News U Can Use August 09, 2019 - Nippon India Mutual Fund
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News U Can Use
August 09, 2019The Week that was…
5th August to 9th August
2Indian Economy • The Monetary Policy Committee (MPC) lowered key policy repo rate by 35 bps from 5.75% to a nine-year low of 5.40% in its third bi-monthly monetary policy review and decided to maintain its accommodative stance on the monetary policy. This is the fourth consecutive rate cut by the MPC in 2019 till date and the third in this fiscal till Aug 2019. • The seasonally adjusted Nikkei India Services Business Activity Index rose to 53.8 in Jul 2019 from 49.6 in Jun 2019, thereby marking a 12-year high. The seasonally adjusted Nikkei India Composite PMI Output Index that considers both the manufacturing sector and the services sector came in at 53.9 in Jul against 50.8 in Jun. New business inflows rise at fastest pace since Oct 2016. • Media reports showed the tax department has sent notices to GST-registered businesses that have reported 20% or more decline in annual revenue. Notices related to mismatch in declaration between GSTR-3B (summary return) and GSTR-1 (outward supplies detail) have been a mainstay but now the department is comparing firms’ earnings under GST with that of erstwhile service and excise regime. • Under the PM-Kisan scheme, the government is aiming to cover as many as 10 crore farmers in 2019. Thus, Rs. 6,000 will be disbursed annually in three equal instalments, agriculture minister said. Around 5.88 crore small farmers have received the first tranche of Rs. 2,000 each under the Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) and 3.40 crore peasants have got the second instalment as well, he said. 3
Indian Equity Market
Domestic Equity Market Indices • Indian equity markets gained in the week
Indices 09-Aug-19 1 Week Return YTD Return ended Aug 9, 2019. Investors welcomed
S&P BSE Sensex 37,581.91 1.25% 4.20% media reports showing the government
Nifty 50 11,109.65 1.02% 2.27%
could exempt foreign portfolio investors
(FPIs) from an increase in taxes.
S&P BSE Mid-Cap 13,670.05 0.91% -11.45%
S&P BSE Small-Cap 12,699.50 1.63% -13.65% • The Reserve Bank of India (RBI) cutting
Source: MFI Explorer interest rates by a more than expected
35 basis points and promising liquidity
S&P BSE S&P BSE S&P BSE
Ratios
Sensex
Nifty 50
Mid Cap Small Cap support to the financial sector at its policy
meet supported sentiment.
P/E 26.28 27.41 32.61 33.85
P/B 2.84 3.45 2.31 1.81 • Initially, markets were tensed over trade
Dividend
Yield
1.23 1.33 1.08 1.14 war after China devalued its currency to
Source: BSE, NSE Value as on Aug 09, 2019 combat U.S.’ tariff threat and stopped
NSE Advance/Decline Ratio import of U.S. agricultural products.
Advance/Decline
Date Advances Declines
Ratio • Later, investor expectations of a rate cut
05-Aug-19 497 1354 0.37 by the Reserve Bank of India at its policy
06-Aug-19 1329 498 2.67 meet on Aug 7, 2019, lifted the
07-Aug-19 854 974 0.88
sentiment. Also, China took steps to
08-Aug-19 1057 742 1.42
09-Aug-19 1170 633 1.85 stabilise the yuan after the U.S. labelled
Source: NSE the country as a currency manipulator.
4Indian Equity Market (contd.)
Sectoral Indices • S&P BSE Auto was the major gainer, up
Last Returns (in %) 2.73%, followed by S&P BSE IT and S&P
Indices
Closing* 1-Wk 1-Mth BSE Teck that gained 2.42% and 2.37%,
S&P BSE Auto 16,061.92 2.73% -6.25% respectively. Auto sector gained as industry
S&P BSE Bankex 32,114.92 0.66% -6.57% leaders met the finance minister to voice their
S&P BSE CD 22,711.46 0.64% -2.24% concerns about slowing growth and job
S&P BSE CG 17,301.19 0.16% -10.10% losses. S&P BSE Healthcare and S&P BSE
S&P BSE FMCG 11,079.77 0.89% -1.41% Realty gained 1.10% and 0.98%,
S&P BSE HC 12,693.67 1.10% -0.68% respectively.
S&P BSE IT 15,906.82 2.42% 5.44%
S&P BSE Metal 8,898.99 -3.03% -14.32% • S&P BSE Metal was the major loser, down
S&P BSE Oil & Gas 12,872.94 -1.44% -9.65% 3.03%. The metal sector lost as tensions on
Source: Thomson Reuters Eikon *Value as on Aug 09, 2019 the U.S.-China trade front continued to worry
investors. .
Indian Derivatives Market Review
• Nifty Aug 2019 Futures stood at 11,122.95, a premium of 13.30 points above the spot
closing of 11,109.65. The total turnover on NSE’s Futures and Options segment for the
week stood at Rs. 51.75 lakh crore as against Rs. 53.03 lakh crore for the week to Aug 2.
• The Put-Call ratio stood at 0.88 compared with the previous week’s close of 0.76.
• The Nifty Put-Call ratio stood at 1.24 against the previous week’s close of 1.18.
5Domestic Debt Market
• Bond yields rose on account of
Debt Indicators Current 1-Wk 1-Mth 6-Mth ambiguity over future policy rate cuts,
(%) Value Ago Ago Ago
both in terms of quantum and timing,
Call Rate 5.32 5.60 5.62 6.35 after the rate-cutting panel trimmed
91 Day T-Bill 5.42 5.65 5.90 6.38 repo rate by 35 bps in the policy
07.32% 2024, (5 Yr GOI) 6.23 6.25 6.52 7.15 meet. The RBI governor said future
07.26% 2029, (10 Yr GOI) 6.49 6.35 6.59 7.33
rate cuts would be data driven.
Source: Thomson Reuters Eikon Value as on Aug 09, 2019 • Besides, profit booking by investors
and the rising geopolitical worries
10 -Yr Benchmark Bond ( % ) over Jammu & Kashmir also weighed
6.54 on sentiments. However, softness in
crude prices gave little support to the
Yield in %
6.46 domestic debt market.
6.38
• Yields on the 10-year benchmark
paper (7.26% GS 2029) surged 14
6.30
bps to close at 6.49% compared with
5-Aug 6-Aug 7-Aug 8-Aug 9-Aug the previous close of 6.35% after
Source: CCIL
trading in the range of 6.30% to
6.52%.
6Domestic Debt Market (Spread Analysis)
• Yields on gilt securities fell across 1 to 7-
year maturities in the range of 2 bps to 11
Maturity
G-Sec Yield Corporate Yield Spread bps and expanded across the remaining
(%) (%) bps maturities by up to 15 bps.
• Corporate bond yields contracted on 1-year
1 Year 5.94 7.62 169
paper, 2-year paper and 5 to 7-year
maturities by up to 21 bps. Yields increased
3 Year 6.18 7.68 150
across the remaining maturities in the range
5 Year 6.41 7.81 140 of 3 bps to 27 bps barring 4-year paper
which closed steady.
10 Year 6.60 8.13 153
• Difference in spread between AAA corporate
Source: Thomson Reuters Eikon Value as on Aug 09, 2019 bond and gilt expanded across the
maturities by up to 26 bps barring 1, 5 and
10-year paper.
India Yield Curve Shift (%) (W-o-W)
Change in bps
7.10 15
Yield in %
6.50 1
5.90 -13
5.30 -27
3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs
Source: Thomson Reuters Eikon Change in bps 09-Aug-19 02-Aug-19
7Regulatory Updates in India
• The Reserve Bank of India (RBI) has taken two important steps in its policy meet held
recently to make access to credit easier for the crisis-ridden non-banking financial
companies (NBFCs). These are – allowing banks to on-lend to priority sectors through
NBFCs and relaxation in norms in banks’ counter-party exposure limit to single NBFC. So,
now if a bank lends to NBFCs for onward lending to the priority sectors, it will automatically
be considered as priority sector lending for the bank. On-lending through non-banks to
agriculture (investment credit) can be up to Rs. 10 lakh, micro and small enterprises up to
Rs. 20 lakh and housing up to Rs. 20 lakh per borrower. On-lending to these three
categories of NBFCs would be classified as priority sector lending. Detailed guidelines will
be issued by month-end.
• The finance minister said the government has planned steps to improve the economy "fairly
quickly". The government has taken inputs from business leaders. The country is facing a
slowdown in gross domestic product and increasing unemployment, with the jobless rate
rising about 2 percentage points in Jul 2019 compared with a year earlier, according to
private data group.
• The government has proposed guidelines for e-commerce firms to protect consumers'
interest. This includes a 14-day deadline to effect refund request, mandate e-tailers to show
details of sellers supplying goods and services on their websites and moot the procedure to
resolve consumer complaints. The ministry of consumer affairs has requested stakeholder
opinions on the draft e-commerce rules by Sep 16.
8Regulatory Updates in India (contd..)
• According to media reports, the Ministry of Statistics and Programme Implementation (Mo-
SPI) has set up a working group to revise the factory output – index of industrial production
(IIP) base to 2017-18 from 2011-12 and see if global practices are followed in its estimation.
This comes amid concerns over the credibility of data in recent past.
• A former RBI governor has said that the government should borrow only long-term fund
from the overseas market. He added that the amount should not exceed 1.5% of GDP
under any condition. The former governor said he does not have a negative view about
overseas sovereign borrowing but thinks India does not need to borrow from abroad.
• The Reserve Bank of India (RBI) has penalised 11 banks by imposing fine for non-
compliance with provisions of "Frauds classification and reporting by commercial banks and
select FIs". The penalty ranges from Rs. 1.5 crore to Rs. 50 lakh. The combined penalty is
Rs 8.5 crore.
• Under the Payment System Vision 2021, RBI has proposed to facilitate the creation of a
Central Payment Fraud Registry that will track banking frauds. Payment system participants
will be provided access to this registry for near-real time fraud monitoring. The aggregated
fraud data will be published to educate customers on emerging risks. A detailed framework
in this regard will be put in place by the end of Oct 2019.
9Global News/Economy
• Institute for Supply Management (ISM) report showed growth in U.S. services sector activity
unexpectedly slowed in Jul 2019. The ISM non-manufacturing index fell to 53.7 in Jul after
dropping to 55.1 in Jun 2019. A reading above 50 still indicates service sector growth.
• Labor Department report said first-time claims for U.S. unemployment benefits
unexpectedly showed a modest decrease in the week ended Aug 3, 2019. Initial jobless
claims dipped to 209,000, a decrease of 8,000 from the previous week's revised level of
217,000.
• A U.S. Federal Reserve report showed consumer credit rose by less than expected in Jun
2019. Consumer credit rose by $14.6 billion in Jun after climbing by $17.8 billion in May
2019.
• First estimate from the Office for National Statistics showed U.K. economy contracted
unexpectedly in the second quarter. Gross domestic product fell 0.2% sequentially,
reversing first quarter's 0.5% growth. GDP was forecast to remain flat. On an annual basis,
the economy grew at a slower pace of 1.2% after rising 1.8% in the first quarter.
• The Cabinet Office said Japan's gross domestic product gained a seasonally adjusted 0.4%
QoQ in the second quarter of 2019, beating expectations. GDP was up 0.7% in the previous
three months. On an annualized yearly basis, GDP gained 1.8%.
10Global Equity Markets U.S.
Global Indices
• Heightened worries over the U.S.-
1-Week YTD China trade turf kept U.S. markets
Indices 09-Aug-19
Return Return under pressure during the week.
Russell 3000 1,714.97 -0.48% 16.50%
Nasdaq 100 7,646.27 -0.60% 20.79%
• In the latest development, media
FTSE 100 7,253.85 -2.07% 7.81% reports stated that the U.S. government
DAX Index 11,693.80 -1.50% 10.75% is keeping on hold its decisions about
Nikkei Average 20,684.82 -1.91% 3.35% licenses for U.S. companies to restart
Straits Times 3,168.94 -2.83% 3.26% business with one of the Chinese tech
Source: Thomson Reuters Eikon Value as on Aug 09, 2019
giants.
Europe
• European markets too remained weak amid political uncertainty in Italy. Brexit worries
loomed large with British finance minister announcing its delay of the long-planned review
of public spending due this year ahead of Brexit. This led to speculation that the new
British Prime Minister may go for a snap election post Brexit. .
Asia
• Asian markets were no exception to the weakness in its global peers. Concerns over U.S.-
China trade tensions resurfaced after media reports stated that the U.S. is delaying the
decision about licenses for its companies to restart business with one of the Chinese tech
giants.
11Global Debt (U.S.)
• Yields on the 10-year U.S. Treasury
US 10-Year Treasury Yield Movement
bond plunged 13 bps to 1.73%
compared with the previous week’s
1.80
close of 1.86%.
• U.S Treasury prices plummeted earlier
1.75
during the week under review as
escalation in trade tensions between
1.70 U.S. and China fuelled concerns of a
global economic slowdown which
boosted its safe haven appeal.
1.65
5-Aug 7-Aug 9-Aug Expectations that the U.S. Federal
Source: Thomson Reuters Eikon
Reserve might increase its pace of rate
cuts to counter risks of recession added
to the gains
• U.S. Treasury prices rose further
following breakdown in Italy's governing
coalition and the prospect of new
elections in the region. Unexpected
contraction of the U.K. economy in the
second quarter of 2019 also contributed
to the upside.
12Commodities Market Gold
Rebased to 10 • Gold prices edged higher amid
Global Commodity Movement
deepening trade worries between the
Global Commodity Prices
11.50 4.50%
U.S. and China. Escalating trade tension
10.40 3.91%
worsened global growth outlook, which in
turn, added to the bullion’s safe-haven
9.30 appeal. However, the upside was
-6.22%
somewhat restricted by better-than-
8.20
9-Jul-19 19-Jul-19 29-Jul-19 8-Aug-19
9-Aug-19
expected Chinese export data for Jul.
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl) Brent Crude
Source: Thomson Reuters Eikon
• Brent crude prices tumbled with
Performance of various commodities weakening demand outlook amid
Commodities Last Closing* 1-Week Ago
deepening U.S.-China trade worries,
which threatened global growth.
Brent Crude($/Barrel) 56.51 60.26
However, reports that the U.S. President
Gold ($/Oz) 1496.84 1440.46
levied sanctions on the Venezuelan
Gold (Rs/10 gm) 37270 35341 government restricted the downside.
Silver ($/Oz) 16.94 16.21
Baltic Dry Index
Silver (Rs/Kg) 43009 40746
Source: Thomson Reuters Eikon *Value as on Aug 09, 2019 • The Baltic Dry Index fell on the back of
declining capesize and panamax
activities.
13Currencies Markets Rupee
Rebased to 10
• The rupee weakened against the
Currency Movement
greenback and witnessed the biggest
10.70 2.72%
Currency Prices ( in terms of INR)
weekly fall in eight months as escalation
1.61% in trade tensions between U.S. and
10.30
2.56% China dampened investor risk appetite.
9.90 Euro
1.81%
• The euro rose against the greenback as
9.50 escalation in trade tensions between
9-Jul-19 19-Jul-19 29-Jul-19 8-Aug-19
9-Aug-19
U.S. and China fuelled hopes of more
USD GBP Euro JPY
Source: Thomson Reuters Eikon
rate cuts by the U.S. Federal Reserve.
Pound
Movement of Rupee vs Other Currencies • The pound plummeted against the
Currency Last Closing* 1-Wk Ago greenback on growing possibility of a
general election in Britain after the
US Dollar 70.52 69.40
October Brexit deadline.
Pound Sterling 85.61 84.09
Yen
EURO 78.91 76.94
• The yen surged against the greenback
100 Yen 66.58 64.82
as escalation in trade tensions between
Source: RBI Figures in INR , *Value as on Aug 09, 2019
U.S. and China increased concerns of a
global economic slowdown and boosted
its safe haven appeal.
14The Week that was…
5th August to 9th August
15The Week that was (August 5 – August 9)
Present Previous
Date Events
Value Value
• India Nikkei Services PMI (Jul) 53.80 49.60
Monday,
August 05, 2019 • U.S. ISM Non-Manufacturing/Services Comp. (Jul) 53.70 55.10
• Japan Leading Index CI (Jun P) 93.30 94.90
Tuesday,
• German Factory Orders (YoY) (Jun) -3.60% -8.40%
August 06, 2019
• Germany Markit Construction PMI (Jul) 49.50 50.00
• India Bi-monthly Monetary Policy Statement 5.40% 5.75%
Wednesday, • Germany Industrial Production (YoY) (Jun) -5.20% -3.70%
August 07, 2019 • U.S. Consumer Credit (Jun) $14.596b $17.793b
• Japan Housing Loans (YoY) (2Q) 2.20% 2.40%
• Japan Trade Balance - BOP Basis (Yen) (Jun) ¥759.3b -¥650.9b
• Japan GDP Annualized (QoQ) (2Q P) 1.80% 2.80%
Thursday, • China Trade Balance CNY (Jul) 310.26b 345.10b
August 08, 2019
• Japan Eco Watchers Survey Current (Jul) 41.20 44.00
• U.S. Initial Jobless Claims (AUG 3) 209k 217k
• China Consumer Price Index (YoY) (Jul) 2.80% 2.70%
Friday,
• U.K. Gross Domestic Product (YoY) (2Q P) 1.20% 1.80%
August 09, 2019
• U.K. Trade Balance (Jun) £1779m -£2002m
16The Week Ahead
12th August to 16th August
17The Week Ahead
Day Event
Monday,
• U.S. Monthly Budget Statement (Jul)
Aug 12, 2019
• India Consumer Price Index (Jul)
Tuesday, • Germany ZEW Survey Expectations (Aug)
• Eurozone ZEW Survey (Economic Sentiment) (Aug)
Aug 13, 2019 • U.S. Consumer Price Index (YoY) (Jul)
• Japan Tertiary Industry Index (MoM) (Jun)
• India Wholesale Price Index (Jul)
Wednesday, • Germany Gross Domestic Product (YoY) (2Q P)
Aug 14, 2019 • U.K. Consumer Price Index (YoY) (Jul)
• Eurozone Gross Domestic Product (YoY) (2Q P)
• U.S. Retail Sales Advance (MoM) (Jul)
Thursday, • Japan Industrial Production (YoY) (Jun F)
Aug 15, 2019 • U.S. Initial Jobless Claims (Aug 10)
• U.S. Business Inventories (Jun)
Friday, • U.S University of Michigan Sentiment (Aug P)
Aug 16, 2019 • U.S. Housing Starts (MoM) (Jul)
18Disclaimer The information herein is meant only for general reading purposes and contains all factual and statistical information pertaining to Industry and markets which have been obtained from independent third party sources and which are deemed to be reliable. The information provided cannot be considered as guidelines, recommendations or as a professional guide for the readers. It may be noted that since Reliance Nippon Life Asset Management Company Limited (RNAM) has not independently verified the accuracy or authenticity of such information or data, or for that matter the reasonableness of the assumptions upon which such data and information has been processed or arrive data; RNAM does not in any manner assures the accuracy or authenticity of such data and information. Some of the statements & assertions contained in these materials may reflect RNAM’s views or opinions, which in turn may have been formed on the basis of such data or information. The Sponsor(s), the Investment Manager, the Trustee or any of their respective directors, employees, affiliates or representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such data or information. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and opinions given are fair and reasonable, to the extent possible. This information is not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument. Recipients of this information should rely on information/data arising out of their own investigations. Before making any investments, the readers are advised to seek independent professional advice, verify the contents in order to arrive at an informed investment decision. None of the Sponsor(s), the Investment Manager, the Trustee, their respective directors, employees, affiliates or representatives shall be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. 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 or its affiliates or group companies and its respective directors, officers, or employees in particular, makes no representation or warranty, express or implied, as to the accuracy, suitability, reliability, timelines or completeness of any such information. All information contained herein must be construed solely as statements of opinion, and ICRA Online Limited, or its affiliates or group companies and its respective directors, officers, or employees shall not be liable for any losses or injury, liability or damage of any kind incurred from and arising out of any use of this document or its contents in any manner, whatsoever. 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. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. 19
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