The Week that was…
20
th
May to 24
th
May
2
Indian Economy
• According to the Organisation for Economic Co-operation and Development (OECD), the
gross domestic product (GDP) of the Indian economy is expected to rise to 7.2% in FY19
and approach 7.5% in FY20 on the back of lower domestic inflationary pressures,
improved financial conditions and rising rural consumption. In addition, OECD opined that
lower global crude oil prices and recent strengthening of the rupee against the greenback
will reduce pressure on domestic inflationary pressures and help contain the current
account deficit.
• Government data showed that, around 1.37 crore jobs were created in the formal sector
during FY19. In addition, around 8.27 lakh Employees' Provident Fund (EPF) subscribers
were added in Mar-19. During the last fiscal, Jul-18 witnessed the highest subscription to
the pension fund which stood at around 14.21 lakh. Meanwhile 1.14 lakh crore ceased
their subscription to Employees' Provident Fund Organization which can be attributed to
loss of jobs or superannuation.
• A report from a major domestic credit rating agency showed that steel production in the
country may be severely impacted if there is a delay in the auction of iron ore mines whose
licenses are expected to decline by Mar 2020. Subsequently, the credit profile of the non-
integrated steel players and merchant miners may also come under pressure.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 24-May-19 1 Week Return YTD Return
S&P BSE Sensex 39,434.72 3.97% 9.33%
Nifty 50 11,844.10 3.83% 9.04%
S&P BSE Mid-Cap 14,945.24 4.45% -3.19%
S&P BSE Small-Cap 14,699.56 5.85% -0.05%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
20-May-19 1,516 334 4.54
21-May-19 605 1,198 0.51
22-May-19 983 818 1.20
23-May-19 800 990 0.81
24-May-19 1,449 362 4.00
Source: NSE
• The election result hogged the limelight
during the week and the Sensex
breached all-time highs to close at
39,434.72 points. Initially, market got
support after the exit poll results
suggested that the ruling party would
win the elections comfortably and a
stable government would be formed at
the Centre. Later, the outcome of the
election result indicated a clearer
picture that the previous government
had garnered a comfortable win and
investors became optimistic that the
government would continue with the
previous reform measures and focus
more on structural reforms and job
creation to support the growth
trajectory.
• However, the upside was limited as
some of the investors preferred to book
profit following a steep rise in the
market. Rise in crude oil prices also
acted spoilsport.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
28.91 29.44 27.93 76.41
P/B
3.04 3.79 2.47 2.05
Dividend Yield
1.20 1.11 0.96 0.94
Source: BSE, NSE
Value as on May24, 2019
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
19,059.90 4.56% -2.39%
S&P BSE Bankex
35,199.19 7.06% 4.83%
S&P BSE CD
24,262.69 2.12% 1.38%
S&P BSE CG
19,675.73 10.92% 7.72%
S&P BSE FMCG
11,560.19 -0.35% -2.90%
S&P BSE HC
13,395.55 1.47% -7.49%
S&P BSE IT
15,122.46 -1.86% -4.96%
S&P BSE Metal
10,789.93 3.16% -4.96%
S&P BSE Oil & Gas
15,354.23 4.72% 2.49%
S&P BSE Teck
7,498.63 -0.95% -4.71%
S&P BSE Power
1,961.27 5.31% -2.31%
S&P BSE Realty
2,166.21 10.75% 5.19%
Source: Thomson Reuters Eikon
*
Value as on May
24, 2019
• On the BSE sectoral front, barring S&P BSE
IT (-1.86%), S&P BSE Tec k (-0.95%) and
S&P BSE FMCG (-0.35%), all the indices
closed in the green.
• S&P BSE Capital Goods (10.92%) and S&P
BSE Realty (10.75%) were the major winners
followed by S&P BSE Bankex (7.06%) and
S&P BSE Power (5.31%).
• The sectors were boosted on expectations
that economic policies and reform measures
would continue to reverse economic
slowdown.
Indian Derivatives Market Review
• Nifty May 2019 Futures were at 11,869.4, a premium of 25.30 points, above the spot
closing of 11,844.10. The total turnover on NSE’s Futures and Options segment for the
week stood at Rs. 52.01 lakh crore as against Rs. 30.43 lakh crore for the week to May 17.
• The Put-Call ratio stood at 0.84 compared with the previous week’s close of 0.69.
• The Nifty Put-Call ratio stood at 1.23 against the previous week’s close of 1.36
• .
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
5.88 5.99 6.19 6.48
91 Day T-Bill
6.25 6.35 6.36 6.78
07.32% 2024, (5 Yr GOI)
6.96 7.12 7.35 --
07.26% 2029, (10 Yr GOI)
7.23 7.36 7.43 --
Source: Thomson Reuters Eikon Value as on May 24, 2019
• Bond yields fell earlier during the
week after exit polls projected that
the current government will continue
to serve for the second term. Gains
were extended after the outcome of
the general elections came in line
with the exit polls raising expectations
that the current government will
continue with its reform agenda.
• Market participants also remained
hopeful that the Reserve Bank of
India will increase liquidity infusion
into the banking system by stepping
up open market purchase of
government bonds. However, profit
booking by market participants
capped the gains. This was the
biggest weekly fall since Dec 21,
2018.
• Yields on the 10-year benchmark
paper (7.26% GS 2029) fell 13 bps to
close at 7.23% compared with the
previous close of 7.36%.
7.20
7.26
7.32
20-May 21-May 22-May 23-May 24-May
Yield in %
10 -Yr Benchmark Bond ( % )
Source: CCIL
Domestic Debt Market (Spread Analysis)
7
Maturity
G-Sec Yield
(%)
Corporate Yield
(%)
Spread
bps
1 Year 6.46 8.24 178
3 Year 6.88 8.08 120
5 Year 7.08 8.31 123
10 Year 7.36 8.55 119
Source: Thomson Reuters Eikon
Value as on May 24, 20 19
• Yields on gilt securities fell across the
maturities in the range of 5 bps to 17 bps
barring 2-year paper that increased 1 bps.
• Corporate bond yields fell across the
maturities in the range of 3 bps to 21 bps
barring 1-year paper that increased 1 bps.
The maximum decline was witnessed on 2-
year paper and the minimum decline was
witnessed on 7-year paper.
• Difference in spread between AAA corporate
bond and gilt expanded across the
maturities in the range of 2 bps to 11 bps
barring 2-, 3- and 15-year papers that
contracted by up to 4 bps.
-20
-10
0
5.80
7.00
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 24-May-19 17-May-19
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• Reserve Bank of India (RBI) notified the revised Voluntary Retention Route (VRR) for
investments by Foreign Portfolio Investors (FPIs), which would be opened for allotment
from May 29, 2019. The investment limit shall be Rs. 54,606.55 crores, under the VRR–
Combined category, which allows investment in both government securities and corporate
debt. The minimum retention period shall be three years. During this period, FPIs shall
maintain a minimum of 75% of the allocated amount in India. Investment limits shall be
available ‘on tap’ and allotted on ‘first come, first served’ basis.
• Capital market regulator Securities and Exchange Board of India (SEBI) allowed mutual
funds to participate in all the exchange-traded commodities barring the ‘Sensitive
Commodities’. Essential commodities under the agriculture segment are regarded as
sensitive. Besides mutual funds, gold exchange traded funds have also been approved to
participate but only in gold derivatives. However, SEBI has barred mutual funds from
becoming a party to physical delivery.
• According to media reports, SEBI is investigating if mutual fund companies cut token bond
deals to lift scheme returns. As such, the regulator has asked fund houses to furnish details
of their latest deals in debt papers. This includes Inter Scheme Transfers and those which
resulted in increasing bond valuations.
Regulatory Updates in India (contd..)
9
• As per media reports, the Insurance Regulatory and Development Authority of India (IRDAI)
has published a list of diseases that can not be omitted from health insurance policies. The
list includes neurodevelopmental disorders, mental illness problems, psychological
disorders, genetic diseases, puberty and menopause-related disorders. The insurance
regulator said all health policies filed and cleared post Apr 1, 2019, must follow the new
guidelines. In addition, all prevailing policies which will not be in line with the guidelines
would cease to exist from Apr 1, 2020.
• As per media reports, IRDAI has proposed to hike third-party (TP) insurance premium for
cars, two-wheelers in the current fiscal. As per the proposal, IRDAI will increase the TP
premium rates for cars below 1000 cc to Rs. 2,120 from the existing Rs. 1,850 for FY20.
Similarly, for cars falling between 1,000 cc and 1,500 cc, premium is being proposed to be
increased to Rs. 3,300 from the existing Rs. 2,863. Insurance premium for two-wheelers
below 75 cc is proposed at Rs. 482, up from Rs. 427. The regulator has also proposed to
increase premium for two-wheelers falling between 75 cc and 350 cc. Rate increase has
also been proposed for taxis, buses (including school buses), trucks and on tractors
Global News/Economy
• Minutes of the U.S. Federal Reserve’s monetary policy review, which ended on May 1,
showed that policymakers of the U.S. central bank are in no hurry to alter the path of interest
rates. The U.S. Fed is expected to remain patient even if there is an improvement in global
economic and financial conditions as U.S. economic growth is expected to remain moderate
and domestic inflationary pressures muted.
• According to a Commerce Department report, U.S. new home sales pulled back by much
more than anticipated in Apr 2019. The Commerce Department said new home sales
declined 6.9% to an annual rate of 673,000 in Apr 2019 after spiking 8.1% to an upwardly
revised rate of 723,000 (692,000 originally reported) in Mar 2019.
• Minutes of European Central Bank’s (ECB) monetary policy review held on Apr 9 and Apr 10
showed that policymakers are less confident that the euro zone economy will witness upbeat
economic growth in the second half of the year which it attributed to the recent downbeat
economic data.
• Data from the Office for National Statistics showed that U.K. consumer price inflation
exceeded the Bank of England's target in Apr 2019 for the first time since Dec 2018.
Consumer price inflation rose to 2.1% in Apr 2019 from 1.9% in Mar 2019. However, core
inflation remained steady at 1.8%.
.
10
Global Equity Markets
11
Global Indices
Indices
24-May-19
1-Week
Return
YTD
Return
Dow Jones
25,585.69 -0.69% 9.68%
Nasdaq 100
7,300.96 -2.70% 15.34%
FTSE 100
7,277.73 -0.96% 8.17%
DAX Index
12,011.04 -1.86% 13.75%
Nikkei Average
21,117.22 -0.63% 5.51%
Straits Times
3,169.89 -1.11% 3.30%
Source: Thomson Reuters Eikon Value as on May 24, 2019
U.S.
• The lingering U.S.-China trade dispute
continued to keep U.S. markets under
pressure during the week. According to
media reports, China is re-examining
the entire bilateral economic relationship
with the U.S. in light of the recent move
by the former to blacklist a Chinese tech
giant.
• However, further losses were restricted
as trade concerns eased to some extent
after the U.S. President expressed
hopes of a U.S.-China trade deal.
Europe
• European markets could not escape the woes of the long-drawn trade war between the
U.S. and China. Renewed Brexit worries also weighed on the market sentiment after
British Prime Minister decided to resign in Jun after her new Brexit deal was rejected.
Asia
• Asian markets reflected weakness of global peers as trade worries persisted. Renewed
worries over Brexit also played spoilsport. On the economic data front, the latest survey
from Nikkei revealed in its preliminary report that the manufacturing sector in Japan fell
into contraction in May 2019 which again added to the losses.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury bond
bond fell 6 bps to 2.33% compared with
the previous week’s close of 2.39%.
• U.S. Treasury prices fell initially after
U.S. reportedly eased trade restrictions
on a bellwether Chinese
telecommunications equipment maker.
• However, the trend reversed due to
worsening of trade tensions between
U.S. and China following reports that
the U.S. government is considering
imposing restrictions on a Chinese video
surveillance firm’s ability to buy
American technology.
• Further, continued concerns about
global growth improved the safe haven
appeal of U.S. Treasuries. Also, reports
showing unexpected fall in U.S. existing
home sales in Apr 2019 added to the
gains. However, some profit booking at
the end of the week capped the gains.
2.26
2.36
2.46
20-May 21-May 22-May 23-May 24-May
Yield in %
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($/Barrel) 68.97 74.93
Gold ($/Oz) 1,284.65 1,277.15
Gold (Rs/10 gm) 31,591 31,911
Silver ($/Oz) 14.56 14.39
Silver (Rs/Kg) 36,343 36,383
Source: Thomson Reuters Eikon *Value as on
May 24, 2019
Gold
• Gold prices increased as equity markets
across Asia and Europe tumbled on
aggravating U.S.-China trade tension.
Further, weak sales data for new U.S.
single-family homes in Apr 2019 fuelled
hopes of a rate cut by the U.S. Federal
Reserve which added to the gains.
Brent Crude
• Brent crude prices fell after American
Petroleum Institute (API) reported a surge
of 2.4 million barrels in U.S. crude
inventories in the week ended May 17,
2019. Prices fell further as escalating
U.S.-China trade feud triggered global
growth worries. However, reports that
OPEC has hinted of continuing with its
production cut plan restricted the losses.
Baltic Dry Index
• The Baltic Dry Index registered a rise on
the back of improved capesize and
panamax activities.
9.40
9.60
9.80
10.00
10.20
10.40
24-Apr-19 4-May-19 14-May-19 24-May-19
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
-7.95%
0.59%
1.18%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
69.61 70.17
Pound Sterling
88.30 89.73
EURO
77.97 78.43
100 Yen
63.55 64.03
Source: RBI Figures in INR , *
Value as on May 24, 2019
Rupee
• The Indian rupee strengthened against
the U.S. dollar as the outcome of the
general elections came in line with the
exit polls boosting market sentiment.
Euro
• The euro strengthened against the
greenback on hopes of rate cut this year
by the U.S. Federal Reserve due to
downbeat U.S. economic data.
Pound
• The pound fell against the U.S. dollar
after U.K. Prime Minister’s (PM) last
Brexit deal was rejected and
subsequently the U.K. PM decided to
resign in Jun. However, hopes that a new
leader could unblock the Brexit deadlock
neutralised most of the losses.
Yen
• The yen rose against the greenback as
persistent U.S.-China trade fears and
Brexit concerns improved its safe haven
appeal.
9.70
9.80
9.90
10.00
10.10
10.20
10.30
24-Apr-19 4-May-19 14-May-19 24-May-19
USD GBP Euro JPY
Source: RBI
Currency Pri ces ( i n terms of INR)
Rebased to 10
Currency Movement
-0.79%
-1.59%
-0.59%
-0.75%
15
The Week that was…
20
th
May to 24
th
May
The Week that was (May 20 – May 24)
16
Date Events Present Value Previous Value
Monday,
May 20, 2019
• Japan Industrial Production (YoY) (Mar F) -4.30% -4.60%
• Japan Housing Loans (YoY) (1Q) 2.40% 2.40%
Tuesday,
May 21, 2019
• Eurozone Consumer Confidence (May A) -6.50% -7.30%
• U.S. Existing Home Sales (MoM) (Apr) -0.40% -4.90%
• Japan Machine Orders (YoY) (Mar) -0.70% -5.50%
Wednesday,
May 22, 2019
• U.K. Consumer Price Index (YoY) (Apr) 2.10% 1.90%
• U.K. House Price Index (YoY) (Mar) 1.40% 1.00%
Thursday,
May 23, 2019
• Japan National Consumer Price Index (YoY) (Apr) 0.90% 0.50%
• Japan Nikkei Manufacturing PMI (May P) 49.60 50.20
• Germany Gross Domestic Product (YoY) (1Q F) 0.70% 0.70%
• U.S. Initial Jobless Claims (May 18) 211k 212k
• U.S. Markit Services PMI (May P) 50.90 53.00
• Germany Markit Services PMI (May P) 55.00 55.70
• Germany IFO Current Assessment (May) 100.60 103.40
• Eurozone Markit Services PMI (May P) 52.50 52.80
Friday,
May 24, 2019
• U.S. Durable Goods Orders (Apr P) -2.10% 1.70%
• Japan All Industry Activity Index (MoM) (Mar) -0.40% -0.20%
17
The Week ahead
27
th
May to 31
th
May
18
The Week Ahead
Day Event
Monday,
May 27, 2019
• Germany Retail Sales (YoY) (Apr)
Tuesday,
May 28, 2019
• U.S. Consumer Confidence Index (May)
• Germany GfK Consumer Confidence (Jun)
• U.S. House Price Index (MoM) (Mar)
Wednesday,
May 29, 2019
• Germany Unemployment Change (000's) (May))
Thursday,
May 30, 2019
• U.S. Gross Domestic Product Annualized (QoQ) (1Q S)
• U.K. GfK Consumer Confidence (MAY)
• U.S. Initial Jobless Claims (May 25)
• Japan Industrial Production (YoY) (Apr P)
Friday,
May 31, 2019
• India GDP Estimate (Q4FY19)
• Index of Eight Core Industries (Apr 19)
• Germany Consumer Price Index (YoY) (May P)
• U.S. Personal Consumption Expenditure Core (YoY) (Apr)
• China Manufacturing PMI (May)
• Japan Consumer Confidence Index (May)
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19
