News U Can Use. January 26, 2018

Transcription

1 News U Can Use January 26, 2018

2 2 The Week that was 22 nd January to 26 th January

3 Indian Economy According to the International Monetary Fund (IMF), India is expected to grow at 7.4% in 2018 as against 6.8% growth of China. This makes India one of the fastest growing countries among emerging economies following slowdown due to demonetisation and the implementation of the goods and service tax in Meanwhile, the economy is expected to grow at a rate of 7.8% in The government announced it will deposit Rs. 88,000 crore of capital to 20 state-run banks in FY18 and also prescribe a reforms package to make them more accountable. Of this, Rs. 80,000 crore will be through recapitalisation bonds and Rs. 8,139 crore as budgetary support. Meanwhile, banks will raise Rs. 10,312 crore from the market. The Ministry of Finance announced registration of one crore tax payers under total revenue collections under the goods and services tax (GST) so far till 24 Jan, Also, GST collections gathered momentum in Dec 2017 after falling for two consecutive months, rising to Rs. 86,703 crore from Rs. 80,808 crore in Nov As per the World Economic Forum, India stands at 62nd place among 103 emerging economies on an Inclusive Development Index. The index considers the living standards, environmental sustainability and protection of future generations from further indebtedness. Despite its low score compared with its neighbouring countries, India is among the 10 emerging economies with 'advancing' trend. 3

4 Indian Equity Market Domestic Equity Market Indices Indices 25-Jan-18 1 Week Return YTD Return S&P BSE Sensex 36, % 6.62% Nifty 50 11, % 6.08% S&P BSE Mid-Cap 17, % 0.03% S&P BSE Small-Cap 19, % 0.32% Source: MFI Explorer Ratios S&P BSE Sensex Nifty 50 S&P BSE Mid Cap NSE Advance/Decline Ratio Date Advances Declines Advance/Decline Ratio 22-Jan Jan Jan Jan Source: NSE S&P BSE Small Cap P/E P/B Dividend Yield Source: BSE, NSE Value as on Jan 25, 2018 Indian equity markets soared with benchmark indices Sensex and Nifty 50 surpassing the coveted 36,000 and 11,000 mark during the week. Investor sentiment improved after a report from the International Monetary Fund (IMF) showed that India could regain the title as the world s fastest growing major economy in Investors also took cues from positive quarterly earnings of some industry majors. Prospects of merger and acquisition activities between index heavyweights in the energy sector further supported buying interest. Also, the U.S. Congress brought an end to a three-day government shutdown as Senate Democrats adopted a short-term spending bill to fund government operations. 4

5 Indian Equity Market (contd.) 5 Indices Sectoral Indices Last Returns (in %) Closing 1-Wk 1-Mth S&P BSE Auto 25, % -3.65% S&P BSE Bankex 31, % 7.13% S&P BSE CD 22, % 1.64% S&P BSE CG 20, % 7.40% S&P BSE FMCG 10, % 2.55% S&P BSE HC 15, % 3.33% S&P BSE IT 12, % 13.87% S&P BSE Metal 15, % 6.64% S&P BSE Oil & Gas 16, % -1.97% Source: Thomson Reuters Eikon Value as on Jan 25, 2018 Indian Derivatives Market Review On the BSE sectoral front, S&P BSE IT (3.63%) stood as the most preferred sector followed by S&P BSE Metal (2.74%) and S&P BSE Oil & Gas (2.25%). Nonetheless, S&P BSE Consumer Durables (-2.60%) stood as the major laggard followed by S&P BSE Auto (-1.32%) and S&P BSE Power (- 0.65%). Meanwhile, the banking sector was impacted after the finance ministry announced certain banking reforms will be introduced soon. Nifty Jan 2018 Futures settled at spot closing of 11, points. Nifty Feb 2018 Futures were at 11,062.6 points, a discount of 7.05 points, below the spot closing. The turnover on NSE s Futures and Options segment stood at Rs lakh crore as against Rs lakh crore in the week to Jan 19. The Put-Call ratio stood at 0.84 compared with the previous week s close of The Nifty Put-Call ratio stood at 1.78 compared with the previous week s close of 1.74.

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) % 2027, (10 Yr GOI) Source: Thomson Reuters Eikon Value as on Jan 25, 2018 Yield in % Source: CCIL 10 -Yr Benchmark Bond ( % ) 22-Jan 23-Jan 24-Jan 25-Jan Bond yields fell after the government stated that it will sell lower than scheduled amount of debt at the auction this week. Meanwhile, investor sentiment improved since last week after the government lowered its additional borrowing for FY18. However, gains were erased as increase in crude oil prices raised concerns over inflation growth that reduced expectations for an interest rate reduction. Yield on the existing 10-year benchmark bond (6.79% GS 2027) stood at 7.48%, unchanged from the previous week s close. Yield on the new 10-year benchmark paper (7.17% GS 2028) rose 2 bps to close at 7.31% from the previous week s close of 7.29%. 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 Jan 25, 2018 Yield in % Source: Thomson Reuters Eikon India Yield Curve Shift (%) (W-o-W) Yields on gilt securities fell across maturities by up to 18 bps, barring 1-, 6-, 7-, 11-, 12- and 30-year papers that increased by up to 6 bps, while yield on 14-year paper was flat. Corporate bond yields fell on 4 to 10 years papers by up to 3 bps, while 1 to 3 years papers increased by up to 9 bps. Yield on 15-year paper was steady. Spread between AAA corporate bond and gilt expanded across the maturities by up to 22 bps, leaving 1-, 6- and 7-year papers that contracted 5 bps each, while spread on 5-year paper was steady. 3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs Change in bps 25-Jan Jan Change in bps 7

8 Regulatory Updates in India Securities and Exchange Board of India (SEBI) announced that the panel of the oversight committee on 'product design' will be responsible for introduction of new contracts, modifications of existing product and reviewing the design of the already approved and running contracts. This is being done to bring uniformity with respect to the role of the oversight committee. The move comes after SEBI noted that the commodity derivatives exchanges have been adopting varied approach in terms of constitution and also the functioning of such oversight committees. The Department of Industrial Policy and Promotion (DIPP) has notified of easing the Foreign Direct Investment (FDI) rules for several sectors- including single brand retail, non- banking financial companies and construction. It has also mentioned that allowing 100% FDI in single brand retail under automatic route would attract more investments in production and marketing. The finance ministry has announced that certain banking reforms will be introduced soon. The government will put loans above Rs. 250 crore under specialised monitoring to reduce the number of non-performing assets after the recapitalisation plan. The government is also planning to limit banks with minimum 10% of exposure only to become a part of the consortium. 8

9 Regulatory Updates in India (contd..) The government is considering a plan to raise the equity investment limit for the Employees' Provident Fund Organisation (EPFO) from 15% to 25%. Such a move could more than double the provident fund money invested in exchange-traded funds (ETFs) over time. The move comes on the wake of higher than expected return on equity while decline in debt, thereby compelling the government to explore wider investment options to maximise returns. The government is set to amend the Goods and Services Tax (GST) law to explicitly state that no transition credit can be availed in lieu of cesses paid under the previous tax regime. The move comes after companies claimed hundreds of crores of rupees as transition credit in lieu of Swachh Bharat Cess and Krishi Kalyan Cess. The government had cleared that no transition credit would be available after implementation of the GST regime. However, some companies claimed it in lack of clarity in law to claim credit against cesses. 9

10 Global News/Economy A report from the Commerce Department showed that U.S. real Gross Domestic Product missed (GDP) market expectations for the fourth quarter It grew by 2.6% in the fourth quarter as against 3.2% growth seen in the third quarter. The GDP growth reflects positive contributions from consumer spending, non-residential fixed investment, exports, residential fixed investment, and government spending. However, these positive contributions were partly offset by a negative contribution from private inventory investment and an increase in imports. A report from the Commerce Department showed that U.S. durable goods orders surpassed market expectations and surged 2.9% in Dec 2017 as against an upwardly revised gain of 1.7% (1.3% gain originally reported) in Nov The strong growth reflects notable increase in orders for transportation equipment that grew 7.4% in Dec as against a gain of 4.6% in Nov. The European Central Bank (ECB) kept its key interest rates and asset purchases steady at record low. The bank reiterated its forward guidance that rates will remain at current level and to increase the size as well as duration of asset buys, until inflation reaches its target. The main refinance rate is at 0% and the deposit rate at -0.40%. The marginal lending facility rate is 0.25%. The president of ECB was concerned over euro exchange rate volatility and its causes and asserted that an interest rate hike was unlikely this year. A preliminary report from the Office for National Statistics showed that U.K. GDP surpassed market expectations and grew 0.5% sequentially in the fourth quarter However, GDP growth for 2017 came in at 1.8% and marked the weakest growth since

11 Global Equity Markets Indices 11 Global Indices 26-Jan-18 1-Week Return YTD Return Dow Jones 26, % 7.22% Nasdaq 100 7, % 7.86% FTSE 100 7, % 0.23% DAX Index 13, % 3.64% Nikkei Average 23, % 0.53% Straits Times 3, % 4.83% Source: Thomson Reuters Eikon Value as on Jan 26, 2018 Europe U.S. U.S. markets rose after policymakers managed to re-open the government following a brief shutdown, passing a stopgap bill funding the government until Feb 8. Upbeat earnings of major companies Positive U.S. GDP for the Dec quarter of 2017 and durables goods data for Dec 2017, added to the upside. European market fell following rally in euro and pound currency against the U.S. dollar. Rally in both these currencies is negative for European exporters. Investors were hardly convinced by the forward guidance of European Central Bank s stance on stimulus measures. However, losses trimmed as Germany's economic confidence improved to an eight-month high and the assessment of current situation hit a record in Jan. Asia Easing concerns over the U.S. government shutdown and political uncertainty in Germany had positive impact on Asian markets. The Bank of Japan kept its massive monetary stimulus programme unchanged, thereby easing worries that it might shift towards a tighter policy. Also, market participants remained optimist of economic growth in China.

12 Global Debt (U.S.) US 10-Year Treasury Yield Movement Jan 23-Jan 24-Jan 25-Jan 26-Jan Source: Thomson Reuters Eikon 12 Yield on the 10-year U.S. Treasury bond increased 2 bps to close at 2.66% from the previous week s close of 2.64%. U.S. Treasury prices fell initially after U.S. lawmakers reached a deal to reopen the federal government, three days after the shutdown. However, losses reversed as treasury prices increased moving in tandem with rise in Japanese government bond prices after the Bank of Japan governor stated that there is no immediate need to raise rates or slow down the purchases of exchange-traded funds by banks. Treasury prices fell again at the end as investors remained optimistic after U.S economy grew 2.6% in the Dec quarter of 2017.

13 Commodities Market Rebased to 10 Global Commodity Prices Performance of various commodities Commodities Last Closing 1-Week Ago Brent Crude($/Barrel) Gold ($/Oz) 1, , Gold (Rs/10 gm)* 30,489 29,958 Silver ($/Oz) Silver (Rs/Kg)* 39,700 38,714 Source: Thomson Reuters Eikon Value as on Jan 26, 2018; * as on Jan 25, Global Commodity Movement % 2.29% 1.76% Dec-17 6-Jan Jan Jan-18 Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl) Source: Thomson Reuters Eikon Gold Gold prices traded higher amid strength in euro against the U.S. dollar. Also, comments from the U.S. Treasury Secretary further weighed on the U.S. dollar. Gold prices continued with their upward trend after ECB President s stimulus measures fell short of investor expectations that the central bank is poised to shift towards steeper monetary policy measures. Crude Brent crude prices rose following comments from Saudi Arabia that cooperation between oil producers who have cut production to boost prices would continue beyond Baltic Dry Index The Baltic Dry Index rose on the back of increasing capesize and panamax activities.

14 Currencies Markets Currency Prices ( in terms of INR) 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 Jan 25, Rebased to % % Dec-17 5-Jan Jan Jan-18 Source: RBI Currency Movement USD GBP Euro JPY 2.56% 1.18% Rupee The Indian rupee went up against the U.S. dollar amid comments from the U.S. President stating that a strong dollar is wanted, contradicting comments by U.S. Treasury Secretary who backed a weaker dollar to help boost America's global trade. Euro Euro rose against the greenback amid euro zone s strong consumer confidence data for Jan Pound Sterling gained against the U.S. dollar amid growing optimism around Britain's chances of securing a favourable Brexit deal. Yen Yen rose against the greenback amid comments from the U.S. President that strong dollar is wanted, contradicting comments by U.S. Treasury Secretary who backed a weaker dollar.

15 15 The Week that was 22 nd January to 26 th January

16 The Week that was (Jan 22 Jan 26) Date Events Present Value Previous Value Monday, Jan 22, 2018 Tuesday, Jan 23, 2018 Wednesday, Jan 24, 2018 Thursday, Jan 25, 2018 Friday, Jan 26, 2018 Japan Convenience Store Sales (YoY) (Dec) -0.3% -0.3% Bank of Japan Rate Decision -0.1% -0.1% Eurozone ZEW Survey (Economic Sentiment) (Jan) U.K. Public Sector Net Borrowing (Dec) 1b 6.6b Markit Eurozone Manufacturing PMI (Jan P) Markit Eurozone Services PMI (Jan P) Markit U.S. Manufacturing PMI (Jan P) Markit U.S. Services PMI (Jan P) Nikkei Japan PMI Manufacturing (Jan P) U.S. Existing Home Sales (Dec) 5.57m 5.78m European Central Bank Rate Decision 0.0% 0.0% U.S. New Home Sales (Dec) 625k 689k U.S. Leading Index (Dec) 0.6% 0.5% Japan National Consumer Price Index (YoY) (Dec) 1.0% 0.6% U.K. Gross Domestic Product (YoY) (4Q A) 1.5% 1.7% U.S. Durable Goods Orders (Dec P) 2.9% 1.7% U.S. Gross Domestic Product Annualized (QoQ) (4Q A) 2.6% 3.2% 16

17 17 The Week Ahead 29 th January to 02 rd February

18 The Week Ahead Day Event Monday, January 29, 2018 Tuesday, January 30, 2018 Wednesday, January 31, 2018 U.S. Personal Spending (Dec) Japan Jobless Rate (Dec) Japan Retail Trade (YoY) (Dec) Euro Zone Gross Domestic Product s.a. (YoY) (4Q A) U.S. Consumer Confidence Index (Jan) German Consumer Price Index (YoY) (Jan P) U.S. Consumer Confidence Index (Jan) China Manufacturing PMI (Jan) China Non-manufacturing PMI (Jan) Euro Zone Consumer Price Index Estimate (YoY) (Jan) U.S. FOMC Rate Decision Euro-Zone Unemployment Rate (Dec) Thursday, February 01, 2018 China Caixin China PMI Mfg (Jan) U.K. Markit UK PMI Manufacturing s.a. (Jan) U.S. ISM Manufacturing (Jan) Friday, February 02, 2018 U.S. Change in Non-farm Payrolls (Jan) U.S. Unemployment Rate (Jan) U.K. Markit/CIPS UK Construction PMI (Jan) 18

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