The Week that was…
23
rd
September to 27
th
September
2
Indian Economy
• The Asian Development Bank (ADB) has sharply lowered India's growth forecast from
7.2% to 6.5% for 2019-20, according to media news. ADB indicated that the country will
grow faster than China. In its Asian Development Outlook (ADO) Update for 2019, ADB cut
the growth projection for India, which recorded an over six-year low growth of 5% in the
Apr-Jun quarter 2019.
• Media reports showed the government is expecting a shortfall of almost Rs. 40,000 crore
in the goods and services tax collections over the budgeted amount for 2019-20. This
could put pressure on the compensation that states are eligible for in case the tax growth
falls below 14% during the year. The GST Council met in Goa on Sep 20, 2019. Most
states were optimistic that the government will find a way to meet the compensation
requirements.
• The government has notified 8.65% interest rate for 2018-19 for Employees' Provident
Fund Organization's (EPFO) more than 60 million active subscribers. While the EPFO
board had decided to pay 8.65% interest rate to its subscribers for 2018-19 in Feb 2019, it
was not yet credited to their account as the finance ministry had not given its go-ahead.
• A major domestic rating agency has said there are various threats to apparel exports that
could slow down the pace and make it challenging for exporters. India's apparel exports
have revived in 2019-20, growing by about 4% YoY during the first four months, after two
consecutive years of de-growth, the agency said.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 27-Sep-19 1 Week Return YTD Return
S&P BSE Sensex 38,822.57 2.13% 7.64%
Nifty 50 11,512.40 2.11% 5.98%
S&P BSE Mid-Cap 14,265.99 1.03% -7.59%
S&P BSE Small-Cap 13,331.93 0.97% -9.35%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline
Ratio
23-Sep-19 1,236 630 1.96
24-Sep-19 811 1,026 0.79
25-Sep-19 497 1,343 0.37
26-Sep-19 986 836 1.18
27-Sep-19 651 1,181 0.55
Source: NSE
• Indian equity markets gained on the back
of the lingering good sentiment
generated by the government’s stimulus
package and hopes of U.S.-China trade
deal. The U.S. President said a deal
could become reality soon. Also, the
Prime Minister assuring of more reforms
boosted sentiment.
• The week opened on a high as
government’s Rs 1.25 lakh crore stimulus
made prominent brokerages raise their
earnings estimates for Indian
businesses. Hopes of a China-U.S. trade
deal added to the gains which arose
when the U.S. President said a deal
could fructify soon.
• However, the sentiment was hurt when
the U.S. President faced impeachment.
Fresh on the heels of an impeachment
against the U.S. President, a whistle
blower report showed the President tried
to hold back evidence.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
27.25 26.52 26.90 41.71
P/B
2.92 3.55 2.39 1.80
Dividend Yield
1.19 1.30 1.13 1.09
Source: BSE, NSE Value as on Sep
27, 2019
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
16,900.3 -1.06% 5.02%
S&P BSE Bankex
33,781.5 3.54% 6.40%
S&P BSE CD
26,140.4 2.14% 11.58%
S&P BSE CG
18,702.5 3.50% 8.68%
S&P BSE FMCG
11,733.8 3.93% 6.86%
S&P BSE HC
12,692.6 -2.49% 1.05%
S&P BSE IT
15,312.4 -1.71% -3.15%
S&P BSE Metal
9,133.9 -1.97% 6.67%
S&P BSE Oil & Gas
14,562.2 4.82% 9.95%
S&P BSE Power
16,900.3 -1.06% 5.02%
S&P BSE Realty
33,781.5 3.54% 6.40%
Source: Thomson Reuters Eikon
*
Value as on Sep 27, 2019
• S&P BSE Oil & Gas was the major gainer
that grew 4.82% followed by S&P BSE
FMCG and S&P Bankex, which grew 3.93%
and 3.54%, respectively.
• The sectors were buoyed by the
government’s stimulus package wherein
corporate tax rate was cut, which would
eventually boost earnings. It helped that
prominent brokerages upgraded their major
companies’ earnings estimates. The metal
sector lost as official data showed China's
industrial profits declined in Aug 2019 amid
the trade dispute with the U.S.
Indian Derivatives Market Review
• Nifty Oct 2019 Futures stood at 11,579.50, a premium of 67.10 points above the spot
closing of 11,512.40. The total turnover on NSE’s Futures and Options segment for the
week stood at Rs. 83.70 lakh crore as against Rs. 83.90 lakh crore for the week to Sep 20.
• The Put-Call ratio stood at 0.91 compared with the previous week’s close of 0.81 .
• The Nifty Put-Call ratio stood at 1.19 against the previous week’s close of 1.39.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
5.24 5.37 5.35 6.22
91 Day T-Bill
5.41 5.32 5.43 6.29
07.32% 2024, (5 Yr GOI)
6.42 6.46 6.24 6.95
07.26% 2029, (10 Yr GOI)
6.74 6.79 6.53 7.33
Source: Thomson Reuters Eikon
Value as on Sep 27, 2019
• Bond yields fell as market participants
resorted to value buying. Decline in
crude oil prices following aggravating
U.S.-China trade tension also
supported domestic bond market.
Besides, the finance minister’s
announcement that the government
does not plan to change the fiscal
deficit target currently, also helped
ease the yield.
• However, the gains were restricted as
market participants remain anxious
regarding the country’s borrowing
plan for the Oct-Mar period, which is
expected to be detailed on Sep 30.
• Yield on the 10-year benchmark
paper (7.26% GS 2029) fell 5 bps to
6.74% compared with the previous
close of 6.79% after trading in a
range of 6.70% to 6.80%.
6.70
6.74
6.78
6.82
23-Sep 24-Sep 25-Sep 26-Sep 27-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 5.91 6.97 106
3 Year 6.24 7.40 116
5 Year 6.61 7.52 91
10 Year 6.84 8.08 124
Source: Thomson Reuters Eikon
Value as on Sep 27, 2019
• Yields on gilt securities increased across the
maturities in the range of 2 bps to 18 bps
barring 4-year paper, 7-year paper and 10 to
14-year maturities which fell by up to 8 bps
while the yield on 5 and 15-year paper closed
steady.
• Corporate bond yields fell across 3 to 10-year
paper by up to 30 bps barring 1, 2 and 15-year
paper which increased in the range of 3 bps to
31 bps.
• Difference in spread between AAA corporate
bond and gilt contracted across the maturities
in the range of 3 bps to 37 bps barring 1-year
paper and 15-year paper which expanded 3
bps and 31 bps respectively.
-6
2
10
18
5.00
5.80
6.60
7.40
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 27-Sep-19 20-Sep-19
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
• In its recent circular, Securities and Exchange Board of India (SEBI) has asked mutual fund
houses to adopt waterfall approach for valuation for debt funds. The market regulator wants
Association of Mutual Funds in India to confirm that valuation agencies document waterfall
approach for valuation of debt and money market securities. SEBI has introduced broad
principles to calculate securities prices. Trade securities should be valued basis the trade
yield. Government securities, including T-bills, would be valued based on Volume Weighted
Average Yield (VWAY) for trades in the final one hour of trading. For other debt securities,
valuation would be done based on VWAY for all trades in the day.
• According to media reports, SEBI’s chairperson reaffirmed that standstill agreements are
not permitted between mutual funds and borrowers. This came in a day after a prominent
conglomerate expressed that certain funds have acceded to further push back the deadline
for the repayment of its debt obligation. The SEBI chairperson asserted that such fresh
extensions does not have regulatory approval.
• According to media reports, SEBI is tightening rules for debt mutual funds by passing a
mandate that all liquid schemes are required to hold a minimum of 20% in liquid assets
such as cash and government securities. This comes in the wake of the latest credit papers
default and downgrades. The mandate will come into force from Apr 1, 2020, with the
purpose of confirming adequate liquidity and improving risk management.
Regulatory Updates in India (contd..)
9
• The Central Board of Direct Taxes (CBDT) will conduct a pan-India review of the e-
assessment system for income-tax payers before starting it in Oct 2019. CBDT, which
frames policy for the income-tax department, had last week set up the national e-
assessment centre in Delhi as part of the Centre's plan to launch faceless and nameless
assessment for income-tax payers.
• The Prime Minister has said the government will further simplify India’s tax regime, including
bringing tax on equity investments in line with global standards, media reports showed. He
said this while making a strong pitch to global business leaders to invest in India. He said
India will not avoid taking toughest decisions. The Prime Minister was at a media meet in
New York which was attended by top executives of some of world’s biggest companies.
• According to media report, the Insurance Regulatory and Development Authority of India
(IRDAI) has suggested minor alterations in policies filed by general and standalone health
insurers. According to the new regulation, health insurers will now be able to revise the base
premium rates by 15% (+/-) of the rates initially approved in an individual product. Also
health insurers will now be able to add more critical illnesses to the cover and to increase
the maximum age limit from 65 years, with consent from the regulator. Even the policy
words can also be altered to some extent.
Global News/Economy
• A Commerce Department final report on U.S. gross domestic product in the second quarter
showed the pace of GDP growth was unrevised from the previous estimate. The report said
real GDP increased at an annual rate of 2.0% in the second quarter of 2019, unchanged
from the previous estimate and in line with expectations.
• IHS Markit data showed euro area private sector moved close to stagnation in Sep 2019 as
demand for both goods and services declined the most in over six years. The flash
composite output index fell unexpectedly to a 75-month low of 50.4 in Sep from 51.9 in Aug
2019.
• A Conference Board report showed U.S. consumer confidence deteriorated by much more
than anticipated in Sep 2019. The Conference Board said its consumer confidence index
tumbled to 125.1 in Sep from 134.2 in Aug 2019.
• A Commerce Department report showed U.S. new home sales rebounded strongly in Aug
2019 following a sharp pullback in the previous month. New home sales surged up by 7.1%
to an annual rate of 713,000 in Aug after plunging 8.6% to a revised rate of 666,000 in Jul
2019.
• An IHS Markit survey showed Japan's private sector expanded at a slightly slower pace in
Sep 2019 as manufacturing activity contracted further. The Jibun Bank flash composite
output index fell to 51.2 from 51.9 in Aug 2019.
10
Global Equity Markets
11
Global Indices
Indices
27-Sep-19
1-Week
Return
YTD
Return
Russell 3000 1,282.88 -1.69% 20.72%
Nasdaq 100 7,681.58 -1.81% 21.35%
FTSE 100 7,426.21 1.11% 10.38%
DAX Index 12,380.94 -0.70% 17.26%
Nikkei Average 21,878.90 -0.91% 9.31%
Straits Times 3,125.63 -1.08% 1.85%
Source: Thomson Reuters Eikon
Value as on Sep 27, 2019
U.S.
• U.S. markets closed a volatile week in
the red. Though the markets had made
some gains, concerns over a potential
escalation in the trade war with China
got the better of indices. Media reports
showed that the administration is
considering ways to limit U.S.
investments in China. Also, the week
saw the U.S. House Speaker announce
a formal impeachment inquiry against
the U.S. President.
Europe
• European markets were mixed in the period. The start was jittery as weaker than expected
economic data from the region raised concerns around global growth. Sentiment was dim
as investors kept an eye on the impeachment developments in the U.S. Also, U.K.’s
highest court ruled that the Prime Minister’s suspension of parliament for five weeks was
unlawful which contributed to the downside.
Asia
• Asian equity markets fell on political uncertainty in the U.S. as the U.S. President faced an
impeachment motion and Chinese economic weakness. China’s industrial profits
contracted in Aug 2019 after a brief recovery in Jul 2019 which dampened market
sentiment.
Global Debt (U.S.)
12
• Yields on the 10-year U.S. Treasury
bond fell 8 bps to 1.67% compared with
the previous week’s close of 1.75%.
• U.S Treasury prices grew initially after
IHS Markit's Euro Zone Composite
Flash Purchasing Managers' Index
(PMI) fell in Sep 2019 which fueled
concerns of a slowdown in global
growth.
• The safe haven appeal of U.S.
Treasuries rose further amid reports of
the launch of a formal impeachment
inquiry against U.S. President. U.S.
Treasury prices rose further amid
reports that the U.S. administration is
considering delisting Chinese
companies from U.S. stock exchanges.
• However, further gains were capped
after pending home sales in U.S. rose
more than expected in Aug 19.
1.60
1.65
1.70
1.75
23-Sep 25-Sep 27-Sep
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($/Barrel) 63.37 66.12
Gold ($/Oz) 1496.56 1516.75
Gold (Rs/10 gm) 37,481 37,390
Silver ($/Oz) 17.54 17.98
Silver (Rs/Kg) 44,604 45,686
Source: Thomson Reuters Eikon *Value as on Sep 27, 2019
Gold
• Gold prices weakened during the week
as the greenback firmed on optimism of
U.S-China trade resolution. However, the
bullion’s downside was limited by
concerns over global economic slowdown
and fall in U.S. consumer confidence for
Sep 2019.
Brent Crude
• Brent crude prices declined more than
4% during the week amid reports that
Saudi Arabia is working to restore output
quickly after the drone and missile strikes
on two of its oil-processing plants. Rise in
U.S. crude inventory for the week ended
Sep 20, as reported by the Energy
Information Administration (EIA) also
weighed on crude prices.
Baltic Dry Index
• The Baltic Dry Index fell on the back of
lower capesize and panamax activities.
9.40
10.70
12.00
27-Aug-19 6-Sep-19 16-Sep-19 26-Sep-19
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
-4.16%
-1.33%
-2.42%
27-Sep-19
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
70.84 70.94
Pound Sterling
87.33 89.21
EURO
77.32 78.44
100 Yen
65.71 65.76
Source: RBI Figures in INR , *
Value as on Sep 27, 2019
Rupee
• The rupee rose against the greenback
following gains in the domestic equity market.
Fall in global crude oil prices over the week
further boosted the rupee.
Euro
• The euro fell against the greenback after IHS
Markit's Euro Zone Composite Flash
Purchasing Managers' Index (PMI) fell in Sep
2019.
Pound
• The pound weakened against the greenback
after the British Supreme Court ruled against
the Britain Prime Minister and termed his
suspension of parliament unlawful. Concerns
of a split parliament and an early general
election further hurt the pound.
Yen
• The yen weakened against the greenback as
the safe-haven appeal of the latter
strengthened amid concerns of a gloomy
economic outlook.
9.60
9.80
10.00
10.20
27-Aug-19 6-Sep-19 16-Sep-19 26-Sep-19
USD GBP Euro JPY
Source: Thomson Reuters Eikon
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
-0.14%
-2.12%
-1.43%
-0.08%
27-Sep-19
15
The Week that was…
23
rd
September to 27
th
September
The Week that was (September 23 – September 27)
16
Date Events Present Value Previous Value
Monday,
September 23, 2019
• Germany Markit PMI Composite (Sep) (P) 49.1 51.7
• Eurozone Markit PMI Composite (Sep) (P) 50.4 51.9
• U.S. Markit PMI Composite (Sep) (P) 51.0 50.7
Tuesday,
September 24, 2019
• Japan Leading Economic Index (Jul) 93.7 93.6
• Eurozone IFO - Current Assessment (Sep) 98.5 97.3
• U.K. Public Sector Net Borrowing (Aug) £5.766B £-1.472B
• U.S. S&P/Case-Shiller Home Price Indices (YoY) (Jul) 2.0% 2.2%
Wednesday,
September 25, 2019
• U.S. MBA Mortgage Applications (Sep 20) -10.1% -0.1%
• U.S. New Home Sales (MoM) (Aug) 0.713M 0.666M
Thursday,
September 26, 2019
• Germany Gfk Consumer Confidence Survey (Oct) 9.9 9.7
• U.S. Gross Domestic Product Annualized (Q2) 2.0% 2.0%
• U.S. Pending Home Sales (MoM) (Aug) 1.6% -2.5%
• Japan Foreign Bond Investment (Sep 20) ¥-164.0B ¥483.4B
Friday,
September 27, 2019
• U.S. Personal Income (MoM) (Aug) 0.4% 0.4%
• U.S. Personal Spending (Aug) 0.1% 0.5%
• U.S. Durable Goods Orders (Aug) 0.2% 2.0%
17
The Week Ahead
30
th
September to 4
th
October
18
The Week Ahead
Day Event
Monday,
September 30, 2019
• India Eight Core Industries (Aug)
• China Caixin Manufacturing PMI (Sep)
• U.K. Gross Domestic Product (QoQ) (Q2)
• Japan Unemployment Rate (Aug)
Tuesday,
October 1, 2019
• U.K. Markit Manufacturing PMI (Sep)
• Eurozone Consumer Price Index (YoY) (Sep) P
• U.S. ISM Manufacturing PMI (Sep)
Wednesday,
October 2, 2019
• U.S. ADP Employment Change (Sep)
• U.K. Markit Construction PMI (Sep)
Thursday,
October 3, 2019
• Eurozone Markit PMI Composite (Sep)
• U.K. Markit Services PMI (Sep)
• Eurozone Retail Sales (YoY) (Aug)
• U.S. ISM Non-Manufacturing PMI (Sep)
• U.S. Markit Services PMI (Sep)
Friday,
October 4, 2019
• U.S. Nonfarm Payrolls (Sep)
• U.S. Unemployment Rate (Sep)
• U.S Trade Balance (Aug)
Disclaimer
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