News U Can Use. March 9, 2018

Transcription

1 News U Can Use March 9, 2018

2 2 The Week that was 5 th March to 9 th March

3 Indian Economy Nikkei India Services Business Activity Index fell to 47.8 in Feb 2018 from 51.7 in Jan 2018, lowest since Aug Service activity contracted as rise in prices led to a decline in new businesses orders. The composite Purchasing Managers Index (PMI) also plunged to 49.7 in Feb 2018 from 52.5 in Jan The Reserve Bank of India (RBI) announced that it will inject Rs. 1 lakh crore short term money into the banking system ahead of end of financial year that normally sees cash crunch. The move is likely to keep short term rates under check benefiting borrowing companies. The central bank will use a combination of appropriate instruments for such fund infusion, while continuing with its normal liquidity adjustment facility (LAF) operations. RBI will conduct four variable repo operations of Rs. 25,000 crore each beginning March 6, The government sought Parliament s approval for additional cash spending of Rs. 85, crore in the current financial year. Out of this amount, 70% is apportioned to compensate states for revenue loss because of Goods and Services Tax (GST) roll out. This was the fourth batch of Supplementary Demands for Grants for FY17-18 in the Lok Sabha. The Union cabinet has increased the dearness allowance (DA) to 7% from 5% with effect from Jan 1, 2018, for its 11 million employees and pensioners. The hike is expected to benefit approximately lakh central government employees and lakh pensioners. 3

4 Indian Equity Market Domestic Equity Market Indices Indices 9-Mar-18 1 Week Return YTD Return S&P BSE Sensex 33, % -1.50% Nifty 50 10, % -2.00% S&P BSE Mid-Cap 15, % % S&P BSE Small-Cap 17, % % Source: MFI Explorer Ratios NSE Advance/Decline Ratio Date Advances Declines Advance/Decline Ratio 05-Mar Mar Mar Mar Mar Source: NSE S&P BSE Sensex Nifty 50 S&P BSE Mid Cap S&P BSE Small Cap P/E P/B Dividend Yield Source: BSE, NSE Value as on Mar 9, 2018 Indian equity markets closed in the red amid consistent decline in banking stocks on reports that chiefs of two major private banks were summoned by Serious Fraud Investigation Office, seeking explanation over loans given to one of the largest branded jewellery retailers in connection with a PSU bank fraud case. The announcement of hefty tariffs on imports of steel and aluminium products by the U.S. President negatively impacted the indices amid weakness in global markets. However, the same eased later amid media reports that U.S. President s import tariff plan may spare select countries. Also, geopolitical tensions eased after North Korea hinted to stop nuclear and missile tests which also supported buying interest. 4

5 Indian Equity Market (contd.) Indices Sectoral Indices Last Returns (in %) Closing 1-Wk 1-Mth S&P BSE Auto 24, % -3.16% S&P BSE Bankex 27, % -5.32% S&P BSE CD 21, % 0.60% S&P BSE CG 18, % -4.03% S&P BSE FMCG 10, % -2.36% S&P BSE HC 13, % -6.26% S&P BSE IT 12, % 2.36% S&P BSE Metal 13, % -7.31% S&P BSE Oil & Gas 15, % -3.15% Source: Thomson Reuters Eikon Value as on Mar 9, 2018 On the BSE sectoral front, S&P BSE Metal (-6.87%) stood as the major loser followed by S&P BSE Healthcare (-4.15%). S&P BSE Metal fell amid concerns over the imposition of tariff on steel and aluminium by the U.S. President. S&P BSE Realty and S&P BSE Bankex fell 2.61% and 2.58%, respectively. S&P BSE Consumer Durables (1.47%) stood as the only gainer. Indian Derivatives Market Review Nifty Mar 2018 Futures were at 10, points, a discount of points below the spot closing of 10, The turnover on NSE s Futures and Options segment stood at Rs lakh crore against Rs lakh crore on Mar 1. The Put-Call ratio stood at 0.78 compared with the previous week s close of The Nifty Put-Call ratio stood at 1.14 compared with the previous week s close of

6 Domestic Debt Market 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 Value as on Mar 9, 2018 Yield in % Source: CCIL 10 -Yr Benchmark Bond ( % ) 5-Mar 6-Mar 7-Mar 8-Mar 9-Mar Bond yields fell amid value buying on expectations that inflation rate would grow at a slower rate in Feb Hopes of improving liquidity conditions of the economy also added to the gains. However, gains were capped following the auction of state development loans of 16 state governments which led to supply of debt securities in the market. Meanwhile RBI announced that it will infuse one trillion rupees in the banking system through term repos in Mar 2018 that ruled out the possibility of any open market purchase of bonds. Yield on the 10-year benchmark paper (7.17% GS 2028) fell 7 bps to close at 7.67% from the previous week s close of 7.74% after trading in a range of 7.63% to 7.80%. 6

7 Domestic Debt Market (Spread Analysis) Maturity G-Sec Yield (%) Corporate Yield (%) Spread bps 1 Year Year Year Year Source: Thomson Reuters Eikon Value as on Mar 9, 2018 Yields on gilt securities fell across the maturities by up to 9 bps, barring 3-year paper that expanded 1 bps. Corporate bond yields increased across 3 to 15 years maturities by up to 3 bps, barring 9- and 10-year maturities that closed steady. Yield fell on 1- and 2-year maturities by 9 bps and 5 bps, respectively. Spread between AAA corporate bond and gilt contracted by up to 7 bps across 1 to 3 years maturities and expanded in the range of 6 bps to 11 bps across the remaining segment. Yield in % India Yield Curve Shift (%) (W-o-W) Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs Change in bps 09-Mar Mar-18 Source: Thomson Reuters Eikon Change in bps 7

8 Regulatory Updates in India The Union cabinet relaxed spectrum holding caps, thereby giving a boost to mergers and acquisitions and spectrum sale, as carriers try to sell assets, including airwaves, to repay debt. It has increased the overall airwaves holding limit to 35% from 25%. The government rules currently bar any merged entity from holding more than 25% of the spectrum allocated in a service area or circle, and over 50% in a particular band. Also, the cabinet extended the payments tenure for auctioned airwaves from 12 years, including a two-year moratorium, to 16 years, as a one-time measure. This would give the immense relief to carriers reeling under debt burden of more than Rs. 7.7 lakh crore. RBI further tightened the priority sector lending (PSL) norms for foreign banks. RBI has directed them to compulsorily create sub-targets so that they lend a portion of their loans to small and marginal farmers as well as micro enterprises from Apr RBI however has provided relief by removing the credit limit, which means all loans given to MSMEs will now qualify under priority sector lending. The PSL norms mandate foreign banks to lend 40% of their total loan book to the priority sector, such as agriculture, rural infra, and MSMEs among others from Apr The government announced that all states shall have to compulsorily implement the national e- way bill system for intra-state movement of goods by Jun 1, However, the states may choose any date before Jun 1. Meanwhile, the Minister of State for Finance also stated that if the recommendation of the Group of Ministers on Information Technology is approved by the GST Council during its Mar 10 meeting, the system is expected to become mandatory from Apr 1 for inter-state movement of goods. 8

9 Regulatory Updates in India (contd..) The Minister of State for Planning stated that under the Direct Benefit Transfer (DBT), after the sale of fertilizers is made by the retailers to the beneficiaries, the fertilizer subsidy will be released to the fertilizer companies, instead of beneficiaries. According to the government, direct transfer of subsidy to beneficiaries has not been introduced as the beneficiaries and their entitlements are not clearly defined. Also, the minister stated that Niti Ayog has set up a committee for in depth analysis of the issue and to recommend a model that could be used for direct transfer of subsidy to the farmers. According to the Indian Railways, passengers will not be charged merchant discount rate (MDR) for booking railway tickets through debit cards for transactions up to Rs. 1 lakh. This comes with an aim to promote digital and cashless transactions. These transactions include those made at railway ticketing counters as well as through the website of the Indian Railway Catering and Tourism Corporation (IRCTC). The department of financial services has communicated the same to the banks. 9

10 Global News/Economy A report from the Labor Department showed that U.S. non-farm payroll employment surged by 313,000 jobs in Feb 2018 as against an upwardly revised increase of 239,000 jobs (200,000 jobs originally reported) in Jan Job growth came in higher than market expectations driven by notable increases in employment in the construction and retail sectors that added 61,000 jobs and 50,300 jobs, respectively. According to a latest report by the Institute for Supply Management, U.S. service sector activity grew at a slightly slower pace to 59.5 in Feb 2018 as compared with 59.9 in Jan The slight decrease was due to a slowdown in the pace of job growth and prices index. However, new orders and business activity witnessed growth. The European Central Bank (ECB) kept interest rates and asset purchases unchanged in its monetary policy review. However, the central bank omitted the mention of its stance that it will boost the asset purchases if outlook turned less favourable, thereby indicating that it is inching closer to the exit of its massive stimulus program. The Bank of Japan kept its monetary stimulus unchanged in its monetary policy review. With regards to outlook, Bank of Japan is of the view that Japan's economy is likely to continue its moderate expansion. A report from the Nikkei showed that Japan s service sector Purchasing Managers Index came in at 51.7 in Feb 2018, down from 51.9 in Jan Also, the composite index came in at 52.2, down from 52.8 in Jan. 10

11 Global Equity Markets Indices Global Indices 9-Mar-18 1-Week Return YTD Return Dow Jones 25, % 2.06% Nasdaq 100 7, % 9.06% FTSE 100 7, % -5.54% DAX Index 12, % -4.08% Nikkei Average 21, % -8.67% Straits Times 3, % 2.43% Source: Thomson Reuters Eikon Value as on Mar 9, 2018 U.S. U.S. markets traded higher after the U.S. Labour Department released a report showing much stronger than expected job growth in Feb Buying interest found additional support from easing geopolitical concerns amid news U.S. President has agreed to meet with North Korean leader regarding denuclearization. Europe European markets too witnessed gains, amid easing geopolitical tensions as the supreme leader of North Korea offered to halt nuclear missile tests and agreed to meet with U.S. President through South Korean national security adviser. ECB s policy decision too generated positive vibes. ECB dropped its easing bias on asset purchases from its forward guidance, while leaving the key interest rates unchanged. Asia Asian markets rose with investors cheering positive cues from Wall Street and European Union. Buying interest found additional support after Bank of Japan kept rates unchanged and reaffirmed its decision to stick to its ultra-easy policy stance in the coming months. 11

12 Global Debt (U.S.) US 10-Year Treasury Yield Movement Yield on the 10-year U.S. Treasury bond rose 3 bps to close at 2.89% from the previous week s close of 2.86%. Yield in % U.S. Treasury prices fell initially after fear of trade war due to imposition of tariffs on imported steel and aluminium eased. Prices fell further after U.S. non-farm payroll employment came better than market expectations in Feb Source: Thomson Reuters Eikon 5-Mar 6-Mar 7-Mar 8-Mar 9-Mar However, data showing that U.S. trade deficit grew to a more than 9-year high in Jan 2018 and slowdown in the growth rate of average hourly employee earnings in Feb 2018 restricted the losses. 12

13 Commodities Market Rebased to 10 Global Commodity Prices Global Commodity Movement % % % Feb Feb-18 9-Mar-18 Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl) Source: Thomson Reuters Eikon Performance of various commodities Commodities Last Closing 1-Week Ago Brent Crude($/Barrel) Gold ($/Oz) 1, , Gold (Rs/10 gm) 30,369 30,269 Silver ($/Oz) Silver (Rs/Kg) 38,313 38,010 Source: Thomson Reuters Eikon Value as on Mar 9, 2018 Gold Gold prices inched up on political uncertainty in Europe as the Italian elections ended in a hung parliament. However, upbeat U.S. non-farm payroll data for Feb 2018 and news that U.S. President has agreed to meet the supreme North Korean leader capped the gains. Crude Brent crude prices gained on hopes of fresh output cuts ahead of a meeting between oil ministers from the Organization of the Petroleum Exporting Countries (OPEC) and U.S. shale firms. Also, International Energy Agency (IEA) stated that global oil demand was expected to grow in the next five years. Baltic Dry Index The Baltic Dry Index fell on the back of lower capesize and panamax activities. 13

14 Currencies Markets Movement of Rupee vs Other Currencies Currency Last Closing 1-Wk Ago US Dollar Pound Sterling EURO JPY Source: RBI Figures in INR, Value as on Mar 9, Rebased to 10 Currency Prices ( in terms of INR) Feb Feb-18 9-Mar-18 Source: RBI Currency Movement USD GBP Euro JPY -0.16% 0.83% -0.23% 0.17% Rupee The rupee rose against the greenback as the latter remained under pressure on concerns of a global trade war after the U.S. President decided to impose steep tariffs on imported steel and aluminium. Euro The euro fell against the greenback after the ECB in its monetary policy review stated that regional inflation remained subdued. Upbeat U.S. non-farm payroll data for Feb 2018 added to the losses. Pound The pound rose against the greenback, on hopes that Britain would be able to secure a transition deal with the European Union. Yen The yen weakened against the greenback after the Bank of Japan reaffirmed its decision to stick to its ultra-easy policy stance in the coming months.

15 15 The Week that was 5 th March to 9 th March

16 The Week that was (Mar 5 Mar 9) Date Events Present Value Previous Value India Nikkei Services PMI (Feb) Monday, Mar 5, 2018 U.S. ISM Non-Manufacturing/Services Composite (Feb) Japan Nikkei Composite PMI (Feb) Eurozone Retail Sales (YoY) (Jan) 2.3% 2.1% China Caixin Composite PMI (Feb) Tuesday, Mar 6, 2018 Markit Germany Construction PMI (Feb) Eurozone Markit Retail PMI (Feb) U.S. Factory Orders (Jan) -1.4% 1.8% Japan Leading Index CI (Jan P) Wednesday, Mar 7, 2018 Eurozone Government Expenditure (QoQ) (4Q) 0.3% 0.4% Eurozone Gross Domestic Product (YoY) (4Q F) 2.7% 2.7% Japan Gross Domestic Product Annualized (QoQ) (4Q F) 1.6% 0.5% European Central Bank Rate Decision 0.0% 0.0% Thursday, Mar 8, 2018 China Trade Balance (Feb) $33.74b $20.35b Japan Eco Watchers Survey Current (Feb) U.S. Initial Jobless Claims (Mar 3) 231k 210k Bank of Japan Rate Decision -1.0% -1.0% Friday, Mar 9, 2018 China Consumer Price Index (YoY) (Feb) 2.9% 1.5% U.S. Unemployment Rate (Feb) 4.1% 4.1% U.S. Change in non-farm Payrolls (Feb) 313k 239k 16

17 17 The Week Ahead 12 th March to 16 th March

18 The Week Ahead Day Event Monday, March 12, 2018 India Consumer Price Index (Feb 18) India Index of Industrial Production (Jan 18) Japan Machine Tool Orders (YoY) (Feb P) Tuesday, March 13, 2018 Wednesday, March 14, 2018 Thursday, March 15, 2018 U.S. Consumer Price Index (YoY) (Feb) Japan Machine Orders (YoY) (Jan) Japan Tertiary Industry Index (MoM) (Jan) India Wholesale Price Index (Feb 18) U.S. Retail Sales Advance (MoM) (Feb) China Retail Sales YTD (YoY) (Feb) China Industrial Production YTD (YoY) (Feb) Eurozone Industrial Production (YoY) (Jan) U.S. Business Inventories (Jan) U.S. Export Price Index (YoY) (Feb) U.S. Initial Jobless Claims (Mar 10) Friday, March 16, 2018 U.S. University of Michigan Sentiment (Mar P) U.S. Housing Starts (MoM) (Feb) U.S. Industrial Production (MoM) (Feb) 18

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