News U Can Use. January 4, 2019

Transcription

1 News U Can Use January 4, 2019

2 2 The Week that was 31 st December to 4 th January

3 Indian Economy The growth of index of eight core industries came in at 3.5% in Nov 2018 as against growth of 4.8% in Oct Cement industry witnessed the maximum growth of 8.8% (though it declined as against the previous month), followed by steel and electricity that surged 6.0% and 5.4%, respectively. Fertilizer sector witnessed the maximum decline of 8.1% and crude oil went down 3.5%. The Nikkei India Manufacturing Purchasing Managers' Index (PMI) came in at 53.2 in Dec 2018 as against 54.0 in Nov Though the score eased as against Nov 2018, the rise in production was among the quickest witnessed in The decline reflects moderated growth in new orders and output. The Nikkei India Services PMI fell to 53.2 in Dec 2018 from 53.7 in Nov The downside reflects moderated pace of new work orders and business activity compared with Nov 2018, though job creation saw a significant uptick. Seasonally adjusted Nikkei India Composite PMI Output Index fell to 53.6 in Dec 2018 as against 54.5 in Nov 2018 because of weaker rise in private sector output. This happened because slowdown in growth of services activity was accompanied by a softer increase in manufacturing production. The government injected Rs. 10,882 crore in four public sector banks. This is part of the Rs. 28,615 crore capital infusion the government will do in about half a dozen public sector lenders. The government pumped in Rs. 28,615 crore into seven public sector banks through recapitalisation bonds. The government had announced an infusion of Rs. 65,000 crore in , of this Rs. 23,000 crore has already been disbursed. 3

4 Indian Equity Market Ratios 4 NSE Advance/Decline Ratio Date Advances Declines Advance/Decline Ratio 31-Dec Jan Jan Jan Jan Source: NSE Domestic Equity Market Indices Indices 04-Jan-19 1 Week YTD Return Return S&P BSE Sensex 35, % -1.03% Nifty 50 10, % -1.24% S&P BSE Mid-Cap 15, % -1.88% S&P BSE Small-Cap 14, % -0.78% Source: MFI Explorer 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 Jan 4, 2019 Indian equity markets ended the first week of 2019 in the negative terrain on account of weakness in global peers, ongoing U.S. government shutdown. Uncertainty ahead of 2019 general elections in India along with upcoming corporate earnings, scheduled to be release from the second week of Jan 2019, kept investors on the sidelines. Weak economic data added to the woes as core sector numbers were lower than the previous month. The growth of index of eight core industries was at 3.5% in Nov 2018 as against growth of 4.8% in Oct Also, the Nikkei India Manufacturing and Service PMI fell in Dec 2018 as against the previous month. Some respite was seen as the government injected Rs. 10,882 crore in four public sector banks.

5 Indian Equity Market (contd.) Sectoral Indices Indices Last Returns (in %) Closing* 1-Wk 1-Mth S&P BSE Auto 19, % -4.27% S&P BSE Bankex 30, % 1.80% S&P BSE CD 20, % 0.10% S&P BSE CG 18, % -1.26% S&P BSE FMCG 11, % 0.59% S&P BSE HC 13, % -2.38% S&P BSE IT 13, % -5.02% S&P BSE Metal 11, % -7.25% S&P BSE Oil & Gas 13, % 0.78% S&P BSE Realty % -0.1% Source: BSE Value as on January 4, 2019 Indian Derivatives Market Review On the BSE sectoral front, all the indices closed in the red barring S&P BSE Realty (1.23%), S&P BSE Bankex (0.36%) and S&P BSE CD (0.08%). S&P BSE Auto (-4.48%) was the major loser followed by S&P BSE Metal (-3.70%) and S&P BSE CG (-2.16%). Metal stocks declined over disappointing Chinese manufacturing data. Also, decline in one of the major metal stocks following reports that Tamil Nadu government has moved the Supreme Court for closure of the company's copper plant in Thoothukudi weighed on the sector. Nifty Jan 2019 Futures were at 10,777.60, a premium of points, over the spot closing of 10, The total turnover on NSE s Futures and Options segment for the week stood at Rs lakh crore as against Rs lakh crore for the week to Dec 28. The Put-Call ratio stood at 0.84 compared with the previous week s close of The Nifty Put-Call ratio stood at 1.34 against the previous week s close of

6 Yield in % 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 Jan 4, Source: CCIL 10 -Yr Benchmark Bond ( % ) 31-Dec 1-Jan 2-Jan 3-Jan 4-Jan Bond yields rose for the second consecutive week as market participants were worried that the government might miss its fiscal deficit target of 3.3% of Gross Domestic Product (GDP) for this fiscal. Concerns of a possible fiscal slippage have come to the forefront on speculation that the government might announce a relief package to support farm and rural sectors. Surge in global crude oil prices over the week and higher than anticipated borrowing plan by state governments for the period from Jan to Mar of 2019 added to the pain. However, bargain hunting restricted further losses. 6

7 Yield in % 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 Jan 4, 2019 Yields on gilt securities increased across the maturities by up to 16 bps barring 12- year paper that fell 1 bps. The maximum increase was witnessed on 14-year paper. Corporate bond increased across the maturities in the range of 3 bps to 13 bps. The maximum increase was witnessed on 5- and 6-year papers and the minimum on 3-year paper. Difference in spread between AAA corporate bond and gilt expanded across the maturities by up to 6 bps barring 10- year paper that closed steady Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs Change in bps 04-Jan Dec-18 Source: Thomson Reuters Eikon India Yield Curve Shift (%) (W-o-W) Change in bps 7

8 Regulatory Updates in India The Securities and Exchange Board of India (SEBI) allowed debt mutual funds to segregate their portfolios and carve out bad securities. SEBI said in case where the credit rating of an instrument held by a debt fund gets downgraded to "below investment grade" (below BBBrating) then fund houses can choose to segregate such bad securities. After this, investors can continue to buy or sell the good portion of the scheme and the segregated portfolio will not allow any fresh investments until the fund recovers the dues from bad assets. The option of segregating is with the fund houses, but they will not be able to do this immediately as they need to first mention it in their scheme information documents. SEBI announced that it has decided to implement mandatory physical settlement for all stock derivatives by Oct The market regulator stated that beginning Apr 2019, the new system will be implemented in three phases. According to SEBI, the stocks that are currently being cash settled, shall be ranked in descending order based on average daily market capitalisation of the company during Dec By Apr 2019, bottom 50 companies will be moved to mandatory physical settlement, followed by the next 50 bottom companies which will be moved by Jul 2019 and the remaining stocks will be moved to physical settlement by Oct India will not impose anti-dumping duty on coated paper from China, European Union and the U.S. This has happened after the commerce ministry's investigation arm Directorate General of Trade Remedies did not find any impact on the domestic industry because of the alleged dumped imports. 8

9 Regulatory Updates in India (contd..) The Central Board of Indirect Taxes and Customs stated that the government has abandoned late fees for non-filers of summary and final sales returns for the period Jul 2017-Sep The late fees have been waived for businesses registered under the Goods and Services Tax (GST). However, it stated that 15-month period returns will have to be filed by these businesses by Mar 31, The GST anti-profiteering authority has issued orders against nine businesses. These businesses were found to have not passed on rate cut benefits of Rs crore to borrowers. Minister of State for Finance said the GST Council has recommended goods and services tax rate reduction in respect of 400 groups of goods and 96 groups of services. The Reserve Bank of India (RBI) formed an expert committee under a former chairman of the SEBI for the micro, small and medium enterprises (MSME) sector. The panel will suggest long-term solutions for the economic and financial sustainability of the MSME sector. The eight-member committee will also look into factors affecting the timely and adequate availability of finance to the sector. 9

10 Global News/Economy According to the Labor Department, employment in the U.S. spiked by much more than estimated in Dec The Labor Department said non-farm payroll employment soared by 312,000 jobs in Dec 2018 after climbing by 176,000 jobs in Nov Institute for Supply Management data showed a notable slowdown in the pace of growth in U.S. manufacturing activity in Dec The ISM Purchasing Managers Index (PMI) decreased to 54.1 in Dec 2018 after rising to 59.3 in Nov 2018, lowering to its lowest level since touching 53.4 in Nov According to a report from the Federal Employment Agency, Germany's unemployment fell more than market expectations and number of employed fell by 14,000 in Dec Meanwhile, the seasonally adjusted jobless rate was 5% in Dec 2018 that remained unchanged from Nov According to the National Bureau of Statistics, manufacturing sector in China fell into contraction in Dec 2018 with a PMI score of That is less than the no-change mark of 50.0 in Nov A score of above 50 indicates expansion. The bureau s non-manufacturing PMI increased to 53.8 from 53.4 in the previous month. The bureau's composite index came in at 52.6, down from 52.8 a month ago. A report from the IHS Markit showed that China s headline Caixin Factory PMI (seasonally adjusted) declined to 49.7 in Dec 2018 from 50.2 in Nov The total new work witnessed decline for the first time since Jun

11 Global Equity Markets Indices Global Indices 04-Jan-19 1-Week Return YTD Return Dow Jones 23, % 0.45% Nasdaq 100 6, % 1.46% FTSE 100 6, % 1.62% DAX Index 10, % 1.98% Nikkei Average 19, % -2.26% Straits Times 3, % -0.31% Source: Thomson Reuters Eikon Value as on Jan 4, 2019 U.S. U.S. markets traded in the green during the first week of 2019 driven by optimism about a potential U.S.-China trade deal following comments from the U.S. President. Markets found additional strength from non-farm payroll employment and U.S. private sector job growth in Dec. Europe European markets went up led by optimism over long-term U.S.-China trade deal after both the nations scheduled fresh trade talks in the upcoming week. Additionally, private survey showing growth in the Chinese services sector to a six-month high in Dec eased global growth worries. Gains were restricted by uncertainty over Brexit deadline after media reports stated that the same may be pushed back if the U.K. Prime Minister's deal fails to get approved by Parliament in Jan 2019 Asia Asian equity markets were mostly high except for Japan. Investor sentiment was buoyed by strong Chinese services data and progress on U.S.-China trade front. However, Japan fell as yen strengthened against the U.S. dollar. 11

12 Yield in % Global Debt (U.S.) US 10-Year Treasury Yield Movement Dec 1-Jan 2-Jan 3-Jan 4-Jan Source: Thomson Reuters Eikon Yields on the 10-year U.S. Treasury bonds fell 8 bps to close at 2.66% from the previous close of 2.74%. U.S. Treasury prices rose amid ongoing U.S. government partial shutdown and concerns about a global growth slowdown. Disappointing Chinese manufacturing activity and significant decline in U.S. manufacturing activity for Dec 2018 improved the safe haven appeal of U.S. Treasuries. Further, reports showing that a U.S technology major lowered its revenue forecast for first quarter 2019 led to selloff in the equity markets, thereby adding to the gains. However, reports showing much more than expected increase in U.S. employment in Dec 2018 restricted the gains. 12

13 Global Commodity Prices Commodities Market Rebased to 10 Global Commodity Movement % 0.32% % Dec Dec-18 4-Jan-19 Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl) Source: Thomson Reuters Eikon Performance of various commodities Commodities Last Closing* 1-Week Ago Brent ($/bbl) Gold ($/Oz) 1, , Gold (Rs/10 gm) 3,1769 3,1547 Silver ($/Oz) Silver (Rs/Kg) 3,8775 3,8133 Source: Thomson Reuters Eikon *Value as on Jan 4, 2019 Gold Gold prices traded higher after China's manufacturing activity fell in Dec The precious metal also gained on uncertainty of global stock and currency markets, concerns over Brexit and political unrest at U.S. However, reports that the U.S. and China might hold talks on trade matters restricted the upside. Brent Crude Brent crude prices traded higher as market participants awaited the supplycut to begin soon, as announced by the oil cartel in early Dec However, gains were restricted on concerns over demand outlook. Baltic Dry Index The Baltic Dry Index witnessed a fall of 0.87% on the back of lower capesize and panamax activities 13

14 Currency Prices ( in terms of INR) Currencies Markets Rebased to % Dec Dec Dec-18 4-Jan-19 Source: RBI Currency Movement USD GBP Euro JPY Movement of Rupee vs Other Currencies Currency Last Closing* 1-Wk Ago US Dollar Pound Sterling EURO JPY(per 100 Yen) % % % Source: RBI Figures in INR, *Value as on Jan 4, 2019 Rupee The Indian rupee strengthened against the U.S. dollar amid progress in U.S.- China trade talks. Speculations over slowdown in pace of interest rate hikes by the U.S. Fed and concerns over U.S. economic growth dampened greenback. Euro The euro fell against the greenback following weak manufacturing PMI from most of the euro area in Dec More than expected rise in U.S. non-farm payroll data in Dec 2018 further dampened euro. Pound The pound fell against the dollar on fears of slower global growth and uncertainty about Brexit negotiations. Yen The yen surged against the U.S. dollar as investors worried slowing of global growth and volatile equity markets that boosted its safe-haven appeal.

15 15 The Week that was 31 st December to 4 th January

16 The Week that was (Dec 31 Jan 4) Date Events Present Value Previous Value Monday, December 31, 2018 Tuesday, January 01, 2019 Wednesday, January 02, 2019 Thursday, January 03, 2019 Friday, January 04, 2019 India Eight Core Industries YoY (Nov) 3.5% 4.8% China Non-manufacturing PMI (Dec) China Manufacturing PMI (Dec) India Nikkei Manufacturing PMI (Dec) U.S. Markit US Manufacturing PMI (F) (Dec) Markit Eurozone Manufacturing PMI (F) (Dec) U.K. Markit Manufacturing PMI (Dec) U.S. ISM Manufacturing PMI (Dec) U.S. ADP Employment Change (Dec) 271k 157k U.K. Markit Construction PMI (Dec) Germany Unemployment Change (Dec) -14k -16k Eurozone Consumer Price Index Estimate (YoY) (A) (Dec) 1.0% 1.0% Nikkei India Services Business Activity Index (Dec) U.S. Change in Non-farm Payrolls (Dec) 312 K 155k U.S. Unemployment Rate (Dec) 3.9% 3.7% 16

17 17 The Week Ahead 7 th January to 11 th January

18 The Week Ahead Day Monday, January 7, 2018 Tuesday, January 8, 2018 Wednesday, January 9, 2018 Thursday, January 10, 2018 Friday, January 11, 2018 Event U.S. Advance Goods Trade Balance (Nov) U.S. New Home Sales (MoM) (Nov) Japan Nikkei Japan PMI Composite (Dec) Eurozone German Factory Orders n.s.a. (YoY) (Nov) U.S. ISM Manufacturing (Aug) U.K. Markit/CIPS UK Construction PMI (Aug) Japan Nikkei PMI Composite (Aug) China Caixin PMI Composite (Aug) Eurozone Retail Sales (YoY) (Jul) U.S. Trade Balance (Jul) U.S. ISM Non-Manufacturing/Services Composite (Aug) German Factory Orders n.s.a. (YoY) (Jul) U.S. ADP Employment Change (Aug) U.S. Factory Orders (Jul) Japan Real Cash Earnings (YoY) (Jul) German Industrial Production n.s.a. and w.d.a. (YoY) (Jul) U.S. Change in Non-farm Payrolls (Aug) U.S. Unemployment Rate (Aug) 18

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