News U Can Use. March 30, 2018

Transcription

1 News U Can Use March 30, 2018

2 2 The Week that was 26 th March to 30 th March

3 Indian Economy India's fiscal deficit for the Apr 2017-Feb 2018 period increased to Rs lakh crore, which is 120% of the government s revised target for FY18. The fiscal deficit target for the current fiscal was revised at 3.5% from the earlier 3.2%. The target for FY19 has been set at 3.3% making changes to fiscal consolidation glide path. Government plans to borrow Rs lakh crore in the first half of FY19 (Apr to Sep). Economic affairs secretary anticipated that the gross market borrowing in FY19 is likely to be lower by Rs. 25,000 crore than the budgeted target. Government will also issue securities of 1-4 years duration, inflation index bonds linked to consumer price index and flexible rate bonds. The secretary also said that the government and the central bank are also considering a plan to raise the foreign investment limit in government bonds. Goods and Services Tax (GST) collections fell for the second consecutive month to Rs. 85,174 crore in Feb 2018 (received till Mar 26). Lower collections resulted because 69% or around lakh (GSTR 3B returns) of assesses filed returns till Mar 25. GST collections in Jan 2018 were Rs. 86,318 crore while in Dec 2017 and Nov 2017 it was Rs. 88,929 crore and Rs. 83,716 crore, respectively. The Income-Tax Department released a list of 24 defaulting individuals and companies who owe about Rs. 490 crore in taxes to the government, which was published in leading national dailies. These entities are either untraceable or have reported inadequate assets for payment of dues. 3

4 Indian Equity Market 4 Domestic Equity Market Indices Indices 28-Mar-18 1 Week Return YTD Return S&P BSE Sensex 32, % -2.50% Nifty 50 10, % -3.08% S&P BSE Mid-Cap 15, % % S&P BSE Small-Cap 16, % % Source: MFI Explorer Ratios NSE Advance/Decline Ratio Date Advances Declines Advance/Decline Ratio 26-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 28, 2018 Indian equity markets gained over the truncated trading week on reports that the U.S. and China are likely to negotiate about the prospective U.S. tariff imposition on Chinese imports. This reduced fears of a probable global trade war. Sentiment also got support as government announced lower than expected borrowing programme for the first half of the fiscal The government will borrow Rs lakh crore during the Apr-Sep period. However, the upside was limited as India's fiscal deficit widened to Rs lakh crore at the end of Feb, exceeding the revised target of Rs 5.94 lakh crore for the entire fiscal and for Apr-Feb period it stood at 120% of the revised estimates due to increased expenditure and subdued revenue.

5 Indian Equity Market (contd.) Indices Sectoral Indices Last Returns (in %) Closing 1-Wk 1-Mth S&P BSE Auto 24, % -3.12% S&P BSE Bankex 27, % -3.94% S&P BSE CD 22, % 5.07% S&P BSE CG 18, % -3.14% S&P BSE FMCG 10, % -2.06% S&P BSE HC 13, % -6.77% S&P BSE IT 12, % -3.24% S&P BSE Metal 13, % % S&P BSE Oil & Gas 14, % -5.75% Source: Thomson Reuters Eikon Value as on Mar 28, 2018 Indian Derivatives Market Review On the BSE sectoral front, barring S&P BSE Teck (-0.68%) and S&P BSE IT (-0.61%), all the sectoral indices closed in the green. S&P BSE CD (2.88%) stood as the major gainer followed by S&P BSE Bankex (2.58%) and S&P BSE CG (2.39%). S&P BSE Metal (1.87%) and S&P BSE Auto (1.55%) sectors also gained. Meanwhile, according to the latest data available from oil ministry's Petroleum Planning and Analysis Cell (PPAC), India's oil import bill is likely to move up by a quarter percentage to $87.7 billion in the current fiscal year. Nifty Mar 2018 Futures settled at spot closing of 10, Nifty Apr 2018 Futures were at 10, points, a premium of points, over the spot closing. The turnover on NSE s Futures and Options segment stood at Rs lakh crore against Rs lakh crore on Mar 23. The Put-Call ratio stood at 0.91 compared with the previous week s close of The Nifty Put-Call ratio stood at 1.10 compared with 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 Mar 28, 2018 Bond yields fell after the government s move to ease debt supply burden in the first six months of the next financial year. The government announced that India will sell bonds worth Rs trillion during Apr-Sep of 2018 accounting to only 47.56% of the government s budgeted fiscal-year borrowing, which is lower than 60%- 65% in the last five years Source: CCIL 10 -Yr Benchmark Bond ( % ) 26-Mar 27-Mar 28-Mar However, profit booking by investors, rise in crude oil prices and sluggish demand in the state development auction capped the gains. Yield on the 10-year benchmark paper (7.17% GS 2028) fell 16 bps to close at 7.40% from the previous week s close of 7.56% after trading in a range of 7.29% to 7.63%. 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 Mar 28, 2018 Yields on gilt securities fell across all maturities in the range of 5 bps to 22 bps. Maximum decrease was witnessed on 13- and 14-year papers, while minimum was witnessed on 2-year paper. Corporate bond yields fell across the maturities in the range of 3 bps to 29 bps, barring 3-year paper that closed steady. Spread between AAA corporate bond and gilt contracted across 5 to 10 years and 15-year maturities in the range of 4 bps to 17 bps, while spread expanded for 1-, 3- and 4-year papers by up to 6 bps and stood steady for 2-year paper Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs Source: Thomson Reuters Eikon India Yield Curve Shift (%) (W-o-W) Change in bps 28-Mar Mar Change in bps 7

8 Regulatory Updates in India The Securities and Exchange Board of India (SEBI) is planning to put in place a stronger mechanism to check non-compliance of listing conditions. Under the proposed framework, the exchanges would have the power to freeze the entire shareholding of the promoter and promoter group in non-compliant listed entity also holding in other securities. According to media report, Goods and Services Tax (GST) Council may soon give relief to businesses having zero tax liability for six consecutive months under GST. The council at its next meeting may propose that such entities file returns only twice a year. Recent data showed that as much as 40% of return filed under GST regime have nil tax liability. A Niti Aayog committee has suggested some measures to encourage gold sector which include, reduction of the import duty on gold, setting up jewellery parks and form a regulatory body for the gold industry. The committee gave 84 recommendations with a three month to one-year timeline for implementation. The committee is headed by the principal adviser of the Niti Aayog. According to the commerce and industry minister, the government may resume negotiations of the long-stalled free trade agreement (FTA) between India and European Union (EU). He added that after 2013, and completing 16 rounds of talks, the negotiations had not moved further. 8

9 Regulatory Updates in India (contd..) According to the media reports, the Insolvency and Bankruptcy Code (IBC) review panel has called for sweeping changes in the law that aims at easing insolvency rules for small enterprises. Also, these changes would provide relief to home buyers by treating them as financial creditors while deeming the amount raised from them for real estate projects as financial debt. Per the proposal by the committee, promoters of micro, small and medium enterprises (MSMEs) who are not willful defaulters should be allowed to bid during the insolvency process. If the change is adopted, it would massively improve the prospects of such companies being acquired and revived, thereby saving jobs, instead of going into liquidation. Prime Minister said a planned increase in guaranteed price for farm goods take into account the cost of production including land rentals and unpaid labour by family members of a farmer. In the latest budget, government said the MSP will be set at least one and a half times the cost of production. This is a major step taken by the government since over the past three years the rise in the average minimum support price was in single digits. An inter-ministerial panel formed by the government, with an objective to double farmers income by 2022 will submit its final report in Apr The committee, which was set up in Apr 2016 points out that real income of farmers needs to register a compound annual growth rate of 10.4% in order to double by Some of the panel s recommendations are already being implemented by the government. 9

10 Global News/Economy A report from the Commerce Department showed that U.S. Gross Domestic Product (GDP) grew 2.9% in the fourth quarter that came in higher than previous expectation of an increase of 2.5% driven by upward revisions to consumer spending and private inventory investment. However, it was modestly lower than 3.2% increase in the third quarter. According to a report from the Commerce Department, U.S. personal income came in line with market expectations and grew 0.4% in Feb 2018, which matched the increases witnessed in the two previous months. Disposable personal income grew by 0.4% in Feb as against a gain of 1% in Jan Also, personal spending grew 0.2% for the second consecutive month. A flash report from Destatis showed that Germany s inflation grew 1.6% in Mar 2018 as against a gain of 1.4% in Feb Consumer price index gained 0.4% on monthly basis. A report from the Office for National Statistics showed that U.K. GDP grew 0.4% quarter on quarter in the fourth quarter of 2017, which is slightly down as against 0.5% gain in the third quarter. However, it was in line with preliminary expectations. A report from the Ministry of Economy, Trade and Industry showed that total value of retail sales in Japan grew 0.4% (seasonally adjusted) month on month in Feb 2018 as against an upwardly revised 1.6% contraction in Jan 2018 (1.8% decline originally reported). Retail sales gained 1.6% in Feb on a yearly basis as against downwardly revised gain of 1.56% (1.6% gain originally reported) in Jan. 10

11 Global Equity Markets U.S. Indices 11 Global Indices 29-Mar-18 1-Week Return YTD Return Dow Jones 24, % -2.90% Nasdaq 100 6, % 1.07% FTSE 100 7, % -7.73% DAX Index 12, % -6.02% Nikkei Average* 21, % -8.73% Straits Times 3, % 0.74% Source: Thomson Reuters Eikon Value as on Mar 29, 2018 * Last close as on Mar 30, 2018 Europe U.S. markets recouped previous week s loss to end the holiday truncated week in the green. Bargain hunting contributed to the rally on Wall Street. Easing concerns about a potential trade war between the U.S. and China soothed investors nerves. Stocks rallied further as U.S. economic activity grew more than previously estimated in the fourth quarter of European markets closed on a positive note ahead of the four-day Easter holiday weekend. Investor sentiment was buoyed as worries over a potential trade war between the U.S. and China eased after officials of both the nations indicated a willingness to negotiate. Markets found additional support after a survey data from the market research group GfK showed that German consumer confidence is set to improve in Apr. Asia Asian markets largely remained high as concerns over probable trade war receded following reports that the U.S. and China are willing to negotiate trade-related issues. Growing expectation over the resolution of geopolitical tensions surrounding the Korean Peninsula further supported investor sentiment.

12 Global Debt (U.S.) US 10-Year Treasury Yield Movement Mar 27-Mar 28-Mar 29-Mar Source: Thomson Reuters Eikon Yield on the 10-year U.S. Treasury bond fell 9 bps to close at 2.74% from the previous week s close of 2.83%. U.S. Treasury prices fell initially as the government planned to sell a record $294 billion of debt in the week in order to test investor appetite. However, the trend reversed and prices rose amid decline in equity market especially technology sector on Tuesday on government scrutiny over political consultants' use of a U.S. technology major s user data. Meanwhile, the auction of $29 billion 7- year auction sailed was completed successfully despite higher bond supply during the week. 12

13 Global Commodity Prices Commodities Market Rebased to 10 Global Commodity Movement % -1.69% % Feb-18 9-Mar Mar Mar 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 ($/Oz) 1, , Gold (Rs/10 gm)* 30,630 30,700 Silver ($/Oz) Silver (Rs/Kg)* 38,325 38,219 Source: Thomson Reuters Eikon * Last closing as on Mar 28, 2018 Value as on Mar 29, 2018 Gold Gold prices moved down when news that U.S. and China might negotiate over U.S. tariff plans on Chinese imports eased fears of a global trade war. Better than expected U.S. economic data also lowered the prices of the precious metal. Crude Brent crude prices inched down on persisting concerns over supply glut after data from the Energy Information Agency indicated that U.S. crude inventories rose in the week to Mar 23. The downside was limited after data from energy services firm Baker Hughes indicated that U.S. oil rigs count fell for the week ended Mar 29. Baltic Dry Index The Baltic Dry Index fell on the back of lower capesize and panamax activities. 13

14 Currency Prices ( in terms of INR) Currencies Markets 14 Rebased to Source: RBI Currency Movement Feb Mar Mar-18 USD GBP Euro JPY Movement of Rupee vs Other Currencies Currency Last Closing 1-Wk Ago US Dollar Pound Sterling EURO JPY % 0.36% -0.95% -0.14% Source: RBI Figures in INR, Value as on Mar 28, 2018 Rupee The Indian rupee fell against the U.S dollar due to month-end dollar demand from importers and after India s fiscal deficit for the 11-month period ended Feb 2018 reached 120% of the revised budgeted target of FY18. Euro Euro rose initially against the U.S. dollar as investors' risk appetite improved on expectations of easing concerns of a trade war between the U.S. and China. Gains soon reversed, and euro fell on quarter-end flows into the greenback. Pound Pound fell against the U.S dollar after a survey showed British retail sales dropped in Mar Yen Yen plunged against the U.S dollar as safe haven appeal receded on optimism that the U.S. and China will begin negotiations on trade.

15 15 The Week that was 26 th March to 30 th March

16 The Week that was (Mar 26 Mar 30) Date Monday, Mar 26, 2018 Tuesday, Mar 27, 2018 Wednesday, Mar 28, 2018 Thursday, Mar 29, 2018 Friday, Mar 30, 2018 Events Present Value Previous Value Euro zone French Gross Domestic Product (YoY) (4Q F) 2.5% 2.5% U.S. Consumer Confidence Index (Mar) U.S. S&P/Case-Shiller US Home Price Index (YoY) (Jan) 6.18% 6.28% Euro zone German GfK Consumer Confidence (Apr) U.S. MBA Mortgage Applications (Mar 23) 4.8% -1.1% U.S. Gross Domestic Product Annualized (QoQ) (4Q T) 2.9% 2.5% U.S. Advance Goods Trade Balance (Feb) -$75.4b -$75.3b U.S. Pending Home Sales (YoY) (Feb) -4.4% -1.9% Japan Retail Trade (YoY) (Feb) 1.6% 1.5% Euro zone German Unemployment Change (000's) (Mar) -19k -23k U.K. Mortgage Approvals (Feb) 63.9b 67.1k U.K. Gross Domestic Product (YoY) (4Q F) 1.4% 1.4% Euro zone German Consumer Price Index (YoY) (Mar P) 1.6% 1.4% U.S. PCE Core (YoY) (Feb) 1.6% 1.5% U.S. U. of Mich. Sentiment (Mar F) Japan Jobless Rate (Feb) 2.5% 2.4% Japan Industrial Production (YoY) (Feb P) 1.4% 2.5% Japan Housing Starts (YoY) (Feb) -2.6% -13.2% Japan Construction Orders (YoY) (Feb) 19.2% 0.9% 16

17 17 The Week Ahead 2 nd April to 6 th April

18 The Week Ahead Day Monday, April 2, 2018 Tuesday, April 3, 2018 Wednesday, April 4, 2018 Thursday, April 5, 2018 Friday, April 6, 2018 Event U.S. ISM Manufacturing (Mar) Index of Eight Core Industries (India) (Feb) Nikkei Japan PMI Manufacturing (Mar F) U.K. Markit UK PMI Manufacturing s.a. (Mar) Euro zone German Retail Sales (YoY) (Feb) Nikkei India PMI Manufacturing (Mar) Euro zone Consumer Price Index Estimate (YoY) (Mar) U.S. ADP Employment Change (Mar) U.S. ISM Non-Manufacturing/Services Composite (Mar) Japan Nikkei Japan PMI Composite (Mar) Euro zone Retail Sales (YoY) (Feb) Nikkei India Services PMI U.S. Change in Non-farm Payrolls (Mar) U.S. Unemployment Rate (Mar) Japan Leading Index CI (Feb P) 18

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