The Week that was…
27
th
May to 31
st
May
2
Indian Economy
• Government data showed that the growth of the gross domestic product (GDP) of India’s
economy slowed to 5.8% in the quarter ended Mar 2019 from 6.6% in the previous quarter
and 8.1% in the same period of the previous year. This was the slowest rate since the
quarter ended Mar 2014. The growth of the economy thus slowed from a growth rate of
8.0% in Q1FY19 to 7.0% in Q2FY19 and 6.6% in Q3FY19. For the entire fiscal, India’s
GDP grew 6.8%, slower than the growth of 7.2% in the previous fiscal, marking the slowest
growth rate in the last five years. The gross value added (GVA), which is GDP less taxes,
grew 5.7% in Q4FY19 from 6.3% in the previous quarter and 7.9% in the same period of
the previous year.
• The growth of the Indian economy slipped primarily due to a slowdown in the country’s key
sectors like agriculture, industry and manufacturing which can be attributed to declining
growth in private consumption, slow increase in fixed investment and subdued exports.
The growth of the manufacturing sector slowed to 3.1% in Q3FY19 from from 9.5% in the
same quarter of the previous year. The agriculture sector witnessed a contraction of 0.1%
compared with a growth of 6.5% in the same quarter of the previous fiscal. However, the
construction sector, financial, real estate and professional services sector and public
administration, defence and other services’ sector grew in excess of 7% during the quarter
under review.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices
31-May-19
1 Week Return
YTD Return
S&P BSE Sensex
39,714.20 0.71% 10.11%
Nifty 50
11,922.80 0.66% 9.76%
S&P BSE Mid
-Cap 15,096.18 1.01% -2.22%
S&P BSE Small
-Cap 14,867.04 1.14% 1.09%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
27-May-19 1,367 485 2.82
28-May-19 976 827 1.18
29-May-19 680 1,120 0.61
30-May-19 866 932 0.93
31-May-19 641 1,195 0.54
Source: NSE
• Indian equity markets remained at
elevated levels throughout the week
and closed above 39,000 points for the
second consecutive week. Investors
were buoyed by hopes that the clear
win of the ruling party will enable the
continuation of reforms and facilitate
more such measures.
• However, the upside was limited on
ongoing global trade tensions between
the U.S. and China as media reported
that China may restrict export of rare
earth minerals, which are crucial for
U.S. technology industry. Worries over
trade war further aggravated after the
U.S. President indicated to raise tariffs
on Mexican imports to curb illegal
immigration from the country. Opening
of a new front in the trade war might
weigh on global growth and put
pressure on central banks to take new
stimulus measures.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
29.01 29.49 27.62 92.03
P/B
3.04 3.81 2.46 2.06
Dividend Yield
1.19 1.22 0.98 0.94
Source: BSE, NSE Value as on May 31, 2019
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
18,445.99
-
3.22% -2.09%
S&P BSE
Bankex
35,264.03 0.18% 5.81%
S&P BSE CD
24,700.46 1.80% 3.46%
S&P BSE CG
19,939.33 1.34% 10.59%
S&P BSE FMCG
11,518.09
-
0.36% -2.09%
S&P BSE HC
13,305.06
-
0.68% -7.39%
S&P BSE IT
15,781.62 4.36% -2.96%
S&P BSE Metal
10,756.40
-
0.31% -6.57%
S&P BSE Oil & Gas
15,734.43 2.48% 2.45%
S&P BSE Teck
7,767.07 3.58% -2.66%
S&P BSE Power
2,010.12 2.49% 2.06%
S&P BSE Realty
2,200.74 1.59% 9.56%
Source: Thomson Reuters Eikon
*
Value as on May
31, 2019
• On the BSE sectoral front, barring S&P BSE
Auto (-3.22%), S&P BSE HC (-0.68%), S&P
BSE FMCG (-0.36%) and S&P BSE Metal (-
0.31%) all the indices closed in the green.
S&P BSE IT (4.36%) was the major gainer
followed by S&P BSE Teck (3.58%) and S&P
BSE Power (2.49%).
• The power sector gained as a leading coal
company posted better than expected fourth
quarter results. Additionally, loss in rupee
against the U.S. dollar helped the IT sector to
gain.
Indian Derivatives Market Review
• Nifty May 2019 Futures settled at spot closing of 11,945.90. Nifty Jun 2019 Futures were at
11,916.50, a discount of 6.30 points, below the spot closing of 11,922.80. The total turnover
on NSE’s Futures and Options segment for the week stood at Rs. 63.15 lakh crore as
against Rs. 52.01 lakh crore for the week to May 24.
• The Put-Call ratio stood at 0.87 compared with the previous week’s close of 0.84.
• The Nifty Put-Call ratio stood at 1.43 against the previous week’s close of 1.23.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-
Wk
Ago
1-
Mth
Ago
6-
Mth
Ago
Call Rate
5.92 5.88 6.15 6.41
91 Day T
-Bill
6.12 6.25 6.40 6.75
07.32% 2024, (5 Yr GOI)
6.85 6.96 7.34 --
07.26% 2029, (10
Yr GOI)
7.03 7.23 7.41 --
Source: Thomson Reuters Eikon
Value as on May 31
, 2019
• Bond yields fell as foreign investors
are continuing to purchase notes
following the outcome of the general
elections, which brought political
stability with the second five-year
term of the government. In addition,
fall in crude oil prices helped improve
inflation outlook and hence was
positive for the bond market
• Further, hopes that the Monetary
Policy Committee would lower
interest rates in the bi-monthly
monetary policy meeting in Jun 2019
and expectations that the Reserve
Bank of India could continue to infuse
liquidity into the Indian banking
system added to the gains.
• Yields on the 10-year benchmark
paper (7.26% GS 2029) fell 20 bps to
close at 7.03% compared with the
previous close of 7.23% after trading
in the range of 7.03% to 7.17%.
6.00
6.67
7.33
8.00
27-May 28-May 29-May 30-May 31-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 6.38 8.03 165
3 Year 6.80 8.04 124
5 Year 6.96 8.06 110
10 Year 7.16 8.37 122
Source: Thomson Reuters Eikon
Value as on May 31
, 2019
• Yields on gilt securities fell across the
maturities in the range of 8 bps to 23 bps
barring 2-year paper that increased 1 bps.
• Corporate bond yields fell across the
maturities in the range of 5 bps to 25 bps.
The maximum decline was witnessed on 1-
year paper and the minimum decline was
witnessed on 3-year paper.
• Difference in spread between AAA corporate
bond and gilt contracted across the
maturities in the range of 2 bps to 17 bps
barring 3-, 10- and 15-year papers that
expanded by 3 bps or 4 bps.
-20
-10
0
5.00
6.00
7.00
8.00
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 31-May-19 24-May-19
Yield
in %
Change
in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• Capital market regulator Securities and Exchange Board of India (SEBI) came out with a
discussion paper on “Regulatory Sandbox” for companies that use financial technologies.
SEBI defined regulatory sandbox as a live, testing environment where companies can test
new processes, services, products and business models on a limited set of eligible
customers for a certain period of time with some relaxation in their regulations and
guidelines. SEBI opined that adoption and usage of financial technologies would help lower
the costs of transaction for investors at large, promote financial inclusion and help maintain
an efficient, fair and transparent securities market ecosystem.
• Capital market regulator SEBI asked debenture trustees to increase their disclosures for
listed debt securities. The objective of the move is to protect the interest of investors. It
needs to be noted that debentures are not secured by any collateral or physical assets and
hence any fall out may result in a crisis. SEBI mandated that debenture trustees need to
disclose the details of the schedule of interest and redemption obligations for the complete
financial year within five working days from the start of a financial year.
• Leading stock exchanges Bombay Stock Exchange and National Stock Exchange have
extended the interoperability deadline for clearing corporations by a month. The objective of
the move is to ensure seamless and non-disruptive transition so that the requisite
development of systems and process, and testing thereof, could be completed.
Regulatory Updates in India (contd..)
9
• Data from SEBI showed that investment in the domestic capital market through participatory
notes rose to Rs. 81,220 crore in Apr 2019 from Rs. 78,110 crore in the previous month, but
fell from Rs. 100,245 crore in the same period of the previous year. Value of investment in
participatory notes thus rose 3.98% on a monthly basis. Out of the total investments made
in Apr 2019, Rs. 58,820 crore was invested in the equities segment, Rs. 21,542 crore in
debt and Rs. 123 crore in derivatives market.
• Media reports said the finance ministry may look at a 10-year tax holiday for real estate
developers on profits earned from rental housing. This is being considered to revive
investment and boost a slowing economy. In a recent meeting with senior finance ministry
officials, the real estate developers have been asked to suggest steps to address
challenges faced by the sector. They have also been asked to submit a note on the rental
housing business model, where expenses would be allowed to claim for deduction, but the
profit will be exempted from tax for 10 years, reports said.
• As per media reports, the Insurance Regulatory and Development Authority of India (IRDAI)
issued a draft regulation on the development of a regulatory sandbox that will help
insurance start-ups to carry on experiments on new product launches. Now, the insurance
regulator has kept the draft guidelines open (till May 31) for comments/suggestions from
public and stakeholders.
Global News/Economy
• Commerce Department data showed U.S. economic growth in the first quarter accelerated
by slightly less than initially estimated. The Commerce Department said real gross domestic
product grew 3.1% in the first quarter, reflecting a slight downward from revision from the
previously reported 3.2% jump.
• The European Central Bank (ECB) said risks to financial stability in the euro area are rising
amid a slowing global economy and escalating trade tensions. Uncertainty surrounding the
global economic growth outlook have led to "bouts of high volatility in financial markets", the
bank said in its latest Financial Stability Review report. Slower than expected growth and a
possible worsening of trade tensions could trigger further falls in asset prices, the report
warned.
• Bank of Japan Governor said Japan has difficulty in re-anchoring long-term inflation
expectations from inflation below the target level and suggested examining how best to
manage inflation expectations within the flexible inflation targeting framework. Many
advanced economies experience very sluggish price development despite significant
improvement in economic activity, he said. This, in turn, raised concerns about the credibility
of inflation targets. Kuroda said Japan's experience shows that it is difficult to re-anchor long-
term inflation expectations from inflation below the target level. "That suggests the
importance of maintaining well-anchored inflation expectations."
10
Global Equity Markets
11
Global Indices
Indices
31-May-19
1-Week
Return
YTD
Return
Dow Jones
24,815.04 -3.01% 6.38%
Nasdaq 100
7,127.96 -2.37% 12.61%
FTSE 100
7,161.71 -1.59% 6.44%
DAX Index
11,726.84 -2.37% 11.06%
Nikkei Average
20,601.19 -2.44% 2.93%
Straits Times
3,117.76 -1.64% 1.60%
Source: Thomson Reuters Eikon
Value as on
May 31, 2019
U.S.
• The negative impact of the ongoing
U.S.-China trade war loomed large,
forcing U.S. markets to end the week in
deep red. Markets were further hit by
media reports stating that China may
restrict the export of rare earth minerals,
which are crucial for the U.S. technology
industry.
• U.S. President revealed plans to use
tariffs to compel Mexico to make efforts
to stop flow of illegal immigrants into the
U.S. This also weighed on the market.
Europe
• The initial boost in the European markets, on the back of favourable outcome of the
European Union Parliamentary elections, was largely overshadowed by persisting
concerns over full-fledged trade war between U.S. and China.
Asia
• Asian markets largely remained low in line with global peers as the rift over U.S.-China
trade row deepened. Investors remained concerned after media reports suggested that
China could be considering restricting the export of rare earth minerals, which are crucial
for the U.S. technology industry.
Global Debt (U.S.)
12
• Yields on the 10-year U.S. Treasury
bond fell 19 bps to 2.14% compared
with the previous week’s close of 2.33%.
• U.S. Treasury prices grew on concerns
about the U.S.-China trade war. U.S.
President stated that Washington was
not ready to make a deal with China,
however, he also stated that it expects
one in the future.
• Meanwhile, reports that Beijing could cut
off its rare-earth-minerals trade with the
U.S. and reports that U.S. will impose a
tariff on Mexican goods beginning Jun
10, 2019 improved the safe haven
appeal of U.S. Treasury prices.
• Gains were extended over tension
between Italy and the European Union
(EU). The European Commission could
reportedly impose a fine of 3 billion euro
($3.36 billion) on Italy for breaking EU
rules due to its rising debt and structural
deficit level.
2.10
2.20
2.30
2.40
28-May 29-May 30-May 31-May
US 10-Year Treasury Yield
Movement
Source: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Commodities
Last Closing*
1-Week Ago
Brent Crude($/Barrel)
68.02 68.97
Gold ($/Oz)
1,305.25 1,284.65
Gold (Rs/10 gm)
32,056.00 31,591.00
Silver ($/Oz)
14.57 14.56
Silver (Rs/Kg)
36,357.00 36,343.00
Source: Thomson Reuters Eikon *
Value as on
May 31, 2019
Gold
• Gold prices surged on rising trade conflict
between U.S. and China. Reports that
U.S. President is planning to increase
tariffs on imports from Mexico added to
the gains. Further, worries over escalating
budget deficit in Italy and political disorder
in Europe were among other factors that
aided the bullion’s safe-haven demand.
Brent Crude
• Brent crude prices declined following
escalation in U.S.-China trade war.
Reports that China would restrict the
trade of rare earths to the U.S. to counter
Washington in the trade battle. The
prolonged battle between the two
economies has dampened the demand
outlook of the commodity.
Baltic Dry Index
• The Baltic Dry Index grew on the back of
improved capesize and panamax
activities.
9.00
9.50
10.00
10.50
11.00
30-Apr-19 10-May-19 20-May-19 30-May-19
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global
Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
-1.38%
1.60%
0.07%
31-May-19
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency
Last Closing*
1-Wk Ago
US Dollar
69.81 69.61
Pound Sterling
88.01 88.30
EURO
77.73 77.97
100 Yen
64.08 63.55
Source: RBI Figures in INR , *
Value as on
May 31, 2019
Rupee
• The Indian rupee weakened against the
greenback as investors’ appetite for
riskier assets dampened amid the
escalating trade feud between U.S. and
China.
Euro
• The euro weakened against the
greenback following political
uncertainties in Europe and signs of
slowdown in euro zone economy.
Pound
• The pound plunged against the U.S.
dollar amid political uncertainty in Britain.
Further, concerns that Britain may leave
European Union without any agreement
also added to the losses.
Yen
• The yen rose against the greenback as
its safe-haven appeal enhanced after the
U.S. President announced plans to
impose 5% tariffs on all Mexican imports
from Jun 10, 2019.
9.33
10.00
10.67
30-Apr-19 10-May-19 20-May-19 30-May-19
USD GBP Euro JPY
Source: RBI
Currency
Prices (
in terms of INR)
Rebased to 10
Currency Movement
0.28%
-0.33%
-0.31%
0.83%
31-May-19
15
The Week that was…
27
th
May to 31
st
May
The Week that was (May 27 – May 31)
16
Date Events Present Value Previous Value
Monday,
May 27, 2019
•
Japan Leading Index CI (Mar F) 95.9 96.3
•
China Industrial Profits (YoY) (Apr) -3.7% 13.9%
Tuesday,
May 28, 2019
•
U.S. Consumer Confidence Index (May) 134.1 129.2
•
Germany GfK Consumer Confidence (Jun) 10.1 10.4
•
U.S. House Price Index (MoM) (Mar) 0.1% 0.3%
Wednesday,
May 29, 2019
•
Germany Unemployment Change (000's) (May) 60k -12k
Thursday,
May 30, 2019
•
U.S. Gross Domestic Product Annualized (QoQ) (1Q S) 3.1% 3.2%
•
U.S. Advance Goods Trade Balance (Apr) -$72.12b -$71.4b
•
U.K. GfK Consumer Confidence (MAY) -10 -13
•
U.S. Initial Jobless Claims (May 25) 215k 212k
•
Japan Jobless Rate (Apr) 2.4% 2.5%
•
Japan Industrial Production (YoY) (Apr P) -1.1% -4.3%
•
U.S. Wholesale Inventories (MoM) (Apr P) 0.7% -0.1%
Friday,
May 31, 2019
•
India GDP Estimate (Q4FY19) 5.8% 6.6%
•
Index of Eight Core Industries (Apr 19) 2.6% 4.9%
•
Germany Retail Sales (YoY) (Apr) 4.0% -2.1%
•
Germany Consumer Price Index (YoY) (May P) 1.4% 2.0%
•
U.S. Personal Consumption Expenditure Core (YoY) (Apr) 1.6% 1.6%
•
China Manufacturing PMI (May) 49.4 50.1
•
Japan Consumer Confidence Index (May) 39.4 40.4
17
The Week ahead
3
rd
June to 7
th
June
18
The Week Ahead
Day Event
Monday,
Jun 3, 2019
•
China Caixin PMI Manufacturing (May)
•
U.S. ISM Manufacturing (May)
•
U.S. ISM Employment (May)
Tuesday,
Jun 4, 2019
•
Eurozone Consumer Price Index Estimate (YoY) (May)
•
U.S. Factory Orders (Apr)
•
U.S. Durable Goods Orders (Apr F)
Wednesday,
Jun 5, 2019
•
Japan Nikkei Japan PMI Composite (May)
•
U.K. Markit/CIPS Composite PMI (May)
•
Eurozone Retail Sales (YoY) (Apr)
•
U.S. ISM Non-Manufacturing/Services Composite (May)
•
U.S. ADP Employment Change (May)
Thursday,
Jun 6, 2019
•
German Factory Orders (YoY) (Apr)
•
European Central Bank Rate Decision
•
U.S. Trade Balance (Apr)
Friday,
Jun 7, 2019
•
German Industrial Production (YoY) (Apr)
•
U.S. Change in Non-farm Payrolls (May)
•
U.S. Unemployment Rate (May)
•
U.S. Consumer Credit (Apr)
Disclaimer
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19
