Weekly Review August 25, 2017

Transcription

1 Weekly Review August 25, 2017

2 Key Economic News International Domestic A report from the National Association of Realtors showed that U.S. existing home sales declined 1.3% YoY to 5.44 million in Jul 2017 after witnessing a fall of 2% to downwardly revised 5.51 million in Jun 2017 (5.52 million originally reported). This marked the lowest annual rate since Aug The downside reflects large declines in the Northeast and Midwest that was partially offset by gains in South and West. A report from the Centre for European Economic Research/ZEW showed that Germany's economic sentimentfellto10.0inaug2017from17.5injul This marked the lowest score since Oct The assessment of the current economic situation improved slightly in Aug and the index grew to 86.7 in Aug from 86.4 in Jul. A flash report from IHS market showed that euro zone s composite output index surpassed market expectations and slightly grew to 55.8 in Aug 2017 from 55.7 in Jul While manufacturing Purchasing Managers' Index (PMI) grew to 57.4 in Aug from 56.6 in Jul, services PMI fell to 54.9 in Aug from 55.4 in Jul. The government lowered the rate of Goods and Services Tax (GST) on work contracts for affordable housing to 12% from 18% fixed earlier. However, the move might not have any impact on prices of affordable housing as the GST rate for buyers to purchase a finished house remains at 12%. The cost will only come down if the developer involves a work contractor for his project. But in the affordable housing segment, the costs for developers are expected to remain the same as developers themselves construct projects to bring in cost efficiency. Data from the Department of Industrial Policy and Promotion (DIPP) showed that India had received $10.41 billion as Foreign Direct Investment (FDI) equity inflows during the period from Apr to Jun of FY18, which is 37% higher than $7.59 billion received during same period last year. The top five sectors that attracted the highest foreign inflows include services, computer hardware and software, construction development, telecommunications, and automobile. The top five investing countries were Mauritius, Singapore, Japan, U.K., and Netherlands.

3 Domestic Equity Market Market got support on news that a major IT company s reins could be taken over by one of its co founders Nifty 50 YTD Return : 20.51% 0.20% S&P BSE 100 YTD Return : 21.89% 0.20% Movement during the Week Jul Aug Aug 17 Movement during the Week Jul Aug Aug S&P BSE Mid Cap YTD Return : 25.72% 0.29% S&P BSE Small Cap YTD Return : 28.35% 0.18% Movement during the Week Jul Aug Aug 17 Movement during the Week Jul Aug Aug 17 Source : BSE and NSE Percentage change are on W o W basis and YTD is absolute return.

4 Domestic Equity Market NSE Advance/Decline Ratio Date Advances Declines Advance/Decline Ratio 21 Aug Aug Aug Aug Source: NSE Ratios S&P BSE Sensex Nifty 50 S&P BSE Midcap S&P BSE Smallcap P/E NA NA P/B NA NA Dividend Yield NA NA Source: Thomson Reuters Eikon Values as on Aug 24, 2017 The domestic equity market closed in the green amid truncated trading session after the Union cabinet gave in principle approval to public sector banks to amalgamate through an alternative mechanism. Initial jitters due to concerns over resignation of the chief executive officer and managing director of a major IT company, faded over news that the company s reins could be taken over by one of its cofounders. Supreme Court s clarification on liquor ban on highways further helped gains. However, upside was limited ahead of the U.S. Federal Reserve's annual symposium in Jackson Hole, which will be attended by central banks of more than 40 countries. Rs. crore 3,500 1, ,750 FII Net Investment MF Net Investment 3, Jul 17 4 Aug Aug Aug 17 Source: SEBI

5 Domestic Equity Market Indices Sectoral Indices Last Returns (in %) Closing 1 Wk 1 Mth S&P BSE Auto S&P BSE Bankex S&P BSE CD S&P BSE CG S&P BSE FMCG S&P BSE HC S&P BSE IT S&P BSE Metal S&P BSE Oil & Gas S&P BSE Power Source: MFI Explorer Values as on Aug 24, 2017 S&P BSE HC S&P BSE Bankex S&P BSE Metal S&P BSE Oil & Gas S&P BSE CG S&P BSE FMCG S&P BSE IT S&P BSE Auto S&P BSE CD S&P BSE Power Source: MFI Explorer Week Return as of August 24, 2017 On the BSE sectoral front, indices witnessed a mixed trend as S&P BSE HC (2.23%) stood as the major gainer followed by S&P BSE Bankex (0.99%) and S&P BSE Metal (0.87%). Meanwhile, S&P BSE Power ( 1.78%) stood as the major loser followed by S&P BSE CD ( 1.59%) and S&P BSE Auto ( 1.00%). Healthcare sector gained after a major pharma company got final approval from the United States Food and Drug Administration on a product. Bankex also gained on news that the government has given in principle approval to public sector banks to amalgamate Weekly Return in (%)

6 Domestic Debt Market Bond yields rose as supply dynamics came into play following weekly debt auctions 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 Values as on Aug 24, 2017 Yield in % Source: CCIL 10 Yr Benchmark Bond ( % ) 21 Aug 22 Aug 23 Aug 24 Aug Bond yields rose following debt auctions that boosted supply of papers in the market. Market participants also remained on the sidelines ahead of the annual central banking conference at Jackson Hole in Wyoming, U.S., scheduled from Aug 24 to Aug 26. Yieldonthe10 year benchmark bond (6.79% GS 2027) increased 3 bps to close at 6.54% from the previous week s close of 6.51% after trading in a range of 6.51% to 6.55%. RBI conducted the auction of state development loans (5,10,and20 year maturity) of 19 state governments for a notified amount of Rs. 20, crore for which the accepted amount stood at Rs. 18, crore. The cut off yield stood in the range of 6.94% to 7.48%.

7 Domestic Debt Market Maturity G Sec Yield (%) Corporate Yield (%) Spread bps 1 Year Year Year Year Source: Thomson Reuters Eikon Values as on Aug 24, 2017 Yields on gilt securities increased across the maturities by up to 7 bps, barring 15 year paper that fell 2 bps. Yield on 6 and 7 year papers closed steady. Yieldoncorporatebondsincreasedacrossthe maturities by up to 7 bps, barring 3 and 5 year maturities that closed steady. Spread between AAA corporate bond and gilt contracted across 1 to 5 years maturities by up to 13 bps, barring 4 year paper that closed steady. Spread across the remaining maturities expanded by up to 7 bps. Spread contracted the most on 1 year maturity and expanded the most on 15 year paper India Yield Curve Shift (%) (W o W) 8.00 Yield in % Change in bps Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs 0.00 Source: Thomson Reuters Eikon Change in bps 24 Aug Aug 17

8 International Markets Jul 17 5 Aug Aug Aug 17 Source: Thomson Reuters Eikon Dow Jones YTD Return : 9.72% Movement during the week 0.64% U.S. markets ended the week on a positive note. Buying interest was generated following reports that U.S. President s key aides and Congressional leaders have made considerable improvement in forming a tax refurbishment. Investor sentiments improved further following U.S. Fed Chief s comment on the stability of the U.S. financial system in recent times, although there was lack of cues on next interest rate hike. Additionally, the European Central Bank (ECB) Chief said the global recovery is firming up. Europe Indices Last Closing Returns (in %) 1 Wk 1 Mth YTD CAC 40 Index DAX Index FTSE Source: Thomson Reuters Eikon Values as on Aug 25, 2017 European markets witnessed mixed trend ahead of the ECB Chief s address in an annual meeting at Jackson Hole, scheduled post market hours on Aug 25. Meanwhile, euro zone private sector activity sustaining their respective strong growth momentum in Aug 2017, supported sentiment. Gains were restricted by Germany's weak economic confidence in Aug 2017, revealing weak exports and scandals in the auto sector, and weaker than expected second quarter results from an industry major.

9 International Markets Hang Seng Strait Times Nikkei Source: MFI Explorer Return Value as of August 25, Weekly Return in (%) % Change YTD % Change week Most of the major Asian markets went up mainly as investors looked ahead at the speeches from the central bank chiefs at the Fed's economic policy symposium due later in the week. Positive economic data from Asia like upbeat Japan s manufacturing sector and consumer prices, and Singapore s manufacturing output, helped sentiment. However, removal of chief strategist of the U.S. by the country s President, start of the combined military drills by the U.S. and South Korea, and U.S. declaring new sanctions on Russian and Chinese entities for their suspected collaboration with North Korea s nuclear weapons programme, bruised sentiment.

10 Commodities Global Commodity Prices Rebased to Performance of various commodities Commodities Global Commodity Movement Jul 17 5 Aug Aug 17 Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl) Source: Thomson Reuters Eikon Last Closing 2.76% 1 Wk Ago Brent Crude($/Barrel) Gold ($/Oz) 1, , Gold (Rs/10 gm)* 28,879 29,134 Silver ($/Oz) % Silver (Rs/Kg)* 38,714 39, % 25 Aug 17 Source: Thomson Reuters Eikon Values as on Aug 25, 2017; *as on Aug 24 Gold Gold prices ended the week on a positive note after witnessing a range bound movement. Bullion prices found support as concerns over probable U.S. monetary policy tightening, later during the year, eased after U.S. Fed refrained from providing any details on monetary policy outlook or balance sheet normalization in an annual meeting of global central banks held at Jackson Hole. Crude Brent crude prices rose after data showed U.S. energy firms reduced rigs drilling for new oil supply for the second week to Aug 18. Oil prices found additional support after Hurricane Harvey hit the U.S. mainland, resulting in closure of oil production unit in the affected area as a precautionary measure. Such closure may extend if the storm causes extensive damage. Nonetheless, gains were restricted by news of reopening of Libya s largest oilfield (Sharara oilfield). Baltic Dry Index The Baltic Dry Index fell during the week owing to weaker capesize and panamax activities.

11 1.81% Currency Currency Prices (in terms of INR) Rebased to Source: RBI Jul 17 4 Aug Aug Aug 17 Movement of Rupee vs. Other Currencies Currency Currency Movement USD GBP Euro JPY Last Closing 1 Wk Ago U.S. Dollar Pound Sterling EURO JPY (per 100 Yen) % 0.50% 0.06% 0.83% Source: RBI Figures in INR, Values as on Aug 24, 2017 Rupee TheIndianrupeeroseagainsttheU.S.dollaron renewed concerns over U.S. administration s ability to implement key economic reforms. Euro The euro rose earlier against the greenback on renewed political tensions in U.S. and after flash data showed strong private sector growth in euro zone in Aug Gains were extended after ECB President did not express concern about a strong euro zone currency at Jackson Hole, Wyoming. Pound Sterling weakened initially against the greenback amid concerns over the outcome of Brexit negotiations. However, the trend reversed after the Fed Chief made no reference to U.S. monetary policy at Jackson Hole, Wyoming. Yen Yenweakenedagainstthegreenbackaheadofa conference of global central bankers in Jackson Hole,Wyoming.However,losseswerewipedout after the Fed Chief made no reference to U.S. monetary policy at the same. Renewed concerns over U.S. administration s ability to implement key economic reforms also boosted the yen.

12 Key Mutual Funds News In order to facilitate compliance of Goods and Services Tax (GST) invoice submission norms by the mutual fund distributors, Karvy Computershare launched a web based workflow for Independent Financial Advisors (IFAs) called GST Invoice Management Workflow Solution. The facility will help mutual fund distributors to raise and submit GST invoice, verify, and e sign it online. Post submission, these invoices will be available for both IFAs and mutual fund houses to complete their GST return filing. In addition, these invoices will also be available for any future reference and download. Karvy has also facilitated digital signature certificate to distributors. The company has tied up with one of the service providers to offer special rates to IFAs. According to media reports, the Association of Mutual Funds in India (AMFI), in a communication to distributors, discontinued the practice of accepting the mark sheet issued by the National Institute of Securities Market (NISM) for the purpose of renewal of AMFI Registration Number (ARN) of the mutual fund distributors. NISM was revalidating the existing certificate for a period of three years from the date of passing the examination. However, the validity date of existing certificate was not being calculated while computing the validity of the renewed/ revalidated certificate in such cases. As a consequence, persons choosing to appear for NISM exam for renewal of existing NISM certification, were losing the benefit of the unexpired period of the validity period of their existing NISM certificate. According to media reports, one of the whole time members of the Securities and Exchange Board of India said that the capital market regulator do not wish to abolish the mutual fund distributor category. However, the market regulator wants investors to invest in mutual funds through advisory route (i.e. Registered Investment Advisors). Union Mutual Fund announced change in the fundamental attributes of Union Ultra Short Term Debt Fund with effect from Sep 27, Accordingly, the name was changed from Union Ultra Short Term Debt Fund to Union Short Term Fund. The revised investment objective is to provide reasonable returns commensurate with low to moderate risk and high level of liquidity through a portfolio of short to medium term debt and money market instruments.

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