Weekly Review May 19, 2017
Key Economic News International Domestic Eurozone s inflation grew 1.9% in Apr 2017 compared with growth of 1.5% in Mar 2017. The growth was in line with the market. Core inflation that excludes energy, food, alcohol, and tobacco, surged to 1.2%, up from 0.7% in Mar, marking the highest rate since Sep 2013. U.K. sinflationsurged2.7%inapr2017,upfrom 2.3% in Mar 2017 owing to higher air fares and oil prices. This marked the highest inflation level since Sep 2013. According to the Labor Department, U.S. initial weekly jobless claims fell surprisingly by 4,000 to 232,000 in the week ended May 13, from the previous week's unrevised level of 236,000. A report from the U.S. Commerce Department showed that housing starts in the U.S. further plunged 2.6% to an annual rate of 1.172 million in Apr 2017 from a revised 1.203 million in Mar 2017. Meanwhile, building permits fell 2.5% to a rate of 1.229 million in Apr from a revised 1.260 million in Mar. India s exports increased 19.77% YoY to $24.64 billion in Apr 2017, but imports surged at a much faster rate by 49.07% to $37.88 billion, which led to rise in the trade deficit. Trade deficit expanded to $13.25 billion in Apr 2017 from $4.84 billion in Apr 2016. Rise in imports was mainly contributed by higher purchase of crude oil and petroleum products. The finance minister announced that the Goods and Services Tax (GST) Council finalised four tax brackets for services that range from 5% to 28% (5%, 12%, 18%, 28%). However, the minister stated that the council is yet to decide tax bracket for gold. Transport services (Railways, air) will come under the 5% category. Hotels and lodges with tariff below Rs. 1,000 will be exempt while those with Rs. 2,500 5,000 will come under the bracket of 18%. Luxury hotels will be levied at a rate of 28%. Tax rate for telecom and financial services is set at 18%. The Government of India announced that owing to the intense and bold policy reforms, inflow of foreign direct investment in India has surged 9% to a record level of $43.48 billion in 2016 2017 as against $40 billion investments in 2015 2016.
Domestic Equity Market Hopes of strong monsoon, economic data and GST rates boost markets 9600 Nifty 50 YTD Return : 15.26% 0.29% 9900 S&P BSE 100 YTD Return : 16.21% 0.16% 9250 9650 Movement during the Week 8900 19 Apr 17 04 May 17 19 May 17 Movement during the Week 9400 19 Apr 17 04 May 17 19 May 17 15100 S&P BSE Mid Cap YTD Return : 20.71% 1.42% 15750 S&P BSE Small Cap YTD Return : 24.91% 1.94% 14700 15300 Movement during the Week 14300 19 Apr 17 04 May 17 19 May 17 Movement during the Week 14850 19 Apr 17 04 May 17 19 May 17 Source : BSE and NSE Percentage change are on W o W basis and YTD is absolute return.
Domestic Equity Market NSE Advance/Decline Ratio Date Advances Declines Advance/Decline Ratio 15 May 17 973 693 1.40 16 May 17 878 806 1.09 17 May 17 703 961 0.73 18 May 17 317 1376 0.23 19 May 17 545 1144 0.48 Source: NSE Ratios S&P BSE Sensex Nifty 50 S&P BSE Midcap S&P BSE Smallcap P/E 21.5 21.7 NA NA P/B 3.3 3.4 NA NA Dividend Yield 1.3 1.3 NA NA Source: Reuters Values as on May 19, 2017 Indian equity markets closed the week higher mainly after Nifty set a new record by breaching the 9,500 mark for the first time. Hopes of a strong monsoon based on the India Meteorological Department s statement that rains could reach the southern Kerala coast on May30,twodayspriortoitsschedule,boosted investor confidence. Bourses were also helped by the release of economic data that came with revisions in new base year series for Wholesale inflation and Index of Industrial Production, a sharp drop in retail inflation to 2.99% in Apr 2017 that stirred up an argument if the RBI should cut interest rates. Conclusion of the two day GST Council meeting, announcing the rates for a range of goods and services lifted sentiment. 2000 1500 FII Net Investment MF Net Investment 1000 500 0 500 1000 1500 19 Apr 17 29 Apr 17 9 May 17 19 May 17 Source: SEBI Rs. crore
Domestic Equity Market Indices Sectoral Indices Last Returns (in %) Closing 1 Wk 1 Mth S&P BSE Auto 23141.6 0.4 5.9 S&P BSE Bankex 25858.6 0.6 5.2 S&P BSE CD 15475.7 3.3 1.0 S&P BSE CG 17669.7 1.5 2.3 S&P BSE FMCG 9627.4 1.6 3.9 S&P BSE IT 10116.8 0.9 5.2 S&P BSE Metal 11206.2 1.3 1.0 S&P BSE Oil & Gas 14034.2 1.7 1.8 S&P BSE Power 2293.6 1.0 1.0 S&P BSE Realty 2044.3 1.1 11.3 Source: MFI Explorer Values as on May 19, 2017 On the BSE sectoral front, most indices closed in the negative. S&P SBE Consumer Durables ( 3.28%) was the toploser,trailedbys&psbeoil&gas( 1.67%), S&P SBE Capital Goods ( 1.48%), S&P SBE Realty ( 1.13%), S&P SBE Power ( 1.05%), and S&P SBE Auto ( 0.45%). Auto sector dipped on reports that vehicles could turn pricier post GST implementation. Cars could fall in the 28% bracket, exclusive of cess. S&P BSE FMCG 1 Week Return as of May 19, 2017 S&P BSE Metal S&P BSE IT S&P BSE Bankex S&P BSE Auto S&P BSE Power 1.0 S&P BSE Realty 1.1 S&P BSE CG 1.5 S&P BSE Oil & Gas 1.7 S&P BSE CD 3.3 Source: MFI Explorer -4-2 0 2 0.4 Weekly Return in (%) 0.6 0.9 1.3 1.6
Domestic Debt Market Bond yields fell after retail inflation plunged to a 5 year low in Apr 2017 Debt Indicators (%) Current Value 1 Wk Ago 1 Mth Ago 6 Mth Ago Call Rate 6.06 6.11 5.97 5.95 91 Day T Bill 6.30 6.30 6.07 5.98 7.80% 2021, (5 Yr GOI) 6.82 6.86 6.81 6.35 6.97% 2026, (10 Yr GOI) 6.85 6.91 6.85 6.43 Source: Reuters Values as on May 19, 2017 Yield in % 6.88 6.82 6.76 Source: CCIL 10 Yr Benchmark Bond ( % ) 15 May 16 May 17 May 18 May 19 May Bond yields fell after retail inflation plunged to a 5 year low in Apr 2017, which increased hopes of a rate cut by the Reserve Bank of India (RBI) in the near term. However, gains were capped as market participants booked profits. Some caution was also noticed ahead of themonetarypolicyreviewandindia Meteorological Department s next forecast for monsoon in Jun 2017. Yieldonthe10 year benchmark bond (6.97% GS 2026) fell 6 bps to close 6.85% compared with the previous close of 6.91%. During the session, bond yields moved in the region of 6.80% to 6.89%. Banks net average lending to RBI under the Liquidity Adjustment Facility stood at Rs. 6,749.40 crore (for Friday, only repo session considered), compared with the previous week s lending of Rs. 10,921.05 crore.
Domestic Debt Market Maturity G Sec Yield (%) Corporate Yield (%) Spread bps 1 Year 6.61 7.10 49 3 Year 6.79 7.35 56 Yields on gilt securities fell across most of the maturities up to 11 bps, barring 1, 9, 15, 19, and 24 year maturities that increasedupto4bps.yieldon8 year paper closed steady. Corporate bond yields closed steady on 1 and 2 year maturities and increased 2 bps on 3 year paper. Yield across the remaining maturities fell in the range of 2 bps to 6 bps. 5 Year 7.11 7.45 34 10 Year 7.20 7.69 49 Source: Reuters Values as on May 19, 2017 Spread between AAA corporate bond and gilt contracted across maturities in the range of 3 to 9 bps, barring 2 and 3 year paper that rose 1 and 6 bps, respectively. Spread on 4, 5,and10 year maturities closed steady. 7.60 India Yield Curve Shift (%) (W o W) 7.00 Yield in % 6.90 0.00 Change in bps 6.20 3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs Source: Reuters Change in bps 19 May 17 12 May 17 7.00
International Markets 21200 20900 20600 20300 Dow Jones YTD Return : 4.64% 0.44% Movement during the week 20000 19 Apr 17 4 May 17 19 May 17 Source: Reuters U.S. markets remained largely low because of the ongoing political turmoil in Washington, which offset optimism about U.S. President's ability to implement tax reform and deregulation. According to media reports, the latest development on the situation involved President s direction to former FBI Director to set aside an investigation of former National Security Advisor. However, losses were restricted by bargain hunting witnessed towards the end of the week. Europe Indices Last Closing Returns (in %) 1 Wk 1 Mth YTD CAC 40 Index 5324.4 1.5 6.4 9.1 DAX Index 12638.7 1.0 5.2 9.0 FTSE 100 7470.7 0.5 5.0 4.1 Source: Reuters Values as on May 19, 2017 European markets too felt the heat of the political turmoil in the U.S., which overshadowedthepositiveimpactofriseinu.k. inflation in Apr 2017 to the highest level since 2013. Buying interest was affected after data showed a decline in eurozone construction output in Mar 2017. Meanwhile, investors were relieved after final data from Eurostat showed that eurozone inflation accelerated as estimated in Apr. Losses were further restricted after Greece's lawmakers approved a reforms package.
International Markets Hang Seng Strait Times Return Value as of May 19, 2017 1.18 0.07 10.97 13.65 Asianmarketswitnessedamixedtrendover the week. While weak cues from Wall Street kept investors wary, concerns over Chinese regulatory tightening eased on expectations of more liquidity infusion in the financial system by the Chinese central bank. Lately, the Chinese central bank injected fresh funds through a medium term lending facility to keep liquidity stable. Nikkei Source: MFI Explorer % Change YTD 0.02 % Change week 1.47 5 0 5 10 15 Weekly Return in (%) Meanwhile, strength in Japanese yen against the U.S. dollar kept Nikkei average index under pressure. While, Japanese core machinery orders for Mar fell short of forecast, industrial output declined less than initially estimated in the month. Singapore markets too witnessed pressure as its nonoil domestic exports declined for the first time in six months in Apr 2017.
Commodities Global Commodity Prices Rebased to 10 10.30 9.90 9.50 9.10 8.70 19 Apr 17 29 Apr 17 9 May 17 19 May 17 Source: Reuters Performance of various commodities Commodities Global Commodity Movement Last Closing 1 Wk Ago Brent Crude($/Barrel) 52.42 48.29 Gold ($/Oz) 1255.05 1228.33 Gold (Rs/10 gm) 28659 28066 Silver ($/Oz) 16.82 16.46 Silver (Rs/Kg) 38690 38059 8.55% 2.18% 2.21% Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl) Source: Reuters Values as on May 19, 2017 Gold Gold prices gained during the week amid rising concerns over political turmoil in the U.S. that further raised doubts on implementation of economic stimulus program by the U.S. President. A successful missile test by North Korea and a worldwide cyber attack fueled demand for the safe haven bullion. Also, weaker than expected economic data dampened investors sentiment for riskier assets and also raised uncertainty on U.S. Federal Reserve s policy rate hike in Jun 2017. Crude Brent crude prices gained after Saudi Arabia and Russia said that supply cuts need to last into 2018, a step toward extending OPEC s effort to support prices for longer than initially agreed. This also raised expectations that major oil producer countries will extend the supply cut plan in the upcoming meeting on May 25. However, concerns over supply glut restricted further gains. Baltic Dry Index The Baltic Dry Index fell during the week owing to weaker capesize and panamax activities.
1.81% Currency Currency Prices (in terms of INR) Rebased to 10 10.60 10.00 Source: RBI Movement of Rupee vs. Other Currencies Currency Currency Movement 9.40 19 Apr 17 29 Apr 17 9 May 17 19 May 17 USD GBP Euro JPY Last Closing 1 Wk Ago U.S. Dollar 64.99 64.30 Pound Sterling 84.18 82.87 EURO 72.30 69.89 JPY (per 100 Yen) 58.44 56.56 3.45% 1.58% 1.07% 3.32% Source: RBI Figures in INR, Values as on May 19, 2017 Rupee The rupee rose initially against the greenback following gains in the domestic equity market. However, the trend reversed following greenback purchases by state run banks and oil importers. Euro The euro surged against the greenback as concerns over political turmoil in the U.S. and doubts over U.S. President s reform agenda kept the latter under pressure. Renewed focus on a possible winding up of the European Central Bank's monetary stimulus program also boosted the common bloc currency. Pound The pound rose against the greenback after inflation in Britain rose more than expected in Apr 2017. Pound got further support after dollar weakened globally. Yen The yen surged against the greenback as its safe haven appeal improved on persisting worries over political turmoil in the U.S. and doubts over U.S. President s reform agenda.
Key Mutual Funds News According to a major credit rating agency, the Indian Mutual Fund (MF) industry started the new financial year on a positive note and it is expected to touch Rs. 20 lakh crore milestone if industry assets grow by another 4%. According to data from AMFI, the Asset Under Management of the Indian MF industry grew 9.8% from Rs. 17.54 lakh crore in Mar 2017 to Rs. 19.26 lakh crore in Apr 2017. It has also mentioned that assets from B15 towns have grown 43.9% due to investor friendly initiatives by regulators and awareness campaigns by Asset Management Companies (AMC). In Apr 2017, the B15 assets grew by Rs. 98,525 crore and stood at Rs. 3.23 lakh crore compared with Rs. 2.24 lakh crore in Apr 2016. Currently, B15 accounts for 16.9% of the total assets of the MF industry; however, the share of direct plans in B15 towns is only 22% against 46% in T15 cities. According to a media report, MD & CEO of BSE opined that Jan Dhan Model to be extended for MF industry as a suitable regulatory measure. This will help in the household savings to flow into the industry. He said that as with the launch of Jan Dhan yojana the banking system could open up 25 crore of additional accounts, a similar initiative can be introduced in MF industry too. UTI Mutual Fund decided to appoint Mr. V Srivatsa as the fund manager of UTI Top100FundinsteadofMs Swati Kulkarni. The change was effective from May 17, 2017. LIC Mutual Fund decided to appoint Mr. Raj Kumar as the whole time director of LIC Mutual Fund. The change will become effective from Apr 28, 2017. IDFC Mutual Fund decided to appoint Ms. Khushboo Sharma as the fund manager in the Fixed Income Investment Team of IDFC Asset Management Company Limited. The change was effective from May 15, 2017. It has also mentioned that Anurag Mittal will be the new fund manager of IDFC Banking Debt Fund instead of Harshal Joshi; Anurag Mittal and Harshal Joshi will be the new fund managers of IDFC Money Manager Fund Treasury Plan instead of Anurag Mittal; Harshal Joshi will be the fund manager of IDFC Government Securities Fund Short Term Plan instead of Suyash Choudhary, and Arvind Subramanian and Khushboo Sharma will be the new fund managers of IDFC Credit Opportunities fund instead of Arvind Subramanian.
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