News U Can Use April 20, 2018
2 The Week that was 16 th April to 20 th April
Indian Economy Minutes of the Monetary Policy Committee s (MPC) meeting held in Mar 2018 showed that MPC may adopt a more hawkish stance moving forward even though domestic inflationary pressure have eased. MPC identified several aspects namely increase in minimum support prices for farmers and high global crude oil prices that may lead to an increase in retail inflation. Government data showed that India s Wholesale Price Index-based inflation (WPI) slowed to an eight-month low of 2.47% in Mar 2018 from a 2.48% in the previous month and 5.11% in Mar 2017. Wholesale inflation grew at a slower pace due to decline in prices of pulses and fibre. The WPI Food Index stood at -0.07% in Mar 2018 compared with 0.07% in Feb 2018. The India Meteorological Department (IMD) expects 97% normal monsoon for 2018-19. According to IMD, this is expected to be the third year in a row with very low chances of rain deficit. The announcement is positive for the rural economy. The International Monetary Fund (IMF) maintained its growth projections for the Indian economy at 7.4% for 2018 and 7.8% for 2019. This is higher than that of China for which IMF projected a growth of 6.6% in 2018 and 6.4% in 2019. According to IMF, structural reforms, pick up in private investments, implementation of the Goods and Services Tax (GST) and fading impact of demonetization will lend support to the growth prospects of the domestic economy. However, IMF expressed concerns regarding corporate debt overhang and bad loans in the banking sector. 3
Indian Equity Market 4 Domestic Equity Market Indices Indices 20-Apr-18 1 Week Return YTD Return S&P BSE Sensex 34,415.58 0.65% 1.78% Nifty 50 10,564.05 0.80% 1.23% S&P BSE Mid-Cap 16,798.94 0.73% -5.81% S&P BSE Small-Cap 18,178.03 1.09% -5.72% Source: MFI Explorer Ratios NSE Advance/Decline Ratio Date Advances Declines Advance/Decline Ratio 16-Apr-18 865 954 0.91 17-Apr-18 963 841 1.15 18-Apr-18 999 805 1.24 19-Apr-18 697 1,110 0.63 20-Apr-18 745 1,048 0.71 Source: NSE S&P BSE Sensex Nifty 50 S&P BSE Mid Cap S&P BSE Small Cap P/E 23.59 26.22 38.69 103.36 P/B 3.13 3.63 2.92 2.62 Dividend Yield 1.14 1.21 0.85 0.64 Source: BSE, NSE Value as on Apr 20, 2018 Indian equity markets closed in the green after India s WPI-based inflation eased to an eight-month low in Mar 2018. The IMD s statement that India is expected to receive normal monsoon for the third year in a row also boosted investor sentiment. Announcement by International Monetary Fund that India could grow at 7.4% in 2018 and 7.8% in 2019, surpassing China, supported buying interest. Gains were restricted after the minutes of MPC s latest monetary policy meeting showed that the committee could adhere to a more hawkish stance beginning Jun 2018. Additionally, tension between the U.S. and Russia over Syria weighed on market sentiment.
Indian Equity Market (contd.) 5 Indices Sectoral Indices Last Returns (in %) Closing* 1-Wk 1-Mth S&P BSE Auto 25,436.61-0.07% 5.34% S&P BSE Bankex 27,855.37-1.58% 2.43% S&P BSE CD 22,569.73-1.21% 5.23% S&P BSE CG 19,191.05 0.29% 4.14% S&P BSE FMCG 11,068.48 4.11% 7.85% S&P BSE HC 13,823.40 1.05% 2.82% S&P BSE IT 13,335.13 4.33% 9.04% S&P BSE Metal 14,731.96 4.51% 9.22% S&P BSE Oil & Gas 14,333.81-2.27% -1.94% Source: Thomson Reuters Eikon *Value as on Apr 20, 2018 Indian Derivatives Market Review On the BSE sectoral front, indices closed on a modestly higher note. S&P BSE Metal (4.51%) stood as the major gainer followed by S&P BSE Information Technology (4.33%), S&P BSE FMCG (4.11%) and S&P BSE Teck (3.73%). Gains in information technology stocks came in after an Indian IT major posted better than expected results for the quarter ended Mar 2018 and announced 1:1 bonus. Meanwhile, gains in S&P BSE Metal reflected soaring global aluminium prices. Nifty Apr 2018 Futures were at 10,585.5 points, a premium of 21.45 points, over the spot closing of 10,564.05. The turnover on NSE s Futures and Options segment stood at Rs. 37.00 lakh crore as against Rs. 36.83 lakh crore on Apr 13. The Put-Call ratio stood at 0.98 compared with the previous week s close of 1.00. The Nifty Put-Call ratio stood at 1.62 compared with the previous week s close of 1.63.
Domestic Debt Market Debt Indicators (%) Current Value 1-Wk Ago 1-Mth Ago 6-Mth Ago Call Rate 5.97 5.86 5.92 5.97 91 Day T-Bill 6.15 6.08 6.13 6.10 7.80% 2021, (5 Yr GOI) 7.36 7.15 7.16 6.65 7.17% 2028, (10 Yr GOI) 7.72 7.43 7.62 -- Source: Thomson Reuters Eikon Value as on Apr 20, 2018 Yield in % 7.80 7.55 7.30 Source: CCIL 10 -Yr Benchmark Bond ( % ) 16-Apr 17-Apr 18-Apr 19-Apr 20-Apr Bond yields rose following surge in global crude oil prices. Losses in the domestic currency against the greenback and persisting geopolitical tensions too dampened the risk appetite of market participants. Yields rose further after the minutes of the MPC s latest meeting showed that it may adopt more hawkish stance in future. Yield on the 10-year benchmark paper (7.17% GS 2028) rose 29 bps to close at 7.72% from the previous week s close of 7.43%. Data from the Reserve Bank of India showed that India's foreign exchange reserves rose to $426.08 billion as on Apr 13, 2018, from $424.86 billion in the previous week. 6
Domestic Debt Market (Spread Analysis) Maturity G-Sec Yield (%) Corporate Yield (%) Spread bps 1 Year 6.65 7.84 119 3 Year 7.36 8.25 89 5 Year 7.64 8.42 78 10 Year 7.72 8.49 77 Source: Thomson Reuters Eikon Value as on Apr 20, 2018 Yields on gilt securities increased across maturities in the range of 11 bps to 35 bps. The lowest increase was witnessed on 1-year paper and the highest increase was witnessed on 12-year paper. Corporate bond yields increased across maturities in the range of 23 bps to 46 bps. Spread between AAA corporate bond and gilt expanded across the maturities by up to 25 bps barring 6-, 8- and 10- year maturities that contracted in the range of 3 bps to 10 bps. Yield in % 8.10 6.90 5.70 3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs Change in bps 20-Apr-18 13-Apr-18 Source: Thomson Reuters Eikon India Yield Curve Shift (%) (W-o-W) 34 17 0 Change in bps 7
Regulatory Updates in India According to the Employees' Provident Fund Organisation s (EPFO), subscribers will get an option to increase or decrease investments of their provident fund into stocks through exchange trade funds (ETF) in the current financial year. The Securities and Exchange Board of India (SEBI) published detailed guidelines for handling and maintaining records, transfer of securities, and payment of dividend by registrar and share transfer agents. SEBI stated that the documents that are prescribed have to be preserved for period not less than eight years post completion of the relevant transactions by bankers to an issue, issuer companies or by registrar and share transfer agents (RTA) on behalf of such firms. As per the norms, issuer companies will have to strictly monitor the activities of their RTAs. According to the government, e-way bill will be required for intra-state movement of goods in 5 states that included Gujarat and Kerala, effective from Apr 15, 2018. E-way bill requirement for inter-state movement was rolled out on Apr 1, 2018. Starting at midnight Apr 15 till 5 p.m. of the same day, approximately 2.4 lakh inter-state and intra-state e-bill were generated on the portal. According to the new guidelines issued by the Personnel Ministry, government employees shall be allowed to go abroad during the child care leave. Also, during this period, the employees they would be allowed to take the advantage of Leave Travel Concession (LTC). 8
Regulatory Updates in India (contd..) The Association of Mutual Funds in India (AMFI) directed distributors to submit the annual declaration of self-certification (DSC) for FY18 to the Computer Age Management Services (CAMS) by Jun 30, in accordance with the code of conduct prescribed by AMFI. If the same is not submitted within due date, the distributor shall stop receiving the brokerage from Jul 2018 onwards. Distributors who registered themselves with AMFI after Oct 1, 2017, are exempted from submitting the DSC for FY18. The finance ministry announced that bank account details and mobile numbers have been made compulsory for subscribers of National Pension Scheme (NPS) by pension fund regulator Pension Fund Regulatory and Development Authority (PFRDA). Also, the pension fund regulator has made Foreign Account Tax Compliance Act and Central Registry of Securitization Asset Reconstruction and Security Interest compulsory for new and existing subscribers. This comes in compliance with the Prevention of Money Laundering Act guidelines. According to media reports, the government is considering launching a natural gas trading hub by Oct 2018 and creating an Indian gas benchmark. The Petroleum and Natural Gas Regulatory Board is planning to set up a regulatory framework for bringing into operation the gas trading/exchange hub. Presently, the Indian government fixes the price of the bulk of domestically produced natural gas. 9
Global News/Economy According to the Commerce Department, U.S. retail sales grew 0.6% in Mar 2018 following 0.1% decline in Feb 2018. More than expected increase in retail sales was primarily due to rebound in sales by motor vehicle and parts dealers. Data from the U.S. Commerce Department showed that U.S. housing starts grew 1.9% to an annual rate of 1.319 million in Mar 2018 after it fell 3.3% to a revised 1.295 million in Feb 2018 (1.236 million originally reported). Building permits also grew 2.5% to an annual rate of 1.354 million in Mar 2018. Data from the Office for National Statistics showed that inflation in the U.K. slowed to 1-year low in Mar 2018. Consumer prices grew 2.5% on a yearly basis in Mar 2018, slower than the 2.7% increase in the previous month. This was the weakest pace since Mar 2017, when prices gained 2.3%. Final data from Eurostat showed that euro zone s inflation accelerated in Mar 2018. Euro zone inflation grew 1.3% in Mar 2018 from downwardly revised growth of 1.1% (from 1.4%) in Feb 2018. Core inflation however remained steady at 1%. According to data from the National Bureau of Statistics, gross domestic product (GDP) of China grew 6.8% YoY in first quarter of 2018, the same pace of growth as seen in the fourth quarter of 2017. However, on a quarterly basis, GDP rose 1.4% in the first quarter of 2018, slower than 1.6% in the previous three months. 10
Global Equity Markets Indices Global Indices 20-Apr-18 1-Week Return YTD Return Dow Jones 24,462.94 0.42% -1.45% Nasdaq 100 6,667.75 0.59% 2.40% FTSE 100 7,368.17 1.43% -3.66% DAX Index 12,540.50 0.79% -2.57% Nikkei Average 22,162.24 1.76% -2.65% Straits Times 3,573.38 2.06% 5.01% Source: Thomson Reuters Eikon Value as on Apr 20, 2018 U.S. U.S. markets moved up over the week amid mixed quarterly earnings of a few major companies. Better than expected economic data for Mar 2018 further buoyed sentiment. However, the upside was limited on uncertainty over tension between the U.S. and Russia and in the Middle East. Europe European markets traded up following strong quarterly earnings of a few major companies and upbeat economic data for Mar 2018. Easing tension in the Korean Peninsula further helped sentiment as the U.S. President indicated that the summit with North Korea would be successful. Asia Asian markets traded mixed as investors remained cautious over developments in Syria. However, market sentiment received support after meeting between Japanese Prime Minister and U.S. President concluded on a positive note. Easing tension in the Korean Peninsula also helped sentiment. 11
Global Debt (U.S.) Yield in % 3.00 2.90 2.80 16-Apr 17-Apr 18-Apr 19-Apr 20-Apr Source: Thomson Reuters Eikon US 10-Year Treasury Yield Movement Yield on the 10-year U.S. Treasury bond rose 12 bps to close at 2.95% from the previous week s close of 2.83%. U.S. Treasury prices began the week on a flattish note amid reports that the U.S. President will nominate one of the renowned American economist as U.S. Federal Reserve vice chairman who was viewed not be either too hawkish or too dovish. However, more than expected increase in U.S. homebuilding and strong retail sales data for Mar 2018 led to the decline in U.S. Treasury prices. Prices remained low on growing possibility that the U.S Federal Reserve will continue to raise interest rates in 2018. 12
Commodities Market Performance of various commodities Commodities Last Closing* 1-Week Ago Brent Crude($/Barrel) 75.36 73.62 Gold ($/Oz) 1334.72 1345.01 Gold (Rs/10 gm) 31,298 30,874 Silver ($/Oz) 17.11 16.62 Silver (Rs/Kg)* 40,106 38,485 Source: Thomson Reuters Eikon *Value as on Apr 20, 2018 13 Rebased to 10 Global Commodity Prices Global Commodity Movement 11.20 2.36% 10.35 2.96% - 0.77% 9.50 21-Mar-18 31-Mar-18 10-Apr-18 20-Apr-18 Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl) Source: Thomson Reuters Eikon Gold Gold prices moved down on easing tension in the Korean Peninsula. Additionally, meeting between Japanese Prime Minister and the U.S. President concluded on a positive note. Better than expected U.S. economic data for Mar 2018 also weighed on bullion prices. Crude Brent crude prices rose following decline in U.S. crude oil production. Additionally, prices got support on expectations that the Organization of the Petroleum Exporting Countries (OPEC) and non- OPEC countries would continue production cuts in 2019. Baltic Dry Index The Baltic Dry Index rose on the back of improved capesize and panamax activities.
Currencies Markets Movement of Rupee vs Other Currencies Currency Last Closing* 1-Wk Ago US Dollar 66.02 65.22 Pound Sterling 92.73 92.77 EURO 81.46 80.34 100 JPY 61.40 60.64 Source: RBI Figures in INR, *Value as on Apr 20, 2018 14 Rebased to 10 Currency Prices ( in terms of INR) 10.40 10.20 10.00 9.80 21-Mar-18 31-Mar-18 10-Apr-18 20-Apr-18 Source: RBI Currency Movement USD GBP Euro JPY -0.05% 1.39% 1.22% 1.25% Rupee The Indian rupee weakened against the greenback following increase in global crude oil prices and growing possibility that the MPC may adopt a more hawkish stance moving forward, which may lead to foreign fund outflow from the Indian economy. Euro Euro weakened against the greenback on concerns over more rate hikes from the U.S. Federal Reserve in 2018. Pound Pound weakened against the greenback after the Bank of England chief indicated that the central bank may not raise interest rates in May 2018 due to mixed economic data. Yen Yen weakened against the greenback on concerns that the U.S. Federal Reserve would raise interest rates further in 2018.
15 The Week that was 16 th April to 20 th April
The Week that was (Apr 16 Apr 20) Date Events Present Value Previous Value Monday, Apr 16, 2018 Tuesday, Apr 17, 2018 Wednesday, Apr 18, 2018 Thursday, Apr 19, 2018 Friday, Apr 20, 2018 India Wholesale Price Index (Mar 18) 2.47% 2.48% U.S. Retail Sales Advance (MoM) (Mar) 0.60% -0.10% China Gross Domestic Product (YoY) (1Q) 6.80% 6.80% Germany ZEW Survey Expectations (Apr) -820.0% 510.0% China Retail Sales YTD (YoY) (Mar) 9.80% 9.70% China Industrial Production (YoY) (Mar) 6.00% 6.20% U.S. Industrial Production (MoM) (Mar) 0.50% 1.00% Japan Trade Balance (Mar) 797.30b 3.40b U.K. ILO Unemployment Rate 3Mths (Feb) 4.20% 4.30% U.S. Housing Starts (MoM) (Mar) 1.90% -3.30% U.K. Consumer Price Index (YoY) (Mar) 2.50% 2.70% Eurozone Consumer Price Index (YoY) (Mar F) 1.30% 1.40% Japan National Consumer Price Index (YoY) (Mar) 1.10% 1.50% U.K. Retail Sales Ex Auto Fuel (YoY) (Mar) 1.10% 1.20% U.S. Initial Jobless Claims (Apr 14) 232k 233k Japan Tertiary Industry Index (MoM) (Feb) 0.00% -0.40% Eurozone Consumer Confidence (Apr A) 0.40 0.10 16
17 The Week Ahead 23 rd April to 27 th April
The Week Ahead Day Monday, April 23, 2018 Tuesday, April 24, 2018 Wednesday, April 25, 2018 Thursday, April 26, 2018 Friday, April 27, 2018 Event Japan Nikkei Japan PMI Manufacturing (Apr P) Euro zone Markit Eurozone Composite PMI (Apr P) U.S. Markit US Composite PMI (Apr P) U.S. Existing Home Sales (Mar) Euro zone German IFO Current Assessment (Apr) U.K. Public Sector Net Borrowing (Mar) U.S. New Home Sales (Mar) U.S. Consumer Confidence Index (Apr) Japan All Industry Activity Index (MoM) (Feb) Euro zone European Central Bank Rate Decision U.S. Durable Goods Orders (Mar P) U.S. Wholesale Inventories (MoM) (Mar P) Japan Industrial Production (YoY) (Mar P) Bank of Japan Rate Decision U.K. Gross Domestic Product (YoY) (1Q A) U.S. Gross Domestic Product Annualized (QoQ) (1Q A) 18
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