News U Can Use
March 23, 2018
The Week that was…
19
th
March to 23
rd
March
2
Indian Economy
• Data from the Reserve Bank of India (RBI) showed that the country’s manufacturing sector
witnessed an improvement in sales growth in the third quarter of this fiscal on a yearly
basis. However, net profit in the sector remained subdued due to lack of support from
other income. According to the data, sales of manufacturing companies grew 14% in the
period from Oct to Dec of 2017-18 compared to similar period of the previous fiscal, while
net profit of manufacturing companies came down 2.4% during the same period. RBI also
noted that demand improved for chemical and chemical products, cement and cement
products, machinery and machine tools, motor vehicles and other transport equipment.
• According to the minister of state for commerce and industry, as many as six sectors
including defense industries, ports and coal production, have failed to attract any foreign
direct investments during the period from Apr to Dec of FY19. The other three sectors
which did not attract foreign inflows are photographic raw and paper, dye-stuffs and coir. It
is to be noted that the government has relaxed foreign direct investment norms in several
sectors, including defense, single brand retail and civil aviation, to attract foreign direct
investment in the country.
• The government has extended the facility of hiring workers on fixed-term employment to all
sectors to improve the ease of doing business, thereby meeting the announcement made
in the Union Budget. Amid major demand of the trade unions, no permanent employee will
be moved to fixed term employment. According to the Industrial Establishment (Standing
Order) 1946, the facility for hiring on fixed-term contract was initially available only for the
apparel manufacturing sector.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 23-Mar-18 1 Week Return YTD Return
S&P BSE Sensex 32596.54 -1.75% -3.60%
Nifty 50 9998.05 -1.93% -4.19%
S&P BSE Mid-Cap 15694.11 -3.24% -12.01%
S&P BSE Small-Cap 16801.18 -4.41% -12.86%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
19-Mar-18 285 1546 0.18
20-Mar-18 691 1124 0.61
21-Mar-18 868 904 0.96
22-Mar-18 425 1391 0.31
23-Mar-18 343 1482 0.23
Source: NSE
• Indian equity markets fell after India’s
current account deficit for the third
quarter of FY18 widened. Meanwhile,
decline in banking stocks after the CBI
filed two more fraud cases against two
major state-owned lenders negatively
impacted indices. Also, reports that
CBI has filed a charge sheet against a
slew of former senior officials of one of
the largest public-sector banks
weighed on market sentiment.
• On the global front, the U.S. Federal
Reserve raising interest rates by 25
basis points while iterating its plan to
raise rates gradually weighed on
indices. Fears over trade war following
reports that the U.S. President will
introduce tariffs on Chinese goods for
approximately $50 billion also muted
buying interest. Further, decline in
metal stocks following fall in Chinese
iron ore prices added to the losses.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
22.50 24.38 36.18 106.89
P/B
2.99 3.38 2.72 2.42
Dividend Yield
1.20 1.30 0.91 0.69
Source: BSE, NSE Value as on Mar
23, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing 1-Wk 1-Mth
S&P BSE Auto
23689.6 -2.14% -2.62%
S&P BSE Bankex
26512.6 -3.98% -7.09%
S&P BSE CD
21638 -0.66% 3.19%
S&P BSE CG
18045.9 -1.75% -4.47%
S&P BSE FMCG
10188 -1.07% -3.55%
S&P BSE HC
13105.5 -2.96% -7.87%
S&P BSE IT
12174.7 -1.16% -2.64%
S&P BSE Metal
13077 -6.05% -14.69%
S&P BSE Oil & Gas
14498.2 -3.32% -5.75%
Source: Thomson Reuters
Eikon Value as on Mar 23, 2018
• On the BSE sectoral front, indices closed on
a negative note. S&P BSE Realty (-6.86%)
stood as the major loser followed by S&P
BSE Metal (-6.05%), S&P BSE Bankex (-
3.98%), and S&P BSE Oil & Gas (-3.32%).
S&P BSE Metal continued to decline amid
persistent trade war concerns.
• Meanwhile, decline in banking stocks are a
result of the banking frauds that have into
light. S&P BSE Healthcare and S&P BSE
Auto fell 2.96% and 2.14%, respectively.
Indian Derivatives Market Review
• Nifty Mar 2018 Futures were at 10,003.9 points, a premium of 5.85 points, above the spot
closing of 9,998.05. The turnover on NSE’s Futures and Options segment stood at Rs. 42.35
lakh crore against Rs. 41.71 lakh crore on Mar 16.
• The Put-Call ratio stood at 0.77 compared with the previous week’s close of 0.86.
• The Nifty Put-Call ratio stood at 1.04 compared with the previous week’s close of 1.09.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
5.93 5.97 5.90 5.89
91 Day T-Bill
6.15 6.19 6.32 6.10
7.80% 2021, (5 Yr GOI)
7.14 7.12 7.16 6.55
7.17% 2028, (10 Yr GOI)
7.56 7.56 7.67 --
Source: Thomson Reuters
Eikon
Value as on Mar 23, 2018
• Bond yields rose initially following
profit booking and rate hike by the U.S.
Federal Reserve. Increase in crude oil
prices added to the losses.
• However, yields fell later amid
indications that the government may
take few steps to lessen supply burden
of FY19 and borrow more next year
through shorter tenure bonds.
• Also, reports that the government is
working on a strategy to bring down
bond yields, while the government may
attempt another round of buyback
before the end of the fiscal, further
boosted market sentiment and
reversed initial losses.
• Yield on the 10-year benchmark paper
(7.17% GS 2028) stood unchanged at
7.56% after trading in a range of
7.52% to 7.68%.
7.52
7.59
7.66
19-Mar 20-Mar 21-Mar 22-Mar 23-Mar
Yield in %
10 -Yr Benchmark Bond ( % )
Source: CCIL
Domestic Debt Market (Spread Analysis)
7
Maturity
G-Sec Yield
(%)
Corporate Yield
(%)
Spread
bps
1 Year 6.78 7.49 71
3 Year 7.26 7.66 40
5 Year 7.57 7.92 35
10 Year 7.88 8.25 37
Source: Thomson Reuters
Eikon Value as on Mar 23, 2018
• Yields on gilt securities increased across
most of the maturities by up to 12 bps,
barring 9-, 13-, 19- and 24-year maturities
that fell by up to 9 bps. Yield on 10-, 14-
,15- and 30-year maturities closed steady.
• Corporate bond yields fell across the
maturities in the range of 2 bps to 8 bps,
barring 2-year paper that closed steady.
• Spread between AAA corporate bond and
gilt contracted across the maturities in the
range of 5 bps to 19 bps, barring 2-year
paper that closed steady.
-7
0
7
14
6.00
6.70
7.40
8.10
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 23-Mar-18 16-Mar-18
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• The ministry of corporate affairs is considering seeking passport details of all those
individuals who have been permitted to serve as directors on the board of companies. The
objective of the move is to prevent loan defaulters from fleeing the country. It needs to be
noted that the ministry of finance has directed banks to collect passport details of borrowers
who are availing loans of Rs. 50 crore and more over 45 days.
• The commerce ministry has notified exemption from Integrated Goods and Services Tax
(IGST) and compensation cess for procurement under advance authorisation and Export
Promotion Capital Goods (EPCG) scheme till Oct 1, 2018. EPCG is an export promotion
scheme under which an exporter can import certain amount of capital goods at zero duty for
upgrading technology related with exports. Meanwhile, advance authorisation is issued to
allow duty free import of input, which is physically incorporated in export product.
• The Securities and Exchange Board of India (SEBI) has permitted bourses to provide
spread benefit in initial margin across futures contracts in commodities. The bourses can
charge higher margins depending upon their risk perception. Margin benefit on spread
positions shall be entirely withdrawn latest by the start of tender period or the start of the
expiry day, whichever is earlier. However, the benefit can be provided if minimum coefficient
of correlation between futures prices of the two commodities is 0.90. Additionally, back
testing for adequacy of spread margin to cover MTM has been carried out for a minimum
period of one year and initial margin after spread benefit has been able to cover MTM on at
least 99% of the days as per back testing.
Regulatory Updates in India (contd..)
• SEBI has announced that members of clearing corporations in commodity derivatives
segment will have to maintain a minimum liquid net-worth of at least Rs. 50 lakhs. The
objective is to align norms related to base minimum capital requirement and liquid net-worth
of clearing corporations in commodity derivatives with equity and currency derivatives.
• SEBI and stock exchanges have brought in additional surveillance measures (ASM) on
stocks with surveillance concerns such as price variation, volatility etc. The Bombay stock
exchange has shortlisted 20 stocks and National Stock exchange has shortlisted 16 stocks
in the ASM framework.
• The environment ministry has relaxed environmental clearances for buildings and
construction sector. The ministry has doubled the threshold for construction projects
requiring environmental clearances from the Centre to 50,000 square metres of built-up
area from 20,000 square metres.
• SEBI is planning to bring in additional disclosure requirements for listed corporates that are
undergoing insolvency resolution process. SEBI is also mulling amending norms pertaining
to minimum public shareholding norms and other provisions for such entities. The
consideration comes at a time when there are increasing number of cases arising under the
Insolvency and Bankruptcy Code.
9
Global News/Economy
• The U.S. Federal Reserve (Fed) increased interest rates by 25 bps to 1.75%, in line with
market expectations. This is the first rate increase in three hikes projected in 2018 by the
U.S. Fed. The reason for the rate hike is attributed to strong labor market and strength in the
broader economy. However, the U.S. Fed now projects three rate hikes in 2019 compared
with the two projected earlier.
• In the second Monetary Policy Committee review of the year, the Bank of England (BoE)
kept its interest rate unchanged at its current 0.5% level amid lower than expected inflation
figures and modest improvements to wage increases. However, two policymakers voted in
favour of an immediate rate hike, thereby boosting the prospects of rising borrowing costs in
May 2018.
• According to the data reported by Office for National Statistics, U.K.’s consumer price
inflation fell more than expected to 2.7% YoY in Feb 2018, weakest since Jul 2017, from 3%
YoY in Jan 2018. Core inflation that excludes energy, food, alcoholic beverages and tobacco,
fell 2.4% in Feb 2018 from 2.7% in Jan 2018. However, monthly, overall consumer prices
grew 0.4% in Feb.
• A report from the Ministry of Internal Affairs and Communications showed that consumer
prices in Japan came in line with market expectations and were up 1.5% on year in Feb
2018 as against 1.4% in Jan 2018. Core CPI that excludes fresh food prices grew 1.0% on
an annual basis in Feb, up from 0.9% in Jan.
10
Global Equity Markets
11
Global Indices
Indices
23-Mar-18
1-Week
Return
YTD
Return
Dow Jones
23533.20 -5.67% -5.20%
Nasdaq 100
6508.09 -7.29% -0.05%
FTSE 100
6921.94 -3.38% -9.49%
DAX Index
11886.31 -4.06% -7.65%
Nikkei Average
20617.86 -4.88% -12.29%
Straits Times
3421.39 -2.58% 0.54%
Source: Thomson Reuters Eikon
Value as on Mar 23,
2018
U.S.
• U.S. markets came under selling
pressure amid political uncertainty in
Washington as the U.S. President
decided to fire the national security
advisor.
• The sell off also reflected concerns
about the impact of a potential trade war
after the President announced tariffs on
at least $50 billion worth of Chinese
imports.
Europe
• European markets remained low amid weak economic data. The U.S. Fed’s interest rate
decision played a spoilsport, although its projection of future rate hikes soothed investors
to some extent. Later, growing concerns over potential global trade war dragged markets
down after the U.S. President signed an executive memorandum imposing tariffs on
Chinese imports.
Asia
• Asian markets too witnessed heavy sell off, amid speculation over a trade war after the
U.S. President announced tariffs on Chinese imports, worth at least $50 billion. In
retaliation, China said it would impose tariffs on up to $3 billion worth of U.S. goods.
Additionally, market sentiment was dampened after the People's Bank of China raised its
short-term interest rates for the first time in 2018 following Fed's rate-hike decision.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury bond
inched down 2 bps to close at 2.83%
from the previous week’s close of
2.85%.
• U.S. Treasury prices fell initially on
growing possibility that the U.S. Fed will
raise interest rates in its monetary policy
review. Losses were extended after the
U.S. central bank raised interest rates
and forecasted two more hikes in 2018,
signaling that U.S. tax cuts and
government spending will boost the U.S.
economy and inflation.
• However, the trend reversed and losses
were made good as the safe haven
appeal of the U.S. Treasuries improved
on concerns of a global trade war after
the U.S. President announced tariffs on
Chinese imports worth roughly $50
billion and the Chinese government
threatened to do the same in retaliation.
2.80
2.88
2.96
19-Mar 20-Mar 21-Mar 22-Mar 23-Mar
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Commodities
Last Closing 1-Week Ago
Brent Crude($/Barrel)
68.62 64.32
Gold ($/Oz)
1346.76 1313.00
Gold (Rs/10 gm)
30700 30299
Silver ($/Oz)
16.52 16.30
Silver (Rs/Kg)
38219 37980
Source: Thomson Reuters
Eikon Value as on Mar 23, 2018
Gold
• Gold prices rose on safe haven appeal
amid concerns of a prospective global
trade war after the U.S. President
imposed tariffs on Chinese imports
worth $50 billion. China also retaliated
by announcing it would levy additional
duties on up to $3 billion of U.S. imports
of agricultural goods. However, the
upside was limited after the U.S.
Federal Reserve raised interest rates by
25 bps.
Crude
• Brent crude prices surged on news that
production cuts by the Organization of
the Petroleum Exporting Countries
(OPEC) and Russia could be extended
into 2019. Prices got further support
amid reports that U.S. could reimpose
sanctions on Iran.
Baltic Dry Index
• The Baltic Dry Index fell on the back of
lower capesize and panamax activities.
9.20
9.60
10.00
10.40
24-Feb-18 5-Mar-18 14-Mar-18 23-Mar-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
6.69%
2.57%
1.35%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing 1-Wk Ago
US Dollar
65.13 64.87
Pound Sterling
91.96 90.49
EURO
80.34 79.91
100 JPY
62.13 61.27
Source: RBI Figures in INR , Value as on Mar 23, 2018
Rupee
• The Indian rupee fell against the U.S.
dollar following upbeat U.S. economic
data and global trade tensions.
Euro
• Euro gained against the U.S. dollar amid
expectations that the European Central
Bank may hike rates soon and after the
U.S. Fed maintained its interest rate
projection of three rate hikes in 2018.
Pound
• Pound rose against the U.S. dollar after
the BoE kept rates unchanged, but two
policymakers unexpectedly voted in
favour of an immediate rate hike.
Yen
• Yen gained against the U.S. dollar after
the U.S. Fed decided to maintain
projection of three rate hikes this year.
The safe-haven currency strengthened
further amid global trade tensions and
weakness on Wall Street.
9.80
10.00
10.20
10.40
24-Feb-18 5-Mar-18 14-Mar-18 23-Mar-18
USD GBP Euro JPY
Source: RBI
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
0.40%
1.62%
1.40%
0.53%
15
The Week that was…
19
th
March to 23
rd
March
The Week that was (Mar 19 – Mar 23)
16
Date Events
Present
Value
Previous
Value
Monday,
Mar 19, 2018
• U.K. Rightmove House Prices (YoY) (Mar) 2.1% 1.5%
Monday,
Mar 20, 2018
• U.K. Consumer Price Index (YoY) (Feb) 2.7% 3.0%
• German ZEW Survey Expectations (Mar) 5.1 17.8
• Euro zone Consumer Confidence (Mar A) 0.1 0.1
Monday,
Mar 21, 2018
• U.S. FOMC Interest Rate Decision 1.75% 1.50%
• U.K. Public Sector Net Borrowing (Feb) -0.27b -11.6b
• U.K. ILO Unemployment Rate 3Mths (Jan) 4.3% 4.4%
• U.S. Existing Home Sales (MoM) (Feb) 3.0% -3.2%
Monday,
Mar 22, 2018
• Japan Nikkei Japan PMI Manufacturing (Mar P) 53.2 54.1
• Japan All Industry Activity Index (MoM) (Jan) -1.8% 0.6%
• Markit Eurozone Manufacturing PMI (Mar P) 56.6 58.6
• U.S. Markit US Manufacturing PMI (Mar P) 55.7 55.3
• Markit/BME Germany Manufacturing PMI (Mar P) 58.4 60.6
• Japan National Consumer Price Index (YoY) (Feb) 1.5% 1.4%
• U.K. Bank of England Interest Rate Decision 0.5% 0.5%
• U.S. Leading Index (Feb)
0.6% 1.0%
Monday,
Mar 23, 2018
• U.S. Durable Goods Orders (Feb P)
3.1% -3.5%
• U.S. New Home Sales (Feb) 618k 622k
17
The Week Ahead
26
th
March to 30
th
March
18
The Week Ahead
Day Event
Monday,
March 26, 2018
• Euro zone French Gross Domestic Product (YoY) (4Q F)
Tuesday,
March 27, 2018
• U.S. Consumer Confidence Index (Mar)
• U.S. S&P/Case-Shiller US Home Price Index (YoY) (Jan)
Wednesday,
March 28, 2018
• Euro zone German GfK Consumer Confidence (Apr)
• U.S. MBA Mortgage Applications (Mar 23)
• U.S. Gross Domestic Product Annualized (QoQ) (4Q T)
• U.S. Advance Goods Trade Balance (Feb)
• U.S. Pending Home Sales (YoY) (Feb)
• Japan Retail Trade (YoY) (Feb)
Thursday,
March 29, 2018
• Euro zone German Unemployment Change (000's) (Mar)
• U.K. Mortgage Approvals (Feb)
• U.K. Gross Domestic Product (YoY) (4Q F)
• Euro zone German Consumer Price Index (YoY) (Mar P)
• U.S. PCE Core (YoY) (Feb)
• U.S. University of Mich. Sentiment (Mar F)
• Japan Jobless Rate (Feb)
• Japan Industrial Production (YoY) (Feb P)
Friday,
March 30, 2018
• Japan Housing Starts (YoY) (Feb)
• Japan Construction Orders (YoY) (Feb)
Disclaimer
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19
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