Mutual Fund News of 2nd November 2018

News U Can Use

November 2, 2018

The Week that was…

October to 2

November

Indian Economy

• The Nikkei India Manufacturing Purchasing Managers' Index (PMI) increased to 53.1 in

Oct 2018 from 52.2 in Sep 2018. The growth reflects stronger order inflows as companies

increased production, input purchasing and employment. This marked the 15 straight

months of maintaining above-50 score. A score above 50 means expansion while below 50

denotes contraction.

• Government data showed that the growth of index of eight core industries slowed to 4.3%

in Sep 2018 as against an upwardly revised 4.7% in Aug 2018 (4.2% originally reported).

This marked a four-month low. Crude oil witnessed the maximum decline of 4.2%, thereby

marking the 10

consecutive monthly fall for the sector. Natural gas sector also fell 1.8%.

The maximum growth of 11.8% was seen in the cement sector. Notably, fertilizers sector

witnessed gains of 2.5% in Sep 2018 as against a decline of 5.3% in the previous month.

• According to World Bank’s Doing Business Report, India jumped another 23 points in the

World Bank’s ease of doing business ranking to 77

place. Hence, for the first time, now it

has become the top ranked country in South Asia and third among the BRICS. The country

has jumped 53 notches in the last two years. The biggest gain was in construction permit

where India climbed 129 ranks to 52

place driven by targeted government effort to

remove hurdles. Meanwhile, the Department of Industrial Policy and Promotion stated that

India now ranks in the top 25 with respect to three indicators - getting electricity, getting

credit and protecting minority investors.

Indian Equity Market

Domestic Equity Market Indices

Indices

2-Nov-18

1 Week Return

YTD Return

S&P BSE Sensex

35,011.65 4.98% 2.80%

Nifty 50

10,553.00 5.21% 0.21%

S&P BSE Mid

-Cap 14,888.73 7.34% -16.46%

S&P BSE Small

-Cap 14,464.68 6.38% -24.78%

Source: MFI Explorer

NSE Advance/Decline Ratio

Date Advances Declines

Advance/Decline Ratio

29-Oct-18 1399 431 3.25

30-Oct-18 1088 702 1.55

31-Oct-18 1196 607 1.97

01-Nov-18 1182 607 1.95

02-Nov-18 1168 652 1.79

Source: NSE

• Markets rose after the manufacturing

PMI for Oct 2018 grew at the

quickest pace in four months on the

back of strong orders. Fall in global

crude oil prices and strengthening of

the rupee against the greenback

provided some support.

• Reserve Bank of India’s (RBI) steps

to boost liquidity also supported

sentiment after it had announced to

buy Rs. 400 billion worth of

government bonds through open

market operations in Nov 2018.

• However, rift between RBI and the

government deepened on

government intervention over the

autonomy of the central bank.

• On the global front, investors became

hopeful on U.S.-China trade deal.

Ratios

S&P BSE

Sensex

Nifty 50

S&P BSE

Mid Cap

S&P BSE

Small Cap

P/E

22.72 25.40 31.59 -69.78

P/B

2.94 3.35 2.61 2.17

Dividend Yield

1.26 1.25 0.95 0.85

Source: BSE, NSE Value as on

Nov 2, 2018

Indian Equity Market (contd.)

Sectoral Indices

Indices

Last Returns (in %)

Closing* 1-Wk 1-Mth

S&P BSE Auto

20,695.4 7.25% -4.36%

S&P BSE Bankex

29,016.4 6.84% 2.64%

S&P BSE CD

19,698.7 8.04% 3.75%

S&P BSE CG

18,129.4

10.48%

6.68%

S&P BSE FMCG

11,223.2 2.89% -2.90%

S&P BSE HC

14,562.8 4.95% -3.30%

S&P BSE IT

14,085.4 4.51%

-12.01%

S&P BSE Metal

13,071.9 4.35% -2.88%

S&P BSE Oil & Gas

13,667.7 5.70% -7.61%

S&P BSE Realty

1,719.9 7.75% 2.47%

Source: Thomson Reuters Eikon

*Value as on Nov 2, 2018

• On the BSE sectoral front, all the indices

closed in the green with S&P BSE Capital

Goods (10.48%) being the major gainer

followed by S&P BSE Consumer Durables

(8.04%) and S&P BSE Realty (7.75%).

• The auto sector gained as various

companies posted steady increase in

sales for Oct 2018.

Indian Derivatives Market Review

• Nifty Nov 2018 Futures settled at 10,577.05, a premium of 24.05 points, above the spot

closing of 10,553.00. The total turnover on NSE’s Futures and Options segment for the

week stood at Rs. 49.00 lakh crore as against Rs. 55.67 lakh crore for the week to Oct 26.

• The Put-Call ratio stood at 0.92 compared with the previous week’s close of 0.70.

• The Nifty Put-Call ratio stood at 1.63 against the previous week’s close of 1.44.

Domestic Debt Market

Debt Indicators

(%)

Current

Value

Ago

Mth

Ago

Mth

Ago

Call Rate

6.41 6.48 6.37 5.89

91 Day T

-Bill

6.96 6.95 7.03 6.21

7.80% 2021, (5

Yr GOI)

7.52 7.66 7.91 7.55

7.17% 2028, (10

Yr GOI)

7.78 7.88 7.99 7.73

Source: Thomson Reuters

Eikon

Value as on Nov 2, 2018

• Bond yields declined after the central

bank revealed its plan of purchasing

bonds under open market operation

in Nov 2018. RBI’s announcement to

purchase Rs. 400 billion worth of

bonds lifted market sentiment.

• Yields eased further with the strong

revival in rupee and fall in crude oil

prices, alleviating inflationary

pressures and worries over foreign

fund outflow.

• However, gains were restricted

following news that RBI governor is

considering various options including

stepping down from his position after

the government’s reported

intervention under the RBI Act.

• Yield on the 10-year benchmark

paper (7.17% GS 2028) fell 10 bps to

close at 7.78% from the last week’s

close at 7.88%.

7.70

7.80

7.90

29-Oct 30-Oct 31-Oct 1-Nov 2-Nov

Yield in %

10 -Yr Benchmark Bond ( % )

Source: CCIL

Domestic Debt Market (Spread Analysis)

Maturity

G-

Sec Yield

(%)

Corporate Yield

(%)

Spread

bps

1 Year 7.52 8.85 133

3 Year 7.62 8.66 104

5 Year 7.87 8.64 77

10 Year 7.93 8.68 75

Source: Thomson Reuters Eikon

Value as on Nov 2, 2018

• Yields on gilt securities fell across the

maturities in the range of 5 bps to 25 bps

barring 2- and 11-year papers that

increased 1 bps and 7 bps, respectively.

• Corporate bond yields fell across the

maturities in the range of 11 bps to 22 bps.

The maximum decline was witnessed on 1-

year paper and the minimum on 2-year

paper.

• Difference in spread between AAA

corporate bond and gilt contracted across

the maturities by up to 15 bps barring 1-

and 2-year papers that expanded 3 bps

and 4 bps, respectively.

-20

-8

6.40

7.60

8.80

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

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

Change in bps 02-Nov-18 26-Oct-18

Yield

in %

Change

bps

Source: Thomson Reuters Eikon

Regulatory Updates in India

• The Reserve Bank of India (RBI) announced its plans to inject Rs. 120 billion into the

system through purchase of government securities, ahead of the Diwali festival. The central

bank had announced last week that it will inject a total of Rs. 400 billion in Nov 2018

through purchase of government securities. This is being done to meet festive season

demand for funds. The result of the auction will be announced on the same day and

successful participants will get payment the following day.

• The government is planning to carry out at least two mergers of central public sector

enterprises (CPSEs) in the power sector. This is being done to fasten the disinvestment

process and meet targets. This may lead to NTPC acquiring hydropower firm SJVN Limited

as the former has shown interest. The government holds 63.79% stake in SJVN. A merger

of Power Finance Corporation (PFC) and Rural Electrification Corporation Ltd. (REC) is also

on the cards. The government’s stake in PFC is 65.64% and REC is 57.99%.

• According to media reports, the Centre will likely not issue any direction under Section 7 of

RBI Act to the Reserve Bank of India that goes against the majority decision of the board.

Further, as per the reports, if at all any instructions are issued, it may be to make sure that

the governor of RBI accepts and implements the majority decision of the board.

Regulatory Updates in India (contd..)

• According to media reports, the Union cabinet approved promulgating an ordinance to

amend the Companies Act. The Corporate Affairs Ministry is implementing the Act. It has

been working on ways to promote ease of doing business and ensure better compliance

levels.

• The Bombay Stock Exchange will delist nine companies from Nov 5, 2018. Trading in

shares of these nine companies has remained suspended for over six months. Further, for a

period of 10 years, these delisted companies, their whole-time directors, promoters and

group firms will be debarred from accessing the securities market. Over the past few

months, the exchange has been delisting those firms whose trading has remained

suspended for a long period.

• According to the chief executive officer of Unique Identification Authority of India (UIDAI),

the planned 'Aadhaar Seva Kendras', which will be similar to Passport Seva Kendras, will

give "hassle-free" enrolment and update facilities. This will ensure ease in Aadhaar-related

services to residents. UIDAI is planning to set up Aadhaar Seva Kendras under a mega

project involving opening of facilitation centres for enrolment and update services in 53

cities and towns pan India.

Global News/Economy

• According to a report by the Institute for Supply Management, U.S. manufacturing

Purchasing Managers’ Index (PMI) fell more than market expectations to 57.7 in Oct 2018

from 59.8 in Sep 2018. This marked the lowest level since Apr 2018. Production and

employment continued to expand, however, at lower levels as against Sep 2018.

• A report from the Labor Department showed that U.S. non-farm payroll employment added

250,000 jobs in Oct 2018 as against downwardly revised 118,000 jobs (134,000 jobs

originally reported) in Sep 2018. Meanwhile, the unemployment rate remained unchanged in

Oct 2018 as against the previous month at 3.7%. This marked the lowest level since Dec

1969.

• The Bank of England policymakers, in the latest policy review meeting, unanimously decided

to maintain the key policy rate at 0.75%. However, it indicated faster rate hikes than the

current market expectations amid Brexit uncertainties. The committee also unanimously

decided to maintain the quantitative easing through asset purchases at GBP 435 billion.

Meanwhile, inflation is expected to be above the 2% target over the coming two years.

• The Bank of Japan maintained status quo in its monetary stimulus, but downgraded the

inflation forecast. This indicates price growth will not reach 2% target until Mar 2021. The

policy board of the bank voted 7-2 to purchase government bonds so that the yield of 10-

year JGBs will remain at around 0%.

Global Equity Markets

Global Indices

Indices

2-Nov-18

1-Week

Return

YTD

Return

Dow Jones

25,270.83 2.36% 2.23%

Nasdaq 100

6,965.29 1.65% 8.89%

FTSE 100

7,094.12 2.23% -7.72%

DAX Index

11,518.99 2.84% -10.83%

Nikkei Average

22,243.66 5.00% -2.29%

Straits Times

3,116.39 4.86% -8.42%

Source: Thomson Reuters Eikon

Value as on Nov 2, 2018

U.S.

• U.S. markets traded higher backed by

positive earnings news from major

companies. Buying interest found

additional support from upbeat private

sector jobs growth and surge in U.S.

non-farm payroll employment in Oct.

• Optimism over resolution of U.S.-China

trade turf buoyed investor sentiment.

Europe

• European markets joined the global rally after U.S. President expressed optimism about

resolving the trade disputes with China ahead of the highly anticipated meeting at the end

of Nov in Argentina. Investment sentiment boosted further after media reports stated that

that U.K. and the European Union have reached a tentative deal that would grant U.K.

companies continued access to European markets after Brexit.

Asia

• Asian markets went up amid optimism that the trade war between the U.S. and China will

soon come to an end. As per the latest development, U.S. President has directed his

administration to draft a potential trade deal with Beijing. A batch of upbeat corporate

earnings too generated positive vibes.

Global Debt (U.S.)

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

rose 12 bps to close at 3.21% from the

previous close of 3.09%.

• U.S. Treasury prices fell over the week

as its safe haven appeal dampened on

hopes that the ongoing trade dispute

between U.S. and China may come to

an end that had roiled global financial

markets so far.

• U.S. Treasury prices fell further after

ADP jobs data for Oct 2018 came better

than market expectations. Losses were

extended after non-farm payroll

employment rebounded sharply in the

same month, increasing the possibility

of a further rate hike by the U.S. Federal

Reserve in Dec 2018.

3.04

3.10

3.16

3.22

29-Oct 30-Oct 31-Oct 1-Nov 2-Nov

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)

70.20 78.29

Gold ($/Oz)

1,232.48 1,233.17

Gold (Rs/10 gm)

31,565 31,868

Silver ($/Oz)

14.71 14.61

Silver (Rs/Kg)

38,299 38,358

Source: Thomson Reuters

Eikon *Value as on Nov 2, 2018

Gold

• Gold prices traded marginally lower as

the probability of U.S. Fed’s interest rate

hikes supported the dollar. However, the

bullion’s downside was capped by

geopolitical uncertainties in the euro

zone, slowing global growth and trade

tensions between U.S. and China.

Crude

• Brent crude traded lower and fell below

the $71 mark amid signs of increasing

supplies and strong inventory build. U.S.

crude stockpile improved 3.22 million

barrels in the week of Oct 26.

Additionally, OPEC bolstered oil

production in Oct, which is the highest

since 2016.

Baltic Dry Index

• The Baltic Dry Index fell on the back of

lower capesize and panamax activities.

7.97

8.80

9.63

10.46

2-Oct-18 12-Oct-18 22-Oct-18 1-Nov-18

Global Commodity Movement

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

Global

Commodity Prices

Rebased to 10

Source: Thomson Reuters Eikon

-10.33%

-0.06%

0.70%

2-Nov-18

Currencies Markets

Movement of Rupee vs Other Currencies

Currency

Last Closing*

1-Wk Ago

US Dollar

72.88 73.37

Pound Sterling

94.75 94.05

Euro

83.23 83.41

100 JPY

64.47 65.41

Source: RBI Figures in INR , *

Value as on Nov 2, 2018

Rupee

• The Indian rupee rose against the U.S.

dollar following steep decline in crude oil

prices and after the U.S. agreed to let

India keep buying Iranian oil.

Euro

• The euro fell against the greenback

following strong economic data from the

U.S.

Pound

• The pound rose against the U.S. dollar

after Britain's Brexit Secretary hinted that

Brexit agreement could be reached by

the end of Nov 2018. The currency rose

further after the BoE hinted that future

interest rate hikes would be slightly faster

if Brexit goes smoothly.

Yen

• The yen fell against the U.S. dollar after

the Bank of Japan signalled its intention

to maintain its ultra-loose monetary

policy for some time.

9.68

9.93

10.18

10.43

3-Oct-18 13-Oct-18 23-Oct-18 2-Nov-18

USD GBP Euro JPY

Source: RBI

Currency

Prices (

in terms of INR)

Rebased to 10

Currency Movement

-0.67%

0.75%

- 0.21%

-1.44%

The Week that was…

October to 2

November

The Week that was (Oct 29 – Nov 2)

Date Events

Present

Value

Monday,

October 29, 2018

•

U.S. Personal Consumption Expenditure Core (YoY) (Sep) 0.5% 0.0%

•

Japan Jobless Rate (Sep) 2.3% 2.4%

Tuesday,

October 30, 2018

•

Germany Unemployment Claims Rate s.a. (Oct) 5.1% 5.1%

•

Eurozone Gross Domestic Product s.a. (YoY) (3Q A) 1.7% 2.2%

•

Germany Consumer Price Index (YoY) (Oct P) 2.5% 2.3%

•

U.S. Consumer Confidence Index (Oct) 137.9 135.3

•

Japan Industrial Production (YoY) (Sep P) -2.9% 0.2%

Wednesday,

October 31, 2018

•

Bank of Japan Rate Decision -0.1% -0.1%

•

China Manufacturing PMI (Oct) 50.2 50.8

•

Eurozone Consumer Price Index Estimate (YoY) (Oct) 2.2% 2.1%

•

U.K. GfK Consumer Confidence (Oct) -10.0 -9.0

•

Japan Housing Starts (YoY) (Sep) -1.5% 1.6%

•

Japan Construction Orders (YoY) (Sep) 1.0% 0.5%

Thursday,

November 01, 2018

•

Bank of England Bank Rate Decision 0.75% 0.75%

•

U.S. ISM Manufacturing (Oct) 57.7 59.8

•

Nikkei India Manufacturing PMI (Oct) 53.1 52.2

•

China Caixin Manufacturing PMI (Oct) 50.1 50

Friday,

November 02, 2018

•

U.S. Unemployment Rate (Oct) 3.7% 3.7%

•

U.S. Change in Non-farm Payrolls (Oct) 250k 118k

The Week Ahead

November to 9

November

The Week Ahead

Day Event

Monday,

November 5, 2018

•

Nikkei India Services PMI (Oct 18)

•

China Caixin China PMI Composite (Oct)

•

U.K. Markit/CIPS UK Composite PMI (Oct)

•

U.S. ISM Non-Manufacturing/Services Composite (Oct)

Tuesday,

November 6, 2018

•

Japan Nikkei Japan PMI Composite (Oct)

•

Eurozone German Factory Orders n.s.a. (YoY) (Sep)

Wednesday,

November 7, 2018

•

Japan Labor Cash Earnings (YoY) (Sep)

•

Eurozone German Industrial Production (YoY) (Sep)

•

Eurozone Retail Sales (YoY) (Sep)

•

U.S. Consumer Credit (Sep)

•

Japan Machine Orders (YoY) (Sep)

Thursday,

November 8, 2018

•

China Trade Balance (Oct)

•

Japan Eco Watchers Survey Current (Oct)

•

U.S. FOMC Rate Decision

Friday,

November 9, 2018

•

U.S. University of Michigan Sentiment (Nov P)

•

China Consumer Price Index (YoY) (Oct)

•

U.K. Trade Balance (Sep)

•

U.K. Gross Domestic Product (YoY) (3Q P)

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