News U Can Use
September 21, 2018
The Week that was…
17
th
September to 21
st
September
2
Indian Economy
• Under the government’s flagship scheme Pradhan Mantri Krishi Sinchai Yojana (PMKSY),
the National Bank for Agriculture and Rural Development (NABARD) has approved Rs.
65,634.93 crore loan so far to 93 prioritised irrigation projects. Under the PMKSY, through
long term irrigation fund, NABARD is funding the central and state share of 99 prioritised
irrigation projects.
• According to the media reports, the Securities and Exchange Board of India (SEBI) has
delayed the deadline for the extension of trading hours which was earlier decided to be Oct
1, 2018. As per the reports, the discussions are underway, and the stock exchanges have
not yet reached at a consensus with brokers. The proposal is that trade hours could be
stretched in order to align domestic market better with the global markets.
• A major credit rating agency has raised India’s growth forecast for FY19 to 7.8% as against
previous expectation of 7.4%. The agency stated that the announcement comes on the
wake of better-than-expected increase in growth forecast in 2Q18 (Apr-Jun 2018).
However, it indicated tightening of financial conditions, rising oil prices and weak bank
balance sheets are headwinds to growth.
• The government has set an objective of producing a record 285.2 million tonnes of food
grains in crop year 2018-19 that began in Jul 2018. The target comes despite 9% below
normal monsoon rainfall so far in 2018. According to the agriculture ministry, the target is
0.53% higher than the initial prediction made in Apr 2018.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 21-Sep-18 1 Week Return YTD Return
S&P BSE Sensex 36841.6 -3.28% 8.18%
Nifty 50 11143.1 -3.23% 5.82%
S&P BSE Mid-Cap 15595.63 -4.61% -12.49%
S&P BSE Small-Cap 15763.1 -5.45% -18.03%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
17-Sep-18 810 1020 0.79
18-Sep-18 498 1326 0.38
19-Sep-18 589 1223 0.48
21-Sep-18 311 1600 0.19
Source: NSE
• The domestic equity market fell with
heavy selling pressure seen in the
banking and financial sectors.
Investor sentiment remained
subdued because of the rating
downgrade of a major domestic
infrastructure development and
finance company earlier this month in
the wake of the recent liquidity
crunch faced by the company. The
news led to speculation that the cost
of borrowing for non-banking finance
companies is going to shoot up and
they may face challenge in raising
money.
• Another factor that put additional
selling pressure on the banking
sector was a media report stating that
the Reserve Bank of India has
directed the managing director and
CEO of a private lender to step down
in Jan 2019.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
23.73 27.09 31.29 -125.89
P/B
3.05 3.59 2.65 2.35
Dividend Yield
1.2 1.20 0.98 0.80
Source: BSE, NSE Value as on
Sep 21, 2018
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
23274.8 -4.01% -5.42%
S&P BSE Bankex
28702.0 -6.27% -10.20%
S&P BSE CD
20087.9 -3.12% -8.04%
S&P BSE CG
18058.2 -2.67% -2.77%
S&P BSE FMCG
11805.9 -2.17% -5.50%
S&P BSE HC
15588.8 -3.99% 1.87%
S&P BSE IT
15469.7 -1.76% 3.34%
S&P BSE Metal
13955.7 -0.96% 6.07%
S&P BSE Oil & Gas
15047.9 1.17% 0.50%
Source: Thomson Reuters Eikon
*Value as on Sep 21, 2018
• On the BSE sectoral front, barring S&P
BSE Oil & Gas all the indices closed in the
red. S&P BSE Bankex was the major loser,
down 6.27%, followed by S&P BSE Realty
and S&P BSE Power, which fell 6.14% and
4.23%, respectively.
• Power sector fell despite the Supreme
Court directing banks to maintain status
quo and not to initiate insolvency
proceedings against defaulting power
companies till Nov 11, 2018. Auto and
healthcare sectors slipped 4.01% and
3.99%, respectively.
Indian Derivatives Market Review
• Nifty Sep 2018 Futures settled at 11,166.35, a premium of 23.25 points, above the spot
closing of 11,143.10. The turnover on NSE’s Futures and Options segment stood at Rs.
54.19 lakh crore as against Rs. 49.39 lakh crore on Sep 14.
• The Put-Call ratio stood at 0.87 compared with the previous week’s close of 0.82.
• The Nifty Put-Call ratio stood at 1.15 against the previous week’s close of 1.38.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
6.58 6.43 6.42 5.94
91 Day T-Bill
7.10 7.07 6.81 6.15
7.80% 2021, (5 Yr GOI)
8.00 8.11 7.69 7.14
7.17% 2028, (10 Yr GOI)
8.08 8.13 7.83 7.58
Source: Thomson Reuters
Eikon
Value as on Sep 21, 2018
• Bond yields fell after the finance
ministry announced that the
government could lay down details on
import restriction and following central
bank’s declaration of notes purchase
under open market operation (OMO).
• Also, rupee recovery from record low
as the government is expected to
intervene and undertake measures to
prevent the local currency from
witnessing further losses also led to
rise in bond’s price.
• The Reserve Bank of India (RBI)
conducted OMO purchase auction of
8.12% GS 2020, 6.84% GS 2022,
6.79% GS 2027, 8.97% GS 2030 and
8.30% GS 2042 for notified amount of
Rs. 10,000 crore, against which the
total amount was accepted. The cut-
off yield was 7.95%, 8.07%, 8.16%,
8.27% and 8.30%, respectively.
8.00
8.08
8.16
17-Sep 18-Sep 19-Sep 21-Sep
Yield in %
10 -Yr Benchmark Bond ( % )
Source: CCIL
Domestic Debt Market (Spread Analysis)
7
Maturity
G-Sec Yield
(%)
Corporate Yield
(%)
Spread
bps
1 Year 7.92 8.81 89
3 Year 8.16 8.84 68
5 Year 8.28 8.93 65
10 Year 8.24 8.95 71
Source: Thomson Reuters Eikon
Value as on Sep 21, 2018
• Yields on gilt securities fell across all
maturities in the range of 2 to 11 bps,
barring 2- and 12-year papers that
increased 1 bps each. Highest fall was
seen on 3-year paper.
• Corporate bond yields increased across
the maturities in the range of 2 bps to 20
bps barring 6 to 8-year maturities which
closed steady. The maximum increase
was witnessed on 15-year paper.
• Spread between AAA corporate bond
and gilt expanded across the maturities
in the range of 3 bps to 28 bps.
-15
-10
-5
0
5
10
6.00
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 21-Sep-18 14-Sep-18
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• Securities and Exchange Board of India (SEBI) has approved new ‘know your customer’
(KYC) norms for foreign portfolio investors (FPI) and would soon issue a revised circular on
KYC norms for FPIs. Also, the market regulator has shortened the time taken for a security
to list on an exchange to three days (T+3) from the date of closure of its initial public offer
(IPO). It has also permitted participation of foreign investors’ in India’s commodities market
except for sensitive ones. SEBI also stated that the mutual fund expenses will be brought
down taking into consideration economies of scale.
• The Securities and Exchange Board of India (SEBI) announced that instead of levying
charges based on turnover slab rates, a nominal regulatory fee of Rs. 1 lakh per exchange
will be levied on turnover arising from agricultural commodity derivatives. The move is
expected to benefit the farmers. Various steps are being taken by the government, SEBI as
well as the exchanges to promote agricultural commodity derivative segment so that the
benefits of agricultural commodity derivative are passed on to the farmers and Farmers
Producer Organisation (FPOs). The market regulator also stated that exchanges dealing
with agricultural commodities derivatives will create a separate fund which will be kept for
the benefit of farmers or FPOs. This would help pass the desired benefits from reduction of
regulatory fees.
Regulatory Updates in India (contd..)
• In order to promote ease of doing business, the government has made procedures simple
under the Merchandise Exports from India Scheme (MEIS). Under the scheme, traders can
get export incentives. MEIS gives duty benefits based on the product and country. The
process of system driven approval of the MEIS claim applications in respect of exports
made through electronic data interface shipping bills will start from Sep 20, 2018.
• India has introduced an anti-subsidy probe into increased imports of select copper wire rods
from Indonesia, Malaysia, Thailand and Vietnam. The probe comes following complaints by
domestic players. As per a notification from the Directorate General of Trade Remedies
(DGTR), there is "prima facie evidence" of existence of subsidies on production and exports
of 'continuous cast copper wire rods' in these four countries. As per DGTR, such subsidised
imports are hurting the domestic industry with their volume and price effects.
• According to the media reports, under Merchandise Export from India Scheme (MEIS)
scheme, the government had decided again to surge duty benefits for exports of milk and
certain milk products. The incentives on milk and certain milk products have been surged
from 10% to 20% for about four months up to Jan 12, 2019. The announcement comes on
the wake of boosting overseas shipments. The government had enhanced the duty benefits
to 10% for certain agriculture and dairy sector items in Jul 2018. The items covered under
the improved incentives include cheese, whole milk, skimmed milk, milk and milk food for
babies, condensed milk, yoghurt, buttermilk and whey.
9
Global News/Economy
• The Organization for Economic Cooperation & Development (OECD) downgraded its global
growth projections for both 2018 and 2019. According to OCED, the global economy will
grow 3.7% in 2018 and 2019.
• Data from the National Association of Realtors showed that existing home sales came in at
an annual rate of 5.34 million in Aug 2018 that remained unchanged from Jul 2018. The
report further showed that existing home sales in the Northeast grew 7.6% to a rate of
710,000, while sales in the West rose 2.4% to a rate of 1.280 million.
• Flash survey from IHS Markit showed that the euro zone manufacturing Purchasing
Managers' Index (PMI) dropped to a 24-month low of 53.3 in Aug 2018 from 54.6 in the
previous month. The services PMI rose to a 3-month high of 54.7 in Sep 2018.
• Euro zone inflation slowed as estimated in Aug 2018. Inflation came in at 2% in Aug 2018
compared with 2.1% in Jul 2018, which was the highest since Dec 2012. The slowdown
came as the core inflation slowed marginally to 1% in Aug 2018, as initially estimated, from
1.1% a month ago.
• U.K. inflation rose in Aug 2018. Consume prices inflation on a yearly basis grew to 2.7% in
Aug 2018 from 2.5% in Jul 2018. On a monthly basis, consumer price inflation grew 0.7%.
• The Bank of Japan in its policy meeting retained the -0.1% interest rate on current accounts
that financial institutions maintain at the bank. The central bank will purchase government
bonds so that the yield of 10-year Japanese Government Bonds (JGBs) remains at around
0%. The purchases will be in a flexible manner so that the outstanding amount will increase
at an annual pace of about JPY 80 trillion.
10
Global Equity Markets
11
Global Indices
Indices
21-Sep-18
1-Week
Return
YTD
Return
Dow Jones
26743.5 2.25% 8.19%
Nasdaq 100
7531.07 -0.19% 17.74%
FTSE 100
7490.23 2.55% -2.57%
DAX Index
12430.88 2.53% -3.77%
Nikkei Average
23869.93 3.36% 4.85%
Straits Times
3217.68 1.78% -5.44%
Source: Thomson Reuters Eikon
Value as on Sep 21, 2018
U.S.
• U.S. markets gained on the back of
positive economic data. Jobless claims
fell to their lowest level in nearly 50
years for the week ended Sep 15, 2018.
• Persisting U.S.-China trade tensions
were a pain point but some respite was
seen after China said tariffs on $60
billion worth of U.S. goods would range
between 5-10% instead of previously
announced 20% on some goods.
Europe
• European markets traded up after the U.S. announced that tariffs on Chinese imports will
be set at 10% against the 25% mentioned earlier; although from Jan 1, 2019, tariffs will be
imposed at 25% rate. Higher than expected U.K. retail sales in Aug 2018, and
expectations that China would take stimulus measure to support its economic growth and
combat the tariff war supported the sentiment.
Asia
• Asian markets got support from their global peers on optimism that the U.S.- China trade
war might not be as damaging as expected. Expectations of more stimulus measures by
China to support economic growth and combat the trade row also boosted sentiment.
Improved manufacturing sector in Japan in Sep 2018, upbeat exports for Aug 2018 and
ultra-loose monetary policy stance by the Bank of Japan, supported the bourses.
Global Debt (U.S.)
12
• Yield on the 10-year U.S. Treasury bond
rose 8 bps to close at 3.07% from the
previous close of 2.99%.
• U.S. Treasury prices fell earlier during
the week under review on rising
expectations of more interest rate
increases by the U.S. Federal Reserve
(Fed) this year and 2019. Heavy
corporate bond auction schedule during
the week further lowered the demand of
treasuries in the secondary market.
• U.S. Treasury prices fell further as
indication of inflation picking up and
strong economic data raised
expectations of a hawkish U.S. Fed
meeting next week.
• However, further losses were capped on
persistent U.S. and China trade
tensions and uncertainty over Brexit
deal that pushed investors towards safe
haven government bonds.
2.98
3.04
3.10
17-Sep 18-Sep 19-Sep 20-Sep 21-Sep
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
Commodities Market
13
Performance of various commodities
Last Closing* 1-Week Ago
Brent Crude($/Barrel)
79.87 77.81
Gold ($/Oz)
1203.58 1193.31
Gold (Rs/10 gm)
30697 30558
Silver ($/Oz)
14.20 14.04
Silver (Rs/Kg)
36882 36565
Source: Thomson Reuters
Eikon *Value as on Sep 21, 2018
Gold
• Gold prices grew amid intensifying trade
friction between U.S. and China. The
U.S. President’s announcement to
impose 10% tariffs on Chinese imports
worth $200 billion triggered China to
retaliate. The Asian economy is hitting
back with new tariffs, ranging between
5% to 10%, on $60 billion worth of
American goods, effective from Sep 24,
2018.
Crude
• Brent Crude prices grew over supply
tightening tension from the impending
U.S. sanction on Iran, which will be
formally applicable from Nov 2018. The
global market is already witnessing
supply crunch as Iran’s exports have
started declining.
Baltic Dry Index
• The Baltic Dry Index grew 2.20% on the
back of improved capesize and
panamax activities.
9.30
10.40
11.50
21-Aug-18 7-Sep-18
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
2.65%
0.86%
1.15%
21-Sep-18
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
71.85 71.81
Pound Sterling
95.15 94.16
EURO
84.68 83.98
100 JPY
63.67 64.19
Source: RBI Figures in INR , *Value as on Sep 21, 2018
Rupee
• The rupee declined against the
greenback following losses in the
domestic equity market.
Euro
• The euro rose against the greenback on
hopes that the adverse impact of the
ongoing trade row between U.S. and
China will take some time to get reflected
in the corporate earnings results.
Pound
• The pound rose against the greenback
on upbeat U.K. retail sales and optimism
over a Brexit deal. However, most gains
wiped out after the British Prime Minister
said Brexit talks with EU had reached a
deadlock and new plans were needed.
Yen
• The yen fell against the greenback as its
safe haven appeal got hurt on hopes that
the adverse impact of the ongoing trade
row between U.S. and China would not
lead to an immediate global shock.
9.80
10.30
10.80
21-Aug-18 7-Sep-18
USD GBP Euro JPY
Source: RBI
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
21-Sep-18
-0.81%
0.84%
1.06%
0.05%
15
The Week that was…
17
th
Sept to 21
st
Sept
The Week that was (Sep 17 – Sep 21)
16
Date Events
Present
Value
Previous
Value
Monday,
September 17, 2018
• Eurozone Consumer Price Index (YoY) (Aug F) 2.0% 2.0%
Tuesday,
September 18, 2018
• U.S. NAHB Housing Market Index (Sep) 67.0 67.0
• Japan Trade Balance (Aug) -¥444.6b -¥231.9b
Wednesday,
September 19, 2018
• Bank of Japan Rate Decision (Sep 19) -0.1% -0.1%
• U.K. Consumer Price Index (YoY) (Aug) 2.7% 2.5%
• U.K. House Price Index (YoY) (Jul) 3.1% 3.2%
• U.S. Housing Starts (MoM) (Aug) 9.2% -0.3%
Thursday,
September 20, 2018
• Japan National Consumer Price Index (YoY) (Aug) 1.3% 0.9%
• U.S. Initial Jobless Claims (Sep 15) 201k 204k
• Eurozone Consumer Confidence (Sep A) -290.0% -190.0%
• U.S. Leading Index (Aug) 0.4% 0.7%
• U.S. Existing Home Sales (MoM) (Aug) 0.0% -0.7%
Friday,
September 21, 2018
• Japan Nikkei Manufacturing PMI (Sep P) 52.9 52.5
• Japan All Industry Activity Index (MoM) (Jul) 0.0% -0.9%
• Germany Markit/BME Composite PMI (Sep P) 53.7 55.9
• Eurozone Markit Composite PMI (Sep P) 53.3 54.5
• U.K. Public Sector Net Borrowing (Aug) 5.9b -3.9b
• U.S. Markit Composite PMI (Sep P) 53.4 54.70
17
The Week Ahead
24
th
Sept to 28
th
Sept
18
The Week Ahead
Day Event
Monday,
Sep 24, 2018
• Eurozone German IFO Current Assessment (Sep)
Tuesday,
Sep 25, 2018
• U.S. S&P/Case-Shiller US Home Price Index (YoY) (Jul)
• U.S. Consumer Confidence Index (Sep)
Wednesday,
Sep 26, 2018
• U.S. FOMC Rate Decision
• U.S. New Home Sales (MoM) (Aug)
• Japan Machine Tool Orders (YoY) (Aug F)
Thursday,
Sep 27, 2018
• Eurozone German Retail Sales (YoY) (Aug)
• Eurozone German Consumer Price Index (YoY) (Sep P)
• U.S. Durable Goods Orders (Aug P)
• U.S. Gross Domestic Product Annualized (QoQ) (2Q T)
• Japan Retail Trade (YoY) (Aug)
• Japan Industrial Production (YoY) (Aug P)
Friday,
Sep 28, 2018
• Eurozone German Unemployment Change (000's) (Sep)
• U.K. Gross Domestic Product (YoY) (2Q F)
• Eurozone Consumer Price Index Estimate (YoY) (Sep)
• U.S. Personal Consumption Expenditure Core (YoY) (Aug)
• China Caixin PMI Manufacturing (Sep)
Disclaimer
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19
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