News U Can Use
May 4, 2018
The Week that was…
30
th
April to 4
th
May
2
Indian Economy
• The Nikkei Manufacturing Purchasing Managers’ Index (PMI) rose to 51.6 in Apr 2018 from
51.0 in Mar 2018 due to faster expansion in output and new orders. This is the ninth
consecutive monthly rise and output growth has picked-up from the previous month.
However, it remained slightly below the average for the current nine-month period.
• Government data showed that the index of eight core industries grew 4.1% in Mar 2018 as
against 5.4% in Feb 2018 (5.3% originally reported) and 5.2% in Mar 2017. The slowdown
in pace of growth reflects significant slowdown in growth in refinery products and cement
sector that grew only 1% and 13% in Mar as against 7.8% and 23% in Feb, respectively.
However, coal sector witnessed significant increase to 9.1% in Mar from 1.3% in Feb.
Meanwhile, crude oil sector witnessed decline of 1.6%. The growth rate for Apr 2018 to
Mar 2018 slowed to 4.2% from 4.8% in the same period of the previous year.
• The Nikkei Services Purchasing Managers' Index (PMI), stood at 51.4 in Apr 2018 against
50.3 in Mar 2018. This is the second consecutive month of rise. Rise in business activity at
a faster pace, supported by new order growth helped the service sector to move up.
Additionally, Nikkei India Composite PMI Output Index rose from 50.8 to a three-month
high of 51.9 in Apr.
• According to an official data, revenue from the Goods and Services Tax (GST) crossed the
threshold of Rs. 1 lakh crore, thereby reaching Rs. 1,03,458 crore in Apr 2018. Of Rs.
1,03,458 crore, CGST is Rs. 18,652 crore, SGST is Rs. 25,704 crore, IGST is Rs. 50,548
crore and cess is Rs. 8,554 crore.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 04-May-18 1 Week Return YTD Return
S&P BSE Sensex 34,915.38 -0.16% 3.26%
Nifty 50 10,618.25 -0.69% 1.75%
S&P BSE Mid-Cap 16,561.01 -2.11% -7.15%
S&P BSE Small-Cap 17,991.45 -1.36% -6.68%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
30-Apr-18 966 840 1.15
02-May-18 533 1,291 0.41
03-May-18 467 1,334 0.35
04-May-18 697 1,101 0.63
Source: NSE
• Indian equity markets closed on a
lower note mainly because of weak
global cues. Global markets
remained subdued due to
expectation of increase in interest
rates by the U.S Federal Reserve in
the coming months. Further, reports
that the U.S. is considering taking
action to confine some Chinese
companies’ ability to sell telecoms
equipment in U.S. weighed on market
sentiment.
• Selling pressure in the stocks of an IT
major following subdued guidance for
organic revenue growth acted as
spoilsport. Karnataka state elections
scheduled to be held on May 12 also
kept investors apprehensive.
Investors remained focused on the
U.S. China trade talks.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
23.5 26.36 37.2 79.77
P/B
3.17 3.65 2.95 2.63
Dividend Yield
1.16 1.21 0.88 0.65
Source: BSE, NSE Value as on May 4
, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
25,174.01 -2.18% 1.17%
S&P BSE Bankex
28,662.53 0.47% 6.38%
S&P BSE CD
22,272.63 -0.61% 2.85%
S&P BSE CG
19,117.39 -0.73% 3.02%
S&P BSE FMCG
11,067.02 -0.79% 6.04%
S&P BSE HC
13,844.68 -1.36% 3.07%
S&P BSE IT
13,139.81 -1.76% 8.52%
S&P BSE Metal
13,755.25 -3.35% 4.92%
S&P BSE Oil & Gas
14,238.60 -2.39% -1.92%
Source: Thomson Reuters
Eikon *Value as on May 4, 2018
• On the BSE sectoral front, indices closed
on lower note. S&P BSE Metal (-3.35%)
stood as the major loser followed by S&P
BSE Oil & Gas (-2.39%), S&P BSE Realty
(-2.30%), and S&P BSE Auto (-2.18%).
S&P BSE Bankex (0.47%) stood as the
only gainer.
• Strong buying interest was witnessed in
banking stocks in one of the sessions after
two industry majors in the financial sector
posted encouraging quarterly earnings
numbers.
Indian Derivatives Market Review
• Nifty May 2018 Futures were at 10,658.75 points, a premium of 40.50 points, above the
spot closing of 10,618.25. The turnover on NSE’s Futures and Options segment stood at
Rs. 26.62 lakh crore as against Rs. 43.61 lakh crore on Apr 27.
• The Put-Call ratio stood at 0.92 compared with the previous week’s close of 0.94.
• The Nifty Put-Call ratio stood at 1.49 compared with the previous week’s close of 1.52.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
5.92 6.02 5.90 5.85
91 Day T-Bill
6.25 6.20 6.05 6.10
7.80% 2021, (5 Yr GOI)
7.60 7.57 7.01 6.61
7.17% 2028, (10 Yr GOI)
7.73 7.77 7.29 --
Source: Thomson Reuters
Eikon
Value as on May 4, 2018
• Bond yields fell after the Reserve
Bank of India (RBI) relaxed rules for
foreign investment in government
securities that increased expectations
of more inflows in the near term. The
central bank allowed foreign investors
to purchase bonds with residual
maturity of below three years.
• Yield on the 10-year benchmark
paper (7.17% GS 2028) fell 4 bps to
close at 7.73% from the previous
week’s close of 7.77% after trading in
a range of 7.68% to 7.76%.
• Data from RBI showed that India's
foreign exchange reserves fell for
second consecutive week to $420.37
billion as on Apr 27 from $423.58
billion in the previous week.
7.71
7.72
7.73
2-May 3-May 4-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 6.83 8.12 129
3 Year 7.60 8.33 73
5 Year 7.77 8.46 69
10 Year 7.73 8.45 72
Source: Thomson Reuters
Eikon Value as on May 4, 2018
• Yields on gilt securities increased across 1
to 3 years’ maturities, 7- and 15-year
papers by up to 4 bps. Yields fell across the
remaining maturities by up to 6 bps barring
4- and 6-year maturities that closed steady.
• Corporate bond yields increased across 1
to 7 years’ maturities by up to 10 bps and
contracted by up to 3 bps across the
remaining maturities.
• Spread between AAA corporate bond and
gilt expanded across 1 to 9 years’
maturities in the range of 2 bps to 6 bps
barring 7-year paper that closed steady.
Spread contracted 3 bps each on 10- and
15-year maturities.
-10
0
10
6.00
7.25
8.50
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 04-May-18 27-Apr-18
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• RBI eased norms for External Commercial Borrowings (ECBs) by coming out with an all-in-
cost ceiling. This all-in-cost ceiling for ECBs was made uniform and fixed at 450 basis
points above the benchmark London Interbank Offer Rate (LIBOR). By this RBI did away
with the concept of different slabs for different maturities. The central bank also liberalized
the ECB framework by expanding the list of eligible borrowers to housing-finance
companies and port trusts and they would not need approval from RBI. RBI also increased
the liability-to-equity ratio for ECB raised from direct foreign equity holder under the
automatic route to 7:1.
• RBI has permitted foreign portfolio investors (FPIs) to invest a fifth or 20% of their total
corpus in less than one-year residual debt papers of local companies. This thereby
motivates Indian corporates to capture the bond market for its working capital needs. Before
this announcement, FPI’s were only allowed to invest in corporate bonds with minimum
residual maturity of three years or above.
• Securities and Exchange Board of India (SEBI) has introduced strict measure to check non-
compliance of listing conditions. The new rules will be made effective from compliance
period ending on or before Sep 30, 2018. The stock exchanges may freeze entire
shareholding of the promoter and promoter group in non-compliant listed entity and such
companies may even be delisted. The exchanges would also have the power to move the
stocks of such firms to a category restrained from trading and also suspend trading in the
shares of such entities.
Regulatory Updates in India (contd..)
• Additional risk management measures have been put in place by SEBI for the derivatives
segment. To be effective from Jun 1, 2018, these measures are related to margin collection
requirement and computation of liquid net worth for the equity derivatives segment. As per
the provisions with regards to client's margin collection requirement, the clearing members
or trading members should include initial margin, exposure margin or extreme loss margin,
calendar spread margin and mark to market settlements. Also, SEBI stated that client
margins need to be collected mandatorily and be conveyed to the exchange or clearing
corporation.
• The Union cabinet has approved the continuation of the Pradhan Mantri Swasthya
Suraksha Yojana (PMSSY) beyond 12th Five Year Plan to 2019-20. This comes as a major
boost to the expansion of health care infrastructure in the country. The PMSSY, the central
sector scheme with an outlay of Rs. 14,832 crore has the objective of making alterations to
the disparities with regards to the availability of affordable tertiary health care facilities in
different parts of the country. Also, particularly in under-served states, it aims at enhancing
facilities for quality medical education.
• The Cabinet Committee on Economic Affairs (CCEA) has approved the continuation of
'Green Revolution —Krishonnati Yojana' till Mar 2020. It is the agriculture sector’s umbrella
programme with a central outlay of Rs. 33,269.97 crore. The approval comes as a part of
the CCEA’s aim to double the farmers income by 2022.
9
Global News/Economy
• The U.S. Federal Reserve in its monetary policy meeting decided to maintain the target
range for the federal funds rate at 1.50%-1.75%. However, with Fed’s indication of two more
rate hikes in 2018, an increase is again expected in Jun 2018. Also, Fed hinted that wages
and prices are now growing at 2% a year.
• According to the U.S. Labour Department, U.S. non-farm payroll employment rose by
164,000 jobs in Apr 2018, less than market forecast after rising by an upwardly revised
135,000 jobs in Mar 2018. The job growth was due to employment increases in the
professional and business services, manufacturing, healthcare, and mining sectors.
However, the unemployment rate fell to 3.9% in Apr after staying steady at 4.1% for the last
six consecutive months.
• According to report from Eurostat, eurozone’s inflation slowed to 1.2% in Apr 2018 as
against 1.3% in Mar 2018. Similarly, eurozone’s core inflation slowed to 0.7% in Apr from 1%
in Mar. The slowdown in inflation came due to slow rate of increase in service cost.
• According to preliminary estimate from Eurostat, euro area grew 0.4% sequentially in the
first quarter of 2018 compared with 0.7% growth recorded in the fourth quarter of 2017. On a
yearly basis, economic growth slowed to 2.5% in the first quarter of 2018 as compared with
2.8% in the fourth quarter of 2017.
10
Global Equity Markets
11
Global Indices
Indices
04-May-18
1-Week
Return
YTD
Return
Dow Jones
24,262.51 -0.20% -2.26%
Nasdaq 100
6,769.12 1.69% 3.96%
FTSE 100
7,567.14 0.87% -1.06%
DAX Index
12,819.60 1.90% -0.40%
Nikkei Average
22,472.78 0.02% -4.40%
Straits Times
3,545.38 -0.89% 4.19%
Source: Thomson Reuters Eikon
Value as on May 4, 2018
U.S.
• U.S. markets traded lower during the
truncated week after U.S. Federal
Reserve indicated inflation rate might
climb up and prompt the central bank to
raise interest rate in Jun.
• However, further losses were restricted
after the U.S. unemployment rate fell in
Apr even though job growth was weaker
than expected in the same month.
Europe
• European markets gained following better than expected corporate earnings. Improved
Chinese manufacturing data along with rise in Germany’s consumer price inflation in Apr
helped sentiment. Market participants also awaited the outcome of China-U.S. trade talks.
Meanwhile, U.K. manufacturing activity expanded at the slowest pace in 17 months in Apr
and the euro area economy expanded at a slower pace in the first quarter.
Asia
• Asian markets mostly traded up following better than expected corporate earnings and
improved economic data. Market participants were, however, cautious of the outcome of
U.S. and China trade talks. Japanese market remained closed in most part of the week.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury bond
fell 2 bps to close at 2.94% from the
previous week’s close of 2.96%.
• U.S. Treasury prices surged after the
quarterly refunding program that aims to
finance U.S.’ massive fiscal deficit
missed market expectations.
• However, gains were capped after U.S.
trade deficit significantly narrowed in
Mar 2018 and U.S. private-sector
employment data for Apr 2018 was
slightly better than expected.
• Concerns that the U.S. Federal Reserve
will raise interest rates in Jun 2018 even
though U.S. jobs report for Apr 2018
was weaker than expected also weighed
on U.S. Treasury Prices.
2.93
2.96
2.99
30-Apr 1-May 2-May 3-May 4-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)
75.74 76.07
Gold ($/Oz)
1,314.65 1,321.89
Gold (Rs/10 gm)
31,003 31,190
Silver ($/Oz)
16.49 16.50
Silver (Rs/Kg)*
38,981 39,236
Eikon *Value as on May 4, 2018
Gold
• Gold prices fell after the U.S. Federal
Reserve in its latest policy meeting kept
room for a rate hike in Jun. Meanwhile,
the U.S. jobs report for Apr generated
mixed reactions. Although it did not give
U.S. Federal Reserve enough reason to
increase interest rates aggressively, it
still largely supported the central bank’s
path towards policy tightening.
Crude
• Brent crude prices fell after U.S. crude
oil production surged to record high of
10.26 million barrels per day in Feb
2018. Nonetheless, prices got support
from growing speculation over re-
imposition of U.S. sanctions on Iran.
Baltic Dry Index
• The Baltic Dry Index rose 1.10% on the
back of improved capesize and
panamax activities.
9.60
10.00
10.40
10.80
11.20
11.60
12.00
4-Apr-18 14-Apr-18 24-Apr-18 4-May-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
-0.43%
-0.55%
-0.07%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
66.77 66.78
Pound Sterling
90.58 92.89
EURO
79.97 80.74
100 JPY
61.17 61.08
Source: RBI Figures in INR , *Value as on May 4, 2018
Rupee
• The Indian rupee closed almost steady
against the U.S. dollar as market
participants remained on the side-lines
ahead of key U.S. non-farm payroll data
for Apr 2018.
Euro
• Euro dropped against the U.S. dollar
following weaker-than-expected German
retail sales data in Mar 2018. It fell
further after U.S. unemployment touched
more than 17-year low in Apr 2018 even
though U.S. nonfarm payroll data came
lower than expected.
Pound
• Pound fell against the U.S. dollar
following soft U.K. manufacturing data
and concerns over Brexit-related risks.
Yen
• Yen weakened against the greenback
after U.S. Federal Reserve in its latest
policy meeting kept room for a rate hike
in Jun.
9.85
10.00
10.15
10.30
4-Apr-18 14-Apr-18 24-Apr-18 4-May-18
USD GBP Euro JPY
Source: RBI
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
-0.02%
-2.48%
-0.96%
0.15%
15
The Week that was…
30
th
April to 4
th
April
The Week that was (Apr 30 – May 4)
16
Date Events Present Value Previous Value
Monday,
Apr 30, 2018
• China Manufacturing PMI (Apr) 51.4 51.5
• Germany Consumer Price Index (YoY) (Apr P) 1.6% 1.6%
• U.S. Personal Consumption Expenditure Core (YoY) (Mar) 1.9% 1.6%
Tuesday,
May 01, 2018
• U.S. ISM Manufacturing PMI (Apr)
57.3 59.3
• U.S. ISM Employment (Apr)
54.2 57.3
• U.K Mortgage Approvals (Mar)
62.9k 63.78k
Wednesday,
May 02, 2018
• U.S. Federal Reserve Policy Decision
1.5%-1.75% 1.5%-1.75%
• India Nikkei Manufacturing PMI (Apr)
51.6 51
• India Index of Eight Core Industries (Mar)
4.1% 5.4%
• Eurozone Gross Domestic Product (YoY) (1Q A)
2.5% 2.8%
• Eurozone Unemployment Rate (Mar)
8.5% 8.5%
• Japan Consumer Confidence Index (Apr)
43.6 44.3
Thursday,
May 03, 2018
• Eurozone Consumer Price Index Estimate (YoY) (Apr)
1.2% 1.3%
• U.S. ISM Non-Manufacturing PMI (Apr)
56.8 58.8
Friday,
May 04, 2018
• India Nikkei Service PMI (Apr)
51.4 50.3
• U.S. Change in Non-farm Payrolls (Apr)
164k 135k
• U.S. Unemployment Rate (Apr) 3.9% 4.1%
17
The Week Ahead
7
th
April to 11
th
April
18
The Week Ahead
Day Event
Monday,
May 7, 2018
• Germany Factory Orders (YoY) (Mar)
• Germany Markit Construction PMI (Apr)
• Germany Markit Retail PMI (Apr)
• U.S. Consumer Credit (Mar)
Tuesday,
May 8, 2018
• China Trade Balance (Apr)
• Germany Trade Balance (Mar)
• Germany Industrial Production (YoY) (Mar)
Wednesday,
May 9, 2018
• U.S. MBA Mortgage Applications (May 4)
• Japan Trade Balance - BOP Basis (Yen) (Mar)
• U.K. House Price Balance (Apr)
Thursday,
May 10, 2018
• Bank of England Policy Meeting
• U.S. Consumer Price Index (YoY) (Apr)
• China Consumer Price Index (YoY) (Apr)
• U.K. Trade Balance (Mar)
• U.K. Industrial Production (YoY) (Mar)
• U.K. Manufacturing Production (YoY) (Mar)
Friday,
May 11, 2018
• India Index of Industrial Production (Mar)
• U.S. University of Michigan Sentiment (May P)
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19
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