News U Can Use September 14, 2018
2 The Week that was 10 th September to 14 th September
Indian Economy Government data showed that the growth of Index of Industrial Production (IIP) slowed to 6.6% in Jul 2018 from a revised 6.9% (7% originally reported) in the previous month. In the year-ago period, IIP had grown 1%. For the period Apr to Jul 2018, IIP grew 5.4% as against 1.7% in the same period of the previous year. The manufacturing sector grew 7% in Jul 2018 as against a degrowth of 0.1% in the same month of the previous year. Government data showed that growth of India s Consumer Price Index (CPI)-based inflation or retail inflation eased to 3.69% in Aug 2018 from 4.17% in Jul 2018, thereby marking a 10-month low. However, it increased as against 3.28% in Aug 2017. The growth in Consumer Food Price Index eased to 0.29% in Aug 2018 from 1.30% in Jul 2018 and 1.52% in the same month of the previous year. Among the key components, fuel and light grew 8.47% in Aug 2018 as against a growth of 7.96% in Jul 2018. Government data showed that India s Wholesale Price Index (WPI)-based inflation eased to 4.53% in Aug 2018 from 5.09% in Jul 2018 as prices of food articles, mainly vegetables, came down. This marked a four-month low. Wholesale price inflation was at 3.24% in Aug 2017. Inflation in vegetables declined 20.18% as against a decline of 14.07% in Jul 2018. Inflation in fruits fell 16.40% in Aug 2018 as against a decline of 8.81% in Jul 2018. Meanwhile, inflation for onion fell 26.80% in Aug 2018 as against an increase of 38.82% in Jul 2018. Fuel and power' inflation went up 17.73% in Aug 2018 as against an increase of 18.10% in Jul 2018. The WPI Food Index came in at -2.25% in Aug 2018 as against - 0.86% in Jul 2018. 3
Indian Equity Market Domestic Equity Market Indices Indices 14-Sep-18 1 Week Return YTD Return S&P BSE Sensex 38,090.6-0.78% 11.84% Nifty 50 11,515.2-0.64% 9.35% S&P BSE Mid-Cap 16,350.0-0.94% -8.26% S&P BSE Small-Cap 16,670.9-1.34% -13.31% Source: MFI Explorer Ratios NSE Advance/Decline Ratio Date Advances Declines Advance/Decline Ratio 10-Sep-18 600 1230 0.49 11-Sep-18 459 1382 0.33 12-Sep-18 722 1083 0.67 14-Sep-18 1276 540 2.36 Source: NSE S&P BSE Sensex Nifty 50 S&P BSE Mid Cap S&P BSE Small Cap P/E 24.64 28.00 32.93-133.70 P/B 3.17 3.71 2.79 2.50 Dividend Yield 1.16 1.16 0.93 0.76 Source: BSE, NSE Value as on Sep 14, 2018 The domestic market posted loss during the truncated trading week as recent weakness in rupee stoked foreign fund outflow fears. Rise in global crude oil prices and global trade war tensions further weighed on sentiment after the U.S. President iterated his plan to impose tariffs an additional $267 billion Chinese imports. Extra tariffs on $200 billion Chinese imports are already being discussed. Later, some respite was seen following encouraging macroeconomic numbers. Government data showed CPI and WPI inflation eased in Aug 2018, which raised optimism that the Monetary Policy Committee (MPC) might not raise interest rates in the near future. 4
Indian Equity Market (contd.) Indices Sectoral Indices Last Returns (in %) Closing* 1-Wk 1-Mth S&P BSE Auto 24,246.9-1.85% 0.19% S&P BSE Bankex 30,621.6-1.25% -3.31% S&P BSE CD 20,735.9-0.63% -6.03% S&P BSE CG 18,553.9 0.07% 3.44% S&P BSE FMCG 12,068.1-0.97% -1.70% S&P BSE HC 16,236.5-0.46% 10.55% S&P BSE IT 15,746.7-0.22% 5.48% S&P BSE Metal 14,090.5 0.32% 8.84% S&P BSE Oil & Gas 14,873.6-0.65% 0.09% Source: Thomson Reuters Eikon *Value as on Sep 14, 2018 Indian Derivatives Market Review On the BSE sectoral front, all the indices closed in the red barring S&P BSE Power (0.47%), S&P BSE Metal (0.32%) and S&P BSE Capital Goods (0.07%). Rate sensitive auto and banking sectors witnessed maximum fall of 1.85% and 1.25%, respectively. Meanwhile, according to the Society of Indian Automobile Manufacturers data, passenger car sales in Aug 2018 dipped 1% to 196,847 units compared with Aug 2017. Nifty Sep 2018 Futures settled at 11,547.30, a premium of 32.10 points, above the spot closing of 11,515.20. The turnover on NSE s Futures and Options segment stood at Rs. 49.39 lakh crore as against Rs. 58.47 lakh crore on Sep 7. The Put-Call ratio stood at 0.82 compared with the previous week s close of 0.87. The Nifty Put-Call ratio stood at 1.38 against the previous week s close of 1.45. 5
Yield in % Domestic Debt Market Debt Indicators (%) Current Value 1-Wk Ago 1-Mth Ago 6-Mth Ago Call Rate 6.43 6.34 6.37 5.83 91 Day T-Bill 7.07 6.85 6.75 6.25 7.80% 2021, (5 Yr GOI) 8.11 7.96 7.67 7.21 7.17% 2028, (10 Yr GOI) 8.13 8.03 7.82 7.68 Source: Thomson Reuters Eikon Value as on Sep 14, 2018 8.20 8.15 8.10 Source: CCIL 10 -Yr Benchmark Bond ( % ) 10-Sep 11-Sep 12-Sep 14-Sep Bond yields surged initially as rupee plunged to a record low against the greenback, surpassing the 72-mark. The increase in crude oil prices and rise in U.S. Treasury yield also kept bond yields at elevated level. Worries over possible monetary tightening action to curb high inflation inflation and the relentless surge in crude oil prices also weighed on the market sentiment. However, losses were limited later as the rupee rebounded against the greenback to some extent. Market sentiment received further support after consumer price inflation fell to a 10-month low in Aug 2018. Yield on the 10-year benchmark paper (7.17% GS 2028) rose 10 bps to close at 8.13% from the previous week s close of 8.03%. 6
Yield in % Domestic Debt Market (Spread Analysis) Maturity G-Sec Yield (%) Corporate Yield (%) Spread bps 1 Year 8.02 8.81 79 3 Year 8.27 8.84 56 5 Year 8.36 8.92 56 10 Year 8.29 8.98 69 Source: Thomson Reuters Eikon Value as on Sep 14, 2018 Yields on gilt securities jumped across all maturities by up to 18 bps. Yield on 15-year paper was steady. Highest rise was seen on 1-year paper while lowest increase was on 2-year paper. Corporate bond surged across maturities in the range of 6 bps to 20 bps. Highest rise was witnessed on 1-year paper and lowest increase was on 15-year paper. Spread between AAA corporate bond and gilt rose across the maturities in the range of 2 to 6 bps, barring 10-year paper that fell by 2 bps. 8.50 7.50 6.50 Source: Thomson Reuters Eikon India Yield Curve Shift (%) (W-o-W) 3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs Change in bps 14-Sep-18 07-Sep-18 24 12 0 Change in bps 7
Regulatory Updates in India The National Anti Profiteering Authority (NAA) ruled that suppliers will be penalised if they do not pass the benefits of Goods and Services Tax (GST) rate cut to consumers. NAA said this in a ruling of a case filed by a department store. The case was examined by the standing committee on anti-profiteering and was referred to the Directorate General of Anti Profiteering (DGAP) for a detailed look. To ensure social security for contract workers, the coal ministry together with a major coal mining company and Singareni Collieries decided to put 70,000 coal contract workers under the Coal Mines Provident Fund Organisation (CMPFO). The move will not only help workers get higher returns but will also assist the body which is facing an asset-liability mismatch. CMPFO is meant for coal workers and is similar to the Employees Provident Fund Organisation. Members of the fund put in a monthly contribution that is matched by the employer. The date, Oct 1, 2018, has been notified by the government for implementing the tax deducted at source (TDS) and tax collected at source provisions under the GST law. According to the Central GST (CGST) Act, notified entities need to collect TDS at 1% on payments to goods or services suppliers in excess of Rs 2.5 lakh. States will levy 1% TDS under state laws. E-commerce companies will have to collect up to 1% TCS when they make payment to suppliers. 8
Regulatory Updates in India (contd..) According to media reports, the government could auction power supply contracts with attached coal supplies. It could also relax rules to allow coal usage for short-term power contracts and start a payment mechanism to enable power projects recover dues from state electricity distribution companies. This may ease sectoral stress to a large extent, the report said. A high-level empowered committee headed by the cabinet secretary is looking into the proposals and will meet on Sep 21, 2018. In order to decrease dependence on cooking oil imports, the government may come out with a scheme under which farmers will be compensated for rates below the minimum support price or MSP. The size of the scheme is being put by media reports as more than Rs. 10,000 crore. The agriculture ministry, under a cabinet note, has proposed a new system Price Deficiency Payment to safeguard oilseeds farmers, say reports. Under the proposed mechanism, the government will give farmers the difference between monthly average price of oilseeds quoted in wholesale markets and MSP. India s edible oil imports stand at about 14-15 million tonne or 70% of domestic demand. 9
Global News/Economy As per a Labour Department report, U.S. consumer prices increased modestly in Aug 2018. The consumer price index increased 0.2% in Aug 2018, the same pace as Jul 2018. Expectations were for prices to climb 0.3%. The modest rise was partly because of increase in energy prices by 1.9% in Aug 2018 against a fall of 0.5% in Jul 2018. According to a report from the University of Michigan, U.S. consumer sentiment index came in higher than market expectations and grew to 100.8 in Sep 2018 as against 96.2 in Aug 2018. The increase came in as the current economic conditions index surged to 116.1 in Sep 2018 from 110.3 in Aug 2018. The index of consumer expectations also grew to 91.1 in Sep 2018 from 87.1 in Aug 2018. According to a report from the Commerce Department, U.S. retail sales missed market expectations and edged up 0.1% in Aug 2018 as against an upwardly revised gain of 0.7% (0.5% gain originally reported) in Jul 2018. The downside reflects decline in auto sales that fell 0.8% in Aug 2018 as against a decline of 0.1% in Jul 2018. The Bank of England maintained status quo in its monetary policy. Policymakers unanimously settled for not making any change in interest rates after hiking rates a quarterpoint in Aug 2018. The Monetary Policy Committee, led by the central bank governor, kept key rates unchanged at 0.75% and maintained the quantitative easing via asset purchases at GBP 435 billion. 10
Global Equity Markets U.S. Indices 11 Global Indices 14-Sep-18 1-Week Return YTD Return Dow Jones 26,154.67 0.92% 5.81% Nasdaq 100 7,545.50 1.55% 17.96% FTSE 100 7,304.04 0.36% -4.99% DAX Index 12,124.33 1.38% -6.14% Nikkei Average 23,094.67 3.53% 1.45% Straits Times 3,161.42 0.86% -7.10% Source: Thomson Reuters Eikon Value as on Sep 14, 2018 Europe U.S. markets rose as the lingering U.S. - China trade tensions eased following reports that the U.S. is planning a new round of trade talks with China soon. In the latest development, the U.S. Treasury Secretary has sent an invitation for talks to senior Chinese officials, proposing a meeting in the next few weeks. European markets too were positively impacted by media reports suggesting probability of fresh round of trade talks between the United States and China. The resultant optimism eased worries over the escalating tariff war threating to derail global economic growth. Concerns over emerging markets also eased to some extent after Turkey's central bank raised its key interest rate sharply in a bid to prevent a currency crisis. Asia Asian markets followed their global peers and ended higher with Chinese officials welcoming the invitation from U.S. Treasury Secretary for fresh round of trade talks. Nonetheless, underlying sentiment remained weak to some extent as the U.S. President is considering imposing tariffs on $200 billion worth of Chinese goods, which may escalate the conflict between the world's two largest economies.
Global Debt (U.S.) US 10-Year Treasury Yield Movement 3.02 2.96 2.90 10-Sep 11-Sep 12-Sep 13-Sep 14-Sep Source: Thomson Reuters Eikon Yield on the 10-year U.S. Treasury bond rose 5 bps to close at 2.99% from the previous close of 2.94%. U.S. Treasury prices fell earlier during the week under review after a report from the U.S. Labour Department showed a record number of job openings in Jul 2018 which indicated a sustained labour market strength and made market participants optimistic of a faster wage growth within the economy. U.S. Treasury prices fell further following upbeat U.S. economic data which increased the possibility of continued rate hikes by the U.S. Federal Reserve in 2018. However, further losses were capped due to strong demand at an auction for $23 billion of U.S. 10-year notes. 12
Global Commodity Prices Commodities Market Rebased to 10 Global Commodity Movement 11.40 2.90% 10.30-0.17% -0.43% 9.20 14-Aug-18 24-Aug-18 3-Sep-18 14-Sep-18 13-Sep-18 Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl) Source: Thomson Reuters Eikon Performance of various commodities Commodities Last Closing* 1-Week Ago Brent Crude($/Barrel) 77.81 75.62 Gold ($/Oz) 1,193.31 1,195.36 Gold (Rs/10 gm) 30,558 30,402 Silver ($/Oz) 14.04 14.10 Silver (Rs/Kg) 36,565 36,389 Gold Gold prices fell amid expectations of interest rate hike by the Federal Reserve, particularly after a strong U.S. job report for Aug 2018. U.S. non-farm payroll employment rose more than expected by 201,000 jobs in Aug 2018. Crude Brent crude prices grew as market participants stayed worried ahead of the U.S. sanction on Iran oil supplies, which comes into effect from Nov 2018. Iran s oil supplies have already started falling at a faster than expected pace. Baltic Dry Index The Baltic Dry Index fell 7.25% on the back of lower capesize and panamax activities. Source: Thomson Reuters Eikon *Value as on Sep 14, 2018 13
Currency Prices ( in terms of INR) Currencies Markets Rebased to 10 10.70 10.30 Source: RBI Currency Movement -1.22% 9.90 14-Aug-18 24-Aug-18 3-Sep-18 13-Sep-18 14-Sep-18 USD GBP Euro JPY 1.20% 0.36% -0.12% Movement of Rupee vs Other Currencies Currency Last Closing* 1-Wk Ago US Dollar 71.81 71.90 Pound Sterling 94.16 93.04 Euro 83.98 83.67 100 JPY 64.19 64.98 Rupee The rupee managed to recover against U.S. dollar on hopes that the government would take steps to provide support to the rupee. Euro The euro rose against the greenback on hopes that trade talks would resume between U.S. and China. Pound Pound surged against the greenback on hopes that Britain would reach an agreement with the European Union (EU) before its exit from the euro zone. Yen Yen weakened against the greenback amid optimism that Britain would reach an agreement with the EU before its exit from the euro zone which lowered the safe haven appeal of yen. Source: RBI Figures in INR, *Value as on Sep 14, 2018 14
15 The Week that was 10 th September to 14 th September
The Week that was (Sep 10 Sep 14) Date Monday, September 10, 2018 Tuesday, September 11, 2018 Wednesday, September 12, 2018 Thursday, September 13, 2018 Friday, September 14, 2018 Events Present Value Previous Value China Consumer Price Index (YoY) (AUG) 2.30% 2.10% Eurozone ZEW Survey (Economic Sentiment) (SEP) -7.20% -11.10% U.K. ILO Unemployment Rate 3Mths (JUL) 4.00% 4.00% Japan Tertiary Industry Index (MoM) (JUL) 0.10% -0.50% India's Consumer Price Inflation Index (AUG 18) 3.69% 4.17% India's Index of Industrial Production (JUL 18) 6.60% 6.90% China New Yuan Loans CNY (AUG) 1280.0b 1450.0b Japan Machine Orders (YoY) (JUL) 13.90% 0.30% U.K. Bank of England Bank Rate (SEP 13) 0.75% 0.75% European Central Bank Rate Decision (SEP 13) 0.00% 0.00% U.S. Consumer Price Index (YoY) (AUG) 2.70% 2.90% Germany Consumer Price Index (YoY) (AUG F) 2.00% 2.00% U.S. Initial Jobless Claims (SEP 8) 204k 205k India's Wholesale Price Index (AUG 18) 4.53% 5.09% U.S. Retail Sales Advance (MoM) (AUG) 0.10% 0.70% Japan Industrial Production (YoY) (JUL F) 2.20% 2.30% China Retail Sales YTD (YoY) (AUG) 9.30% 9.30% U.S. University of Michigan Sentiment (SEP P) 100.8 96.20 16
17 The Week Ahead 17 th September to 21 st September
The Week Ahead 18 Day Monday, September 17, 2018 Tuesday, September 18, 2018 Wednesday, September 19, 2018 Thursday, September 20, 2018 Friday, September 21, 2018 Event Eurozone Consumer Price Index (YoY) (AUG F) Japan Nationwide Dept Sales (YoY) (AUG) U.S. NAHB Housing Market Index (SEP) Japan Trade Balance (AUG) Bank of Japan Rate Decision (SEP 19) U.K. Consumer Price Index (YoY) (AUG) U.K. House Price Index (YoY) (JUL) U.S. Housing Starts (MoM) (AUG) Japan National Consumer Price Index (YoY) (AUG) U.S. Initial Jobless Claims (SEP 15) U.S. Leading Index (AUG) U.S. Existing Home Sales (MoM) (AUG) Japan Nikkei Manufacturing PMI (SEP P) Japan All Industry Activity Index (MoM) (JUL) Germany Markit/BME Composite PMI (SEP P) Eurozone Markit Composite PMI (SEP P) U.K. Public Sector Net Borrowing (AUG)
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