Weekly Review November 9, 2018
Key Economic News International Domestic The U.S. Federal Reserve in its monetary policy review kept interest rates on hold at 2% to 2.25%. The U.S. Fed maintained its upbeat outlook on the U.S. economy and kept the door open for a rate hike in its monetary policy review scheduled in Dec 2018. The central bank, however, noted that the growth of business fixed investment has moderated from its rapid pace earlier in the year. According to the Institute for Supply Management, U.S. non-manufacturing Purchasing Managers' Index (PMI) fell to 60.3 in Oct 2018 after rising to 61.6 in Sep 2018. The modest slowdown in the business activity growth was due to the decline in business activity index to 62.5 in Oct 2018 from 65.2 in Sep 2018. The employment index also fell to 59.7 in Oct 2018 from 62.4 in Sep 2018. U.K. economy expanded at the fastest pace in nearly two years in the third quarter of 2018, which can be attributed to household spending and exports. Gross Domestic Product (GDP) grew 0.6% in the third quarter of 2018 after expanding 0.4% a quarter ago. On a yearly basis, GDP grew 1.5% in the third quarter of 2018, was in line with expectations. The Nikkei India Services PMI grew to 52.2 in Oct 2018 from 50.9 in Sep 2018 on the back of improvement in new orders and robust jobs growth. The rise is the highest pace of growth since Jul 2018 and fifth month of consecutive growth. Seasonally adjusted Nikkei India Composite PMI Output Index grew to 53.0 in Oct 2018 as against 51.6 in Sep 2018. The government cleared that it is not seeking Rs. 3.6 lakh crore capital from the Reserve Bank of India (RBI). It said there are discussions going on to fix the appropriate economic capital framework of the central bank. Media had been reporting that the government has asked RBI to transfer Rs. 3.6 lakh crore as it struggles with the fiscal deficit target. World Bank signed an agreement with the Centre and the government of Andhra Pradesh to forward a loan Rs. 1,257 crore to help make farming in Andhra financially viable. The programme called the Andhra Pradesh Integrated Irrigation and Agriculture Transformation Project will help two lakh families of poor and marginalised farmers, agro-entrepreneurs, women and other vulnerable groups.
Index Values Index Values Domestic Equity Market Index Values Index Values Domestic equity market witnessed gains due to the fall in global crude oil prices 10684 Nifty 50 YTD Return : 0.52% Nifty 100 0.31% 0.38% YTD Return : -1.47% 10921 10466 10689 10248 10457 Movement during the Week 10030 10-Oct-18 20-Oct-18 30-Oct-18 09-Nov-18 Movement during the Week 10225 10-Oct-18 20-Oct-18 30-Oct-18 09-Nov-18 17705 Nifty Mid Cap 100 YTD Return : -16.69% 1% 6423 Nifty Small Cap 100 YTD Return : -30.44% 1.32% 17138 6198 16571 Movement during the Week 16004 10-Oct-18 20-Oct-18 30-Oct-18 09-Nov-18 5973 Movement during the Week 5748 10-Oct-18 20-Oct-18 30-Oct-18 09-Nov-18 Source : BSE and NSE Percentage change are on W-o-W basis and YTD is absolute return.
Rs. crore Domestic Equity Market NSE Advance/Decline Ratio Date Advances Declines Advance/Decline Ratio 05-Nov-18 869 913 0.95 06-Nov-18 890 884 1.01 09-Nov-18 943 847 1.11 Source: NSE Ratios S&P BSE Sensex Nifty 50 Nifty Mid Cap 100 Nifty Small Cap 100 P/E 22.8 25.5 47.7 124.7 P/B 3.0 3.4 2.6 1.7 Dividend Yield 1.3 1.3 1.0 0.9 Source: BSE & NSE Values as on Nov 9, 2018 Indian equity markets witnessed gains during the truncated trading week. Markets were supported by strong Sep 2018 quarterly earnings. Fall in global crude oil prices also supported sentiment. Additionally, during Muhurat Trading, the onehour trading session on the occasion of Diwali on Nov 7, equity markets gained and all the sectors ended in the green. The upside was limited after the U.S. Federal Reserve iterated its hawkish stance on interest rates and differences between the European Union and the Italian government seemed to deepen. 3654 FII Net Investment DII Net Investment 1827 0-1827 -3654 10-Oct-18 20-Oct-18 30-Oct-18 9-Nov-18 Source: SEBI
Domestic Equity Market Indices Sectoral Indices Last Returns (in %) Closing* 1-Wk 1-Mth S&P BSE Auto 20,845.2 0.7 6.4 S&P BSE Bankex 29,098.3 0.3 6.1 S&P BSE CD 19,512.0-0.9 9.0 S&P BSE CG 18,246.3 0.6 11.7 S&P BSE FMCG 11,210.4-0.1 5.7 S&P BSE HC 14,692.8 0.9 1.9 S&P BSE IT 14,185.5 0.7-6.2 S&P BSE Metal 12,863.1-1.6 0.0 S&P BSE Oil & Gas 13,584.5-0.6 10.4 S&P BSE Realty 1,762.76 2.5 13.9 Source: MFI Explorer *Values as on Nov 9, 2018 On the BSE sectoral front, indices witnessed a mixed trend as S&P BSE Realty (2.49%) stood as the major gainer followed by S&P BSE HC (0.89%) and S&P BSE Auto (0.72%). Meanwhile, S&P BSE Metal (-1.60%) stood as the major loser followed by S&P BSE CD (- 0.95%). In the banking space, State Bank of India posted higher than expected earnings for the quarter ended Sep 2018 which provided support to the banking sector. S&P BSE Realty S&P BSE HC S&P BSE Auto S&P BSE IT S&P BSE CG S&P BSE Bankex S&P BSE FMCG S&P BSE Oil & Gas S&P BSE CD S&P BSE Metal 1-Week Return as of November 09, 2018-1.6-0.9-0.6-0.1 0.3 0.9 0.7 0.7 0.6-3 -1 1 3 Source: MFI Explorer Weekly Return in (%) 2.5
Yield in % Domestic Debt Market Bond yields fell due to the gains in rupee against the greenback and fall in crude oil prices Debt Indicators (%) Current Value* 1-Wk Ago 1-Mth Ago 6-Mth Ago Call Rate 6.47 6.41 6.39 5.91 91 Day T-Bill 6.95 6.96 6.87 6.24 07.80% 2021, (5 Yr GOI) 7.57 7.52 7.86 7.62 07.17% 2028, (10 Yr GOI) 7.76 7.78 8.08 7.71 Source: Thomson Reuters Eikon; CCIL *Values as on Nov 9, 2018 7.90 7.80 7.70 7.60 7.50 Source: CCIL 10 -Yr Benchmark Bond ( % ) 2-Nov 5-Nov 6-Nov 9-Nov Initially, bond yield increased as rupee depreciated against the greenback on better-than-expected U.S. jobs data for Oct 2018. However, losses were reversed following the appreciation in rupee against the greenback and the central bank s purchase of securities under open market operation, which lifted the market sentiment. Yields also fell due to the continuous decline in crude oil prices, which lowered inflationary concerns to some extent. The yield on the 10-year benchmark paper (7.17% GS 2028) fell 2 bps to close at 7.76% from the last week s close at 7.78%.
Yield in % Domestic Debt Market Maturity G-Sec Yield (%) Corporate Yield (%) Spread bps 1 Year 7.47 8.72 125 3 Year 7.65 8.59 93 5 Year 7.81 8.58 77 10 Year 7.92 8.50 58 Source: Thomson Reuters Eikon Values as on Nov 9, 2018 Yields on gilt securities fell across maturities by up to 15 bps barring 2-year paper which increased 1 bps. The maximum fall was witnessed on 15-year paper. Corporate bond yields fell across the maturities in the range of 6 bps 1o 19 bps. The maximum fall was witnessed on 15-year paper and the minimum on 4-year paper. Difference in spread between AAA corporate bond and gilt contracted across most of the maturities in the range of 7 bps to 16 bps barring 3 and 5-year paper which expanded 3 bps and 9 bps respectively. Difference in spread between AAA corporate bond and gilt closed steady on 4-year paper. 8.61 India Yield Curve Shift (%) (W-o-W) 1.50 7.89 7.17 6.45 3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs Source: Thomson Reuters Eikon Change in bps 09-Nov-18 02-Nov-18-4.17-9.83-15.50 Change in bps
Index Values International Markets 26390 25741 25092 Movement during the week 24443 10-Oct-18 25-Oct-18 9-Nov-18 Source: Thomson Reuters Eikon Dow Jones YTD Return : 5.14% 2.84% U.S. markets traded higher as the results of the highly anticipated mid-term elections, held during the week, came largely in line with expectations. The Democratic candidates managed to regain confidence of a number of suburban districts across the country, thereby paving way for control of the House of Representatives. Meanwhile, Democrats did not fare as well in the Senate, as Republicans expanded their majority in the upper chamber. Nonetheless, gains were largely restricted by concerns over the Fed s interest rate outlook. Europe Indices Last Closing* Returns (in %) 1-Wk 1-Mth YTD CAC-40 Index 5,106.8 0.1-4.0-3.9 DAX Index 11,529.2 0.1-3.7-10.7 FTSE 100 7,105.3 0.2-1.8-7.6 Source: Thomson Reuters Eikon *Values as on Nov 9, 2018 European markets too witnessed buying interest on the back of results of the U.S. midterm elections, which saw Democrats reclaim control of the House of Representatives and the Republicans retaining control of the Senate. Additionally, U.K. GDP for the third quarter of 2018 came in line with market expectations. However, some of the gains were erased after the U.S. Fed reaffirmed its monetary tightening stance.
International Markets Hang Seng Strait Times Nikkei Return Value as of November 09, 2018 % Change YTD % Change week -14.43-9.55-18 -11-4 3 Source: MFI Explorer Weekly Return in (%) -3.34-2.26-1.23 0.03 Asian markets closed lower during the week, unlike global peers. Investor sentiment was dented after the U.S. Federal Reserve reiterated its hawkish stance on interest rate outlook. Additionally, the populist government in Italy dismissed the European Union's (EU) negative outlook for the Italian economy, thereby deepening a rift with EU. Chinese markets declined as policymakers efforts to instil confidence among investors with promises of tax cuts and greater bank lending could not do much. Meanwhile, Chinese producer prices increased 3.3% in Oct 2018, slowing from 3.6% in the previous month which added to the woes.
Global Commodity Prices Commodities Rebased to 10 10.50 10.00 9.50 9.00 8.50 8.00 Performance of various commodities Commodities Global Commodity Movement 7.50 9-Oct-18 19-Oct-18 29-Oct-18 8-Nov-18 9-Nov-18 Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl) Source: Thomson Reuters Eikon Last Closing* -1.89% -3.79% -2.99% 1-Wk Ago Brent Crude($/Barrel) 68.1 70.2 Gold ($/Oz) 1,209.2 1,232.5 Gold (Rs/10 gm) 31,773.0 31,565.0 Silver ($/Oz) 14.2 14.7 Silver (Rs/Kg) 38,205.0 38,299.0 Source: Thomson Reuters Eikon *Values as on Nov 9, 2018 Gold Gold prices traded lower after the U.S. Federal Reserve left its current interest rate unchanged but reiterated its stance for hiking interest rates soon. In addition, improved Chinese import and export growth data for Oct 2018 reduced the bullion s appeal. Brent Crude Brent crude traded lower following concerns over global oil oversupply. In addition, worries over global economic slowdown amid the ongoing geopolitical uncertainties and persistent trade tension between the U.S. and its trading partners dented the oil demand outlook. The downside was limited after OPEC gave indications of lowering output in 2019 amid concerns over global geopolitical unrest and increasing crude oil inventories. OPEC and its allies are slated to meet on Nov 11,2018 to further discuss production cuts. Baltic Dry Index The Baltic Dry Index fell on the back of lower capesize and panamax activities.
Currency Prices ( in terms of INR) -1.81% Currency Rebased to 10 10.20 10.00 9.80 9.60 9-Oct-18 19-Oct-18 29-Oct-18 8-Nov-18 9-Nov-18 Source: RBI Movement of Rupee vs. Other Currencies Currency Currency Movement USD GBP Euro JPY Last Closing * 1-Wk Ago U.S. Dollar 72.73 72.88 Pound Sterling 94.87 94.75 EURO 82.52 83.23 100 Yen 63.84 64.47-0.20% 0.13% - 0.98% - 0.85% Source: RBI Figures in INR, *Values as on Nov 9, 2018 Rupee The Indian rupee inched up against the U.S. dollar in a truncated week following decline in global crude oil prices and subsequent gains in the domestic equity market. Euro The euro fell against the greenback after the European Commission downgraded its growth forecasts for Italy for 2018 and the next two years, lower than what Italy itself had projected in its draft budget. Pound The pound rose initially against the greenback on hopes that a Brexit deal between Britain and the European Union (EU) was imminent. However, most of the gains were neutralized due to profit booking and the resignation of a junior transport minister in the British government who advocated for another referendum on Britain's EU membership. Yen The yen fell against the U.S. dollar after the U.S. Federal Reserve kept interest rates on hold in its monetary policy review but reiterated its upbeat outlook on the U.S. economy.
Key Mutual Funds News According to media reports, the majority of direct mutual fund plans have become cheaper following Securities and Exchange Board of India s (SEBI) circular dated Oct 22, 2018. The circular provided guidelines for mutual fund Total Expense Ratio (TER) and performance disclosure to increase transparency for expense for avoiding mis-selling and reducing churn. According to media reports, the Association of Mutual Funds of India (AMFI) requested market regulator SEBI to let debt funds with exposure to the debt-distressed infrastructure development and finance company s bonds to resort to side-pocketing. Side-pocketing is an accounting practice that protects investors from getting adversely impacted by unexpected exits of large investors in the exposed funds. YES Mutual Fund is seeking SEBI s approval for the launch of a new fund, YES Liquid Fund, which is an openended liquid scheme. Canara Robeco Mutual Fund announced that D. Suresh Pai, Associate Director resigned from the Board of Directors of Canara Robeco Asset Management Company Limited. IDFC Mutual Fund announced the appointment of Bhavin Patadia as a Dealer in the Equity Fund Management Team of IDFC Asset Management Company Limited, effective Nov 2, 2018. He has been designated as a Key Personnel of the fund house. Tata Mutual Fund announced change in exit load of Tata Large Cap Fund, Tata Large & Mid Cap Fund, Tata Mid Cap Growth Fund, Tata Hybrid Equity Fund and Tata Medium Term Fund. As per the revised exit load, 1% will be charged if the units redeemed are in excess of 12% of the original cost of investment on or before expiry of 365 days from the date of allotment.
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