News U Can Use
October 26, 2018
The Week that was…
22
nd
October to 26
th
October
2
Indian Economy
• Government data showed that India’s fiscal deficit for Apr-Sep 2018 period came in at Rs.
5.95 lakh crore, or 95.3% of the budgeted target for FY19 against 91.3% in the year-ago
period. Net tax revenue was Rs. 5.83 lakh crore or 39.4% of the budget estimate for FY19
compared with 44.2% in the corresponding period of the previous year. The government’s
total expenditure for the period from Apr to Sep of 2018 stood at Rs. 13.04 lakh crore or
53.4% of the budget estimate for FY19 compared with 53.5% in the corresponding period
of the previous year.
• The Centre has given ex-post facto approval to an agreement signed among BRICS
nations on environmental cooperation. This is expected to bring in latest technologies and
best practices for better environment protection. The Union cabinet, chaired by the Prime
Minister, gave its approval to the memorandum of understanding signed during the 10th
BRICS Summit in Jul 2018 in Johannesburg, South Africa. The pact has identified various
areas of cooperation, including air quality, water, biodiversity, climate change and waste
management.
• According to a major credit rating agency, the supply of corporate bonds is expected to
increase to Rs. 55 lakh crore - Rs. 60 lakh crore by the end of FY23. This will be double as
against Rs. 27.4 lakh crore witnessed at the end of FY18. The upside is driven by increase
in bond issuances from the financial and infrastructure sectors.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 26-Oct-18 1 Week Return YTD Return
S&P BSE Sensex 33,349.31 -2.82% -2.08%
Nifty 50 10,030.00 -2.65% -4.75%
S&P BSE Mid-Cap 13,870.15 -1.34% -22.18%
S&P BSE Small-Cap 13,597.64 -3.45% -29.29%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
22-Oct-18 492 1,351 0.36
23-Oct-18 492 1,335 0.37
24-Oct-18 994 819 1.21
25-Oct-18 563 1,234 0.46
26-Oct-18 787 1,006 0.78
Source: NSE
• Indian equity markets fell for the
second consecutive week ended Oct
26, 2018. Concerns surrounding
liquidity crunch continued to weigh on
the markets. Widening of the fiscal
deficit in the first half of 2018-19 to
95.3% of the Budget Estimate on
account of slow growth in revenue
collections further dampened investor
sentiment.
• Disappointing quarterly earnings of
some blue-chip companies across
sectors added to the woes. On the
global front, rising geopolitical
tensions and concerns over Italian
government finances kept major
markets around the world under
pressure and the affects were seen in
domestic markets as well.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
21.32 24.12 29.38 -62.80
P/B
2.76 3.19 2.41 2.02
Dividend Yield
1.34 1.34 1.03 0.90
Source: BSE, NSE Value as on Oct 26
, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
19,296.3 -1.41% -13.87%
S&P BSE Bankex
27,159.3 -3.15% -4.45%
S&P BSE CD
18,233.1 -0.07% -8.17%
S&P BSE CG
16,409.6 -1.41% -8.50%
S&P BSE FMCG
10,907.8 -2.47% -5.35%
S&P BSE HC
13,875.5 -4.63% -10.45%
S&P BSE IT
13,477.3 -5.73% -13.56%
S&P BSE Metal
12,526.6 -2.26% -10.91%
S&P BSE Oil & Gas
12,930.9 -1.65% -13.38%
Source: Thomson Reuters Eikon
*Value as on Oct 26, 2018
• On the BSE sectoral front, indices closed
on a negative note. S&P BSE information
technology was the major loser that fell
5.73%. S&P BSE Healthcare and S&P
BSE Bankex plunged 4.63% and 3.15%,
respectively. S&P BSE FMCG and S&P
BSE Metal declined 2.47% and 2.26%,
respectively.
• FMCG stocks were hit after an FMCG
major witnessed decline as the domestic
legal cigarette industry faces severe
pressure due to punitive and
discriminatory taxation and regulatory
regime.
Indian Derivatives Market Review
• Nifty Oct 2018 Futures settled at 10,124.90, same as the spot closing. Nifty Nov 2018
Futures closed at 10,054.1, a premium of 24.10 points, above the spot closing of
10,030.00. The total turnover on NSE’s Futures and Options segment for the week stood
at Rs. 55.67 lakh crore as against Rs. 44.07 lakh crore for the week to Oct 19.
• The Put-Call ratio stood at 0.70 compared with the previous week’s close of 0.83.
• The Nifty Put-Call ratio stood at 1.44 against the previous week’s close of 1.07.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
6.48 6.55 6.45 5.88
91 Day T-Bill
6.95 6.95 7.17 6.22
7.80% 2021, (5 Yr GOI)
7.66 7.73 8.04 7.49
7.17% 2028, (10 Yr GOI)
7.88 7.92 8.07 7.76
Source: Thomson Reuters
Eikon
Value as on Oct 26, 2018
• Bond yields fell following plunge in
crude oil prices boosting market
sentiments and easing inflationary
concerns to some extent. Release of
minutes of the latest monetary policy,
which came in as per expectations
with no significant deviations, also
boosted market sentiment.
• However, weekly debt auction
conducted by the Reserve Bank of
India (RBI) that increased the supply
of government securities in the
market capped gains. Weakness in
domestic equity market also weighed
on investors’ sentiment.
• Yield on the 10-year benchmark
paper (7.17% GS 2028) fell 4 bps to
close at 7.88% from the last week’s
close at 7.92%, after trading in a
range of 7.83% to 7.94%.
7.85
7.90
7.95
22-Oct 23-Oct 24-Oct 25-Oct 26-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 7.70 8.95 125
3 Year 7.81 8.84 103
5 Year 8.01 8.84 83
10 Year 8.03 8.86 83
Source: Thomson Reuters Eikon
Value as on Oct 26, 2018
• Yields on gilt securities fell across
maturities by up to 9 bps barring 1- and
2-year maturities, which expanded 10
bps and 1 bps, respectively.
• Corporate bond yields fell across
maturities in the range of 3 bps to 8 bps
barring 1-year paper, which expanded 19
bps.
• Difference in spread between AAA
corporate bond and gilt expanded across
maturities by up to 8 bps, barring 2- and
3-year maturities, which contracted 1 bps
each.
-8
-4
0
4
8
6.45
7.22
8.00
8.77
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 26-Oct-18 19-Oct-18
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• The Securities and Exchange Board of India (SEBI) proposed some measures that aim at
strengthening the regulatory framework for debenture trustees (DT). The measures include
raising minimum net worth requirement for registration of such entities to Rs. 10 crore from
Rs. 2 crore currently. The measures come on the wake of securing interests of debenture
holders. Additionally, the market regulator proposed that if the issuer defaults in case of
public issues there should be no need to call a meeting of debenture holders and the
debenture trustees can directly enforce the security without attaining any consensus from
the debenture holders.
• SEBI data shows India’s non-bank financial companies (NBFCs) are looking at repaying
commercial paper near a record Rs. 1.46 trillion during Aug-Oct 2018 period and about Rs
1.2 trillion ($16.3 billion) in Oct-Dec 2018 period. This comes at the backdrop of the fallout
from defaults by a leading NBFC.
• The government is planning to change many sections of the Companies Act to simplify the
law, which came into force in 2013. The Ministry of Corporate Affairs is looking into the
changes, which include fast tracking of mergers and acquisitions, doubling of penalty for
repeat offences, raising remuneration of independent directors and preventing Section 8
companies, or companies formed with charitable objects, from changing into commercial
companies. Offences that are procedural and technical lapses have been proposed to be
transferred to in-house adjudication mechanism.
Regulatory Updates in India (contd..)
• Certain ministries have joined industry players in seeking higher tariffs to protect the
interests of domestic players. This comes after two rounds of customs duty hikes by the
government to check import of “non-essential items”. The list is long and includes lithium-ion
batteries, toasters and vinyl flooring. New players are joining every day, according to media
reports. The government had first raised import duty on 19 items — including diamonds,
footwear, refrigerators and air-conditioners — to reduce imports so the widening current
account deficit could be tackled. This was followed by a second round of hike, focusing on
telecom equipment.
• SEBI is working to set up a body for the mutual fund industry and form a standardised
template for portfolio manager to market their schemes. Presently, the portfolio
management service (PMS) providers file offers documents and issue quarterly statements
without any uniform marketing document for funds to potential customers.
• SEBI announced measures to increase the transparency of investment expenses, lower
portfolio turnover and curb mis-selling of mutual fund schemes. The regulator said that
going forward scheme related expenses, including commissions will be paid out of the
relevant scheme instead of being charged to the asset management company’s books.
9
Global News/Economy
• According to a report from the Commerce Department, U.S. real gross domestic product
surpassed market expectations and grew 3.5% in the third quarter as against an increase of
4.2% in the second quarter of 2018. The growth surpassed expectations driven by positive
contributions from personal spending, private inventory investment, government spending
and non-residential fixed investment. However, negative contributions from exports and
residential fixed investment along with an increase in imports limited the upside.
• The European Central Bank (ECB) kept its interest rates and forward guidance neutral for
the third consecutive policy session. This along it reaffirmed its massive asset purchase
program would end in Dec 2018. The main refinance rate, deposit rate and marginal lending
facility stands at 0%, -0.40% and 0.25%, respectively. The central bank continues to halve its
monthly bond purchases to EUR 15 billion as announced in Jun 2018 and plans to end it in
Dec 2018.
• A Commerce Department data showed new orders for U.S. manufactured durable goods
increased unexpectedly in Sep 2018. Durable goods orders increased 0.8% in Sep 2018
after increasing 4.6% in Aug 2018. Expectations were for orders to decline 0.9%.
• A Nikkei survey showed Japan’s manufacturing sector expanded in Oct 2018 at a faster rate.
The preliminary reading came at 53.1, which is up from 52.5 in Sep 2018. Output, new
orders and employment increased, and rates of input cost and output price inflation rose to
multi-year highs.
10
Global Equity Markets
11
Global Indices
Indices
26-Oct-18
1-Week
Return
YTD
Return
Dow Jones
24,688.3 -2.97% -0.13%
Nasdaq 100
6,852.4 -3.59% 7.13%
FTSE 100
6,939.6 -1.56% -9.73%
DAX Index
11,200.6 -3.06% -13.29%
Nikkei Average
21,184.6 -5.98% -6.94%
Straits Times
2,972.0 -2.95% -12.66%
Source: Thomson Reuters Eikon
Value as on Oct 26, 2018
U.S.
• U.S. markets moved down over the
week following disappointing Sep 2018
quarterly results from some major
companies. Worries over slowing global
economic growth and rising geopolitical
tensions also weighed on the sentiment.
• Investors remained cautious of the
monthly jobs data for Oct 2018 along
with personal income and spending,
consumer confidence data scheduled to
release in the upcoming week.
Europe
• European markets fell after taking subdued cues from the Wall Street and disappointing
Sep 2018 quarterly results of some major global companies. Investors remained cautious
over a probable hard Brexit, as mentioned by the ECB President, and rejection of the
Italian budget by the European Commission.
Asia
• Asian markets too followed global peers and remained concerned over the slowing global
growth forecasts, tensions between the U.S. and Saudi Arabia over a prominent
journalist’s death and the persisting trade dispute between U.S. and China. Italy’s budget
rejection and probability of hard Brexit also made investors jittery.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury bond
plunged 12 bps to close at 3.08% from
the previous close of 3.20%.
• U.S. Treasury prices rose the most
following decline in U.S. equity markets
globally, which boosted the demand for
low-risk assets. Prices gained further
due to ongoing political uncertainty
ahead of the U.S. Congressional
elections.
• Concerns over a slowdown in China,
tensions between the European Union
and Italy regarding latter’s spending
plans and some downbeat U.S.
corporate earnings reports for the
quarter ended Sep 2018 affected the
risk sentiment during the week.
• However, data showed that the U.S.
economy slowed less than market
forecasts in the Sep quarter of 2018
which capped earlier gains.
3.04
3.11
3.17
3.24
22-Oct 23-Oct 24-Oct 25-Oct 26-Oct
Yield in %
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Last Closing* 1-Week Ago
Brent Crude($/Barrel)
78.29 81.17
Gold ($/Oz)
1,233.17 1,225.86
Gold (Rs/10 gm)
31,868 31,706
Silver ($/Oz)
14.61 14.59
Silver (Rs/Kg)
38,358 38,248
Source: Thomson Reuters
Eikon *Value as on Oct 26, 2018
Gold
• Gold prices edged up on concerns over
weak U.S. corporate results for the
quarter ended Sep 2018. Worries over
the Italian government’s budget plan,
persistent trade tensions between U.S.-
China and escalating geopolitical
worries between U.S. and Saudi Arabia
also supported gains.
Crude
• Brent crude prices moved down on
worries over demand outlook following
some weak U.S. corporate earnings for
the quarter Sep 2018. Also, concerns
over global growth, the rejection of the
Italian budget by the European
Commission and global trade war
concerns kept prices under pressure.
Baltic Dry Index
• The Baltic Dry Index fell 3.62% on the
back of lower capesize and panamax
activities.
9.45
10.00
10.55
26-Sep-18 6-Oct-18 16-Oct-18 26-Oct-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
-3.55%
0.60%
0.12%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
73.37 73.44
Pound Sterling
94.05 95.65
EURO
83.41 84.17
100 JPY
65.41 65.27
Source: RBI Figures in INR , *Value as on Oct 26, 2018
Rupee
• The Indian rupee gained against the U.S.
dollar following a steep decline in crude
oil prices.
Euro
• The euro declined against the greenback
on political and economic unrest in
Europe, particularly the financial
instability in Italy.
Pound
• The pound plunged against the
greenback on worries that the U.K. Prime
Minister could face leadership challenges
after fears grew about the Irish border
issue and disagreements within Britain's
ruling Conservatives over Brexit.
Yen
• The yen rose against the greenback after
a range bound session on improved safe
haven appeal as risk appetite diminished
following decline in global equity
markets.
9.70
10.00
10.30
26-Sep-18 6-Oct-18 16-Oct-18 26-Oct-18
USD GBP Euro JPY
Source: RBI
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
- 0.08%
-1.68%
- 0.91%
0.21%
15
The Week that was…
22
nd
Oct to 26
th
Oct
The Week that was (Oct 22 – Oct 26)
16
Date Events Present Value Previous Value
Monday,
October 22, 2018
• Japan All Industry Activity Index (MoM) (Aug)
0.50% 0.00%
Tuesday,
October 23, 2018
• Eurozone Consumer Confidence (Oct A)
-2.70 -2.90
Wednesday,
October 24, 2018
• Japan Nikkei Manufacturing PMI (Oct P)
53.1 52.5
• Germany Markit/BME Composite PMI (Oct P)
52.7 55
• Eurozone Markit Composite PMI (Oct P)
52.7 54.1
• U.S. House Price Index (MoM) (Aug)
0.30% 0.40%
• U.S. Markit Composite PMI (Oct P)
54.8 53.9
• U.S. MBA Mortgage Applications (Oct 19)
4.90% -7.10%
• U.S. New Home Sales (MoM) (Sep)
-5.50% -3.00%
Thursday,
October 25, 2018
• India Fiscal Deficit (Apr
-Sep)
(% of Budgeted target for FY19)
95.30% 94.70%
• European Central Bank Rate Decision (Oct 25)
0.00% 0.00%
• U.S. Advance Goods Trade Balance (Sep)
-76.0b -75.8b
• U.S. Durable Goods Orders (Sep P)
0.80% 4.60%
• Germany IFO Expectations (Oct)
99.8 100.9
• U.S. Wholesale Inventories (MoM) (Sep P)
0.30% 0.90%
• U.S. Initial Jobless Claims (Oct 2)
215k 210k
Friday,
October 26, 2018
• U.S. Gross Domestic Product Annualized
(QoQ) (3Q A)
3.50% 4.20%
• U.S. University of Michigan Sentiment (OCT F)
98.60 99.00
17
The Week Ahead
29
th
Oct to 2
nd
Nov
18
The Week Ahead
Day Event
Monday,
October 29, 2018
• U.S. Personal Consumption Expenditure Core (YoY) (Sep)
• Japan Jobless Rate (Sep)
Tuesday,
October 30, 2018
• Germany Unemployment Claims Rate s.a. (Oct)
• Eurozone Gross Domestic Product s.a. (YoY) (3Q A)
• Germany Consumer Price Index (YoY) (Oct P)
• U.S. Consumer Confidence Index (Oct)
• Japan Industrial Production (YoY) (Sep P)
Wednesday,
October 31, 2018
• Bank of Japan Rate Decision
• China Manufacturing PMI (Oct)
• Eurozone Consumer Price Index Estimate (YoY) (Oct)
• U.K. GfK Consumer Confidence (Oct)
• Japan Housing Starts (YoY) (Sep)
• Japan Construction Orders (YoY) (Sep)
Thursday,
November 1, 2018
• Bank of England Rate Decision
• U.S. ISM Manufacturing (Oct)
• China Caixin Manufacturing PMI (Oct)
Friday,
November 2, 2018
• U.S. Unemployment Rate (Oct)
• U.S. Change in Non-farm Payrolls (Oct)
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19
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