News U Can Use. August 31, 2018

Transcription

1 News U Can Use August 31, 2018

2 2 The Week that was 27 th August to 31 st August

3 Indian Economy Government data showed that the Gross Domestic Product (GDP) at prices of the Indian economy witnessed a growth of 8.2% on a yearly basis in the first quarter of FY19, mainly on the back of manufacturing growth. GDP growth in Jun 2017 was 5.6% as companies were preparing for the start of the Goods and Services Tax (GST) regime. On the sectoral front, manufacturing and public administration, defence & other services surged 13.5% and 9.9%, respectively. Construction and electricity, gas, water supply & other utility services grew 8.7% and 7.3%, respectively. India s fiscal deficit for Apr-Jul 2018 came in at Rs lakh crore, or 86.5% of the budgeted target for FY19 against 92.4% in the year-ago period. Net tax receipts were Rs lakh crore or 19.8% of the budget estimate for FY19 compared with 21.0% in the corresponding period of the previous year. The government s total expenditure for the period from Apr to Jul of 2018 stood at Rs lakh crore or 36.4% of the budget estimate for FY19 compared with 37.7% in the corresponding period of the previous year. The growth of index of eight core industries in India came in at 6.6% in Jul 2018 as against an upwardly revised growth of 7.6% (6.7% originally reported) in Jun Refinery products witnessed the maximum growth of 12.3%, followed by cement and coal sectors that surged 10.8% and 9.7%, respectively. However, crude oil sector witnessed the maximum decline of 5.4%, marking a decrease for the eighth consecutive month. Natural gas also registered a decline of 5.2%, marking the third consecutive monthly fall. 3

4 Indian Equity Market Domestic Equity Market Indices Indices 31-Aug-18 1 Week Return YTD Return S&P BSE Sensex 38, % 13.47% Nifty 50 11, % 10.92% S&P BSE Mid-Cap 16, % -5.28% S&P BSE Small-Cap 17, % % Source: MFI Explorer Ratios NSE Advance/Decline Ratio Date Advances Declines Advance/Decline Ratio 27-Aug Aug Aug Aug Aug 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 Aug 31, 2018 The domestic market gained over the week and touched all-time highs in one of the sessions. Initially, the market started moving up after the Federal Reserve (Fed) chairman hinted at gradual rate hikes going forward if the strong growth in income and jobs continues. Further, the U.S. and Mexico reached a preliminary trade pact and Canada announced to re-join the North American Free Trade Agreement (NAFTA) talks. However, caution ahead of the GDP data for the first quarter of FY19, which was released on Aug 31 post market hours, kept investors wary. 4

5 Indian Equity Market (contd.) Indices Sectoral Indices Last Returns (in %) Closing* 1-Wk 1-Mth S&P BSE Auto 24, % 0.90% S&P BSE Bankex 31, % 2.37% S&P BSE CD 21, % 3.80% S&P BSE CG 18, % 3.83% S&P BSE FMCG 12, % 6.32% S&P BSE HC 15, % 12.24% S&P BSE IT 15, % 7.03% S&P BSE Metal 13, % 9.18% S&P BSE Oil & Gas 15, % 0.37% S&P BSE Power 2, % 8.38% Source: Thomson Reuters Eikon *Value as on Aug 31, 2018 On the BSE sectoral front, all the indices closed in the green and S&P BSE Power (4.85%) stood as the major gainer followed by S&P BSE Metal (4.67%), S&P BSE IT (3.29%) and S&P BSE Healthcare (3.00%). Rally was witnessed in pharma and IT companies after the rupee depreciated to its lowest level against the U.S. dollar. Indian Derivatives Market Review Nifty August 2018 Futures settled at 11,676.8 on Aug 30. Nifty Sep 2018 Futures settled at 11,735.30, a premium of points, above the spot closing of 11, The turnover on NSE s Futures and Options segment stood at Rs lakh crore as against Rs lakh crore on Aug 24. The Put-Call ratio stood at 0.91 compared with the previous week s close of The Nifty Put-Call ratio stood at 1.55 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 Aug 31, Source: CCIL 10 -Yr Benchmark Bond ( % ) 27-Aug 28-Aug 29-Aug 30-Aug 31-Aug Bond yields rose as rupee plunged to a record low against the greenback. Besides, the consistent surge in crude oil prices following reports of falling U.S. crude inventories continued to dampen market sentiment. These factors have raised fears over foreign fund outflow from the domestic debt market and aggravated domestic inflationary concern in the coming months, which might lead the Monetary Policy Committee undertake measures on additional monetary tightening. Yield on the 10-year benchmark paper (7.17% GS 2028) rose 8 bps to close at 7.95% from the previous week s close of 7.87% after trading in a range of 7.86% to 7.96%. 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 Aug 31, 2018 Yields on gilt securities increased across all maturities by up to 11 bps. Highest rise was seen on 15-year paper while lowest was seen on 2-year paper. Corporate bond yields rose across maturities in the range of 7 bps to 20 bps. Highest rise was seen on 1-year paper and lowest increase was on 3-year paper. Spread between AAA corporate bond and gilt rose across the maturities by up to 16 bps, barring 2-, 10- and 15-year papers that fell by 5 bps, 1 bps and 3 bps, respectively Source: Thomson Reuters Eikon India Yield Curve Shift (%) (W-o-W) 3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs Change in bps 31-Aug Aug Change in bps 7

8 Regulatory Updates in India The Union cabinet approved an extra 2% hike in Dearness Allowance (DA) and Dearness Relief (DR). This move will benefit around 1.1 crore Central government employees and pensioners. It would pinch the exchequer by Rs. 6, crore per annum for DA and Rs. 4, crore for DR in The hike will come into effect from Jul 1, The government has put restrictions on bio-fuels exports after imposing similar conditions on its imports. A licence is needed for both exports and imports of bio-fuels. Bio-fuels include ethyl alcohol, petroleum oil and oils obtained from bituminous minerals, bio-diesel and mixtures. Previously, exports of these were allowed without any limitations. The Department of Industrial Policy and Promotion (DIPP) does not want foreign direct investment (FDI) in inventory-based ecommerce. DIPP said there is need for a regulator to supervise the sector. The department of commerce had planned up to 49% FDI in inventory-based ecommerce for goods made 100% locally. The Securities and Exchange Board of India (SEBI) could allow on tap public issue of bonds, according to media reports. Bond tap gives companies the flexibility to time the market, cut cost and reduce paperwork for raising money. It will allow corporates to sell bonds via stock exchanges directly to investors, including retail investors. Companies could through bond tap sell any time and as many times during a fiscal after filing a prospectus. A corporate can plan when to enter the market after filing the tap bond issue prospectus. 8

9 Regulatory Updates in India (contd..) NITI Aayog will review the progress of standardisation and indigenisation of Metro rail systems across the country. According to the Ministry of Housing and Urban Affairs, this will help promote the 'Make-in India' initiative. The ministry has standardised provisions of rolling stock, telecom systems and signalling for Metro rails. The Reserve Bank of India (RBI) plans to review marginal cost of funds based lending rate (MCLR) norms. The central bank could do away with the mechanism for lending rate calculation. MCLR was launched less than three years ago. RBI said in its annual report that it would review MCLR guidelines and subsidiarisation of foreign banks for the purpose of fostering competition and re-orienting the banking structure in India. Bankers are of the view that this was coming because the system had not reflected the changes in rates, according to media reports. Reserve Bank of India s newly- appointed director is in favour of adopting a public cooperative model. He said replacing the public private partnership (PPP) model will balance development and growth. The director is of the opinion that the PPP model, adopted after liberalisation in 1991, has not led to the desired impact. 9

10 Global News/Economy A report released by the Conference Board showed that the consumer confidence index in the U.S. surged to in Aug 2018 from an upwardly revised reading of in Jul 2018 (127.4 originally reported). The expectations index also rose to in Aug 2018 after falling to in the previous month. A Commerce Department report showed U.S. economic activity grew modestly more than estimated initially in the second quarter. According to the report, real gross domestic product increased 4.2% in the second quarter compared with the earlier reported 4.1% rise. A report released by the Commerce Department showed both personal income and spending in the U.S. increased in Jul 2018 and was in line with market s expectations. Personal income rose 0.3% after moving up by 0.4% in Jun Personal spending grew 0.4% in Jul 2018, similar with the increase in the previous month. Flash data from Eurostat showed euro zone inflation slowed unexpectedly in Aug 2018 due to oil prices but was above the European Central Bank s target of "below, but close to 2 percent" inflation. Inflation eased to 2% in Aug from 2.1% in Jul Cabinet Office survey showed Japan's consumer confidence deteriorated further in Aug It came in at the lowest level in a year. The seasonally adjusted consumer confidence index decreased to 43.3 in Aug from 43.5 in Jul This is the lowest score since Aug

11 Global Equity Markets U.S. Indices 11 Global Indices 17-Aug-18 1-Week Return YTD Return Dow Jones 25, % 5.04% Nasdaq 100 7, % 19.67% FTSE 100 7, % -3.32% DAX Index 12, % -4.29% Nikkei Average 22, % 0.44% Straits Times 3, % -5.57% Source: Thomson Reuters Eikon Value as on Aug 31, 2018 Europe U.S. markets traded higher initially, driven by positive outcome of the trade talks between the U.S. and Mexico. However, gains were restricted later as the meeting between U.S. and Canada on a trade deal concluded on Aug 31 without a resolution. Buying interest also found support from the official data showing U.S. economic activity grew by more than initially estimated in the second quarter of European markets remained under pressure amid uncertainty surrounding Brexit and U.S. trade policy. Investors are expecting a probable disorderly exit of the United Kingdom from the European Union, which may lead to a new financial crisis in Europe. Asia Majority of the Asian markets saw buying interest on optimism over trade talks between the U.S. and Canada. The talks were a sign that the three-nation North American Free Trade Agreement (NAFTA) may preserve. Investors took positive cues from Chinese official manufacturing PMI for Aug 2018, which came in higher than market expectations. However, gains were largely restricted by growing U.S. China trade row.

12 Global Debt (U.S.) US 10-Year Treasury Yield Movement Aug 28-Aug 29-Aug 30-Aug 31-Aug Source: Thomson Reuters Eikon Yield on the 10-year U.S. Treasury bond rose 2 bps to close at 2.85% from the previous close of 2.83%. U.S. Treasury prices fell initially as fears of a global trade war abated after the U.S. and Mexico agreed on an overhaul of the North America Free Trade Agreement (NAFTA). Also, fair demand at auction for $37 billion of 5-year notes added to the losses. However, reports of U.S. President s plan to impose tariffs on $200 billion worth of Chinese goods in Sep 2018 restricted the losses. Losses trimmed further after Argentina's central bank raised interest rates 15 percentage points to 60% and on news that Canada and the U.S. failed to reach an agreement on the NAFTA before the deadline on Aug

13 Global Commodity Prices Commodities Market Rebased to % -0.40% % Jul Aug Aug Aug Aug-18 Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl) Source: Thomson Reuters Eikon Global Commodity Movement Performance of various commodities Commodities Last Closing* 1-Week Ago Brent Crude($/Barrel) Gold ($/Oz) 1, , Gold (Rs/10 gm) 30,226 29,561 Silver ($/Oz) Silver (Rs/Kg) 37,096 36,640 Source: Thomson Reuters Eikon *Value as on Aug 31, 2018 Gold Gold prices fell as the greenback s rebound continued with the Federal Reserve expected to raise interest rates. Positive outcome of U.S.-Mexico trade negotiations added to the losses. Crude Brent Crude prices grew after Energy Information Administration reported that U.S. crude inventories declined by 2.6 million barrels in the Aug 24 week. Further, indication from OPEC that oil producing countries are maintaining their compliance to reduce oil production and output has reduced by 9% in Jul added to the gains. Baltic Dry Index The Baltic Dry Index fell 5.56% on the back of lower capesize and panamax activities. 13

14 Currency Prices ( in terms of INR) Currencies Markets Rebased to Currency Movement 1.48% 1.12% 2.06% 2.65% Rupee The rupee plummeted to a record low against the greenback due to month-end dollar demand from oil importers. Euro Euro fell on concerns over escalating trade conflict between the U.S. and the European Union Jul Aug Aug Aug Aug-18 Source: RBI USD GBP Euro JPY 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 Aug 31, 2018 Pound Pound rose against the U.S. dollar after the European Union's chief negotiator indicated an accommodative stance towards the U.K. on ongoing Brexit negotiations. Yen Yen rose marginally after moving in a range against the U.S. dollar as risk aversion triggered demand for the safe haven currency. 14

15 15 The Week that was 27 th August to 31 st August

16 The Week that was (Aug 27 Aug 31) Date Events Present Value Previous Value Monday, August 27, 2018 Tuesday, August 28, Wednesday, August 29, 2018 Thursday, August 30, 2018 Friday, August 31, 2018 China Industrial Profits (YoY) (Jul) 16.2% 20.0% Germany IFO Expectations (Aug) U.S. Advance Goods Trade Balance (Jul) -$72.2b -$67.9b U.S. Consumer Confidence Index (Aug) U.S. Wholesale Inventories (MoM) (Jul P) 0.7% 0.1% U.S. Gross Domestic Product Annualized (QoQ) (2Q S) 4.2% 4.1% Japan Consumer Confidence Index (Aug) U.S. MBA Mortgage Applications (Aug 24) -1.7% 4.2% U.S. Pending Home Sales (YoY) (Jul) -0.5% -4.0% Japan Retail Trade (YoY) (Jul) 1.5% 1.8% Germany Unemployment Change (000's) (Aug) -8K -6k Germany Consumer Price Index (YoY) (Aug P) 2.0% 2.0% U.S. Personal Consumption Expenditure Core (YoY) (Jul) 2.0% 1.9% U.S. Initial Jobless Claims (Aug 25) 213k 210k Japan Jobless Rate (Jul) 2.5% 2.4% India s Index of Eight Core Industries (Jul 18) 6.6% 7.6% China Manufacturing PMI (Aug) India s Gross Domestic Product growth (Q1FY19) 8.2% 7.7% Eurozone Consumer Price Index Estimate (YoY) (Aug) 2.0% 2.1%

17 17 The Week Ahead 3 rd September to 7 th September

18 The Week Ahead Day Monday, September 3, 2018 Tuesday, September 4, 2018 Wednesday, September 5, 2018 Thursday, September 6, 2018 Friday, September 7, 2018 Event Japan Nikkei PMI Manufacturing (Aug F) China Caixin PMI Manufacturing (Aug) U.K. Markit PMI Manufacturing s.a. (Aug) 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) Japan Leading Index CI (Jul P) 18

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