market Indices

Indices 1-Mar-18 1 Week Return YTD Return

S&P BSE Sensex 34,046.94 -0.28% 0.69%

Nifty 50 10,458.35 -0.31% 0.22%

S&P BSE Mid-Cap 16,461.27 -0.61% -7.71%

S&P BSE Small-Cap 18,084.94 0.49% -6.20%

Source: MFI Explorer

NSE Advance/Decline Ratio

Date Advances Declines

Advance/Decline Ratio

26-Feb-18 1075 738 1.46

27-Feb-18 620 1177 0.53

28-Feb-18 692 1086 0.64

01-Mar-18 690 1072 0.64

Source: NSE

• Indian equity markets closed in the red

after India's fiscal deficit during Apr to

Jan 2018 came in at 113.7% of the

budgeted target for FY18. Also, slight

decline in Nikkei India Manufacturing

Purchasing Managers' Index in Feb

2018 weighed on markets.

• Sentiment dampened further amid

reports that a state-owned bank has

disclosed that the amount of fraudulent

transactions could be approximately

Rs. 13 billion, higher than the current

estimate. Hawkish comments from

U.S. Federal Reserve Chief also

muted buying interest.

• However, losses were capped on

India’s strong GDP data for third

quarter of FY 18 and upbeat eight core

industries’ data for Jan 2018 released

on Feb 28.

Ratios

S&P BSE

Sensex

Nifty 50

S&P BSE

Mid Cap

S&P BSE

Small Cap

P/E

23.61 25.59 39.13 113.92

P/B

3.14 3.53 2.82 2.57

Dividend Yield

1.16 1.19 0.89 0.63

Source: BSE, NSE Value as on Mar 1

, 2018

Indian Equity Market (contd.)

Sectoral Indices

Indices

Last Returns (in %)

Closing 1-Wk 1-Mth

S&P BSE Auto

24,819.30 2.02% -1.56%

S&P BSE Bankex

28,072.19 -1.62% -6.15%

S&P BSE CD

21,036.15 0.32% -1.39%

S&P BSE CG

19,026.68 0.72% -4.58%

S&P BSE FMCG

10,515.05 -0.45% -1.59%

S&P BSE HC

14,031.54 -1.36% -0.26%

S&P BSE IT

12,439.91 -0.52% -0.44%

S&P BSE Metal

15,030.13 -1.94% 0.12%

S&P BSE Oil & Gas

15,521.08 0.90% -0.94%

Source: Thomson Reuters

Eikon Value as on Mar 1, 2018

• On the BSE sectoral front, S&P BSE Auto

(2.02%) stood as the major gainer followed

by S&P BSE Oil & Gas (0.90%) and S&P

BSE Capital Goods (0.72%). Meanwhile,

S&P BSE Metal (-1.94%) stood as the major

loser followed by S&P BSE Bankex (-

1.62%) and S&P BSE HC (-1.36%).

• Banking stocks fell on announcement by the

finance ministry of a 15-day deadline to

state-run banks to take pre-emptive action,

identify and address operational and

technological risks, thereby negatively

impacting the indices.

Indian Derivatives Market Review

• Nifty Mar 2018 Futures were at 10,456.55 points, a discount of 1.80 points below the spot

closing of 10,458.35. The turnover on NSE’s Futures and Options segment stood at Rs. 30.82

lakh crore against Rs. 31.23 lakh crore on Feb 23.

• The Put-Call ratio stood at 0.80 compared with the previous week’s close of 0.83.

• The Nifty Put-Call ratio stood at 1.29 compared with the previous week’s close of 1.43.

Domestic Debt Market

Debt Indicators

(%)

Current

Value

1-Wk

Ago

1-Mth

Ago

6-Mth

Ago

Call Rate

5.91 5.90 5.92 5.83

91 Day T-Bill

6.31 6.32 6.42 6.11

7.80% 2021, (5 Yr GOI)

7.19 7.16 7.16 6.43

7.17% 2028, (10 Yr GOI)

7.74 7.67 7.56 --

Source: Thomson Reuters

Eikon

Value as on Mar 1, 2018

• Bond yields rose following initial rise

in international crude oil prices and

fresh bond supply due to state

development auction. Market

sentiment remained bearish amid

absence of new triggers as well as low

participation from state-run banks.

Sharp fall in rupee and gains in U.S.

Treasury yields due to U.S. Federal

Reserve chairman’s indication on rate

hike also weighed on market

sentiment.

• Yield on the 10-year benchmark paper

(7.17% GS 2028) rose 7 bps to close

at 7.74% from the previous week’s

close of 7.67% after trading in a range

of 7.66% to 7.78%.

• RBI announced to conduct the auction

of 91-, 182- and 364-day Treasury Bills

for a notified amount of Rs. 7,000

crore, Rs. 3,000 crore and Rs. 4,000

crore, respectively on Mar 7.

7.65

7.71

7.77

26-Feb 27-Feb 28-Feb 1-Mar

Yield in %

10 -Yr Benchmark Bond ( % )

Source: CCIL

Domestic Debt Market (Spread Analysis)

Maturity

G-Sec Yield

(%)

Corporate Yield

(%)

Spread

bps

1 Year 6.71 7.76 105

3 Year 7.32 7.88 56

5 Year 7.66 8.09 43

10 Year 8.01 8.4 40

Source: Thomson Reuters

Eikon Value as on Mar 1, 2018

• Yields on gilt securities expanded across

the maturities by up to 10 bps barring 30-

year paper that closed steady. Highest

rise was seen on 19-year paper.

• Corporate bond yields closed steady on

1-year paper, fell 1 bps each on 2 to 4

years’ maturities and rose in the range of

11 to 17 bps across 5 to 10 years’

maturities and 15-year paper.

• Spread between AAA corporate bond and

gilt contracted across 1 to 4 years’

maturities by up to 6 bps and expanded in

the range of 6 to 14 bps across the

remaining maturities.

-3

6.10

6.80

7.50

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 01-Mar-18 23-Feb-18

Yield in %

Change in bps

Source: Thomson Reuters Eikon

Regulatory Updates in India

• Data from capital market regulator Securities and Exchange Board of India (SEBI) showed that

investment in the domestic capital market through participatory notes plunged to a near eight

and a half year low to Rs. 1.19 lakh crore in Jan 18 from Rs. 1.25 lakh crore in the previous

month. This is at the lowest level since Aug 2009 when investment in the domestic capital

market through participatory notes stood at Rs. 1.10 lakh crore. The steep decline can be

attributed to strict measures taken by SEBI to check misuse of the same.

• The Reserve Bank of India soothed concerns over mobile wallet money. The central bank

added that customers do not stand at risk of losing their money even if the wallet companies

are not complaint to its full KYC (Know Your Customer) guidelines. However, the central bank

added that reloading the wallets with money will resume after completing the KYC requirement.

• The cabinet has approved an action plan for 12 champion services sectors identified by the

ministry of commerce and industry for special focus. Meanwhile, fund worth Rs. 5,000 crore is

proposed to be established to activate the plan for realising their full potential. The sectors

include IT and IT-enabled services, tourism and hospitality, medical value travel, transport and

logistics, accounting and finance, audio visual, legal, communication, construction and related

engineering, environment, financial and education. The ministries responsible for these sectors

have to come up with the implementation timelines along with the monitoring mechanism.

Regulatory Updates in India (contd..)

• The cabinet permitted a strict Fugitive Economic Offenders Bill through which government can

confiscate assets without conviction. The provisions of the bill will apply for the economic

offenders who flee the country and against whom an arrest warrant has been issued for a

scheduled offence as well as wilful bank loan defaulters with outstanding over Rs. 100 crore.

• The cabinet has permitted setting up an independent regulator for the auditing profession

called National Financial Reporting Authority (NFRA). The regulator has been formed to fill

various auditing lapses in the banking sector. The jurisdiction of the NFRA would extend to all

listed companies and large unlisted public companies.

Global News/Economy

• According to a report from the Commerce Department, U.S. durable goods orders fell more than

market expectations in Jan 2018. It fell 3.7% in Jan as against a revised gain of 2.6% (2.8%

gain originally reported) in Dec 2017. The downside reflects sharp fall in orders for

transportation equipment that plunged by 10% in Jan as against a gain of 6.4% in Dec.

• A report from the Conference Board showed that U.S. consumer confidence index surpassed

market expectations and grew to 130.8 in Feb 2018 as against downwardly revised 124.3

(125.4 originally reported) in Jan 2018. This marked the highest level since Nov 2000. The

expectations index grew to 109.7 in Feb as against 104.0 in Jan.

• A preliminary report from Destatis showed that Germany’s consumer price index grew 1.4% YoY

in Feb 2018 as against an increase of 1.6% in Jan 2018. This marked the lowest figure since

Nov 2016. Meanwhile, CPI grew 0.5% in Feb MoM.

• According to a flash report from the Eurostat, eurozone’s inflation came in at 1.2% in Feb 2018

as against 1.3% in Jan 2018. The inflation remained below the European Central Bank's target

of 'below, but close to 2%’. Meanwhile, core inflation that excludes energy, food, alcohol and

tobacco, held steady at 1% in Feb.

• According to a report from the National Bureau of Statistics, China’s manufacturing PMI came in

at 50.3 in Feb 2018 as against 51.3 in Jan 2018. Meanwhile, the non-manufacturing PMI came

in at 54.4 in Jan, down from 55.3 in Dec.

Global Equity Markets

Global Indices

Indices

2-Mar-18

1-Week

Return

YTD

Return

Dow Jones

24,538.06 -3.05% -1.15%

Nasdaq 100

6,811.04 -1.24% 4.60%

FTSE 100

7,069.90 -2.41% -7.56%

DAX Index

11,913.71 -4.57% -7.44%

Nikkei Average

21,181.64 -3.25% -9.89%

Straits Times

3,479.20 -1.53% 2.24%

Source: Thomson Reuters Eikon

Value as on Mar 2, 2018

U.S.

• U.S. markets came under selling

pressure after the new U.S. Federal

Reserve (Fed) chief’s comment raised

speculation that the central bank may

raise rates more than the three times

currently being anticipated.

• Meanwhile, the U.S. President’s plan to

impose hefty tariffs on global imports of

steel and aluminum raised concerns

over potential trade war.

Europe

• European markets too witnessed a sell off triggered by speculations that Fed may be more

aggressive in hiking interest rates. Concerns over potential trade war also prompted

investors to offload riskier assets. Other factors weighing on investor sentiment included

slowdown in growth of eurozone manufacturing sector to a 4-month low in Feb.

Asia

• Asian markets too felt the heat of global sell off following U.S. President’s plan to impose

tariffs on steel and aluminum imports, igniting worries over a trade war. Renewed

concerns over a faster pace of interest rate increases by Fed also kept investors nervous.

Prospects of Bank of Japan exiting extraordinary stimulus too weighed on buying interest.

Global Debt (U.S.)

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

fell 1 bps to close at 2.86% from the

previous week’s close of 2.87%.

• U.S. Treasury prices fell initially after the

new U.S. Federal Reserve chief

maintained an upbeat outlook on the

U.S. economy, which increased the

possibility of a faster than expected

interest rate hike.

• However, the trend reversed as the

safe-haven appeal of U.S. Treasuries

improved after the U.S. President’s

decision to impose steep tariffs on

imported steel and aluminum fueled

concerns of an imminent trade war

• U.S. Treasury prices fell again as gains

were almost wiped out after the Bank of

Japan trimmed the purchase amount of

long term Japanese government bonds.

2.70

2.80

2.90

3.00

26-Feb 27-Feb 28-Feb 1-Mar 2-Mar

U.S. 10-Year Treasury Yield Movement

Source: Thomson Reuters Eikon

Commodities Market

Performance of various commodities

Commodities

Last Closing 1-Week Ago

Brent Crude($/Barrel)

65.05 66.98

Gold ($/Oz)

1,322.17 1,328.87

Gold (Rs/10 gm)*

30,269 30,390

Silver ($/Oz)

16.49 16.54

Silver (Rs/Kg)*

38,010 38,343

Source: Thomson Reuters

Eikon * Last closing as on Mar 1, 2018 Value as on Mar 2, 2018

Gold

• Gold prices were hit as the new U.S.

Fed chief’s first testimony before the

House Financial Services Committee

raised speculation that the central bank

may raise rates more than the three

times currently being anticipated,

although he stressed on not prejudging

the new set of projections.

Crude

• Brent crude prices slumped amid

persisting concerns over supply glut

after the International Energy Agency

(IEA) predicted that the United States

will surpass Russia as the world’s

biggest oil producer by 2019, if not

sooner.

Baltic Dry Index

• The Baltic Dry Index gained on the back

of higher capesize and panamax

activities

9.10

9.50

9.90

10.30

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

Global Commodity Movement

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

Global Commodity Prices

Rebased to 10

Source: Thomson Reuters Eikon

-2.88%

-0.50%

-0.28%

Currencies Markets

Movement of Rupee vs Other Currencies

Currency Last Closing 1-Wk Ago

US Dollar

65.23 64.82

Pound Sterling

89.71 90.40

EURO

79.50 79.76

100 JPY

61.07 60.59

Source: RBI Figures in INR , Value as on Mar 1, 2018

Rupee

• The rupee weakened against the

greenback following losses in the

domestic equity market and concerns that

the U.S. Fed may increase interest rates

at a faster than expected pace.

Euro

• The euro rose against the greenback after

the U.S. President decided to impose

steep tariffs on imported steel and

aluminum that fueled concerns of an

imminent trade war.

Pound

• The pound weakened against the

greenback on concerns over a faster than

expected U.S. interest rate hike scenario.

Yen

• The yen rose against the greenback after

the Bank of Japan trimmed the purchase

amount of long term Japanese

government bonds and indicated an exit

from its ultra-easy monetary policy.

9.50

9.90

10.30

10.70

1-Feb-18 15-Feb-18 1-Mar-18

USD GBP Euro JPY

Source: RBI

Currency Prices ( in terms of INR)

Rebased to 10

Currency Movement

0.45%

-1.78%

-1.43%

1.20%

The Week that was…

February to 2

March

The Week that was (Feb 26 – Mar 2)

Date Events Present Value Previous Value

Monday,

Feb 26, 2018

• U.S. New Home Sales (MoM) (JAN) -7.8% -7.6%

Tuesday,

Feb 27, 2018

• Germany Consumer Price Index (YoY) (FEB P) 1.4% 1.6%

• U.S. Consumer Confidence Index (FEB) 130.8 124.3

• U.S. Advance Goods Trade Balance (JAN) -$74.4b -$72.3b

Wednesday,

Feb 28, 2018

• India's Gross Domestic Product (Q3’ FY 1) 7.20% 6.50%

• India's Nikkei Manufacturing Purchasing Managers' Index (Feb 2018) 52.1 52.4

• India's fiscal deficit YoY (Apr to Jan 2018) 1.137 1.056

• India's index of eight core industries (Jan 2018) 6.70% 4.20%

• China Manufacturing PMI (FEB) 50.3 51.3

• U.S. Gross Domestic Product Price Index (4Q S) 2.30% 2.40%

• Germany Unemployment Claims Rate (FEB) 5.40% 5.40%

• Eurozone Consumer Price Index Estimate (YoY) (FEB) 1.20% 1.30%

Thursday,

Mar 1, 2018

• U.S. PCE Core (YoY) (JAN) 1.50% 1.50%

• U.S. ISM Manufacturing (FEB) 60.8 59.1

• China Caixin Manufacturing PMI (FEB) 51.6 51.5

• U.K. Markit Manufacturing PMI (FEB) 55.2 55.3

Friday,

Mar 2, 2018

• Germany Retail Sales (YoY) (JAN) 2.30% -1.90%

• U.K. Markit/CIPS Construction PMI (FEB) 51.4 50.2

The Week Ahead

March to 9

March

The Week Ahead

Day Event

Monday,

March 5, 2018

• India Nikkei Services PMI (Feb 18)

• U.S. ISM Non-Manufacturing/Services Composite (FEB)

• Japan Nikkei Composite PMI (FEB)

• China Caixin Composite PMI (FEB)

Tuesday,

March 6, 2018

• Germany Markit Construction PMI (FEB)

• Eurozone Markit Retail PMI (FEB)

• U.S. Factory Orders (JAN)

Wednesday,

March 7, 2018

• Japan Leading Index CI (JAN P)

• Eurozone Government Expenditure (QoQ) (4Q)

• Eurozone Gross Domestic Product (YoY) (4Q F)

• Japan Gross Domestic Product Annualized (QoQ) (4Q F)

Thursday,

March 8, 2018

• European Central Bank Rate Decision (MAR 8)

• China Foreign Direct Investment (YoY) (FEB)

• U.S. Initial Jobless Claims (MAR 3)

Friday,

March 9, 2018

• Bank of Japan Rate Decision (MAR 9)

• China Consumer Price Index (YoY) (FEB)

• U.S. Change in non-farm Payrolls (FEB)

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recommendations or as a professional guide for the readers. It may be noted that since Reliance Nippon Life Asset Management Company Limited (RNLAM)

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