News U Can Use
October 05, 2018
The Week that was…
1
st
October to 5
th
October
2
Indian Economy
• The Monetary Policy Committee (MPC) in its fourth bi-monthly monetary policy review for
FY19 kept key policy repo rate on hold after it increased the same by 25 bps each in its
two previous bimonthly policy reviews. The decision comes as MPC opted to keep inflation
on a close vigil for the next few months. MPC voted 5:1 in favour of a status quo. However,
it changed its stance to “calibrated tightening” from neutral that was in place since Feb
2017.
• The Nikkei India Services Purchasing Managers' Index (PMI) fell to 50.9 in Sep 2018 from
51.5 in Aug 2018. This marked the lowest score in the four-month period. The downside
reflects weak demand and stagnant new work. Despite slight improvement in
manufacturing PMI, seasonally adjusted Nikkei India Composite PMI Output Index fell to
51.6 in Sep 2018 as against 51.9 in Aug 2018. Rising price pressures weighed on the
market activity.
• The Nikkei India Manufacturing PMI improved to 52.2 in Sep 2018 from 51.7 in Aug 2018.
The growth came on the back of gain in new orders, output and employment. A reading of
over 50 indicates expansion and otherwise contraction.
• Government has announced a relief of Rs. 2.50 on petrol and diesel for the consumers.
The finance minister stated that out of Rs. 2.50, the Centre will cut Rs. 1.50 in excise duty
on fuel and an additional Re. 1 will be absorbed by the Oil Marketing Companies. The
state governments have been asked by the government to cut the value-added tax on fuel
by an equal amount. Though the move is expected to have an impact of Rs. 10,500 crore
in FY19, however, the finance minister is confident of attaining the fiscal deficit target.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 05-Oct-18 1 Week Return YTD Return
S&P BSE Sensex 34376.99 -5.11% 0.94%
Nifty 50 10316.45 -5.62% -2.03%
S&P BSE Mid-Cap 14003.81 -5.14% -21.43%
S&P BSE Small-Cap 13840.26 -4.09% -28.03%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
01-Oct-18 712 1144 0.62
03-Oct-18 1092 783 1.39
04-Oct-18 467 1388 0.34
05-Oct-18 413 1441 0.29
Source: NSE
• The domestic equity market
witnessed significant fall with Sensex
registering major losses in
consecutive three trading sessions
and closing below 35,000 mark for
the first time since May 2018. Surge
in global oil prices, which touched a
4-year high of $86 per barrel during
the week, coupled with continuous
fall in rupee against the greenback
raised concerns over widening fiscal
deficit and increase in domestic
inflationary pressures. Weak services
sector data for Aug 2018 also muted
buying interest.
• The MPC’s status-quo stance could
not bring respite to investor sentiment
as it contradicted market
expectations of a 25 basis points rate
hike because of higher crude oil
prices and persisting weak rupee.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
21.96 24.95 29.55 -65.82
P/B
2.84 3.28 2.44 2.03
Dividend Yield
1.31 1.30 1.03 0.89
Source: BSE, NSE Value as on
Oct 5, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
19975 -6.99% -17.24%
S&P BSE Bankex
27226.9 -2.73% -11.92%
S&P BSE CD
18659.7 -2.48% -10.41%
S&P BSE CG
16635.3 -2.77% -10.00%
S&P BSE FMCG
10870.7 -5.49% -10.18%
S&P BSE HC
14400.5 -4.16% -8.97%
S&P BSE IT
15304.4 -2.08% -2.50%
S&P BSE Metal
13147.3 -0.99% -4.37%
S&P BSE Oil & Gas
12143.6 -18.25% -17.31%
Source: Thomson Reuters Eikon
*Value as on Oct 5, 2018
• On the BSE sectoral front, all the indices
closed in red with S&P BSE Oil & Gas (-
18.25%) registering maximum fall followed
by S&P BSE Auto (-6.99%). Oil & Gas
stocks remained under pressure after the
finance minister urged the oil marketing
companies to absorb Re. 1 cut on fuel
prices.
• Auto sector fell as some auto majors
reported decline in passenger car sales for
third straight month in a row in Sep 2018.
The decline came on account of erratic
monsoon rainfall, floods in Kerala and
unfavourable macro-economic conditions.
Indian Derivatives Market Review
• Nifty Oct 2018 Futures settled at 10,347.15, a premium of 30.70 points, above the spot
closing of 10,316.45. The turnover on NSE’s Futures and Options segment stood at Rs.
47.47 lakh crore as against Rs. 62.53 lakh crore on Sep 28.
• The Put-Call ratio stood at 0.68 compared with the previous week’s close of 0.78.
• The Nifty Put-Call ratio stood at 1.07 against the previous week’s close of 1.33.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
6.41 6.51 6.31 5.91
91 Day T-Bill
6.93 6.97 6.81 6.10
7.80% 2021, (5 Yr GOI)
7.84 7.96 7.96 6.92
7.17% 2028, (10 Yr GOI)
8.02 8.02 8.05 7.13
Source: Thomson Reuters
Eikon
Value as on Oct 5, 2018
• Bond yields fell initially after the
Reserve Bank of India announced its
plans of open market purchases
during the month. The government’s
lower than anticipated borrowing
schedule for the second half of the
fiscal also added to the gains.
• However, the trend reversed as yields
spiked following increase in global
crude oil prices and a record plunge
of the rupee against the greenback,
which disrupted market’s sentiment.
• Losses were completely neutralized
on the penultimate day of the week
as bond yields plunged and
witnessed the biggest single day fall
in more than six months after the
MPC kept repo rate unchanged in its
fourth bi-monthly monetary policy
review, which surprised market
participants.
7.90
8.05
8.20
1-Oct 3-Oct 4-Oct 5-Oct
Yield in %
10 -Yr Benchmark Bond ( % )
Source: CCIL
Domestic Debt Market (Spread Analysis)
7
Maturity
G-Sec Yield
(%)
Corporate Yield
(%)
Spread
bps
1 Year 7.79 9.09 130
3 Year 8.00 8.82 82
5 Year 8.14 8.93 78
10 Year 8.18 9.08 90
Source: Thomson Reuters Eikon
Value as on Oct 5, 2018
• Yields on gilt securities fell on 1-year, 3 to
7 years’ maturities, 13- and 15-year
paper by up to 12 bps. Yields rose on
remaining maturities by up to 9 bps
barring 10-year paper that closed flat.
• Corporate bond yields fell on 1 to 7 years’
maturities in the range of 2 to 14 bps and
rose on remaining papers by up to 6 bps.
• Spread between AAA corporate bond and
gilt contracted across the maturities by up
to 5 bps barring 1-, 5-, 10- and 15-year
maturities that expanded by up to 10 bps.
-15
-10
-5
0
5
10
15
6.50
7.00
7.50
8.00
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 05-Oct-18 28-Sep-18
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• The Reserve Bank of India eased overseas borrowing norms for oil marketing companies
(OMCs). Under the revised norms, all state-run OMCs will now be able to raise external
commercial borrowings (ECBs) for working capital requirement with a minimum average
maturity of three to five years from all recognised lenders under “the automatic route”.
Presently OMCs can raise ECBs from direct or indirect shareholders or a group company if
the loan is for an average maturity of five years. The move comes at a time when the rupee
plunged to a record low against the greenback. It needs to be noted that India imports 80%
of its oil requirement and OMCs are the biggest consumers of dollar in the country.
• According to the media reports, the Union Cabinet has approved minimum support prices
(MSP) of Rabi crops. Minimum support price of wheat has been hiked by Rs. 105 per
quintal to Rs. 1,840 per quintal for the 2018-19 season from Rs. 1,735 per quintal in the
2017-18 crop year. The increase is in accordance with the recommendations of farm
advisory body Commission for Agricultural Costs and Prices (CACP). Also, it is in line with
the government's announcement to provide farmers a 50% profit over the cost of
production.
• The Union Cabinet has given an ex-post facto approval to the second protocol, thereby
amending the free trade agreement between India and Singapore. Comprehensive
Economic Cooperation Agreement (CECA) - the free trade agreement, came into force in
Aug 2005 in between the two countries. Besides improving the utilisation of CECA, the
signing of the second protocol will enhance bilateral trade and will deepen the Economic
Cooperation between India and Singapore.
Regulatory Updates in India (contd..)
• The goods and services tax (GST) network has made it compulsory for businesses and
transporters to mention PIN codes of places of loading and unloading of consignments. This
comes on the wake of tightening of norms for issuance of electronic way (e-way) bill.
Mentioning of PIN would determine the validity of the e-way bill that is used by businesses
to transport goods of more than Rs. 50,000 both within and outside a state. Also, it would
help in calculating the correct distance.
• Following several audit firms exiting troubled companies, the government is planning to
tighten rules for auditors and directors, according to media reports. The scanner is on
auditors and directors that leave the company at the first sight of problem citing “personal
reasons”. The National Financial Reporting Authority (NFRA), which is the newly appointed
independent regulator for auditors of large and listed companies, could be asked to review
the audit standards that are under the Institute of Chartered Accountants of India.
• According to media news, government may ask companies claiming more than Rs. 25 lakh
credit under the Goods and Services Tax (GST) to give details of purchase ledger for six
months of the pre-GST regime. The government is planning to introduce a new ‘credit
growth return’ form after discovering that the top 50,000 taxpayers’ closing balance of credit
at the end of Jun 2017 is much more than Sep 2016. These 50,000 taxpayers have claimed
around Rs. 1.5 lakh crore worth of credit.
9
Global News/Economy
• According to a report from the Labor Department, U.S. employment rose less than expected
by 134,000 jobs in Sep 2018 as against upwardly revised growth of 270,000 jobs in Aug
2018. Another report from the Labor Department showed that unemployment rate fell to
3.7% in Sep 2018, lowest level since Dec 1969, from 3.9% in Aug 2018.
• Institute for Supply Management data showed more than expected slowdown in U.S.
manufacturing sector growth in Sep 2018, partly because of supply chain issues. ISM’s
Purchasing Managers’ Index (PMI) decreased to 59.8 in Sep from 61.3 in Aug 2018.
Expectations were for the index to edge down to 60.3.
• According to IHS Markit and the Chartered Institute of Procurement & Supply data, U.K.
manufacturing sector expanded at a faster pace in Sep 2018 on the back of growth in output
and new orders. The manufacturing PMI increased unexpectedly to 53.8 in Sep 2018 from
53.0 in Aug 2018 and defied expectations for a drop.
• A report from the Eurostat showed that eurozone’s retail sales fell 0.2% MoM in Aug 2018 as
against a decline of 0.6% in Jul 2018. This marked the second consecutive decline in a row.
Food, drinks and tobacco turnover fell 0.3% and non-food product sales remained flat in Aug
2018. Growth in retail trade surged to 1.8% on yearly basis as against 1% growth in Jul
2018.
• A report from the Ministry of Internal Affairs and Communications showed that average of
household spending in Japan was up 2.8% on year in Aug 2018 and came in 292,481 yen.
On an individual basis, spending was up for housing, furniture, clothing, medical care,
transportation and education, however, it was down for fuel and recreation.
10
Global Equity Markets
11
Global Indices
Indices
05-Oct-18
1-Week
Return
YTD
Return
Dow Jones
26447.05 -0.04% 6.99%
Nasdaq 100
7399.01 -3.00% 15.67%
FTSE 100
7318.54 -2.55% -4.80%
DAX Index
12111.90 -1.10% -6.24%
Nikkei Average
23783.72 -1.39% 4.48%
Straits Times
3209.79 -1.45% -5.68%
Source: Thomson Reuters Eikon
Value as on Oct 5, 2018
U.S.
• U.S. market fell as upbeat monthly U.S.
jobs report for Sep reignited concerns
over the outlook for Fed’s interest rates.
• Although the report showed weaker
than expected non farm payroll growth
in Sep, the increase in employment in
Aug was upwardly revised and the
unemployment rate fell to its lowest
level since 1969 in Sep.
Europe
• European markets witnessed selling pressure as concerns surrounding Italy and Brexit
uncertainty weighed on investor sentiment. Some respite was seen after an Italian
newspaper reported that the Italian government estimates a budget deficit of 2.4% of GDP
for 2019, and then slashed it to 2.2 % for 2020. Persistent trade tension between U.S. and
China further dented market sentiment.
Asia
• Asian markets were no exception to the weakness in the global peers. Upbeat U.S.
economic data drove 10-year U.S. Treasury yields to their highest level since 2011, which
led to speculation that the U.S. Fed may raise interest rates aggressively. Report from
payroll processor ADP showed stronger than expected private sector job growth in Sep,
which raised concerns about the outlook for interest rates.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury bond
surged 17 bps to close at 3.23% from
the previous close of 3.06%.
• Initially, U.S. Treasury prices fell after
the U.S. and Canada reached a deal to
save North American Free Trade
Agreement (NAFTA) as a trilateral pact
with Mexico. However, losses reversed
soon as safe haven appeal improved
following selloff in Italian bonds.
• Later, U.S. Treasury yields surged and
touched multi-year highs after upbeat
U.S. economic data increased the
probability for the U.S. Federal Reserve
to raise rates in Dec 2018. Economic
data includes U.S. service sector activity
that touched 21-year high and the ADP
private payrolls data for Sep 2018 was
unexpectedly strong.
2.86
3.05
3.23
3.42
1-Oct 2-Oct 3-Oct 4-Oct 5-Oct
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)
85.16 83.21
Gold ($/Oz)
1202.45 1191.69
Gold (Rs/10 gm)
31216 30296
Silver ($/Oz)
14.59 14.60
Silver (Rs/Kg)
38480 37006
Source: Thomson Reuters
Eikon *Value as on Oct 5, 2018
Gold
• Gold prices increased as U.S. non-farm
payroll employment data for Sep 2018
came in lower than market expectations.
Prices got support when the U.S.
President said it is too early for any
agreement with China on the trade front.
Brexit tension and concerns over debt-
ridden Italy’s budget were among other
factors that weighed on investor
sentiment and dented their risk appetite.
Crude
• Brent crude prices grew and surpassed
the 86-mark in one of the sessions amid
looming U.S. sanctions against Iran's oil
industry. The markets are likely
preparing themselves for tighter supply
once U.S. sanctions against Iran start in
Nov 2018.
Baltic Dry Index
• The Baltic Dry Index grew 0.91% on the
back of improved capesize and
panamax activities.
9.50
10.00
10.50
11.00
11.50
5-Sep-18 20-Sep-18 5-Oct-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
2.34%
0.90%
-0.07%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
73.58 72.55
Pound Sterling
95.89 94.91
EURO
84.70 84.44
100 JPY
64.59 63.90
Source: RBI Figures in INR , *Value as on Oct 05, 2018
Rupee
• The rupee hits another record low
against the greenback amid persistent
surge in global crude oil prices.
Euro
• Euro fell against the U.S. dollar amid
uncertainty surrounding Italy's debt, fiscal
plans and future ties with Europe that led
to tensions in the market and amongst
other eurozone leaders.
Pound
• Sterling rose against the greenback after
European Union’s Brexit negotiator said
that they have moved close to an agreed
position on a deal for Brexit and a way to
avoid extensive border checks in Ireland.
Yen
• Yen fell marginally against the U.S. dollar
on strong U.S. private sector
employment data in Sep 2018 and
possibility of rate hike in Dec 2018 by the
U.S. Federal Reserve..
9.80
9.90
10.00
10.10
10.20
10.30
10.40
5-Sep-18 20-Sep-18 5-Oct-18
USD GBP Euro JPY
Source: RBI
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
1.42%
1.03%
0.30%
1.08%
15
The Week that was…
01
st
Oct to 05
th
Oct
The Week that was (Oct 01 – Oct 05)
16
Date Events Present Value Previous Value
Monday,
October 1, 2018
• India Nikkei Manufacturing PMI (Sep) 52.20 51.70
• India Index of Eight Core Industries (Aug) 4.20% 7.30%
• U.S. ISM Manufacturing (Sep) 59.80 61.30
Tuesday,
October 2, 2018
• Japan Consumer Confidence Index (Sep) 43.40 43.30
• U.K. Markit/CIPS Construction PMI (Sep) 52.10 52.90
Wednesday,
October 3, 2018
• U.S. ISM Non-Manufacturing Composite (Sep) 61.60 58.50
• Japan Nikkei Services PMI (Sep) 50.20 51.50
• U.K. Markit/CIPS Services PMI (Sep) 53.90 54.30
• U.S. ADP Employment Change (Sep) 230k 168k
• Eurozone Retail Sales (YoY) (Aug) 1.80% 1.00%
Thursday,
October 4, 2018
• India Nikkei Services PMI (Sep) 50.90 51.50
• Germany Markit Construction PMI (Sep) 50.20 51.50
• U.S. Initial Jobless Claims (Sep 29) 207k 215k
• U.S. Durable Goods Orders (Aug F) 4.40% 4.50%
Friday,
October 5, 2018
• India Monetary Policy for 2018-19 (Repo Rate) 6.50% 6.50%
• U.S. Change in Non-farm Payrolls (Sep) 134k 270k
• U.S. Unemployment Rate (Sep) 3.70% 3.90%
• Germany Factory Orders (YoY) (Aug) 3.10% 2.90%
17
The Week Ahead
08
th
Oct to 12
th
Oct
18
The Week Ahead
Day Event
Monday,
Oct 08, 2018
• China Caixin Composite PMI (Sep)
• Germany Industrial Production (YoY) (Aug)
• Japan Trade Balance - BOP Basis (Yen) (Aug)
Tuesday,
Oct 09, 2018
• Germany Trade Balance (Aug)
• Japan Machine Orders (YoY) (Aug)
Wednesday,
Oct 10, 2018
• China New Yuan Loans CNY (Sep)
• U.K. Trade Balance (Aug)
• U.K. Industrial Production (YoY) (Aug)
• U.K. Gross Domestic Product (MoM) (Aug)
Thursday,
Oct 11, 2018
• U.S. Consumer Price Index (YoY) (Sep)
• U.S. Initial Jobless Claims (Oct 6)
Friday,
Oct 12, 2018
• India Consumer Price Index (Sep)
• India Index of Industrial Production (Aug)
• U.S. University of Michigan Sentiment (Oct P)
• China Trade Balance (Sep)
• Japan Tertiary Industry Index (MoM) (Aug)
• Germany Consumer Price Index (YoY) (Sep F)
• Eurozone Industrial Production (YoY) (Aug)
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19
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