Mutual Fund News of the Week 14th May’18 to 18th May’18

News U Can Use

May 18, 2018

The Week that was…

May to 18

May

Indian Economy

• The Consumer Price Index (CPI)-based inflation or retail inflation grew 4.58% in Apr 2018,

up from 4.28% in Mar 2018 and from 2.99% in Apr 2017. The increase reflects increase in

prices of fruits and vegetables by 9.65% and 7.29%, respectively. However, prices of

pulses and products, and sugar and confectionery, declined 12.35% and 4.05%,

respectively. The retail inflation growth remained above the Reserve Bank of India’s (RBI)

medium-term target of 4% for the sixth consecutive month. The Consumer Food Price

Index also grew 2.80% in Apr 2018, down from 2.81% in the previous month and up from

0.61% in the same month of the previous year.

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

rose to four-month high to 3.18% in Apr 2018 from a provisional 2.47% in Mar 2018, but

down from 3.85% in Apr 2017. The WPI Food Index also increased to 0.67% in Apr 2018

from -0.07% in Mar 2018. The inflation for fuel items surged to 7.85% in Apr 2018 from

4.70% in Mar 2018.

• India’s export during the month of Apr 2018 grew 5.17% YoY to $25.91 billion from $24.64

billion in Apr 2017. Meanwhile, imports grew 4.60% YoY to $39.63 billion in Apr 2018 from

$37.88 billion in the same period of the previous year. Trade deficit widened to $13.72

billion in Apr 2018 as against $13.25 billion in Apr 2017 and $13.69 billion in Mar 2018.

• The government has announced a national wind-solar hybrid policy to promote new

projects and for hybridisation of the existing ones. The government targets to achieve 175

gigawatt of installed capacity from renewable energy sources by 2022.

Indian Equity Market

Domestic Equity Market Indices

Indices 18-May-18 1 Week Return YTD Return

S&P BSE Sensex 34,848.30 -1.93% 3.06%

Nifty 50 10,596.40 -1.94% 1.54%

S&P BSE Mid-Cap 15,895.68 -2.74% -10.88%

S&P BSE Small-Cap 17,326.78 -2.76% -10.13%

Source: MFI Explorer

NSE Advance/Decline Ratio

Date Advances Declines

Advance/Decline Ratio

14-May-18 523 1,283 0.41

15-May-18 594 1,200 0.50

16-May-18 646 1,143 0.57

17-May-18 932 860 1.08

18-May-18 467 1,335 0.35

Source: NSE

• Indian equity markets slipped for the

fourth consecutive session on May

18 to end the week on a subdued

note. Increase in both wholesale and

retail-price based inflation in Apr

2018 raised concerns over probable

rate hike by the Monetary Policy

Committee in its forthcoming

meeting.

• Market participants also maintained a

cautious stance over development in

U.S.-China trade negotiations.

Growing speculations over faster

pace of rate hike by the U.S. Federal

Reserve renewed concerns over

foreign fund outflow from the

domestic economy. The recent

strength in global crude oil prices,

with Brent crude surpassing the $80

per barrel level, resulted in fiscal

deficit worries which added to the

losses.

Ratios

S&P BSE

Sensex

Nifty 50

S&P BSE

Mid Cap

S&P BSE

Small Cap

P/E

23.49 26.27 31.90 77.14

P/B

3.03 3.64 2.72 2.48

Dividend Yield

1.18 1.21 0.92 0.68

Source: BSE, NSE Value as on May 18

, 2018

Indian Equity Market (contd.)

Sectoral Indices

Indices

Last Returns (in %)

Closing* 1-Wk 1-Mth

S&P BSE Auto

24,348.41 -3.68% -3.98%

S&P BSE Bankex

28,944.66 -2.51% 2.79%

S&P BSE CD

21,547.46 -1.90% -5.35%

S&P BSE CG

18,438.81 -4.06% -3.75%

S&P BSE FMCG

11,340.69 1.14% 2.94%

S&P BSE HC

13,018.30 -2.63% -5.23%

S&P BSE IT

13,204.35 0.01% 4.73%

S&P BSE Metal

13,615.47 -3.10% -4.09%

S&P BSE Oil & Gas

14,299.61 -3.07% -2.17%

Source: Thomson Reuters Eikon

*Value as on May 18, 2018

• On the BSE sectoral front, barring S&P

BSE FMCG and S&P BSE IT, all the

indices closed in the red. S&P BSE Capital

Goods was the major loser, down 4.06%,

followed by S&P BSE Auto and S&P BSE

Metal, which fell 3.68% and 3.10%,

respectively. S&P BSE Oil & Gas and S&P

BSE Healthcare slipped 3.07% and 2.63%,

respectively.

• Rate sensitive sector came under pressure

amid speculation over probable rate hike

by the Monetary Policy Committee in its

forthcoming meeting, owing to increase in

retail price inflation.

Indian Derivatives Market Review

• Nifty May 2018 Futures were at 10,597.05 points, a premium of 0.65 points, above the

spot closing of 10,596.40. The turnover on NSE’s Futures and Options segment stood at

Rs. 46.07 lakh crore as against Rs. 31.04 lakh crore on May 11.

• The Put-Call ratio stood at 0.85 compared with the previous week’s close of 0.89.

• The Nifty Put-Call ratio stood at 1.36 compared with the previous week’s close of 1.66.

Domestic Debt Market

Debt Indicators

(%)

Current

Value

1-Wk

Ago

1-Mth

Ago

6-Mth

Ago

Call Rate

5.97 5.92 5.88 5.88

91 Day T-Bill

6.40 6.26 6.07 6.11

7.80% 2021, (5 Yr GOI)

7.60 7.62 7.20 6.79

7.17% 2028, (10 Yr GOI)

7.83 7.73 7.54 --

Source: Thomson Reuters

Eikon

Value as on May 18, 2018

• Bond yields rose following increase in

consumer and wholesale price

inflation in Apr 2018, which increased

concerns of rate hike in the near

term. Yields rose further following

political uncertainty in Karnataka after

outcome of its legislative assembly

elections.

• Also, investors remained cautious on

the back of increasing U.S. Treasury

yields and global crude oil prices.

• However, losses were restricted after

the RBI’s Open Market Operation to

purchase bonds was fully accepted.

• Yield on the 10-year benchmark

paper (7.17% GS 2028) rose 10 bps

to close at 7.83% from the previous

week’s close of 7.73% after trading in

a range of 7.71% to 7.95%.

7.75

7.85

7.95

14-May 15-May 16-May 17-May 18-May

Yield in %

10 -Yr Benchmark Bond ( % )

Source: CCIL

Domestic Debt Market (Spread Analysis)

Maturity

G-Sec Yield

(%)

Corporate Yield

(%)

Spread

bps

1 Year 6.90 8.35 145

3 Year 7.60 8.46 86

5 Year 7.77 8.56 79

10 Year 7.84 8.52 69

Source: Thomson Reuters Eikon

Value as on May 18, 2018

• Yields on gilt securities increased across

the maturities by up to 17 bps, barring 3 to

5 years’ maturities that fell by up to 3 bps.

• Corporate bond yields expanded across

the maturities in the range of 5 bps to 11

bps. The maximum increase was

witnessed on 1-year paper.

• Spread between AAA corporate bond and

gilt expanded across the maturities in the

range of 2 bps to 8 bps, barring 7-,8- and

15-year maturities that contracted in the

range of 5 bps to 10 bps. Spread closed

steady on 10-year paper.

-15

5.80

7.10

8.40

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

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

Change in bps 18-May-18 11-May-18

Yield in %

Change in bps

Source: Thomson Reuters Eikon

Regulatory Updates in India

• The Union Cabinet has approved the National Policy on Biofuels made by Ministry of New

and Renewable Energy during the year 2009. The policy categorises biofuels into three

generations. Basic Biofuels are the First Generation (1G) that produces bioethanol from

molasses and biodiesel from non-edible oilseeds. Advanced Biofuels are the Second

Generation that produces ethanol from municipal solid waste. Third Generation (3G) fuels

produces bio-CNG. This policy aims to enable extension of appropriate financial and fiscal

incentives under each category.

• The Union cabinet has approved a new two-tier mechanism to quickly resolve commercial

disputes of central public-sector enterprises, curtailing the need to file cases before courts.

The new mechanism will replace the existing Permanent Machinery of Arbitration

mechanism. A committee of secretaries of relevant administrative and secretary department

of legal affairs will look at the matter at the first-tier level. If the dispute remains unresolved,

it will be referred to the Cabinet Secretary at the second level (tier) and the decision will be

final.

• The Union cabinet has approved signing of Exchange of Information and Assistance in

Collection agreement between India and Brunei. This will enable both the countries to

exchange information relevant to the administration and enforcement of the domestic tax

laws.

Regulatory Updates in India (contd..)

• RBI has issued detailed guidelines on Net Stable Funding Ratio (NSFR). The guidelines

come on the wake of maintaining a stable funding profile against the composition of their

assets and off-balance sheet activities. Amid global financial crisis that started in 2007, the

Basel Committee on Banking Supervision had proposed certain reforms to strengthen

global capital and liquidity regulations. The reforms aim at promotion of a more resilient

banking sector. The detailed guidelines issued on NFSR are in line with global norms

prescribed by the Basel Committee.

• RBI has modified the norms for setting up of International Financial Services Centres

Banking Units (IBUs). It stated that the parent bank will have to provide and maintain a

minimum capital of $20 million to its IBU at all times. A scheme for setting up of IBUs by

banks in IFSCs were framed by RBI in Apr 2015. RBI stated that the modifications have

been made based on suggestions from stakeholders to consider minimum prescribed

regulatory capital at the parent level rather than at the IBU level.

• The food minister announced that the government has decided not to increase the prices of

food grains sold through public distribution system (PDS) for one more year. As per the

National Food Security Act, food grains via ration shops are supplied at a highly subsidised

rate. Rice is supplied for Rs. 3 per kg, wheat for Rs. 2 and coarse grains for Rs. 1 per kg via

PDS.

Global News/Economy

• A report from the Commerce Department showed that U.S. retail sales came in line with

market expectations and grew 0.3% in Apr 2018 as against an upwardly revised growth of

0.8% in Mar 2018 (0.6% gain originally reported). The slowdown in retail sales growth came

in as sales for motor vehicle and parts dealers inched up 0.1% in Apr down from a gain of

2.1% in Mar 2018.

• A report from the Commerce Department showed that U.S. housing starts fell 3.7% to an

annual rate of 1.287 million in Apr 2018 as against a gain of 3.6% to an upwardly revised

1.336 million (1.319 million originally reported) in Mar 2018. Housing starts missed market

expectations due to significant decline in multi-family starts that plunged 11.3% to a rate of

393,000 in Apr as against a gain of 13.6% to 443,000 in Mar.

• According to data from Destatis, Gross Domestic Product (GDP) growth rate of Germany

slowed to 0.3% in the first quarter of 2018 from 0.6% in the last quarter of 2017. The

slowdown in growth rate was due to weak foreign trade where both exports and imports

decreased. On a yearly basis, GDP rose 2.3% in first quarter of 2018 following 2.9% growth

in the fourth quarter of 2017.

• A preliminary report from the Cabinet Office showed that Japan's GDP was down 0.2% QoQ

in the first three months of 2018 as against downwardly revised gain of 0.1% in the prior

three months period (0.4% gain originally reported).

Global Equity Markets

Global Indices

Indices

18-May-18

1-Week

Return

YTD

Return

Dow Jones

24,715.09 -0.47% -0.44%

Nasdaq 100

6,866.25 -1.24% 5.45%

FTSE 100

7,778.79 0.70% 1.71%

DAX Index

13,077.72 0.59% 1.60%

Nikkei Average

22,930.36 0.76% 0.73%

Straits Times

3,529.27 -1.15% 3.71%

Source: Thomson Reuters Eikon

Value as on May 18, 2018

U.S.

• U.S. markets fell during the week under

review due to rise in U.S. Treasury

yields that touched the highest level

since 2011.

• Market participants also remained

cautious over the outcome of trade talk

between the U.S. and China and

ongoing geopolitical tensions. The

Federal Reserve’s rate hike proposition

also dented sentiment.

Europe

• European markets traded up on stronger corporate earning numbers and economic

reports. However, rising U.S. Treasury yields and ongoing geopolitical concerns restricted

gains. Uncertainty on U.S. and China trade talks and political development in Italy also

dented sentiment.

Asia

• Asian markets witnessed a mixed trend during the week. Initially market sentiment was

boosted following higher than expected growth in China’s industrial production for Apr.

Later, investors became cautious over outcome of trade talks between the U.S. and

China. Uncertainty over the fate of planned summit between Korea and U.S. in Jun 2018

also kept investors on the side lines.

Global Debt (U.S.)

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

rose 10 bps to close at 3.07% from the

previous week’s close of 2.97%.

• U.S. Treasury prices fell as trade

tensions eased to some extent after the

U.S. President pledged to help a

Chinese telecommunications company

that has been penalised for violating

U.S. sanctions with Iran.

• Prices fell further due to surge in U.S.

retail sales in Apr 2018 that came in line

with market expectations, thereby

indicating a pick-up in U.S. economy

growth in the second quarter of 2018.

• However, further losses were restricted

as market participants bought U.S.

treasuries on worries about borrowing

by the U.S. government.

2.97

3.01

3.05

3.09

3.13

14-May 15-May 16-May 17-May 18-May

Yield in %

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)

79.37 78.36

Gold ($/Oz)

1,291.50 1,317.68

Gold (Rs/10 gm)

30,921 31,379

Silver ($/Oz)

16.42 16.62

Silver (Rs/Kg)

39,650 39,687

Source: Thomson Reuters

Eikon *Value as on May 18, 2018

Gold

• Gold prices traded lower as growing

speculation over faster pace of rate hike

by the U.S. Federal Reserve weighed

on the precious metal. Nonetheless,

gold prices found support from

uncertainty over the fate of planned

summit between North Korea and U.S.

in Jun 2018.

Crude

• Brent crude prices continued to gain,

trading above $80 per barrel level.

Concerns over fall in global supply

following U.S. sanctions on Iran

continued to lend support to oil prices.

Decline in Venezuela's crude production

further supported prices.

Baltic Dry Index

• The Baltic Dry Index fell 13.52% WoW

due to sluggish capsize and panama

activities.

9.30

9.64

9.98

10.32

10.66

11.00

18-Apr-18 28-Apr-18 8-May-18 18-May-18

Global Commodity Movement

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

Global Commodity Prices

Rebased to 10

Source: Thomson Reuters Eikon

1.29%

-1.99%

-1.20%

Currencies Markets

Movement of Rupee vs Other Currencies

Currency Last Closing* 1-Wk Ago

US Dollar

67.96 67.22

Pound Sterling

91.88 90.88

EURO

80.28 80.09

100 JPY

61.31 61.43

Source: RBI Figures in INR , *Value as on May 18, 2018

Rupee

• The Indian rupee fell against the U.S.

dollar following surge in global oil prices.

Political uncertainty in Karnataka further

dampened sentiment.

Euro

• Euro weakened against the greenback

following increase in U.S. retail sales in

Apr 2018. Softer than expected growth in

Germany in the first quarter of 2018 and

political uncertainty in Italy pulled down

the euro further.

Pound

• Pound fell against the U.S. dollar

following doubts on whether the Bank of

England will increase interest rates this

year and weak U.K. wage growth in three

months to Mar 2018.

Yen

• Yen weakened against the U.S. dollar

following rise in U.S. Treasury yields

during the week. Rise in U.S. retail sales

in Apr 2018 added to the pain.

9.60

9.80

10.00

10.20

10.40

18-Apr-18 3-May-18 18-May-18

USD GBP Euro JPY

Source: RBI

Currency Prices ( in terms of INR)

Rebased to 10

Currency Movement

1.10%

0.24%

-0.20%

The Week that was…

May to 18

May

The Week that was (May 14 – May 18)

Date Events Present Value Previous Value

Monday,

May 14, 2018

• Japan Machine Tool Orders (YoY) (Apr) 22.0% 28.1%

• India WPI Inflation (Apr) 3.18% 2.47%

Tuesday,

May 15, 2018

• China Retail Sales (YoY) (Mar) 9.4% 10.1%

• China Industrial Production (YoY) (Mar) 7.00% 6.00%

• Japan Tertiary Industry Index (MoM) (Apr)

-0.30% 0.00%

• Germany Gross Domestic Product w.d.a (YoY) (Q1) (P) 2.3% 2.9%

• U.K. ILO Unemployment Rate (3M) (Mar) 4.2% 4.2%

• India Trade Deficit (Apr)

$13.72B

$13.69B

Wednesday,

May 16, 2018

• China House Price Index (Apr)

4.70% 4.90%

• Euro Zone Consumer Price Index - Core (MoM) (Apr) 0.2% 1.4%

• U.S. Housing Starts Change (Apr) -3.7% 3.6%

Thursday,

May 17, 2018

• U.S. Initial Jobless Claims (May 11)

222K 211K

• Euro Zone Construction Output w.d.a (YoY) (Mar)

0.8% 0.2%

• China Foreign Direct Investment (YTD) (YoY) (Apr)

0.1% 0.5%

• U.S. Philadelphia Fed Manufacturing Survey (May) 34.40 23.20

• Japan National Consumer Price Index (YoY) (Apr) 0.6% 1.1%

Friday,

May 18, 2018

• India Forex Reserves, USD $417.70B $418.94B

• Germany Wholesale Price Index (YoY) (Apr) 1.4% 1.2%

The Week Ahead

May to 25

May

The Week Ahead

Day Event

Monday,

May 21, 2018

• U.S. Chicago Fed National Activity Index (Apr)

Tuesday,

May 22, 2018

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

• U.S. Redbook index (YoY) (May 18)

• U.S. API Weekly Crude Oil Stock

Wednesday,

May 23, 2018

• Japan Nikkei Manufacturing PMI (May) (P)

• Germany Markit Manufacturing PMI (May) (P)

• Euro Zone Markit Manufacturing PMI (May) (P)

• U.S. Markit Manufacturing PMI (May) (P)

• Euro Zone Consumer Confidence (May) (P)

Thursday,

May 24, 2018

• Japan Leading Economic Index (Mar)

• U.K. Gfk Consumer Confidence Survey (Jun)

• U.K. Retail Sales (YoY) (Feb)

• U.S. Initial Jobless Claims (May 18)

Friday,

May 25, 2018

• U.K. Gross Domestic Product (YoY) (Q1) (P)

• U.K. BBA Mortgage Approvals (Apr)

• U.S. Durable Goods Orders (Apr)

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