Mutual Fund News of 21 August 2020 – Nippon India Mutual Fund

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NEWS U CAN USE

August 21, 2020

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The Week that was…

August to 21

August

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Indian Economy

• Minutes of the monetary policy review held in Aug 2020 showed that rising domestic

inflationary pressures has made it difficult for the Monetary Policy Committee to lower

interest rates further. Almost all the members of the committee highlighted the

uncertainty regarding inflation and advocated the need of adopting fiscal stimulus

measures and structural reforms to improve the growth prospects of the domestic

economy.

• Data from capital market regulator Securities and Exchange Board of India (SEBI) showed

that investment through participatory notes (P-notes) in the domestic capital market

increased for the fourth consecutive month and surged to Rs. 63,228 crore at the end of

Jul 2020. The investment through P-notes plummeted to Rs. 48,006 crore in Mar 2020

amid concerns over COVID-19 pandemic which led to volatility in broader markets.

• According to ILO-ADB report, India’s 41 lakh youth may lose jobs in the next three months

and 61 lakh jobs in six months due to the ongoing disruptions in business activities. The

highest impact is expected to be seen in the construction and farm sectors. The report

showed that youth between 15–24 years will be hit harder than adults age 25 and older in

the immediate crisis.

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Domestic Equity Market Indices

Indices 21-Aug-20 1 Week Return YTD Return

S&P BSE Sensex

38,434.72 1.47% -6.83%

Nifty 50

11,371.6 1.73% -6.55%

S&P BSE Mid-Cap

14,953.95 3.61% -0.09%

S&P BSE Small-Cap

14,625.19 5.56% 6.76%

Source: MFI Explorer

NSE Advance/Decline Ratio

Date Advances Declines Advance/Decline Ratio

17-Aug-20 1139 743 1.53

18-Aug-20 1325 550 2.41

19-Aug-20 1214 665 1.83

20-Aug-20 1050 840 1.25

21-Aug-20 1214 679 1.79

Source: NSE

• Indian equity markets managed to end

the week on a positive note, largely led

by strong buying interest in the power,

realty and metal sectors.

• While power sector went up after

provisional data showed that country's

electricity generation in the first 15

days of Aug rose for the first time since

early Mar, metal industry rose higher

on hopes of gaining competitive edge

in the pandemic stricken global

economy against China.

• Realty sector edged higher on hopes of

resumption of activity in the sector and

the expectations of consolidation post

COVID, which will reward stronger and

established players.

Ratios

S&P BSE

Sensex

Nifty 50

S&P BSE

Mid Cap

S&P BSE

Small Cap

P/E

27.74 32.08 33.95 -188.42

P/B

2.89 3.18 2.40 2.29

Dividend Yield

1.00 1.47 1.04 1.03

Source: BSE, NSE Value as on Aug 21, 2020

Indian Equity Market

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Sectoral Indices

Indices

Last Returns (in %)

Closing* 1-Wk 1-Mth

S&P BSE Auto

17,909.7 3.54% 8.42%

S&P BSE Bankex

25,278.4 2.77% -2.05%

S&P BSE CD

23,185.3 4.53% 8.35%

S&P BSE CG

14,171.3 2.86% 8.77%

S&P BSE FMCG

11,738.9 1.24% 1.41%

S&P BSE HC

19,228.2 0.60% 13.72%

S&P BSE IT

18,262.7 0.37% 4.35%

S&P BSE Metal

9,191.91 5.14% 19.53%

S&P BSE Oil & Gas

13,353.1 1.24% -2.44%

Source: Refinitiv *Value as on Aug 21, 2020

• On the BSE sectoral front, S&P BSE Power was

the top gainer, up 10.46%, followed by S&P

BSE Realty and S&P BSE Metal, which rose

8.64% and 5.14%, respectively.

• S&P BSE Consumer Durables and S&P BSE

Auto went up 4.53% and 3.54%, respectively.

Indian Derivatives Market Review

• Nifty Aug 2020 Futures stood at 11,377.20, a premium of 5.60 points above the spot closing

of 11,371.60. The total turnover on NSE’s Futures and Options segment for the week stood

at Rs. 87.11 lakh crore as against Rs. 88.47 lakh crore for the week to Aug 14.

• The Put-Call ratio stood at 0.85 compared with the previous session’s close of 0.98.

• The Nifty Put-Call ratio stood at 1.54 compared with the previous session’s close of 1.31.

Indian Equity Market (contd.)

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Debt Indicators

(%)

Current

Value

1-Wk

Ago

1-Mth

Ago

6-Mth

Ago

Call Rate

3.43 3.45 3.43 5.04

91 Day T-Bill

3.19 3.30 3.25 5.07

05.22% 2025, (5 Yr GOI)

5.41 5.23 4.94 -

05.79% 2030, (10 Yr GOI)

6.14 5.97 5.83 -

Source: Refinitiv Value as on Aug 21, 2020

• Bond yields rose for the sixth

consecutive week as inflation concerns

highlighted in the minutes of the

Monetary Policy Committee's latest

meeting, dampened hopes of rate cuts

in the near term. Moreover, weak

demand at a government auction

along with exercising green-shoe

option in the auction, led to higher-

than-expected cut-off yields.

• RBI conducted the auction of three

government securities namely 5.22%

GS 2025, 6.19% GS 2034 and 7.16% GS

2050 for a notified amount of Rs.

30,000 crore. The cut off stood at Rs.

99.32 (YTM: 5.38%), Rs. 98.00 (YTM:

6.41%) and Rs. 105.11 (YTM: 6.76%).

Green Shoe option of Rs. 2000 crore

has been exercised in 6.19% GS 2034.

Domestic Debt Market

5.80

6.00

6.20

17-Aug 18-Aug 19-Aug 20-Aug 21-Aug

Yield in %

10 -Yr Benchmark Bond ( % )

Source: CCIL

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Maturity

G-Sec Yield

(%)

Corporate Yield

(%)

Spread

bps

1 Year

3.78 5.13 134

3 Year

4.98 5.86 88

5 Year

5.48 6.85 137

10 Year

6.23 7.43 119

Source: Refinitiv

Valueason

Aug 21, 2020

• Yields on gilt securities jumped by up to 41

bps across maturities.

• Corporate bond yields rose in the range of

10 to 34 bps up across the curve, leaving

2- & 3-year papers that fell 5 & 4 bps,

respectively.

• Spread between AAA corporate bond and

gilt contracted in the range of 2 to 9 bps

across maturities, barring 6- & 7-year

papers that expanded 2 & 4 bps,

respectively. Spread on 5-year paper was

flat.

Domestic Debt Market (Spread Analysis)

-20

2.60

4.90

7.20

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-Aug-20 14-Aug-20

Yield in %

Change in bps

Source: Thomson Reuters Eikon

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• According to media reports, the ministry of corporate affairs has initiated discussions with

various regulators including the RBI, SEBI, and the Department for Promotion of Industry

and Internal Trade (DPIIT) regarding setting up of a unified compliance platform for Indian

corporates. The objective of the move is to improve the ease of doing business in the

country by cutting down on duplication of filings and integrating the MCA database with

that of other regulatory bodies.

• Capital market regulator SEBI has revised its guidelines on reporting of statement of

accounts for entities that have listed their debt securities in International Financial Services

Centre (IFSC). The objective of the move is to streamline the operations. SEBI further

mandated that a domestic entity or a foreign entity may provide financial services in IFSC

provided it is in compliance with the applicable regulatory framework.

• The National Financial Reporting Authority, which has been given the authority to regulate

auditors, has formed a technical advisory committee. The committee will advise on

accounting and auditing standards, along with improving the drafting of audit quality review

reports. The authority rules allow the regulator to constitute advisory committees, study

groups and task forces for the effective performance of its roles and responsibilities.

• The Central Government eased norms by offering 50% of salary for three months as

unemployment allowance to workers who are members of the Employees State Insurance

Corporation and have either lost their jobs or are on the verge of unemployment due to the

COVID-19 pandemic.

Regulatory Updates in India

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• RBI has directed banks to avoid frequent ad hoc review of loan facility for businesses. The

directive comes from the central bank as there has been an increase in complaints that

banks are quoting high differential interest rates and not providing the necessary financial

support to businesses.

• According to media reports, the government is considering coming out with a pre-

packaged resolution framework for stressed companies under the Insolvency and

Bankruptcy Code (IBC). Under a pre-packaged resolution framework, the company

presents a restructuring plan in cooperation with its creditors before initiating insolvency

proceedings, which lowers the cost and reduces the cost involved in the process.

• Finance ministry eased norms for Partial Credit Guarantee Scheme for purchase of bonds

and commercial papers by public sector banks and extended its period by three months.

The view is to provide additional liquidity to crisis-ridden NBFCs and housing finance

companies.

• RBI released the draft framework for recognition of a Self-Regulatory Organisation for

payment system operators. It will be responsible for setting and enforcing rules for

payment systems operators. Currently, National Payments Corporation of India offers and

manages a slew of payment platforms like Unified Payment Interface, Bharat Bill Payment

Systems, Aadhar Enabled Payment Systems and others.

Regulatory Updates in India (contd..)

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• Members of the U.S. Federal Reserve's monetary policy review held in Jul showed that

policymakers expressed concerns about the coronavirus’s continuing impact on the

economy. The minutes also showed that the U.S. central bank might adopt aggressive

stimulus measures for longer period of time than necessary.

• According to the minutes of the European Central Bank (ECB) policy meeting in Jul 2020,

ECB Governing Council left its key interest rates and the volume of its asset purchases

unchanged amid early signs of a gradual economic recovery from the slump induced by the

coronavirus pandemic. However, there was significant uncertainty regarding the outlook.

The policymakers debated on extent of their flexibility in conducting emergency bond

purchases as part of unprecedented efforts to revive the euro zone economy.

• Inflation in eurozone rose marginally in Jul 2020. Inflation on a yearly basis rose to 0.4% in

Jul 2020 from 0.3% in Jun 2020. Core inflation on a yearly basis also accelerated to 1.2% in

Jul 2020 from 0.8% in Jun 2020.

• Preliminary data showed that Japan's economy contracted at the fastest pace on record in

the second quarter of 2020. The gross domestic product (GDP) contracted 7.8% in the

second quarter of 2020 compared to a decline of 0.6% in the first quarter of 2020. On a

yearly basis, GDP contracted 27.8%. GDP thus contracted the most since the records began

in 1955.

Global News/Economy

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Global Indices

Indices

21-Aug-20

1-Week

Return

YTD

Return

Russell 3000 1,752.11 2.86% 22.86%

Nasdaq 100 11,555.16 3.50% 32.31%

FTSE 100 6,001.89 -1.45% -20.43%

DAX Index 12,764.80 -1.06% -3.65%

Nikkei Average 22,920.30 -1.58% -3.11%

Straits Times 2,528.54 -2.04% -21.54%

Source: Refinitiv

Valueason

Aug 21, 2020

U.S.

• U.S. markets traded higher, largely led

by strong buying in the tech stocks on

hopes of solid earnings growth

potential in the near future.

• Positive sentiments were also

generated by news that China and the

U.S. have agreed to hold fresh trade

talks in the coming days.

Europe

• European markets traded lower as the minutes of FOMC’s latest meeting struck a

pessimistic tone over U.S. economic recovery prospects. Escalating tension between U.S.

and China also kept investors wary following U.S. government’s announcement on further

restrictions on one of the Chinese tech majors in a bid to limit the company's access to

electronic components.

Asia

• Asian markets too remained under pressure weighed down by cautious outlook from the

U.S. Federal Reserve as highlighted in the minutes of the FOMC’s latest meeting.

Global Equity Markets

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• After two weeks of rise, yields on the

10-year U.S. Treasury fell 7 bps to close

at 0.64% compared with the previous

week’s close of 0.71%.

• U.S. Treasury prices rose during the

week under review as investors awaited

the new supply to finance stimulus

efforts to battle the economic fallout

from the coronavirus pandemic.

• Meanwhile, after a good demand in the

auction of 20-year bonds, market saw

poor show for an auction of 30-year

Treasury-Inflation Protected Securities.

• Prices further rose following rise in flash

U.S. Composite PMI Index (business

activity) in Aug 2020 even after the

country's still-high number of new

covid-19 cases.

Global Debt (U.S.)

0.63

0.66

0.69

17-Aug 18-Aug 19-Aug 20-Aug 21-Aug

US 10-Year Treasury Yield Movement

Source: Thomson Reuters Eikon

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Performance of various commodities

Commodities Last Closing* 1-Week Ago

Brent Crude($/Barrel) 44.13 45.56

Gold ($/Oz) 1,939.40 1,943.76

Gold (Rs/10 gm) 51,840 52,688

Silver ($/Oz) 26.69 26.41

Silver (Rs/Kg) 65,633 67,317

Source: Refinitiv *Value as on Aug 21, 2020

Gold

• Gold prices fell amid media reports that

agreement on a smaller coronavirus

relief bill worth around $500 billion

could be reached. Profit booking to

some extent also contributed to the

downside.

Brent Crude

• Brent crude prices fell on persisting

concerns that a second prolonged wave

of the coronavirus pandemic might

adversely impact global growth.

However, further losses were restricted

as China planned to ship large volumes

of U.S. crude in Aug and Sep of 2020.

Baltic Dry Index

• The index fell due to weak capesize and

panamax activities.

Commodities Market

9.00

11.50

14.00

21-Jul-20 6-Aug-20

Global Commodity Movement

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

Global Commodity Prices

Rebased to 10

Source: Thomson Reuters Eikon

1.05%

‐3.14%

‐0.22%

21-Aug-20

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Movement of Rupee vs Other Currencies

Currency Last Closing* 1-Wk Ago

US Dollar

74.88 74.77

Pound Sterling

99.12 97.73

EURO

88.86 88.39

100 Yen

70.90 69.99

Source: RBI Figures in INR , *Value as on Aug 21, 2020

Rupee

• The rupee fell against the greenback as

state run banks continued to purchase

dollars likely on behalf of the RBI.

Euro

• The euro weakened against the

greenback after the minutes of the U.S.

Federal Reserve monetary policy review

in Jul 2020 indicated no changes to its

policy framework.

Pound

• The pound inched up against the

greenback after upbeat U.K. retail sales

numbers for Jul 2020.

Yen

• The yen rose against the greenback as

the ongoing impact of the U.S. Federal

Reserve's stimulus program kept the

greenback under pressure.

Currencies Markets

9.90

10.20

10.50

21-Jul-20 6-Aug-20

USD GBP Euro JPY

Source: Thomson Reuters Eikon

Currency Prices ( in terms of INR)

Rebased to 10

Currency Movement

21-Aug-20

1.42%

0.14%

1.30%

0.53%

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The Week that was…

August to 21

August

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The Week that was (August 17– August 21)

Date Events Present Value Previous Value

Monday,

Aug 17, 2020

• Japan Industrial Production (YoY)(Jun) -18.2% -17.7%

• U.S. NAHB Housing Market Index(Aug) 78 72

• Japan Capacity Utilization(Jun) 6.2% -11.6%

Tuesday,

Aug 18, 2020

• U.S. Building Permits (MoM)(Jul) 1.495M 1.258M

• U.S. Housing Starts (MoM)(Jul) 1.496M 1.22M

• U.S. Redbook Index (YoY)(Aug 14) -2.8% -3.4%

• Japan Machinery Orders (YoY)(Jun) -22.5% -16.3%

Wednesday,

Aug 19, 2020

• U.K. Consumer Price Index (YoY)(Jul) 1.0% 0.6%

• U.K. Retail Price Index (YoY)(Jul) 1.6% 1.1%

• Eurozone Consumer Prce Index (MoM)(Jul) -0.4% 0.3%

Thursday,

Aug 20, 2020

• Germany Producer Price Index (MoM)(Jul) 0.2% 0.0%

• U.K. GfK Consumer Confidence(Aug) -27 -27

• Japan National Consumer Price Index (YoY)(Jul) 0.3% 0.1%

Friday,

Aug 21, 2020

• U.K. Retail Sales (YoY)(Jul) 1.4% -1.6%

• Germany Markit PMI Composite(Aug) PREL 53.7 55.3

• Eurozone Markit PMI Composite(Aug) PREL 51.6 54.9

• U.S. Markit PMI Composite(Aug) PREL 54.7 50.3

• U.S. Existing Home Sales (MoM)(Jul) 5.86M 4.7M

• Eurozone Consumer Confidence(Aug) PREL -14.7 -15

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The Week Ahead

August to 28

August

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Day Event

Monday,

August 24, 2020

• Germany Import Price Index (YoY) (Jul)

• U.S. Chicago Fed National Activity Index (Jul)

Tuesday,

August 25, 2020

• Germany Gross Domestic Product (YoY)(Q2)

• Germany IFO – Business Climate (Aug)

• U.S. Redbook Index (YoY) (Aug 21)

• U.S. Housing Price Index (MoM) (Jun)

• U.S. New Home Sales (MoM) (Jul)

Wednesday,

August 26, 2020

• Japan Leading Economic Index (Jun)

• U.S. Durable Goods Orders (Jul)

Thursday,

August 27, 2020

• Japan All Industry Activity Index (MoM) (Jun)

• U.S. Core Personal Consumption Expenditures (QoQ) (Q2) PREL

• U.S. Gross Domestic Product Price Index(Q2) PREL

Friday,

August 28, 2020

• U.K. Nationwide Housing Prices (YoY) (Aug)

• Germany Gfk Consumer Confidence Survey (Sep)

• Eurozone Consumer Confidence (Aug)

• U.S. Personal Spending (Jul)

• U.S. Michigan Consumer Sentiment Index (Aug)

The Week Ahead

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The information herein is meant only for general reading purposes and contains all factual and statistical information pertaining to Industry and

markets which have been obtained from independent third party sources and which are deemed to be reliable. The information provided cannot be

considered as guidelines, recommendations or as a professional guideforthereaders.ItmaybenotedthatsinceNipponLifeIndiaAsset

Management Company Limited (NAM India) has not independently verified the accuracy or authenticity of such information or data, or for that

matter the reasonableness of the assumptions upon which such data and information has been processed or arrive data; NAM India does not in any

manner assures the accuracy or authenticity of such data and information. Some of the statements & assertions contained in these materials may

reflect NAM India’s views or opinions, which in turn may have been formed on the basis of such data or information. The Sponsor(s), the Investment

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