News U Can Use August 09, 2019

The Week that was…

5th August to 9th August

2

Indian 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

4

Domestic Equity Market Indices

Indices 09-Aug-19 1 Week Return YTD Return

S&P BSE Sensex 37,581.91 1.25% 4.20%

Nifty 50 11,109.65 1.02% 2.27%

S&P BSE Mid-Cap 13,670.05 0.91% -11.45%

S&P BSE Small-Cap 12,699.50 1.63% -13.65%

Source: MFI Explorer

NSE Advance/Decline Ratio

Date Advances DeclinesAdvance/Decline

Ratio

05-Aug-19 497 1354 0.37

06-Aug-19 1329 498 2.67

07-Aug-19 854 974 0.88

08-Aug-19 1057 742 1.42

09-Aug-19 1170 633 1.85Source: NSE

• Indian equity markets gained in the week

ended Aug 9, 2019. Investors welcomed

media reports showing the government

could exempt foreign portfolio investors

(FPIs) from an increase in taxes.

• The Reserve Bank of India (RBI) cutting

interest rates by a more than expected

35 basis points and promising liquidity

support to the financial sector at its policy

meet supported sentiment.

• Initially, markets were tensed over trade

war after China devalued its currency to

combat U.S.’ tariff threat and stopped

import of U.S. agricultural products.

• Later, investor expectations of a rate cut

by the Reserve Bank of India at its policy

meet on Aug 7, 2019, lifted the

sentiment. Also, China took steps to

stabilise the yuan after the U.S. labelled

the country as a currency manipulator.

RatiosS&P BSE

SensexNifty 50

S&P BSE

Mid Cap

S&P BSE

Small Cap

P/E 26.28 27.41 32.61 33.85

P/B 2.84 3.45 2.31 1.81

Dividend

Yield1.23 1.33 1.08 1.14

Source: BSE, NSE Value as on Aug 09, 2019

Indian Equity Market (contd.)

5

Sectoral Indices

IndicesLast Returns (in %)

Closing* 1-Wk 1-Mth

S&P BSE Auto 16,061.92 2.73% -6.25%

S&P BSE Bankex 32,114.92 0.66% -6.57%

S&P BSE CD 22,711.46 0.64% -2.24%

S&P BSE CG 17,301.19 0.16% -10.10%

S&P BSE FMCG 11,079.77 0.89% -1.41%

S&P BSE HC 12,693.67 1.10% -0.68%

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 Oil & Gas 12,872.94 -1.44% -9.65%

Source: Thomson Reuters Eikon *Value as on Aug 09, 2019

• S&P BSE Auto was the major gainer, up

2.73%, followed by S&P BSE IT and S&P

BSE Teck that gained 2.42% and 2.37%,

respectively. Auto sector gained as industry

leaders met the finance minister to voice their

concerns about slowing growth and job

losses. S&P BSE Healthcare and S&P BSE

Realty gained 1.10% and 0.98%,

respectively.

• S&P BSE Metal was the major loser, down

3.03%. The metal sector lost as tensions on

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.

Domestic Debt Market

6

Debt Indicators

(%)

Current

Value

1-Wk

Ago

1-Mth

Ago

6-Mth

Ago

Call Rate 5.32 5.60 5.62 6.35

91 Day T-Bill 5.42 5.65 5.90 6.38

07.32% 2024, (5 Yr GOI) 6.23 6.25 6.52 7.15

07.26% 2029, (10 Yr GOI) 6.49 6.35 6.59 7.33

Source: Thomson Reuters Eikon Value as on Aug 09, 2019

• Bond yields rose on account of

ambiguity over future policy rate cuts,

both in terms of quantum and timing,

after the rate-cutting panel trimmed

repo rate by 35 bps in the policy

meet. The RBI governor said future

rate cuts would be data driven.

• Besides, profit booking by investors

and the rising geopolitical worries

over Jammu & Kashmir also weighed

on sentiments. However, softness in

crude prices gave little support to the

domestic debt market.

• Yields on the 10-year benchmark

paper (7.26% GS 2029) surged 14

bps to close at 6.49% compared with

the previous close of 6.35% after

trading in the range of 6.30% to

6.52%.

6.30

6.38

6.46

6.54

5-Aug 6-Aug 7-Aug 8-Aug 9-Aug

Yie

ld in

%

10 -Yr Benchmark Bond ( % )

Source: CCIL

Domestic Debt Market (Spread Analysis)

7

MaturityG-Sec Yield

(%)

Corporate Yield

(%)

Spread

bps

1 Year 5.94 7.62 169

3 Year 6.18 7.68 150

5 Year 6.41 7.81 140

10 Year 6.60 8.13 153

Source: Thomson Reuters Eikon Value as on Aug 09, 2019

• Yields on gilt securities fell across 1 to 7-

year maturities in the range of 2 bps to 11

bps and expanded across the remaining

maturities by up to 15 bps.

• Corporate bond yields contracted on 1-year

paper, 2-year paper and 5 to 7-year

maturities by up to 21 bps. Yields increased

across the remaining maturities in the range

of 3 bps to 27 bps barring 4-year paper

which closed steady.

• Difference in spread between AAA corporate

bond and gilt expanded across the

maturities by up to 26 bps barring 1, 5 and

10-year paper.

-27

-13

1

15

5.30

5.90

6.50

7.10

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

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

Change in bps 09-Aug-19 02-Aug-19

Yie

ldin

%

Cha

nge

in b

ps

Source: Thomson Reuters Eikon

Regulatory Updates in India

8

• 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.

Regulatory Updates in India (contd..)

9

• 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.

Global 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%.

10

Global Equity Markets

11

Global Indices

Indices 09-Aug-191-Week

Return

YTD

Return

Russell 3000 1,714.97 -0.48% 16.50%

Nasdaq 100 7,646.27 -0.60% 20.79%

FTSE 100 7,253.85 -2.07% 7.81%

DAX Index 11,693.80 -1.50% 10.75%

Nikkei Average 20,684.82 -1.91% 3.35%

Straits Times 3,168.94 -2.83% 3.26%Source: Thomson Reuters Eikon Value as on Aug 09, 2019

U.S.

• Heightened worries over the U.S.-

China trade turf kept U.S. markets

under pressure during the week.

• In the latest development, media

reports stated that the U.S. government

is keeping on hold its decisions about

licenses for U.S. companies to restart

business with one of the Chinese tech

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.

Global Debt (U.S.)

12

• Yields on the 10-year U.S. Treasury

bond plunged 13 bps to 1.73%

compared with the previous week’s

close of 1.86%.

• U.S Treasury prices plummeted earlier

during the week under review as

escalation in trade tensions between

U.S. and China fuelled concerns of a

global economic slowdown which

boosted its safe haven appeal.

Expectations that the U.S. Federal

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.

1.65

1.70

1.75

1.80

5-Aug 7-Aug 9-Aug

US 10-Year Treasury Yield Movement

Source: Thomson Reuters Eikon

Commodities Market

13

Performance of various commodities

Commodities Last Closing* 1-Week Ago

Brent Crude($/Barrel) 56.51 60.26

Gold ($/Oz) 1496.84 1440.46

Gold (Rs/10 gm) 37270 35341

Silver ($/Oz) 16.94 16.21

Silver (Rs/Kg) 43009 40746

Source: Thomson Reuters Eikon *Value as on Aug 09, 2019

Gold

• Gold prices edged higher amid

deepening trade worries between the

U.S. and China. Escalating trade tension

worsened global growth outlook, which in

turn, added to the bullion’s safe-haven

appeal. However, the upside was

somewhat restricted by better-than-

expected Chinese export data for Jul.

Brent Crude

• Brent crude prices tumbled with

weakening demand outlook amid

deepening U.S.-China trade worries,

which threatened global growth.

However, reports that the U.S. President

levied sanctions on the Venezuelan

government restricted the downside.

Baltic Dry Index

• The Baltic Dry Index fell on the back of

declining capesize and panamax

activities.

8.20

9.30

10.40

11.50

9-Jul-19 19-Jul-19 29-Jul-19 8-Aug-19

Global Commodity Movement

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

Glo

ba

lC

om

mo

dity P

rice

s

Rebased to 10

Source: Thomson Reuters Eikon

-6.22%

3.91%

4.50%

9-Aug-19

Currencies Markets

14

Movement of Rupee vs Other Currencies

Currency Last Closing* 1-Wk Ago

US Dollar 70.52 69.40

Pound Sterling 85.61 84.09

EURO 78.91 76.94

100 Yen 66.58 64.82

Source: RBI Figures in INR , *Value as on Aug 09, 2019

Rupee

• The rupee weakened against the

greenback and witnessed the biggest

weekly fall in eight months as escalation

in trade tensions between U.S. and

China dampened investor risk appetite.

Euro

• The euro rose against the greenback as

escalation in trade tensions between

U.S. and China fuelled hopes of more

rate cuts by the U.S. Federal Reserve.

Pound

• The pound plummeted against the

greenback on growing possibility of a

general election in Britain after the

October Brexit deadline.

Yen

• The yen surged against the greenback

as escalation in trade tensions between

U.S. and China increased concerns of a

global economic slowdown and boosted

its safe haven appeal.

9.50

9.90

10.30

10.70

9-Jul-19 19-Jul-19 29-Jul-19 8-Aug-19

USD GBP Euro JPY

Source: Thomson Reuters Eikon

Cu

rren

cy P

rice

s (

in t

erm

s o

f IN

R)

Rebased to 10 Currency Movement

1.81%

1.61%

2.56%

2.72%

9-Aug-19

15

The Week that was…

5th August to 9th August

The Week that was (August 5 – August 9)

16

Date EventsPresent

Value

Previous

Value

Monday,

August 05, 2019

• India Nikkei Services PMI (Jul) 53.80 49.60

• U.S. ISM Non-Manufacturing/Services Comp. (Jul) 53.70 55.10

Tuesday,

August 06, 2019

• Japan Leading Index CI (Jun P) 93.30 94.90

• German Factory Orders (YoY) (Jun) -3.60% -8.40%

• Germany Markit Construction PMI (Jul) 49.50 50.00

Wednesday,

August 07, 2019

• India Bi-monthly Monetary Policy Statement 5.40% 5.75%

• Germany Industrial Production (YoY) (Jun) -5.20% -3.70%

• 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

Thursday,

August 08, 2019

• Japan GDP Annualized (QoQ) (2Q P) 1.80% 2.80%

• China Trade Balance CNY (Jul) 310.26b 345.10b

• Japan Eco Watchers Survey Current (Jul) 41.20 44.00

• U.S. Initial Jobless Claims (AUG 3) 209k 217k

Friday,

August 09, 2019

• China Consumer Price Index (YoY) (Jul) 2.80% 2.70%

• U.K. Gross Domestic Product (YoY) (2Q P) 1.20% 1.80%

• U.K. Trade Balance (Jun) £1779m -£2002m

17

The Week Ahead

12th August to 16th August

18

The Week Ahead

Day Event

Monday,

Aug 12, 2019• U.S. Monthly Budget Statement (Jul)

Tuesday,

Aug 13, 2019

• India Consumer Price Index (Jul)

• Germany ZEW Survey Expectations (Aug)

• Eurozone ZEW Survey (Economic Sentiment) (Aug)

• U.S. Consumer Price Index (YoY) (Jul)

• Japan Tertiary Industry Index (MoM) (Jun)

Wednesday,

Aug 14, 2019

• India Wholesale Price Index (Jul)

• Germany Gross Domestic Product (YoY) (2Q P)

• U.K. Consumer Price Index (YoY) (Jul)

• Eurozone Gross Domestic Product (YoY) (2Q P)

Thursday,

Aug 15, 2019

• U.S. Retail Sales Advance (MoM) (Jul)

• Japan Industrial Production (YoY) (Jun F)

• U.S. Initial Jobless Claims (Aug 10)

• U.S. Business Inventories (Jun)

Friday,

Aug 16, 2019

• U.S University of Michigan Sentiment (Aug P)

• U.S. Housing Starts (MoM) (Jul)

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19

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