Weekly Review

November 23, 2018

Key Economic News Domestic The crucial meeting between the Reserve Bank of

India (RBI) and the government came to an end and according to media reports both RBI and the government succeeded in coming to an agreement on a wide range of issues. RBI’s board advised the bank to support small businesses and give banks more time to fulfil capital regulations. The board had a nine-hour meeting on Nov 19, 2018, wherein it also decided to form an expert committee to advice on whether RBI reserves are adequate since there have been requests from the government for access to surplus reserves.

Tax evasion worth Rs. 29,088 crore have been detected by the investigation arm of the finance ministry in 1,835 cases during Apr-Oct 2018, according to media reports. Of this, the Directorate General of GST Intelligence has detected evasion of Goods and Services Tax (GST) worth Rs. 4,562 crore in 571 cases.

According to reports, the Comptroller and Auditor General (CAG) of India is conducting performance audit of GST and could finalise its report soon. The performance audit report on the implementation of GST could be tabled in Parliament in the forthcoming Winter session, which starts from Dec 11, 2018.

International Data from the U.S. Commerce Department showed

that durable goods orders in the U.S. fell 4.4% in Oct 2018 following a revised 0.1% (0.7% increase originally reported for the previous month) fall in Sep 2018.

A report from the U.S. Federal Reserve showed that industrial production in the U.S. increased marginally in Oct 2018. Industrial output inched up 0.1% in Oct 2018 after rising by a downwardly revised 0.2% (0.3% originally reported) in Sep 2018.

Minutes of the European Central Bank’s (ECB) latest monetary policy meeting showed that policymakers had agreed to affirm the central bank's plan to gradually taper its massive asset purchase programme, despite the recent weak economic data. The next ECB policy session is on Dec 13, 2018.

Data from the Ministry of Internal Affairs and Communications of Japan showed that consumer price inflation in Japan grew 1.4% on a yearly basis in Oct 2018 from 1.2% in Sep 2018. On a monthly basis, both overall and core inflation grew 0.2%.

5748

5973

6198

6423

23-Oct-18 02-Nov-18 12-Nov-18 22-Nov-18

Ind

ex

Val

ue

s

Nifty Small Cap 100

Movement during the Week

16168

16680

17192

17704

23-Oct-18 02-Nov-18 12-Nov-18 22-Nov-18

Ind

ex

Val

ue

s

Nifty Mid Cap 100

Movement during the Week

10225

10512

10799

11086

23-Oct-18 02-Nov-18 12-Nov-18 22-Nov-18

Ind

ex

Val

ue

s

Nifty 100

Movement during the Week

10030

10307

10584

10861

23-Oct-18 02-Nov-18 12-Nov-18 22-Nov-18

Ind

ex

Val

ue

s

Nifty 50

Movement during the Week

Domestic Equity Market

Source : BSE and NSE Percentage change are on W-o-W basis and YTD is absolute return.

Domestic markets fell on escalating global trade tensions and concerns about earnings outlook of domestic companies

YTD Return : -0.04%

YTD Return : -17.92%

YTD Return : -2.04%

YTD Return : -31.78%

-1.46% -1.35%

-0.70% -0.92%

NSE Advance/Decline Ratio

Date Advances Declines Advance/Decline Ratio

19-Nov-18 933 847 1.10

20-Nov-18 490 1327 0.37

21-Nov-18 898 875 1.03

22-Nov-18 695 1079 0.64

Source: NSE

Ratios S&P BSE Sensex

Nifty 50 Nifty Mid Cap 100

Nifty Small Cap 100

P/E 22.9 25.4 43.2 35.5

P/B 2.9 3.3 2.5 1.7

Dividend Yield 1.2 1.3 1.0 0.9 Source: BSE & NSE Values as on Nov 22, 2018

Domestic Equity Market

The domestic market fell on escalating trade tensions, concerns about earnings outlook and Brexit development weighed on sentiment.

The cautious stance was seen due to the upcoming state elections in some major Indian states and Monetary Policy Committee’s upcoming policy review meeting.

The RBI’s board meeting gave mixed signals as investors seemed divided on the outcome – the board has advised the bank to support small businesses and give banks more time to fulfil capital regulations.

-6000

-4000

-2000

0

2000

4000

23-Oct-18 2-Nov-18 12-Nov-18 22-Nov-18

FII Net Investment DII Net Investment

R

s. c

rore

Source: SEBI

R

s. c

rore

Source: SEBI

-4.3

-4.1

-3.6

-1.5

-1.1

-0.6

-0.5

-0.3

0.1

1.6

-5 -4 -3 -2 -1 0 1 2

S&P BSE MetalS&P BSE IT

S&P BSE TeckS&P BSE Oil & Gas

S&P BSE BankexS&P BSE Auto

S&P BSE CDS&P BSE HCS&P BSE CG

S&P BSE Realty

Source: MFI Explorer Weekly Return in (%)

Domestic Equity Market

On the BSE sectoral front, major indices closed in the red barring S&P BSE Realty (1.64%) and S&P BSE CG (0.10%). S&P BSE Metal (-4.26%) stood as the major loser followed by S&P BSE IT (-4.11%) and S&P BSE Teck (-3.60%).

Technology and internet behemoths saw their stocks decline on the Wall Street, which led to tech companies in Asia fall. Strong rupee further dented IT stocks.

Banking stocks remained under pressure despite the crucial meeting between RBI and the government succeeding in the two coming to an agreement on a wide range of issues.

Sectoral Indices

Indices Last Returns (in %)

Closing* 1-Wk 1-Mth

S&P BSE Auto 20400.1 -0.6 5.0

S&P BSE Bankex 29192.1 -1.1 4.6

S&P BSE CD 20025.2 -0.5 11.3

S&P BSE CG 18431.2 0.1 12.2

S&P BSE HC 14303.0 -0.3 0.9

S&P BSE IT 13443.5 -4.1 -2.6

S&P BSE Metal 12031.5 -4.3 -4.8

S&P BSE Oil & Gas 13421.4 -1.5 5.0

S&P BSE Realty 1756.5 1.6 11.0

S&P BSE Teck 6809.0 -3.6 -1.0

Source: MFI Explorer *Values as on Nov 22, 2018

1-Week Return as of November 22, 2018

Debt Indicators (%)

Current Value*

1-Wk Ago

1-Mth Ago

6-Mth Ago

Call Rate 6.48 6.36 6.53 5.97

91 Day T-Bill 6.78 6.82 6.96 6.32

08.27% 2020, (5 Yr GOI) 7.15 7.40 7.70 7.68

07.17% 2028, (10 Yr GOI) 7.71 7.82 7.89 7.85

Source: Thomson Reuters Eikon; CCIL *Values as on Nov 22, 2018

Domestic Debt Market

Bond yields fell initially during the week under review after the much-anticipated meeting between the government and the Reserve Bank of India concluded on a positive note.

Bond yields fell further as global crude oil prices plunged to a near 1-year low and the rupee appreciated against the greenback. This eased concerns over the possibility of an increase in domestic inflationary pressures and widening of the current account deficit of the country to some extent.

However, further gains were capped as market participants preferred to book profits from the recent bond rally.

According to the Scheduled Bank's Statement of Position in India as of Nov 10, 2018, banks’ deposit and credit growth stood at 9.1% and 14.9% YoY, respectively.

Bond yields fell following a decline in global crude oil prices and appreciation of the rupee against the greenback

7.51

7.64

7.76

7.89

16-Nov 19-Nov 20-Nov 22-Nov

Yiel

d in

%

10 -Yr Benchmark Bond ( % )

Source: CCIL

Domestic Debt Market

Yields on gilt securities fell across the maturities in the range of 4 bps to 16 bps barring 2-year paper that increased 1 bps. The maximum fall was witnessed on 15-year paper and the minimum on 30-year paper.

Corporate bond yields fell across the maturities by up to 13 bps. The maximum fall was witnessed on 1-year paper and the minimum on 3-year paper.

Difference in spread between AAA corporate bond and gilt expanded across the maturities by up to 7 bps barring 1- and 6-year papers that closed steady.

Maturity G-Sec Yield (%) Corporate Yield (%)

Spread bps

1 Year 7.35 8.53 119

3 Year 7.64 8.63 99

5 Year 7.71 8.56 85

10 Year 7.86 8.53 67

Source: Thomson Reuters Eikon Values as on Nov 22, 2018

-14.00-12.00-10.00-8.00-6.00-4.00-2.000.00

6.00

6.50

7.00

7.50

8.00

8.50

3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs

India Yield Curve Shift (%) (W-o-W)

Change in bps 22-Nov-18 16-Nov-18

Y

ield

in %

Ch

ange

in b

ps

Source: Thomson Reuters Eikon

International Markets U.S. markets extended the previous week’s

loss amid lingering concerns about the outlook for the global economy. Hopes over a potential trade deal between the U.S. and China dampened after the U.S. Vice President, in the recently held Asia Pacific Economic Cooperation summit, said that the U.S. would not back down until China changes its ways.

Stock-specific weakness also kept markets under pressure as the stock price of a major multinational technology company slumped after it slashed production orders for its newly-launched model. Also, a series of weak corporate earnings soured market sentiment.

Indices Last

Closing*

Returns (in %)

1-Wk 1-Mth YTD

Europe

CAC-40 Index 4951.81 -1.46 -0.32 -6.79

DAX Index 11172.97 -1.48 -0.90 -13.51

FTSE 100 6981.50 -0.46 0.38 -9.19

Source: Thomson Reuters Eikon *Values as on Nov 23, 2018

European markets too witnessed selling pressure owing to worries over the outlook of the global economic health. Investors maintained a cautious stance ahead of a meeting between the U.S. and Chinese Presidents at the Nov 2018 G20 summit.

A series of weak economic data too restrained market participants from taking bets on riskier assets. The downturn was restricted by approval of U.K. and European Union on the draft agreement regarding future relationship between the nations ahead of the EU summit.

23500

24500

25500

26500

23-Oct-18 8-Nov-18

Dow Jones

Movement during the week

YTD Return : -1.75%

-4.44%

23-Nov-2018

-0.16

-1.37

-0.63

-4.91

-10.62

-13.03

-15 -10 -5 0

Nikkei

Strait Times

Hang Seng

% Change YTD

% Change weekSource: MFI Explorer

Weekly Return in (%) Source: MFI Explorer

Uncertainty over the fate of the U.S. – China trade relation kept Asian markets under pressure. While the U.S. President is hopeful of making a deal with China at the upcoming G20 summit in Argentina, U.S. Vice President warned that the U.S. would not back down until China changes its ways.

Investors got jittery after the World Trade Organization said trade restrictions imposed by G20 countries between mid-May and mid-Oct soared, covering $481 billion of trade and added that further escalation would likely increase global economic risks. Tech stocks were hit following reports that the U.S. has been pressuring foreign allies to avoid doing business with a major Chinese technology company.

International Markets

Return Value as of November 23, 2018

Commodities

Gold

Gold prices closed flat as the safe haven appeal of the bullion, which was due to uncertainty over the U.S.-China trade talks ahead of the upcoming G20 summit, was neutralised by reports that Italy may accommodate with the European Union and modify certain aspects of its budget.

Meanwhile, U.S. Federal Reserve officials expressed concerns of a weak global economy ahead. Weak global trend and softening demand from jewellers in Asian economies kept the bullion’s gains under leash.

Brent Crude

Brent crude prices slipped below the $60 per barrel level as concerns over supply glut and weak global cues continued to weigh on the commodity. The rising U.S. crude stockpiles have added to worries of oil oversupply amid soft demand outlook.

The commodity’s downside, however, was restricted by supply cut talks between Saudi Arabia and its OPEC allies.

Baltic Dry Index

The Baltic Dry Index rose on the back of higher capesize and panamax activities.

Performance of various commodities

Commodities Last

Closing* 1-Wk Ago

Brent Crude($/Barrel) 56.83 64.13

Gold ($/Oz) 1222.44 1221.39

Gold (Rs/10 gm)# 30834 30912

Silver ($/Oz) 14.24 14.41

Silver (Rs/Kg) # 36798 36747

Source: Thomson Reuters Eikon Values as on Nov 23, 2018 *Values as on Nov 22, 2018

6.50

7.00

7.50

8.00

8.50

9.00

9.50

10.00

10.50

23-Oct-18 3-Nov-18 14-Nov-18

Global Commodity Movement

Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)

Glo

bal

Co

mm

od

ity

Pri

ces

Rebased to 10

Source: Thomson Reuters Eikon

23-Nov-18

-11.38%

0.09%

-1.18%

9.50

9.60

9.70

9.80

9.90

10.00

10.10

23-Oct-18 2-Nov-18 12-Nov-18 22-Nov-18

USD GBP Euro JPYSource: RBI

Cu

rren

cy P

rice

s (

in t

erm

s o

f IN

R)

Rebased to 10 Currency Movement

Currency

Rupee

The Indian rupee posted its biggest weekly rise in nearly three years against the greenback and rose for the second consecutive week as global crude oil prices plummeted to a near 1-year low and U.S. Federal Reserve (Fed) officials acknowledged slowdown of the global economy.

Euro

The euro fell against the greenback as persisting worries about the U.S.-China trade conflict and continuing confrontation between the European Union (EU) and Italy over the latter’s budget plans kept market participants jittery.

Pound

The pound rose against the greenback after both Britain and EU agreed on a draft text that outlined their trade relationship post Brexit. However, gains were wiped out after Spain raised objections regarding the same and asked for changes to the withdrawal contract.

Yen

The yen weakened as the safe haven appeal of the dollar improved on persisting worries about the U.S.-China trade conflict, Italy’s budget negotiations and plunge in global crude oil prices.

Movement of Rupee vs. Other Currencies

Currency Last 1-Wk

Closing * Ago

U.S. Dollar 71.18 71.80

Pound Sterling 91.04 91.92

EURO 81.19 81.46

100 Yen 62.97 63.37

Source: RBI Figures in INR , *Values as on Nov 22, 2018

-1.81%

-0.87%

-0.96%

-0.34% -0.63%

Key Mutual Funds News

According to media reports, the Securities and Exchange Board of India (SEBI) is planning to add strict rules for liquid funds for making is safer for investors. The market regulator is said to be introducing robust rules for protecting investors from credit risk.

According to media reports, the mutual fund industry is urgently seeking to meet SEBI for getting clarification on the expenses being booked in the respective schemes. The industry is worried that the net asset value of liquid schemes would get adversely impacted if the borrowing costs are adjusted against such schemes.

According to media reports, SEBI is forming an enquiry on DSP Mutual Fund for selling AAA-rate bonds of a leading housing finance company at loss in Sep 2018. The market regulator wrote to the fund house probing if it has violated any model code of conduct by selling such bonds at loss.

Kotak Mutual Fund announced changes in the minimum application amount for SIP and Non-SIP for certain scheme, which stands effective from Nov 19,2018. Minimum SIP application amount for Kotak Bluechip Fund and Kotak Balanced Advanced Fund has been revised from Rs. 1,000 to Rs. 100. Minimum Non-SIP application amount for Kotak Bluechip Fund and Kotak Balanced Advanced Fund has been revised from Rs. 5,000 to Rs. 1,000 for the initial purchase.

DHFL Pramerica Mutual Fund launched Global Equity Opportunities Fund, which is an open-ended fund-of-fund scheme. The fund aims to generate long term capital appreciation and provides investors with the opportunity of investing in growth companies with no restriction on countries or sectors.

Axis Mutual Fund announced change in fund manager of Axis Equity Hybrid Fund from Shreyash Devalkar, Ashish Naik and R. Sivakumar to Ashish Naik and R. Sivakumar.

IDFC Mutual Fund announced the change in the fund manager for the debt portion of IDFC Hybrid Equity Fund from Suyash Choudhary and Anurag Mittal to Anurag Mittal, effective Nov 21, 2018.

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