Weekly Review August 17, 2018

Transcription

1 Weekly Review August 17, 2018

2 Key Economic News International Domestic According to a flash report from Eurostat, Eurozone s Gross Domestic Product (GDP) grew 0.4% sequentially in the second quarter as against the same pace of upwardly revised increase (0.3% increase originally reported) in the first quarter. GDP growth came in at 2.2% on yearly basis in the second quarter as against an upwardly revised growth of 2.5% (2.1% originally reported) in the first quarter. A report from Destatis showed that Germany s economy grew 0.5% sequentially in the second quarter as against an increase of 0.4% in the first quarter. GDP grew 2.3% on yearly basis in the second quarter as against an increase of 1.4% in the first quarter. According to a Labour Department report, first-time claims for U.S. unemployment benefits declined in the week ended Aug 11, Initial jobless claims came in at 212,000, a dip of 2,000 from the previous week's 214,000. Government data showed that growth of India s Consumer Price Index-based inflation (CPI) or retail inflation fell to 4.17% in Jul 2018 from 4.92% in Jun However, it was higher compared to the 2.36% reported in Jul The growth in Consumer Food Price Index came in at 1.37% in Jul 2018 compared to 2.91% in Jun 2018 and -0.36% in the same month of the previous year. Government data showed that India s Wholesale Price Index-based inflation (WPI) decreased to 5.09% in Jul 2018 from 5.77% in Jun 2018 as prices of food articles, mainly fruits and vegetables, came down. Wholesale price inflation was at 1.88% in Jul India s trade deficit in Jul 2018 increased to more than 5-year high at $18.02 billion as against $16.60 billion in Jun The rise was on the back of increase in oil imports that stood at $12.35 billion, a 57.41% jump on a YoY basis. Merchandise exports increased 14.32% YoY to $25.77 billion and imports rose 28.81% to $43.79 billion.

3 Index Values Index Values Domestic Equity Market Index Values Index Values Markets witnessed marginal gains as the drop in inflation numbers in Jul 2018 soothed investor nerves Nifty 50 YTD Return : 8.93% 0.36% Nifty 100 YTD Return : 6.94% 0.34% Movement during the Week Jul Aug Aug-18 Movement during the Week Jul Aug Aug Nifty Mid Cap 100 YTD Return : -8.00% 1.6% 7700 Nifty Small Cap 100 YTD Return : % - 0.2% Movement during the Week Jul Aug Aug-18 Movement during the Week Jul Aug Aug-18 Source : BSE and NSE Percentage change are on W-o-W basis and YTD is absolute return.

4 Rs. crore Domestic Equity Market NSE Advance/Decline Ratio Date Advances Declines Advance/Decline Ratio 13-Aug , Aug Aug , Aug-18 1, Source: NSE Ratios S&P BSE Sensex Nifty 50 Nifty Mid Cap 100 Nifty Small Cap 100 P/E P/B Dividend Yield Source: BSE & NSE Values as on Aug 17, 2018 The domestic market witnessed marginal gains during the truncated trading week as the drop in inflation numbers soothed investor nerves. CPI fell to a 9-month low and WPI decreased too in Jul Investors cheered the numbers as a contained inflation could mean that the Monetary Policy Committee may not raise rates any time soon. Further, industrial output recorded a fivemonth high growth rate of 7% in Jun because of higher output in mining, manufacturing and power generation segments. But gains were capped as India s trade deficit widened to more than five-year high in Jul On the global front, concerns over trade tension between U.S. and China added to the woes FII Net Investment DII Net Investment Jul Jul-18 7-Aug Aug-18 Source: SEBI

5 Domestic Equity Market Indices Sectoral Indices Last Returns (in %) Closing* 1-Wk 1-Mth S&P BSE Auto 24, S&P BSE Bankex 31, S&P BSE CD 22, S&P BSE CG 17, S&P BSE FMCG 12, S&P BSE HC 15, S&P BSE IT 15, S&P BSE Metal 12, S&P BSE Oil & Gas 14, S&P BSE Power 1, Source: MFI Explorer *Values as on Aug 17, 2018 On the BSE sectoral front, most of the indices closed in green barring S&P BSE Oil & Gas (- 2.18%), S&P BSE CG (-1.29%), S&P BSE Metal (- 1.06%) and S&P BSE Power (-0.56%). S&P BSE HC (5.33%) stood as the major gainer followed by S&P BSE IT (2.78%) and S&P BSE FMCG (2.37%). Under the banking sector, the government has asked the Reserve Bank of India (RBI) to consider diluting the Prompt Corrective Action (PCA) framework. S&P BSE HC S&P BSE IT S&P BSE FMCG S&P BSE Auto S&P BSE CD S&P BSE Bankex S&P BSE Power S&P BSE Metal S&P BSE CG S&P BSE Oil & Gas Source: MFI Explorer Week Return as of August 17, Weekly Return in (%)

6 Yield in % Domestic Debt Market Bond yields surged after rupee declined to a record low against the greenback Debt Indicators (%) Current Value* 1-Wk Ago 1-Mth Ago 6-Mth Ago Call Rate Day T-Bill % 2021, (5 Yr GOI) % 2028, (10 Yr GOI) Source: Thomson Reuters Eikon; CCIL *Values as on Aug 16, Yr Benchmark Bond ( % ) Bond yields surged as rupee declined to a record low against the greenback after the Turkish lira plunged against the U.S. dollar affecting emerging economies. Geopolitical risks and concerns that India s current account deficit may widen in Jul 2018 added to the losses. Yield on the 10-year benchmark paper (7.17% GS 2028) rose 11 bps to close at 7.86% from the previous week s close of 7.75% after trading in a range of 7.79% to 7.88% Aug 14-Aug 16-Aug According to the Scheduled Bank's Statement of Position in India as of Aug 3, 2018, banks deposit and credit growth stood at 8.20% and 12.70% YoY, respectively. Source: CCIL

7 Yield in % Domestic Debt Market Maturity G-Sec Yield (%) Corporate Yield (%) Spread bps Yields on gilt securities increased across maturities by up to 15 bps. The maximum increase was witnessed on 4-year paper. 1 Year Year Year Year Source: Thomson Reuters Eikon Values as on Aug 16, 2018 Corporate bond yields increased across maturities in the range of 7 bps to 13 bps. The maximum increase was witnessed on 8 to 10-year maturities and the minimum on 1 and 4-year papers. Spread between AAA corporate bond and gilt contracted across 1 to 5-year maturities by up to 8 bps barring 2-year paper which closed steady. Spread expanded across the remaining securities by up to 4 bps India Yield Curve Shift (%) (W-o-W) Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs Source: Thomson Reuters Eikon Change in bps 16-Aug Aug Change in bps

8 Index Values International Markets Movement during the week Jul Jul-18 7-Aug Aug-18 Source: Thomson Reuters Eikon Dow Jones YTD Return : 3.84% 1.41% U.S. markets witnessed selling pressure initially on concerns over escalating tensions between the U.S. and Turkey after the U.S. President doubled the steel and aluminium tariffs on Turkey. The situation worsened after the Turkish government announced an increase in tariffs on American cars, alcohol and cigarettes. However, the trend reversed later on reports that China and the U.S. will hold a new round of trade talks later this month that triggered optimism of easing trade tensions between the two countries. Europe Indices Last Closing* Returns (in %) 1-Wk 1-Mth YTD CAC-40 Index 5, DAX Index 12, FTSE 100 7, Source: Thomson Reuters Eikon *Values as on Aug 17, 2018 The concerns over Turkey contributed to the sell-off in European markets following the announcement of tariff hike on U.S. goods by the Turkish government. The move intensified the dispute between the two nations, which recently dragged the Turkish lira down to a record low. The downturn was restricted by optimism over trade agreement between China and the U.S. after the former accepted an invitation from the U.S. for a new round of trade talks later during the month.

9 International Markets Hang Seng Strait Times Return Value as of August 17, Asian markets too felt the heat of the intensifying tension between U.S. and Turkey and the recent weakness of the latter s currency. Chinese markets fell amid worries about an economic slowdown in China in the wake of recent downbeat economic data. The retail sales, industrial output and urban investment of the nation were all weaker than expected in Jul Nikkei Source: MFI Explorer % Change YTD Weekly Return in (%) % Change week Losses were restricted by media reports stating that the Chinese delegation, led by vice commerce minister will travel to the U.S. in late Aug 2018 for trade talks to be held with U.S. under Secretary of Treasury for International Affairs.

10 Global Commodity Prices Commodities Rebased to Global Commodity Movement Gold Gold prices fell owing to the broad dollar strength that drew market participants to the safety of the currency % -2.19% % Bullion prices remained under pressure due to growing demand for U.S. dollar amid Turkish Iira crisis. Reports that China and the U.S. will hold a new round of trade talks later this month also dampened its safe haven appeal Jul Jul-18 7-Aug Aug-18 Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl) Source: Thomson Reuters Eikon Performance of various commodities Commodities Last Closing* 1-Wk Ago Brent Crude($/Barrel) Gold ($/Oz) 1, , Gold (Rs/10 gm) 29,361 29,477 Silver ($/Oz) Silver (Rs/Kg) 36,660 37,763 Source: Thomson Reuters Eikon *Values as on Aug 17, 2018 Crude Brent crude prices fell amid concerns over currency crisis in Turkey and the global economic outlook in the wake of escalating trade disputes between the United States and its major trading partners. However, the decline in oil price was restricted to some extent by speculations regarding the fresh sanction introduced by U.S. against Iran, which is expected to result in tightened oil supply in the future. Baltic Dry Index The Baltic Dry Index fell 4.62% on the back of weak capesize and panamax activities.

11 Currency Prices ( in terms of INR) -1.81% Currency Rebased to Currency Movement 1.93% 1.85% 1.23% 1.33% Rupee The rupee weakened against the greenback and surpassed the 70 level after the domestic trade deficit widened to a more than 5-year high in Jul The ongoing currency turmoil in Turkey also weighed on the rupee. Euro The euro rose against the greenback on reports that China and the U.S. will hold a new round of trade talks later this month that fuelled hopes of easing trade tensions between the two countries Jul Jul-18 6-Aug Aug-18 Source: RBI USD GBP Euro JPY Movement of Rupee vs. Other Currencies Currency Last Closing * 1-Wk Ago U.S. Dollar Pound Sterling EURO Yen Source: RBI Figures in INR, *Values as on Aug 16, 2018 Pound The pound weakened against the greenback as a weaker than expected wage growth in the second quarter of 2018 offset gains following a fall in Britain's unemployment rate in the same time period. Uncertainty as to whether Britain would secure a trade deal with the European Union before it exits the bloc also weighed on the pound. Yen Yen strengthened against a globally weak greenback on reports that China and the U.S. will hold a new round of trade talks later this month that triggered optimism over easing trade tensions between the two countries.

12 Key Mutual Funds News According to media reports, the Securities and Exchange Board of India (SEBI) will assess the applicable expenses ratio for mutual fund schemes and undertake a go-green initiative by supporting digital transactions as a measure to bring cost efficiency. Among others, the market regulator will also consider examining practices including governance, risk management, due diligence method and distribution channel of the industry. According to media reports, SEBI is evaluating the introduction of covered calls in the Indian mutual fund industry. In a recent meeting of mutual fund advisory committee (MFAC), the capital market regulator constituted a sub-committee to explore the covered calls strategy in mutual funds. In the covered calls strategy, a fund manager writes a call option contract if he has neutral view on a stock. The covered call strategy will help investors generate marginal returns even during flat market conditions. SBI Mutual Fund announced the change in benchmark of SBI Equity Savings Fund to NIFTY Equity Savings Index instead of 35% Nifty 50 Arbitrage Index, 35% Nifty 50 and 30% CRISIL Liquid Fund Index. HDFC Mutual Fund proposed the change in the base Total Expense ratio (TER) of 14 schemes, which will come into effect from Aug 20, Canara Robeco Mutual Fund proposed the change in base Total Expense Ratio (TER) of 9 schemes, which will come into effect from Aug 21, UTI Mutual Fund has revised the benchmark indices of UTI Arbitrage Fund, UTI Regular Savings Fund and UTI Equity Savings Fund effective from Aug 14, Accordingly, the revised benchmarks for the above mentioned funds are Crisil Arbitrage Index, Crisil Short Term Debt Hybrid Fund Index and Crisil Equity Savings Index respectively.

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