Mutual Fund News of the Week 21st May’18 to 25th May’18

News U Can Use

May 25, 2018

The Week that was…

May to 25

May

Indian Economy

• According to the ministry of finance, India’s net direct tax collection in FY18 stood at Rs.

10.03 lakh crore. This corresponds to an increase of 18% on a yearly basis. India’s net

direct tax collection rate was thus the fastest in the last seven fiscal years.

• Data from a major domestic credit rating agency showed that non-performing assets

(NPAs) of 26 banks (of which 14 are state-run banks and 12 are private banks) in the

Indian banking system grew to Rs. 7.31 lakh crore in Mar 2018 from Rs. 4.82 lakh crore in

the same period of the previous year. This corresponds to an increase of more than 50%

during the same time period. State-run banks accounted for nearly Rs. 6.16 lakh crore of

the total NPAs while the remaining Rs. 1.15 lakh crore came from private banks.

• According to a major domestic credit rating agency, growth of the Indian economy may

improve to 7.4% in the fourth quarter of FY18 from 7.2% in third quarter of FY18. The

rating agency attributed the improvement in growth to good rabi crop harvest and

improved corporate earnings. On a separate note, the rating agency added that it expects

a marginal pick up in the services sector activity. The improvement is expected to come on

the back of increase in passengers carried by domestic airlines, cargo handled at major

ports and railway revenue carrying freight.

• The government has made e-way bill for moving goods within a state compulsory from Jun

3, 2018. The inter-state e-way bill was launched on Apr 1 and intra-state e-way bill was

launched on Apr 15. As of now, 20 states and Union Territories have mandated the e-way

bill for intra-state movement of goods.

Indian Equity Market

Domestic Equity Market Indices

Indices

25-May-18

1 Week Return

YTD Return

S&P BSE Sensex

34,924.87 0.22% 2.55%

Nifty 50

10,605.15 0.08% 0.71%

S&P BSE Mid

-Cap 15,904.41 0.05% -10.76%

S&P BSE Small

-Cap 17,151.43 -1.01% -10.81%

Source: MFI Explorer

NSE Advance/Decline Ratio

Date Advances Declines

Advance/Decline Ratio

21-May-18 355 1469 0.24

22-May-18 1029 766 1.34

23-May-18 698 1117 0.62

24-May-18 818 970 0.84

25-May-18 1175 622 1.89

Source: NSE

• Indian equity markets closed

modestly higher. Oil prices eased on

expectations of a gradual increase in

output from Russia and the

Organization of Petroleum Exporting

Countries. This, in turn, provided

relief to the investors.

• However, political uncertainty over

government formation in Karnataka

continued to keep the Indian equity

markets under pressure. Concerns

that the government may ask oil

companies to share the burden of

higher petrol and diesel prices

weighed on market sentiment.

• Decline in one of the mining majors in

one of the sessions following protests

in its copper plant also added to the

woes. Concerns over the U.S.

President cancelling the planned

historic summit with North Korea

capped the gains.

Ratios

S&P BSE

Sensex

Nifty 50

S&P BSE

Mid Cap

S&P BSE

Small Cap

P/E

22.81 26.24 33.85 74.22

P/B

3.01 3.64 2.72 2.46

Dividend Yield

1.16 1.21 0.90 0.72

Source: BSE, NSE Value as on May 25, 2018

Indian Equity Market (contd.)

Sectoral Indices

Indices

Last Returns (in %)

Closing* 1-Wk 1-Mth

S&P BSE Auto

24,191.63

-0.64%

-5.46%

S&P BSE Bankex

29,540.97 2.06% 6.52%

S&P BSE CD

21,111.10

-2.03%

-5.62%

S&P BSE CG

18,605.06 0.90% -2.53%

S&P BSE FMCG

11,223.31

-1.04%

2.11%

S&P BSE HC

13,044.21 0.20% -6.51%

S&P BSE IT

13,549.52 2.61% 1.41%

S&P BSE Metal

13,498.31

-0.86%

-4.46%

S&P BSE Oil & Gas

13,937.92

-2.53%

-3.38%

S&P BSE Realty

2,239.36

-2.38%

-6.84%

S&P BSE Teck

7022.55 2.56% -0.13%

Source: Thomson Reuters Eikon

*Value as on May

25, 2018

• On the BSE sectoral front, the indices

closed on a mixed note. S&P BSE Oil &

Gas (-2.53%) stood as the major loser

followed by S&P BSE Realty (-2.38%),

S&P BSE Consumer Durables (-2.03%),

and S&P BSE FMCG (-1.04%). S&P BSE

Oil & Gas witnessed declines amid

concerns that the government may ask oil

companies to share the burden of higher

petrol and diesel prices.

• S&P BSE IT stood as the major gainer

(2.61%), followed by S&P BSE Teck

(2.56%) and S&P BSE Bankex that grew

2.06%.

Indian Derivatives Market Review

• Nifty May 2018 Futures were at 10,602.4 points, a discount of 2.75 points, below the spot

closing of 10,605.15. The turnover on NSE’s Futures and Options segment stood at Rs.

44.43 lakh crore as against Rs. 46.07 lakh crore on May 18.

• The Put-Call ratio stood at 0.94 compared with the previous week’s close of 0.85.

• The Nifty Put-Call ratio stood at 1.47 compared with the previous week’s close of 1.36.

Domestic Debt Market

Debt Indicators

(%)

Current

Value

Ago

Mth

Ago

Mth

Ago

Call Rate

5.93 5.97 5.88 5.91

91 Day T

-Bill

6.39 6.40 6.16 6.12

7.80% 2021, (5

Yr GOI)

7.66 7.60 7.46 6.76

7.17% 2028, (10

Yr GOI)

7.79 7.83 7.74 --

Source: Thomson Reuters

Eikon

Value as on May 25

, 2018

• Bond yields fell initially on

expectations that the Reserve Bank

of India (RBI) will conduct another

open market purchase of bonds

soon, thereby easing the supply

pressure.

• Yields fell further following decline in

crude oil prices.

• Strong demand at weekly auction on

May 25 added to the gains. However,

renewed concerns over U.S.-China

trade talks capped the gains.

• Yield on the 10-year benchmark

paper (7.17% GS 2028) fell 4 bps to

close at 7.79% from the previous

week’s close of 7.83% after trading in

a range of 7.79% to 7.90%.

7.74

7.82

7.90

21-May 22-May 23-May 24-May 25-May

Yield in %

10 -Yr Benchmark Bond ( % )

Source: CCIL

Domestic Debt Market (Spread Analysis)

Maturity

G-

Sec Yield

(%)

Corporate Yield

(%)

Spread

bps

1 Year 7.21 8.46 125

3 Year 7.81 8.53 72

5 Year 7.95 8.65 70

10 Year 7.95 8.58 63

Source: Thomson Reuters Eikon

Value as on May 25

, 2018

• Yields on gilt securities increased across 1

to 5 year’s maturities and 11-year paper by

up to 19 bps. Yield across the remaining

maturities fell by up to 14 bps.

• Corporate bond yields increased across

the maturities in the range of 2 bps to 22

bps barring 15-year paper that fell 1 bps.

• Spread between AAA corporate bond and

gilt expanded across the maturities in the

range of 3 bps to 21 bps barring 9-year

paper that closed steady. The maximum

expansion was witnessed on 7-year paper

and the minimum on 1- and 3-year papers.

-22

6.00

7.80

9.60

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

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

Change in bps 25-May-18 18-May-18

Yield

in %

Change

in bps

Source: Thomson Reuters Eikon

Regulatory Updates in India

• Clearing corporations at international financial services centres (IFSCs) have been

permitted by Securities and Exchange Board of India (SEBI) to invest their own funds in

foreign sovereign securities holding the highest credit quality. However, the market regulator

has stated that the investment in such securities should not be more than the limit of 10% of

the total investible resources. Meanwhile, total investible resource would exclude funds

lying in core settlement guarantee fund of the clearing corporation.

• The Union Cabinet gave its approval to two separate Memorandums of Understanding with

France and Morocco for cooperation in the field of renewable energy. Both the countries will

now seek expertise and information in the field of renewable energy.

• The Securities and Exchange Board of India (SEBI) has permitted 'segregated nominee

account structure' in international financial services centre (IFSC) for foreign investors to

trade on stock exchanges. The announcement comes on the wake of easing market access

for these investors. In segregated nominee account structure, orders of foreign investors

will be routed through eligible segregated nominee account providers for trading on stock

exchanges in IFSC. Simultaneously, regulatory requirements relating to identification of

end-client, unique client code, order placement at client level, client level margining and

position limits will be followed.

Regulatory Updates in India (contd..)

• SEBI has permitted ‘omnibus’ trades at the Gujarat International Finance Tec-city (GIFT

City). GIFT City is the India’s only international financial service centre (IFSC). Under an

omnibus structure, an investor is permitted to trade through a broker or service provider

with confidentiality. The announcement comes on the wake of further facilitating ease of

market access for foreign investors.

• The government has removed licensing requirement for ships that are chartered by Indian

citizens or companies for trans-shipment of containers. This has been done to boost coastal

trade and promote entrepreneurship.

Global News/Economy

• According to the minutes of U.S. Federal Reserve’s May meeting, two more rate hikes are

expected in 2018 and three in 2019. Interest rate was not hiked at the latest meeting citing

the threat of inflation and uncertainties related to global trade. The Fed has raised interest

rates six times since the financial crisis. Meanwhile, another rate hike of a quarter-point is

expected in Jun 2018. The minutes indicated slight concern over inflation rate and suggested

gradual rate hike in future.

• According to a report from the Office for National Statistics, the second estimate for U.K.’s

gross domestic product (GDP) came in line with initial expectations and inched up 0.1%

sequentially in the first quarter 2018, down from 0.4% gain in the fourth quarter of 2017. This

marked the weakest pace of growth in five years due to soft consumer spending and

business investment. GDP surged 1.2% on yearly basis in the first quarter as against a

growth of 1.4% witnessed in the previous quarter.

• The latest survey from Nikkei showed that the manufacturing sector in Japan continued to

expand in May 2018. The manufacturing Purchasing Managers’ Index stood at 52.5 in May

compared with 53.8 in Apr 2018.

• Data from the Ministry of Economy, Trade and Industry showed that Japan's all industry

activity remained unchanged in Mar 2018. The all industry activity index was flat in Mar 2018

after rising 0.4% in Feb 2018. The indicator for construction activity fell 0.8% and that for

tertiary industry activity fell 0.3%.

Global Equity Markets

Global Indices

Indices

25-May-18

1-Week

Return

YTD

Return

Dow Jones

24,753.09 0.15% -0.29%

Nasdaq 100

6,960.92 1.38% 6.90%

FTSE 100

7,730.28 -0.62% 1.07%

DAX Index

12,938.01 -1.07% 0.52%

Nikkei Average

22,450.79 -2.09% -4.49%

Straits Times

3,513.23 -0.45% 2.42%

Source: Thomson Reuters

Eikon

Value as on May 25, 2018

U.S.

• Notable buying interest was seen in the

U.S. markets during the week as the

minutes of the U.S. Fed's monetary

policy meeting earlier this month was

perceived as dovish by investors.

• The minutes highlighted uncertainty

over the inflation outlook. Gains were

restricted following media reports stating

that U.S. is considering imposing new

duties on Chinese automobile imports.

Europe

• European markets witnessed selling pressure following weak economic data and renewed

concerns over geo political tension. Preliminary estimates of a private survey showed the

eurozone private sector grew at the weakest pace in one-and-a-half years in May. The

private sector of Germany also expanded at a weaker pace in May.

Asia

• Market sentiment was dented as easing concerns over trade war between U.S. and China

were overshadowed by media reports stating that U.S. is considering imposing new duties

on automobile imports. Bourses witnessed further selling pressure after the U.S. President

cancelled the planned historic summit with the North Korean leader. Losses were

restricted by official data showing that Singapore’s GDP grew more than initially estimated

in the first quarter of 2018.

Global Debt (U.S.)

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

fell 13 bps to close at 2.94% from the

previous week’s close of 3.07%.

• U.S. Treasury prices rose during the

week under review after minutes of U.S.

Federal Reserve’s latest policy meeting

indicated that rate hike might occur

moving forward, but not at aggressive

pace.

• Gains were extended as its safe haven

appeal improved after the U.S.

President called off a planned summit

with North Korean leader and warned

that the U.S. military was ready in the

event of any reckless acts by North

Korea.

• Prices rose further as market

participants were concerned over

political uncertainty in Spain.

2.80

3.00

3.20

21-May 22-May 23-May 24-May 25-May

Yield (%)

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)

77.14 79.37

Gold ($/Oz)

1,301.17 1,291.50

Gold (Rs/10 gm)

31,171 30,921

Silver ($/Oz)

16.48 16.42

Silver (Rs/Kg)

40,229 39,650

Source: Thomson Reuters

Eikon *Value as on May

25, 2018

Gold

• Gold prices initially remained weak

following recent negotiations between

China and the U.S. where both the

countries had hinted at putting a halt to

imposing import tariffs and decided to

set up a framework to address trade-

related issues. Later prices gained after

the U.S. President hinted at fresh tariffs

on Chinese imports and decided to

cancel the meeting with North Korea.

Crude

• Brent crude prices plunged on concerns

over higher crude oil supply from OPEC

and Russia after the Russian energy

minister hinted that output restrictions

could be loosened if oil markets move

towards rebalancing.

Baltic Dry Index

• The Baltic Dry Index fell 12.88% on the

back of lower capesize and panamax

activities.

9.20

10.30

11.40

25-Apr-18 5-May-18 15-May-18 25-May-18

Global Commodity Movement

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

Global

Commodity Prices

Rebased to 10

Source: Thomson Reuters Eikon

-2.81%

0.75%

0.37%

Currencies Markets

Movement of Rupee vs Other Currencies

Currency

Last Closing*

1-Wk Ago

US Dollar

68.26 67.96

Pound Sterling

91.22 91.88

EURO

79.88 80.28

100 JPY

62.38 61.31

Source: RBI Figures in INR , *

Value as on

May 25, 2018

Rupee

• The Indian rupee fell against the

greenback as obstructions in talks

between the U.S. and China renewed

fears of trade war.

Euro

• Euro weakened against the greenback

after preliminary data from a private

survey showed that the euro zone

manufacturing Purchasing Managers'

Index fell in May 2018.

Pound

• Pound fell against the U.S. dollar after

U.K. inflation slowed to a 13-month low

in Apr 2018.

Yen

• Yen rose against the greenback as its

safe haven appeal improved after the

U.S. President called off a summit

meeting with North Korean leader.

9.50

10.00

10.50

25-Apr-18 5-May-18 15-May-18 25-May-18

USD GBP Euro JPY

Source: RBI

Currency

Prices (

in terms of INR)

Rebased to 10

Currency Movement

0.44%

-0.72%

-0.49%

1.75%

The Week that was…

May to 25

May

The Week that was (May 21 – May 25)

Date Events

Present Value

Value

Monday,

May 21, 2018

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

0.3 0.3

Tuesday,

May 22, 2018

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

6.23B -0.8b

• U.S. Redbook index (YoY) (May 18)

3.2% 4.9%

• U.S. API Weekly Crude Oil Stock

-1.300M

4.854M

Wednesday,

May 23, 2018

• Japan Nikkei Manufacturing PMI (May) (P)

52.5 53.8

• Germany Markit Manufacturing PMI (May) (P)

56.8 58.1

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

55.5 56.2

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

56.6 56.5

• Euro Zone Consumer Confidence (May) Preliminary

0.2 0.3

Thursday,

May 24, 2018

• Japan Leading Economic Index (Mar)

104.4 105.0

• U.K.

Gfk Consumer Confidence Survey (Jun)

10.7 10.8

• U.K. Retail Sales (YoY)

(Apr)

1.4% 1.3%

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

234K 223K

Friday,

May 25, 2018

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

1.2% 1.2%

• U.K. BBA Mortgage Approvals (Apr)

38.049K 37.606K

• U.S. Durable Goods Orders (Apr)

-1.7% 2.7%

The Week Ahead

May to 1

June

The Week Ahead

Day Event

Monday,

May 28, 2018

•

Japan Jobless Rate (Apr)

Tuesday,

May 29, 2018

•

U.S. Consumer Confidence Index (May)

•

Japan Retail Trade (YoY) (Apr)

•

U.S. S&P/Case-Shiller US Home Price Index (YoY) (Mar)

Wednesday,

May 30, 2018

•

Japan Consumer Confidence Index (May)

•

Eurozone German Retail Sales (YoY) (Apr)

•

Eurozone German Unemployment Change (000's) (May)

•

Eurozone German Consumer Price Index (YoY) (May P)

•

U.S. Gross Domestic Product Annualized (QoQ) (1Q S)

Thursday,

May 31, 2018

•

China Manufacturing PMI (May)

•

Eurozone Consumer Price Index Estimate (YoY) (May)

•

India Quarterly GDP estimate (Q4 of FY18)

•

Index of Eight Core Industries - India (Apr 18)

Friday,

June 1, 2018

•

Eurozone Markit Manufacturing PMI (May F)

•

U.S. Change in Non-farm Payrolls (May)

•

U.S. Unemployment Rate (May)

•

U.S. ISM Manufacturing (May)

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