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NEWS U CAN USE
May 22, 2020
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The Week that was…
18
th
May to 22
nd
May
2
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Indian Economy
• The Monetary Policy Committee (MPC) in its second off-cycle monetary policy review in
less than two months lowered the key policy repo rate by 40 bps to a record low of 4.00%
by a five to one vote. The MPC decided to continue with its accommodative stance on its
monetary policy as long as it is necessary to mitigate the impact of the COVID-19
pandemic on the domestic economy while ensuring that retail inflation remains within its
medium-term target.
• MPC decided to lower the key policy repo rate in order to ease financial conditions as it
noted that the impact of the COVID-19 pandemic on the domestic economy was more
severe than anticipated and as a result various sectors of the economy was reeling under
acute stress. MPC expects the easing of monetary policy will help revive the domestic
economic activity to some extent by facilitating the flow of funds at affordable rates.
• According to the MPC, the inflation outlook of the country moving ahead is clouded with
uncertainty. MPC expects that the unusual rise in food inflation to moderate with gradual
easing of restrictions on COVID-19 induced lockdowns. Also, a normal monsoon is
expected to keep food inflation under control. In addition, muted global crude oil prices
and lower prices of metals and other industrial raw materials will help keep the input costs
of domestic firms on the downside. However, the persisting supply disruptions and
volatility in financial markets may neutralize the above-mentioned aspects. Overall, MPC
expects retail inflation to come down below its medium-term target in the third quarter
and fourth quarter of FY21.
3
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4
Domestic Equity Market Indices
Indices 22-May-20 1 Week Return YTD Return
S&P BSE Sensex
30,672.59 -1.37% -25.65%
Nifty 50
9,039.25 -1.07% -25.72%
S&P BSE Mid-Cap
11,270.03 -2.00% -24.71%
S&P BSE Small-Cap
10,524.23 -1.54% -23.18%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
18-May-20 390 1,462 0.27
19-May-20 788 982 0.80
20-May-20 1,056 707 1.49
21-May-20 1,049 721 1.45
22-May-20 667 1,103 0.60
Source: NSE
• Indian equity markets largely remained
a drag for the week ended May 22. The
stimulus measures announced by the
finance minister, as a part of the
government's Rs 20 trillion economic
package, fell short of market
expectation. Additionally, the
government's decision to extend the
nationwide lockdown, albeit with some
relaxations, till May 31, dented
sentiment.
• However, global optimism about a
potential vaccine for the coronavirus
soothed nerves of the already panicked
investors. Market participants also
found some solace after the
government announced resumption of
domestic airline operations from May
25, almost two months after the
operations were suspended on Mar 25.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
18.79 20.97 21.89 125.50
P/B
2.31 2.57 1.79 1.57
Dividend Yield
1.24 1.69 1.61 1.58
Source: BSE, NSE Va
lue as on May 22, 2020
Indian Equity Market
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5
Sectoral Indices
Indices
Last
Closing*
Returns (in %)
1-Wk 1-Mth
S&P BSE Auto
13,070.1 0.35% 5.76%
S&P BSE Bankex
19,909.4 -7.72% -11.41%
S&P BSE CD
18,193.8 -0.68% -8.58%
S&P BSE CG
11,116.8 -4.74% -4.82%
S&P BSE FMCG
10,339.6 2.60% -5.84%
S&P BSE HC
15,518.2 3.25% 2.59%
S&P BSE IT
14,029.2 5.37% 10.44%
S&P BSE Metal
6,192.8 -2.04% 2.44%
S&P BSE Oil & Gas
11,112.1 -0.78% -0.20%
Source:
Refinitiv *Value as on May 22, 2020
• On the BSE sectoral front, S&P BSE Bankex
was the major loser, down 7.72%, followed by
S&P BSE Realty and S&P BSE Capital Goods,
which slipped 4.83% and 4.74%, respectively.
• Majority of the rate sensitive sectors fell even
after the MPC cut key policy rates in its latest
policy meet held during the week. Meanwhile,
S&P BSE Teck was the top gainer, up 5.59%,
followed by S&P BSE IT and S&P BSE
Healthcare, which rose 5.37% and 3.25%,
respectively.
Indian Derivatives Market Review
• Nifty May 2020 Futures stood at 9,027.80, a discount of 11.45 points below the spot closing
of 9,039.25. The total turnover on NSE’s Futures and Options segment for the week stood
at Rs. 63.87 lakh crore as against Rs. 60.28 lakh crore for the week to May 15.
• The Put-Call ratio stood at 0.88 compared with the previous session’s close of 0.80.
• The Nifty Put-Call ratio stood at 1.28 compared with the previous session’s close of 1.11.
Indian Equity Market (contd.)
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6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
3.71 3.97 4.12 5.04
91 Day T-Bill
2.70 3.41 3.65 5.04
07.32% 2024, (5 Yr GOI)
4.98 5.08 5.08 6.19
06.45% 2029, (10 Yr GOI)
5.96 6.08 6.22 6.50
Source: Refinitiv Value as on May 22, 2020
• Bond yields plunged during the week
under review and plummeted to its
lowest level in more than a decade
after the MPC slashed key policy repo
rate by 40 bps to a record low of
4.00% while sticking to its
accommodative stance. Hopes that
the Reserve Bank of India (RBI) will
announce open market bond
purchases also added to the gains.
• Yield on the existing 10-year
benchmark paper (6.45% GS 2029)
plunged 12 bps to close at 5.96%
compared with the previous week’s
close of 6.08% after trading in a range
of 5.88% to 6.10%. Yield thus fell to its
lowest level since Jan 24, 2009.
Domestic Debt Market
5.80
5.90
6.00
6.10
18-May 19-May 20-May 21-May 22-May
Yield in %
10 -Yr Benchmark Bond ( % )
Source: CCIL
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7
Maturity
G-Sec Yield
(%)
Corporate Yield
(%)
Spread
bps
1 Year 3.58 5.49 191
3 Year 4.73 6.42 169
5 Year 5.50 6.87 137
10 Year 6.05 7.27 122
Source: Refinitiv Value as on
May 22, 2020
• Yields on gilt securities fell across the
maturities in the range of 2 bps to 28 bps.
• Corporate bond yields fell across the
maturities in the range of 16 bps to 37 bps
barring 15-year paper which increased 5
bps.
• Difference in spread between AAA
corporate bond and gilt contracted across
the maturities in the range of 3 bps to 14
bps barring 15-year paper which expanded
14 bps and 5-year paper which closed
steady.
Domestic Debt Market (Spread Analysis)
-90
-60
-30
0
2.50
4.10
5.70
7.30
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 22-May-20 15-May-20
Yield in %
Change in bps
Source: Refinitiv
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8
• RBI has decided to extend the special refinance facility of Rs. 15,000 crore given to Small
Industries Development Bank of India (SIDBI) for on-lending/refinancing for another period
of 90 days. The objective of the move is to provide greater flexibility to SIDBI in its
operations.
• RBI has decided to give an extension to the Voluntary Retention Route (VRR) under which
investments are made by Foreign Portfolio Investors (FPIs) by an additional three months.
The move comes after RBI took note of difficulties expressed by FPIs and their custodians
on account of disruptions related to the COVID-19 pandemic.
• RBI has decided to extend the maximum permissible period of pre-shipment and post-
shipment export credit sanctioned by banks from the existing one year to fifteen months,
for disbursements made up to Jul 31, 2020. The move comes as exporters raised concerns
over delay/ postponement of orders and delay in realization of bills.
• RBI has decided to extend a line of credit of Rs. 15,000 crore to the Export-Import Bank of
India for a period of 90 days from the date when it starts availing the loan. This comes with a
rollover of up to a maximum period of one year so that the EXIM Bank is able to avail a US
dollar swap facility to meet its foreign exchange requirements. The objective of the move is
to give a boost to the country’s international trade when global trade has contracted sharply
due to COVID-19 pandemic.
Regulatory Updates in India
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9
• RBI has decided to extend the time period for completion of remittances against normal
imports from six months to twelve months from the date of shipment for such imports
that are made on or before Jul 31, 2020. The objective of the move is to provide flexibility
to importers in managing their operating cycles amid the COVID-19 pandemic. However,
this will not be applicable for import of gold/diamonds and precious stones/jewellery or in
those cases where amounts are withheld towards guarantee of performance.
• RBI has decided to give approval to banks and other lending institutions for extending the
moratorium on term loan instalments by another three months from Jun 1, 2020 to Aug
31, 2020. The move comes after RBI took note of the extension of lockdowns and
continued disruptions due to the COVID-19 pandemic.
• RBI deferred the payment of interest on working capital facilities sanctioned in the form of
cash credit/overdraft by another three months from Jun 1, 2020 to Aug 31, 2020. The
central bank also took note of the difficulties that the borrower might face while paying
the interest in one go and hence permitted lending institutions to convert the
accumulated interest on working capital facilities over the deferment period into a funded
interest term loan which need to be repaid by the end of FY21.
• RBI took note of the difficulties faced by corporates in raising funds from the capital
market and hence decided as a one-time measure, to increase a bank’s exposure to a
group of connected counterparties from 25% to 30% of the eligible capital base of the
bank. The increased limit will be applicable till Jun 30, 2021.
Regulatory Updates in India (contd..)
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• The People's Bank of China left its benchmark lending rates unchanged in its monetary
policy review. The one-year loan prime rate was retained at 3.85% and the five-year loan
prime rate at 4.65%.
• At the emergency meeting, the Bank of Japan (BoJ) decided to introduce a new lending
program worth about JPY 30 trillion against pooled collateral for up to 1 year at the loan
rate of 0%. It would help financing small and medium-sized firms struggling to operate
amid the spread of the COVID-19. Meanwhile, BoJ left its target for short-term interest
rate and the bond yield unchanged at -0.1% at 0%, respectively.
• Data from the Office of National Statistics showed that consumer price index-based
inflation in U.K. eased to 0.8% in Apr 2020 from 1.5% in Mar 2020. On a monthly basis
consumer price inflation fell 0.2% in Apr 2020 after remaining flat in Mar 2020.
• Data from the U.S. Commerce Department showed that housing starts in U.S. plummeted
by 30.2% to an annual rate of 891,000 in Apr 2020 after falling by 18.6% to a revised 1.276
million in Mar 2020 (1.216 million originally reported for the previous month). The decline
came on account of COVID-19 pandemic induced economic lockdown.
• The composite output index of Euro area rose to 30.5 in May 2020 from a record low 13.6
in Apr 2020. The prior low of 36.2 was seen during the peak of the global financial crisis in
Feb 2009. The services Purchasing Managers' Index advanced to a three-month high of
28.7 from 12.0 in the previous month.
10
Global News/Economy
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11
Global Indices
Indices
22-May-20
1-Week
Return
YTD
Return
Russell 3000 1,451.90 3.33% 1.81%
Nasdaq 100 9,413.99 2.86% 7.80%
FTSE 100 5,993.28 3.34% -20.54%
DAX Index 11,073.87 5.82% -16.42%
Nikkei Average 20,388.16 1.75% -13.82%
Straits Times 2,499.83 -0.94% -22.43%
Source: Refinitiv Value as on May 22, 2020
U.S.
• U.S. markets traded higher during the
week after an American bio-technology
firm reported "positive" phase one
results for a potential coronavirus
vaccine. Optimism over an economic
recovery as states begin to reopen
following the coronavirus-induced
lockdowns contributed to the upside.
Europe
• European markets rose on hopes of more stimulus from governments and central banks,
and optimism about a potential coronavirus vaccine sometime soon.
Asia
• Asian markets remained a mixed bag during the week. Initial optimism over gradual
reopening of businesses around the world, helped investors shrug off worries over a
renewed trade row between U.S. and China. Gains were largely neutralized following
reports questioning the validity of the U.S. bio pharma’s early trial results for a possible
coronavirus vaccine.
Global Equity Markets
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12
• Yields on the 10-year U.S. Treasury rose
2 bps to close at 0.66% compared to the
previous week’s close of 0.64%.
• U.S. Treasury prices fell initially during
the week under review as the investor
risk sentiment improved to some extent
on hopes of a potential vaccine that
could help fight the coronavirus
pandemic.
• However, most of the losses were made
good after the U.S. Federal Reserve
chief showed willingness to extend the
monetary stimulus to fight the
coronavirus economic crisis.
• U.S. Treasury prices rose further
towards the end of the week on worries
over mounting tensions between U.S.
and China after the latter proposed
imposing a new security law on Hong
Kong.
Global Debt (U.S.)
0.61
0.67
0.73
0.79
18-May 19-May 20-May 21-May 22-May
Yield in %
US 10-Year Treasury Yield Movement
Source: Refinitiv
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13
Performance of various commodities
Commodities
Last Closing* 1-Week Ago
Brent Crude($/Barrel)
33.20 29.79
Gold ($/Oz)
1,734.07 1,741.00
Gold (Rs/10 gm)
#
40,989 40,989
Silver ($/Oz)
17.18 16.62
Silver (Rs/Kg)
#
36,871 36,871
Source: Refinitiv *Value as on May 22, 2020
#
Domestic spot market of Gold and Silver are closed. Values as on Mar 20, 2020
Gold
• Gold prices traded lower as market
participants weighed some signs of
improvement in the latest economic
data, which improved the risk appetite
of the investors.
Brent Crude
• Brent crude prices witnessed uptick as
countries across the globe started
easing restrictions on COVID-19 induced
lockdowns. Data from the U.S. Energy
Information Administration showed that
for the week ending May 15 oil inventory
in U.S dropped by 5 million barrels,
which also added to the gains.
Baltic Dry Index
• The Baltic Dry Index rose due to
improved capesize and panamax
activities.
Commodities Market
5
10
15
20
25
30
35
22-Apr-20 2-May-20 12-May-20 22-May-20
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Refinitiv
3.37%
11.45%
-0.40%
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14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
75.79 75.56
Pound Sterling
92.49 92.26
EURO
82.82 81.65
100 Yen
70.55 70.48
Source: Refinitiv Figures in INR , *Value as on May 22, 2020
Rupee
• The rupee weakened against the
greenback after the Indian government
extended the nationwide lockdown.
Euro
• The euro rose against the greenback
after France and Germany proposed a
Recovery Fund to combat the COVID-19
pandemic and permitted borrowing by
the European Commission on behalf of
the European Union.
Pound
• The pound rose against the greenback as
countries across the globe started easing
restriction on lockdowns.
Yen
• The yen weakened against the
greenback after France and Germany
proposed to set up a Recovery fund.
Currencies Markets
9.70
9.80
9.90
10.00
10.10
22-Apr-20 2-May-20 12-May-20 22-May-20
USD GBP Euro JPY
Source: Refinitiv
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
0.25%
0.30%
0.10%
1.42%
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15
The Week that was…
18
th
May to 22
nd
May
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16
The Week that was (May 18 – May 22)
Date Events Present Value Previous Value
Monday,
May 18, 2020
• China House Price Index (Apr) 5.1% 5.3%
• Japan GDP Growth Annualized Prel Q1 -3.4% -7.3%
• Japan Tertiary Industry Index (MoM) (Mar) -4.2% -0.5%
• U.S. NAHB Housing Market Index (May) 37 30
Tuesday,
May 19, 2020
• Japan Industrial Production (YoY) (Mar) -5.2% -5.2%
• U.K. ILO Unemployment Rate (3M) (Mar) 3.9% 4.0%
• Eurozone ZEW Survey - Economic Sentiment (May) 46.0 25.2
• Eurozone Construction Output (YoY) (Mar) -15.4% 0.2%
• U.S. Housing Starts (MoM) (Apr) 0.891 M 1.276 M
• Japan Machinery Orders (YoY) (Mar) -0.7% -2.4%
Wednesday,
May 20, 2020
• U.K. Consumer Price Index (MoM) (Apr) -0.2% 0.0%
• Eurozone Gfk Consumer Confidence Survey (Jun) -34.0 -33.0
Wednesday,
May 21, 2020
• Japan National Consumer Price Index (YoY) (Apr) 0.10% 0.40%
• U.S. Existing Home Sales (MoM) (Apr) 4.33 M 5.27 M
Friday,
May 22, 2020
• U.K. Retail Sales (YoY) (Apr) -22.6% -5.8%
• Japan BoJ Interest Rate Decision -0.1% -0.1%
• U.K. Public Sector Net Borrowing (Apr) £61.4 B £14.005 B
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17
The Week Ahead
25
th
May to 29
th
May
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18
Day Event
Monday,
May 25, 2020
• Germany Gross Domestic Product (YoY) (Q1)
• Germany IFO - Current Assessment (May)
Tuesday,
May 26, 2020
• Japan All Industry Activity Index (MoM) (Mar)
• Eurozone Gfk Consumer Confidence Survey (Jun)
• U.S. S&P/Case-Shiller Home Price Indices (YoY) (Mar)
• U.S. New Home Sales (MoM) (Apr)
Wednesday,
May 27, 2020
• China Industrial Profits (YTD) YoY (Apr)
• U.S. MBA Mortgage Applications (May 22)
Thursday,
May 28, 2020
• Eurozone Economic Sentiment Indicator (May)
• Japan Industrial Production (YoY) (Apr) (P)
• Japan Retail Trade (YoY) (Apr)
• U.S. Durable Goods Orders (Apr)
• U.S. Gross Domestic Product Annualized (Q1) (P)
Friday,
May 29, 2020
• Eurozone Consumer Price Index (YoY) (May) (P)
• U.S. Personal Spending (Apr)
• U.S. Personal Income (MoM) (Apr)
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 guide for the readers. It may be noted that since Nippon Life India Asset
Management Limited (NAM India) (formerly Reliance Nippon Life Asset Management Limited) 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
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