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NEWS U CAN USE
May 29, 2020
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The Week that was…
25
th
May to 29
th
May
2
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Indian Economy
Growth of the Indian economy slowed for the fourth consecutive quarter to 3.1% in the
quarter ended Mar 2020 compared to a growth of 4.1% in the previous quarter and a
growth of 5.7% in the same period of the previous year. Growth in the first quarter and
second quarter of FY20 stood at 5.2% and 4.4% respectively. Growth of the domestic
economy for FY20 also plummeted to 4.2% from 6.1% in FY19. Growth in FY20 thus stood
at the lowest level since 2008 when the growth of the Indian economy fell to 3.1% which
can be attributed to the global financial crisis.
On the sectoral front, the construction sector was the worst hit which contracted 2.2%
during the quarter under review followed by the manufacturing sector that contracted
1.4% in the same period. For FY20, the manufacturing sector witnessed a meagre growth
of 0.03%. However, the agriculture sector was the sliver lining of the Indian economy as it
witnessed a growth of 5.9% in Q4FY20 compared to a growth of 3.6% in the previous
quarter and 1.6% in the same quarter of the previous year.
The output of India’s eight core infrastructure industries contracted a record 38.1% in Apr
2020 compared to a contraction of 9.0% in the previous month and a growth of 5.2% in
the same period of the previous year. The sharp plunge can be attributed to the
nationwide lockdown imposed by the government to combat the COVID-19 pandemic
across the country and as a result all the eight sectors witnessed contraction during the
month under review. The cement sector witnessed a maximum contraction of 86%
followed by the steel sector which contracted 83.9%.
3
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4
Domestic Equity Market Indices
Indices
29
-May-
20
1 Week Return
YTD Return
S&P BSE Sensex
32,424.10 5.71% -21.40%
Nifty 50
9,580.30 5.99% -21.27%
S&P BSE Mid
-Cap
11,843.22 5.09% -20.88%
S&P BSE Small
-Cap
10,892.60 3.50% -20.49%
Source:
MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
26-May-20 904 892 1.01
27-May-20 1064 715 1.49
28-May-20 1264 537 2.35
29-May-20 1163 632 1.84
Source: NSE
Indian equity markets ended the
holiday truncated week in the green.
Investors shrugged off geopolitical
concerns that include a border stand-
off between India and China and
escalating U.S.- China trade tensions.
Buying interest continued to remain
supported by easing of lockdown
measures and gradual re-opening of
economic activities, although covid-19
infections have been on a rise.
Markets found additional support from
India Meteorological Department's
(IMD) forecast that the southwest
monsoon is expected to reach Kerala
coast around Ju 1. Earlier IMD had
estimated monsoon to be delayed by a
week.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
20.33 22.38 21.96 88.21
P/B
2.45 2.73 1.90 1.63
Dividend Yield
1.17 1.59 1.53 1.48
Source: BSE, NSE
Value as on May 29, 2020
Indian Equity Market
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5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
14,094.69 7.84% 11.87%
Bankex
22,135.67
11.18%
-8.60%
18,966.54 4.25% -4.86%
12,333.98
10.95%
3.57%
10,897.67 5.40% 1.06%
15,646.40 0.83% 1.46%
14,067.30 0.27% 4.40%
6,805.26 9.89% 9.22%
11,835.97 6.51% 2.63%
Source: Thomson Reuters Eikon
*Value as on May 29, 2020
On the BSE sectoral front, majority of the
indices closed in the green. S&P BSE Bankex
was the top gainer, up 11.18%, followed by
S&P BSE Capital Goods and S&P BSE Realty,
which rose 10.95% and 10.17% respectively.
Banking sector rose as investors downplayed
worries about possible escalation in bad loan
burdens and picked up these stocks at
attractive prices. Some stock specific news
also helped the counter.
Indian Derivatives Market Review
Nifty Jun 2020 Futures stood at 9,494.10, a discount of 86.20 points below the spot closing
of 9,580.30. The total turnover on NSE’s Futures and Options segment for the week stood
at Rs. 63.68 lakh crore as against Rs. 63.87 lakh crore for the week to May 22.
The Put-Call ratio stood at 0.79 compared with the previous session’s close of 0.88.
The Nifty Put-Call ratio stood at 1.61 compared with the previous session’s close of 1.28.
Indian Equity Market (contd.)
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6
Debt Indicators
(%)
Current
Value
1-
Wk
Ago
1-
Mth
Ago
6-
Mth
Ago
Call Rate
3.62 3.71 4.08 5.06
91 Day T
-Bill
3.27 2.70 3.68 4.91
07.32% 2024, (5 Yr GOI)
4.97 4.98 5.11 6.19
06.45%
2029, (10 Yr GOI)
6.01 5.96 6.12 6.47
Source: Thomson Reuters Eikon
Value as on May 29, 2020
Bond yields rose as investors booked
profits after the benchmark yield fell
to 11-year low. Yields rose further as
possibility of additional borrowing
grew after a government official said
all options were open for more
stimulus measures to boost the
economy.
Yield on the existing 10-year
benchmark paper (6.45% GS 2029)
rose 5 bps to close at 6.01% compared
with the previous week’s close of
5.96% after trading in a range of
5.95% to 6.03%.
Yield on the new 10-year benchmark
paper (5.79% GS 2030) rose 4 bps to
close at 5.78% compared to the
previous week’s close of 5.74% after
trading in a range of 5.73% to 5.80%.
Domestic Debt Market
5.95
5.97
5.99
6.01
26-May 27-May 28-May 29-May
Yield in %
10 -Yr Benchmark Bond ( % )
Source: CCIL
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7
Maturity
G-
Sec Yield
(%)
Corporate Yield
(%)
Spread
bps
1 Year
3.65 5.61 196
3 Year
4.63 6.37 174
5 Year
5.50 6.85 135
10 Year
6.10 7.25 115
Source: Thomson Reuters
Eikon Value as on
May 29,
2020
Yields on gilt securities rose across curve
by up to 7 bps barring 3- to 5-, 14-, 15-, 19-
and 30-year that rose by up to 17 bps.
Corporate bond yields rose across
maturities in the range of 2 to 12 bps
barring 3- to 5-, 10- and 15-year papers
that fell in the range of 2 to 28 bps barring
2- and 6-year papers that stood steady.
Spread between AAA corporate bond and
gilt contracted across maturities by up to
24 bps barring 1- to 3-year papers that
contracted in the range of 4 bps to 7 bps.
Domestic Debt Market (Spread Analysis)
-20
7
34
61
2.00
4.00
6.00
8.00
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
India Yield Curve Shift (%) (W-o-W)
Change in bps 29-May-20 22-May-20
Yield
in %
Change
in bps
Source: Thomson Reuters Eikon
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8
The Indian government notified the Rs. 3 lakh crore Emergency Credit Line Guarantee
Scheme for Medium, Small and Micro Enterprises (MSMEs) under the Atma Nirbhar Bharat
Abhiyan. The objective of the move is to help MSMEs overcome the economic distress that
they are facing due to the COVID-19 pandemic.
Capital market regulator Securities and Exchange Board of India (SEBI), clarified that it has
imposed no restriction on the usage of Power of Attorney (POA) between the broker and
client in the domestic equity markets. POA gives a broker the authority to manage the
shares of its client and is collected by the broker at the time of opening the demat account.
The broker uses POA to transfer the shares of the client to the client’s collateral account.
Subsequently, these shares are placed with clearing corporation by way of transfer or by
creation of pledge towards margin. However, the broker now cannot report all securities
lying in the demat account of the client as margin collected.
According to media reports a section of brokers have built up a case against the trading of
crude oil contract at negative price and have approached the SEBI. The move comes after a
controversial settlement of April crude oil contract at negative price following which many
brokers incurred huge losses. Brokers want the exchange to provide an intermediate
auction window soon after prices turn negative.
Regulatory Updates in India
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9
SEBI has issued guidelines that need to be followed by stock exchanges for identification
and selection of a location as a delivery centre for commodity derivatives contracts. This
identification and selection needs to be done on the basis of liquidity of the contract,
demand-supply dynamics, value chain participants, infrastructure support and trade
feedback. The new framework will come into effect from Aug 1, 2020.
SEBI has given approval for use of shares in depository account as margin until Aug 31,
2020. The move comes amid the COVID-19 pandemic as changes to the systems and
software development are still under progress.
According to media reports, SEBI is considering taking steps to reduce redemption risks.
Some of the measures that the capital market regulator is mulling is increasing the
minimum number of investors and a maximum threshold for investment per investor in a
scheme. Presently, at least 20 investors are required to run a scheme, while a single
investor is not allowed to hold more than 25% of the fund’s corpus.
The Insurance Regulatory and Development Authority of India (IRDAI) has directed
insurance companies to hasten settlement of claims pertaining to the cyclone Amphan.
IRDAI advocated for a simplified procedure and called for relaxations wherever feasible in
order to expedite claims settlement.
Regulatory Updates in India (contd..)
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Durable goods orders in U.S. plunged 17.2% on a yearly basis in Apr 2020 following a 16.6%
fall In Mar 2020 (14.4% slump originally reported for the previous month). The orders for
transportation equipment, durable goods orders also came down by 7.4% in Apr 2020
after coming down by 1.7% in Mar 2020.
Personal income rose in the U.S. unexpectedly by 10.5% YoY in Apr 2020 after falling by a
revised 2.2% in Mar 2020 (2.0% fall originally reported). Growth reflects the distribution of
stimulus checks by the U.S. government.
Data from Destatis showed that consumer price index-based inflation in Germany fell to its
lowest level since 2016. Consumer price inflation slowed to 0.6% on a yearly basis in May
2020 from 0.9% in Apr 2020. A similar lower rate was witnessed in Sep 2016. On a monthly
basis, consumer price index based inflation fell 0.1% in May 2020.
Flash data from Eurostat showed, eurozone inflation rose 0.1% YoY in May 2020, slower
than 0.3% in Apr 2020. It was the slowest since Jun 2016 driven by a sharp fall in energy
prices. On a sequential basis, consumer prices fell 0.1% while core inflation held steady at
0.9% in May 2020.
According to the governor of the People's Bank of China (PBoC), PBoC will adopt various
monetary policy tools to ensure that there is reasonable and sufficient liquidity in the
system. The announcement comes as the COVID-19 pandemic has raised concerns over the
quality of bank assets in China and there is high risk of increase in non-performing loans.
10
Global News/Economy
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11
Global Indices
Indices
29-May-20
1-Week
Return
YTD
Return
Russell 3000
1,482.59 2.11% 3.96%
Nasdaq 100
9,555.53 1.50% 9.42%
FTSE 100
6,076.60 1.39% -19.43%
DAX
Index 11,586.85 4.63% -12.55%
Nikkei Average
21,877.89 7.31% -7.52%
Straits Times
2,510.75 0.44% -22.09%
Source: Thomson Reuters
Eikon
Value as on
May 29, 2020
U.S.
U.S. markets traded higher on optimism
about the reopening of the economy
through gradual removal of economic
restrictions related to COVID-19 and
signs that Americans are beginning to
feel safe enough to travel and
congregate in larger groups.
However, gains were restricted on China
stepped up efforts to curtail Hong
Kong's independence.
Europe
European markets gained on massive stimulus plan from the European Commission and
fairly encouraging jobless claims data from the U.S. However, concerns about an
escalation in U.S.-China tensions over the Hong Kong issue restricted upside.
Asia
Asian markets ended the week in the green as stimulus announcements by Japan and the
European Commission eased investor concerns surrounding rising U.S.-China tensions.
Global Equity Markets
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12
Yields on the 10-year U.S. Treasury fell 2
bps to close at 0.64% compared to the
previous week’s close of 0.66%.
U.S. Treasury prices fell as the investor
risk sentiment improved to some extent
on hopes of a potential vaccine that
could help fight the coronavirus
pandemic and as countries across the
globe eased restrictions on lockdowns.
U.S. Treasury prices declined further
after the European Commission
proposed a 750 billion-euro coronavirus
recovery fund which fueled optimism
about the euro zone economy.
However, losses reversed due to
concerns over rising tensions between
U.S. and China after the latter proposed
to impose security laws on Hong Kong
which dampened the investor risk
sentiment to some extent.
Global Debt (U.S.)
0.62
0.67
0.71
0.76
26-May 27-May 28-May 29-May
US 10-Year Treasury Yield Movement
Source: Thomson Reuters Eikon
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13
Performance of various commodities
Commodities
Last Closing*
1-Week Ago
Brent Crude($/Barrel)
33.60 33.20
Gold ($/Oz)
1,726.30 1,734.07
Gold (
Rs/10 gm) 40,989 40,989
Silver ($/Oz)
17.84 17.18
Silver (
Rs/Kg) 36,871 36,871
Source: Thomson Reuters
Eikon *Value as on May 29, 2020
Gold
Gold prices fell marginally as the risk
appetite on the back of development of
coronavirus vaccines and hopes of quick
economic recovery outweighed the
growing safe haven appeal of the bullion
on escalating tensions between U.S. and
China after the latter imposed a
national-security law in Hong Kong.
Brent Crude
Brent crude prices rose on hopes of a
pickup in fuel demand as countries
across the globe eased restrictions on
coronavirus lockdowns.
Baltic Dry Index
Baltic Dry Index fell due to weak
capesize and panamax activities.
Commodities Market
5
10
15
20
25
30
29-Apr-20 9-May-20 19-May-20 29-May-20
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global
Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
3.84%
1.20%
-0.45%
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14
Movement of Rupee vs Other Currencies
Currency
Last Closing*
1-Wk Ago
US Dollar
75.64 75.79
Pound Sterling
93.31 92.49
EURO
83.91 82.82
100 Yen
70.56 70.55
Source: RBI
Figures in INR , *Value as on May 29,
2020
Rupee
The rupee rose against the greenback on
gains in the domestic equity market.
Euro
The euro rose against the greenback
after the European Commission
proposed a 750 billion-euro coronavirus
recovery fund which fuelled optimism
about the euro zone economy.
Pound
The pound rose against the greenback
after the British Prime Minister set out
plans to reopen the U.K. economy.
Yen
The yen fell against the greenback on
reports of a proposal for an economic
recovery package to help the euro zone
region recover from the COVID-19
pandemic.
Currencies Markets
9.50
9.75
10.00
10.25
10.50
29-Apr-20 9-May-20 19-May-20 29-May-20
USD GBP Euro JPY
Source: Thomson Reuters Eikon
Currency
Prices (
in terms of INR)
Rebased to 10
Currency Movement
0.89%
-0.20%
0.01%
1.32%
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15
The Week that was…
25
th
May to 29
th
May
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16
The Week that was (May 25 May 29)
Date Events Present Value Previous Value
Monday,
May 25, 2020
Germany Gross Domestic Product (YoY) (Q1) -1.9% 0.2%
Germany IFO - Current Assessment (May) 78.9 79.4
Tuesday,
May 26, 2020
Japan All Industry Activity Index (MoM) (Mar) -3.8% -0.7%
Eurozone Gfk Consumer Confidence Survey (Jun) -18.9 -23.1
U.S. S&P/Case-Shiller Home Price Indices (YoY) (Mar) 3.9% 3.5%
U.S. New Home Sales (MoM) (Apr) 0.623 M 0.619 M
Wednesday,
May 27, 2020
China Industrial Profits (YTD) YoY (Apr) -27.4% -36.7%
U.S. MBA Mortgage Applications (May 22) 2.7% -2.6%
Wednesday,
May 28, 2020
Eurozone Economic Sentiment Indicator (May) 67.5 64.9
Germany Consumer Price Index (YoY) (May) (P) 0.6% 0.9%
Japan Industrial Production (YoY) (Apr) (P) -14.4% -5.2%
Japan Retail Trade (YoY) (Apr) -13.7% -4.7%
U.S. Durable Goods Orders (Apr) -17.2% -16.6%
U.S. Gross Domestic Product Annualized (Q1) (P) -5.0% -4.8%
Friday,
May 29, 2020
Germany Retail Sales (YoY) (Apr) -6.5% -1.2%
Eurozone Consumer Price Index (YoY) (May) (P) 0.1% 0.3%
U.S. Personal Spending (Apr) -13.6% -6.9%
• U.S
. Personal Income (MoM) (Apr) 10.5% -2.2%
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17
The Week Ahead
01
st
June to 05
th
June
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18
Day Event
Monday,
June 01, 2020
China Caixin Manufacturing PMI (May)
U.S. ISM Manufacturing PMI (May)
Germany Markit Manufacturing PMI (May)
Eurozone Markit Manufacturing PMI (May)
Tuesday,
June 02, 2020
U.K. Nationwide Housing Prices n.s.a (YoY) (May)
U.K. Mortgage Approvals (Apr)
Wednesday,
June 03, 2020
Germany Unemployment Rate s.a. (May)
Eurozone Markit Services PMI (May)
U.K. Markit Services PMI (May)
Eurozone Unemployment Rate (Apr)
U.S. Markit Services PMI (May)
Thursday,
June 04, 2020
Eurozone Retail Sales (YoY) (Apr)
European Central Bank Interest Rate Decision
U.S. Trade Balance (Apr)
Friday,
June 05, 2020
U.S. Nonfarm Payrolls (May)
U.S. Unemployment Rate (May)
Japan Leading Economic Index (Apr) (P)
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 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
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19
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