Weekly Review September 28, 2018
Key Economic News International Domestic The U.S. Federal Reserve (Fed) in its monetary policy review increased interest rates by 25 bps as it decided to raise the target range for the federal funds rate to a range of 2% to 2.25%. This was the third-rate hike by Fed in 2018. Fed also projected one more rate hike in 2018, three rate hikes in 2019 and one in 2020. Fed upwardly revised the outlook for GDP growth in 2018 to 3.1% from 2.8%. According to the Office for National Statistics, U.K. s Gross Domestic Product (GDP) rose 0.4% in the second quarter of 2018, same as the previous estimate. However, the growth rate for the first quarter was revised down to 0.1% from 0.2%. On a yearly basis, the economy expanded 1.2% that was revised down from 1.3%. European Central Bank s President indicated a rise in underlying inflation in coming months. He also indicated euro zone s continuous growth at robust pace amid high level of capacity utilization. He also specified that labour markets are tightening with signs of labour shortages in some countries and sectors. Government data showed that India s fiscal deficit for Apr-Aug 2018 came in at Rs. 5.91 lakh crore, or 94.7% of the budgeted target for FY19 against 96.1% in the corresponding period of the previous year. Net tax receipts were Rs. 3.66 lakh crore or 24.7% of the budget estimate for FY19 compared with 27.8% in the corresponding period of the previous year. The government s total expenditure for the period from Apr to Aug of 2018 stood at Rs. 10.70 lakh crore or 43.8% of the budget estimate for FY19 compared with 44.3% in the corresponding period of the previous year. India has raised import duty on a range of products including air-conditioners, refrigerators, washing machines, footwear, jewellery, furniture fittings and tableware. Also, it has been raised on aviation turbine fuel (ATF). Basic customs duties have been increased by 2.5-10% points on 19 tariff lines that accounted for an import bill of Rs. 86,000 crore in FY18. Meanwhile, a basic customs duty of 5% has been imposed on ATF. The raise comes on the wake of government s efforts to rein in the current account deficit and strengthen up the rupee against the greenback.
Index Values Index Values Domestic Equity Market Index Values Index Values Liquidity concerns weighed on investor sentiment; surging oil prices & depreciating rupee added to the woes 11800 Nifty 50 YTD Return : 3.80% -1.91% 12200 Nifty 100 YTD Return : 1.29% -2.29% 11100 11600 Movement during the Week 10400 29-Aug-18 13-Sep-18 28-Sep-18 Movement during the Week 11000 29-Aug-18 13-Sep-18 28-Sep-18 20100 Nifty Mid Cap 100 YTD Return : -18.83% -6.50% 8000 Nifty Small Cap 100 YTD Return : -32.36% -10.88% 18600 7000 Movement during the Week 17100 29-Aug-18 13-Sep-18 28-Sep-18 Movement during the Week 6000 29-Aug-18 13-Sep-18 28-Sep-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 24-Sep-18 285 1,619 0.18 25-Sep-18 664 1,186 0.56 26-Sep-18 890 943 0.94 27-Sep-18 471 1,374 0.34 28-Sep-18 268 1,621 0.17 Source: NSE Ratios S&P BSE Sensex Nifty 50 Nifty Mid Cap 100 Nifty Small Cap 100 P/E 23.37 26.44 47.19 119.84 P/B 3.02 3.47 2.52 1.66 Dividend Yield 1.23 1.23 1.02 0.89 Source: BSE & NSE Values as on Sep 28, 2018 Indian equity markets closed in the red during the week under review. Liquidity concerns kept market participants wary. Surge in crude oil prices amid worries regarding the shrinking supplies once U.S. sanction on Iran kicks in Nov 2018 continued to weigh on the market sentiment. Depreciating rupee against the greenback added to the woes. Additionally, the decline in banking stocks after stock price of one of the major private sector bank witnessed fall following reports that RBI has denied an extension of the term of bank s current managing director and the chief executive officer also hit market sentiment. 5200 FII Net Investment DII Net Investment 2600 0-2600 -5200 29-Aug-18 8-Sep-18 18-Sep-18 28-Sep-18 Source: SEBI
Domestic Equity Market Indices Sectoral Indices Last Returns (in %) Closing* 1-Wk 1-Mth S&P BSE Auto 21,476.5-7.7-13.5 S&P BSE Bankex 27,992.2-2.5-12.4 S&P BSE CD 19,134.3-4.7-11.8 S&P BSE CG 17,108.9-5.3-9.2 S&P BSE FMCG 11,502.8-2.6-8.7 S&P BSE HC 15,025.3-3.6-3.3 S&P BSE IT 15,628.9 1.0 1.8 S&P BSE Metal 13,278.8-4.9-2.7 S&P BSE Oil & Gas 14,855.4-1.3-1.6 S&P BSE Power 1,929.4-4.4-8.1 S&P BSE Realty 1,702.9-12.2-19.3 Source: MFI Explorer *Values as on Sep 28, 2018 S&P BSE IT 1-Week Return as of September 28, 2018 S&P BSE Oil & Gas S&P BSE Bankex S&P BSE FMCG S&P BSE HC S&P BSE Power S&P BSE CD S&P BSE Metal S&P BSE CG S&P BSE Auto S&P BSE Realty -12.2-7.7 On the BSE sectoral front, indices closed on a weak note barring IT sector that grew 1.03%. S&P BSE Realty stood as the major loser that fell 12.23% followed by S&P BSE Auto that fell 7.73%. The decline in auto stocks likely comes on the wake of rising crude oil prices and escalating trade tensions between the U.S. and China. S&P BSE Capital Goods and S&P BSE Metal fell 5.26% and 4.85%, respectively. S&P BSE Consumer Durables and S&P BSE Power fell 4.75% and 4.44%, respectively. -4.4-4.7-4.9-5.3-14 -10-6 -2 2 Source: MFI Explorer Weekly Return in (%) -3.6-2.5-2.6-1.3 1.0
Yield in % Domestic Debt Market Bond yields fell amid announcement of OMO purchase by RBI of up to Rs. 10,000 crore Debt Indicators (%) Current Value* 1-Wk Ago 1-Mth Ago 6-Mth Ago Call Rate 6.51 6.58 6.35 7.57 91 Day T-Bill 6.97 7.10 6.80 6.12 07.80% 2021, (5 Yr GOI) 7.96 8.00 7.75 7.09 07.17% 2028, (10 Yr GOI) 8.02 8.08 7.90 7.40 Source: Thomson Reuters Eikon; CCIL *Values as on Sep 28, 2018 8.16 10 -Yr Benchmark Bond ( % ) Bond yields fell following announcement of Open market operations (OMO) purchase of up to Rs. 10,000 crore which took place later during the week. Further, market participants resorted to short covering as they expected government borrowing targets to come down in the second half of FY19. However, the increase in crude oil prices and weakening of rupee against the greenback restricted the gains as it triggered concerns over rising inflation. 8.12 8.08 8.04 Yield on the 10-year benchmark paper (7.17% GS 2028) fell 6 bps to close at 8.02% from the previous week s close of 8.08% after trading in a range of 8.02 to 8.14%. 8.00 Source: CCIL 21-Sep 24-Sep 25-Sep 26-Sep 27-Sep 28-Sep Data from RBI showed that India s foreign exchange reserves rose to $401.79 billion as of Sep 21, 2018, from $400.49 billion in the previous week.
Yield in % Domestic Debt Market Maturity G-Sec Yield (%) Corporate Yield (%) Spread bps Yields on gilt securities fell across the maturities by up to 12 bps barring 2-year paper that increased 1 bps and 15-year paper that closed steady. 1 Year 7.91 9.01 110 3 Year 8.14 8.97 83 5 Year 8.25 9.02 77 10 Year 8.19 9.03 84 Source: Thomson Reuters Eikon Values as on Sep 28, 2018 Corporate bond yields increased across the maturities in the range of 5 bps to 21 bps. Spread between AAA corporate bond and gilt expanded across the maturities in the range of 4 bps to 27 bps. The maximum increase was witnessed on 2-year paper and the minimum on 15-year paper. 8.40 India Yield Curve Shift (%) (W-o-W) 13.00 7.55 6.70 3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs Source: Thomson Reuters Eikon Change in bps 28-Sep-18 21-Sep-18 0.00-13.00-26.00 Change in bps
Index Values International Markets 26850 26600 26350 26100 Movement during the week 25850 29-Aug-18 8-Sep-18 18-Sep-18 28-Sep-18 Source: Thomson Reuters Eikon Dow Jones YTD Return : 7.04% -1.07% U.S. markets closed on a mixed note during the week. Market participants remained cautious over trade deal between U.S. and Canada and after China rejected a trade meeting with the U.S. However, market sentiment received some support following a higher than expected rise in durable goods orders in Aug 2018. Meanwhile, the Fed raised key policy rates by 25 bps as expected and mentioned that economic activity has been rising at a strong rate. The Fed's monetary policy decision was already factored-in by market participants. Europe Indices Last Closing* Returns (in %) 1-Wk 1-Mth YTD European markets closed on a mixed note during the week. Market sentiments remained subdued following trade war concerns between U.S. and China and on political uncertainty in Italy after the nation announced a high deficit budget. CAC-40 Index 5,493.5 0.0 0.2 3.4 DAX Index 12,246.7-1.5-2.2-5.2 FTSE 100 7,510.2 0.3-1.4-2.3 Source: Thomson Reuters Eikon *Values as on Sep 28, 2018 Respite was seen following improvement in some key economic data including German consumer confidence data for Oct 2018, rise in Germany's wholesale price inflation for Aug 2018 and rise in eurozone inflation in Sep 2018.
International Markets Hang Seng Strait Times Return Value as of September 28, 2018-7.12-0.59-4.29 1.22 Asian markets mostly found support amidst expectations that the Chinese government would take some stimulus measures to support the growth trajectory of the country. Some key economic data in the region helped sentiment, including the rise in Japanese industrial output, retail sales data in Aug 2018 and fall in the unemployment rate in the same month. Nikkei Source: MFI Explorer 5.95 1.05-7.5-3.75 0 3.75 7.5 Weekly Return in (%) % Change YTD % Change week Additionally, global index provider MSCI is expected to raise weighting of China A-shares fourfold in its global benchmarks. However, trade concerns over U.S. and China limited the upside after media reported that China has cancelled its meeting with the U.S. and a fresh set of tariffs are expected to be imposed by both the nations.
Global Commodity Prices Commodities Rebased to 10 11.00 10.50 Global Commodity Movement 4.88% Gold Gold prices came under pressure after the Fed increased interest rates by 25 bps and gave clues of another rate-hike in Dec 2018. It further added that the central bank is expected to increase interest rates thrice in 2019 and once in 2020. 10.00 9.50 29-Aug-18 8-Sep-18 18-Sep-18 28-Sep-18 Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl) Source: Thomson Reuters Eikon Performance of various commodities Commodities Last Closing* 1-Wk Ago Brent Crude($/Barrel) 83.21 79.34 Gold ($/Oz) 1,191.69 1,199.09 Gold (Rs/10 gm) 30,296 30,697 Silver ($/Oz) 14.60 14.25 Silver (Rs/Kg) 37,006 36,882 2.46% -0.62% Source: Thomson Reuters Eikon *Values as on Sep 28, 2018 The safe haven appeal of the bullion was also hit by U.S. economic growth data for the second quarter of 2018, which came in at 4.2%, a substantial acceleration from the 2.2% increase in the first quarter. Crude Brent crude prices rose and surpassed the $80 per barrel level during the week, on worries regarding shrinking supplies once U.S. sanction on Iran starts in Nov 2018. The oil market is faced with increasing supply challenge following the decline of production in Venezuela. Nonetheless, gains were restricted by U.S. assurance that it would ensure proper oil supply before the Iran sanction begins. Baltic Dry Index The Baltic Dry Index grew 8.99% on the back of improved capesize and panamax activities.
Currency Prices ( in terms of INR) -1.81% Currency Rebased to 10 10.60 10.40 10.20 10.00 Source: RBI Currency Movement 9.80 29-Aug-18 8-Sep-18 18-Sep-18 28-Sep-18 USD GBP Euro JPY - 0.25% 0.97% - 0.28% 0.36% Rupee The rupee weakened against the greenback as increase in global crude oil prices and month-end dollar demand from oil importers weighed on market sentiment. However, selling of the greenback by exporters and foreign banks restricted further losses. Euro The euro plunged against the greenback after the Fed in its monetary policy review increased interest rates by 25 bps and indicated another rate hike in Dec 2018, three more next year, and one in 2020. Concerns about the Italian budget also weighed on the common bloc currency. Movement of Rupee vs. Other Currencies Currency Last 1-Wk Closing * Ago U.S. Dollar 72.55 71.85 Pound Sterling 94.91 95.15 EURO 84.44 84.68 100 Yen 63.90 63.67 Source: RBI Figures in INR, *Values as on Sep 28, 2018 Pound Yen The pound initially rose against the greenback on optimism over a Brexit deal between Britain and the European Union. However, the trend reversed after the Fed increased interest rates by 25 bps and indicated multiple rate hikes moving forward. The yen weakened against the greenback after the Fed in its monetary policy review increased interest rates by 25 bps and indicated multiple rate hikes until 2020.
Key Mutual Funds News According to media reports, Securities and Exchange Board of India s (SEBI) step of slashing and putting a cap on the cost that mutual fund asset management companies (AMC) charge investors (total expense ratio or TER) will benefit the latter. As per the regulator, investors will annually save around Rs. 1,300 crore to Rs. 1,500 crore. SEBI has introduced a revised slab for an expense charge of funds for different fund sizes. According to media reports, SEBI clarified that it has not given any recommendation to mutual funds on matters relating to an extension of their current exposure in Indiabulls Housing Finance and Dewan Housing Finance. The explanation from the regulator came in after a few media reports said that SEBI is looking for details from mutual funds due to liquidity concerns. As per media reports, a board member of the Association of Mutual Funds of India (AMFI) appealed to SEBI to allow AMCs to make upfront commission payment of up to Rs. 1,000 to distributors. This will assist IFAs to manage client acquisition cost. According to media reports, investor exits from equity-oriented mutual funds rose to Rs. 27,330 crore in Jul and Aug of 2018. Redemption or exits in Aug 2018 increased 29.5% over last year, which adversely impacted the net inflow. DHFL Pramerica Mutual Fund announced the change in fundamental attributes of DHFL Pramerica Global Agribusiness Offshore Fund, effective from Oct 17, 2018. The name of the fund will change to DHFL Pramerica Global Equity Opportunities Fund. Other changes include the change in investment objective. The scheme will focus on generating long term capital appreciation from a diversified portfolio of units of overseas mutual funds. Union Mutual Fund announced that all subscriptions, switch-in applications and other pre-registered investments in Union Liquid Fund have been temporarily suspended with immediate effect. All redemptions shall continue without any disruption.
Disclaimer All information contained in this document has been obtained by ICRA Online Limited from sources believed by it to be accurate and reliable. Although reasonable care has been taken to ensure that the information herein is true, such information is provided as is without any warranty of any kind, and ICRA Online Limited in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. All information contained herein must be construed solely as statements of opinion, and ICRA Online Limited shall not be liable for any losses incurred by users from any use of this document or its contents in any manner. Opinions expressed in this document are not the opinions of our holding company, ICRA Limited (ICRA), and should not be construed as any indication of credit rating or grading of ICRA for any instruments that have been issued or are to be issued by any entity. This newsletter is for customer information only and does not constitute an investment advice or an offer to purchase or sell securities. Persons accessing this document are advised to obtain independent professional advice wherever necessary. All rights of the newsletter are reserved with ICRA Online Ltd, the provider of the newsletter. Trust-Plutus Wealth Managers (India) Private Limited and TrustPlutus Family Office & Investment Advisers (India) Private Limited is not responsible for any error or omission in the data or for any losses suffered on account of information contained in this newsletter. Mutual fund investments are subject to market risk. Please read the offer document before investing into mutual funds. This document may not be reproduced, distributed or published for any purpose.