News U Can Use
July 26, 2019
The Week that was…
22
nd
July to 26
th
July
2
Indian Economy
The International Monetary Fund (IMF) is further reducing India's annual growth prediction
as it expects lower domestic demand to restrict economic recovery. In the year ending Mar
31, 2020, the economy is now anticipated to grow 7 percent, 0.3 percentage point slower
than the April projection of the IMF. IMF cut the growth perspective for India by 0.2
percentage point to 7.3 percent in Apr 2019. In the year ending Mar 2021, economic
development is anticipated to accelerate to 7.2%.
The government has made a target of adding 1.3 crore income tax filers in FY20
compared with 1.1 crore fresh filers last fiscal year. In Assessment Year 2018-19, there
were 8.44 crore taxpayers. This included individuals who submitted an income return for
the 2018-19 Assessment Year as well as individuals who did not file an income return but
in whose case tax was deducted at source during the FY18.
According to the Economic Advisory Council to the Prime Minister (EAC-PM), growth in
R&D spending should be proportional with the growth of the economy and should be
aimed to reach at least 2% of GDP by 2022. In a study entitled ' R&D Expenditure
Ecosystem, ' the EAC-PM stated that the Centre's line ministries could be required to
allocate a certain proportion of their research and innovation budget to the development
and deployment of technologies according to their respective ministries ' priorities.
3
Indian Equity Market
4
Domestic Equity Market Indices
Indices 26-Jul-19 1 Week Return YTD Return
S&P BSE Sensex 37882.79 -1.18% 5.03%
Nifty 50 11284.3 -1.18% 3.88%
S&P BSE Mid-Cap 13856.19 -1.58% -10.25%
S&P BSE Small-Cap 13060.34 -1.88% -11.19%
Source: MFI Explorer
NSE Advance/Decline Ratio
Date Advances Declines
Advance/Decline Ratio
22-Jul-19 541 1283 0.42
23-Jul-19 925 913 1.01
24-Jul-19 566 1260 0.45
25-Jul-19 809 1021 0.79
26-Jul-19 994 816 1.22
Source: NSE
Indian equity markets closed on weak
note in the week ended Jul 26, 2019.
International Monetary Fund (IMF)
reduced its growth estimate for the
Indian economy, thereby weighing on
the indices. IMF cut 30 basis points
from its earlier growth estimates for
FY20 and FY21. Losses were extended
following foreign fund outflows and a
weak set of corporate earnings seen in
the past couple of days.
Further, the non-performing asset
(NPA) problem of banks continues to
mar the sector as the leading private
sector bank of the country reported a
high double digit increase in its NPAs,
drumming the sector down. Also,
derivative agreements expiry in Jul
2019 came in the way of market gains.
Weakness in rupee added to the woes.
Ratios
S&P BSE
Sensex
Nifty 50
S&P BSE
Mid Cap
S&P BSE
Small Cap
P/E
27.10 27.73 31.12 33.51
P/B
2.89 3.53 2.33 1.83
Dividend Yield
1.22 1.32 1.07 1.10
Source: BSE, NSE Value as on
Jul 26, 2019
Indian Equity Market (contd.)
5
Sectoral Indices
Indices
Last Returns (in %)
Closing* 1-Wk 1-Mth
S&P BSE Auto
16185.2 -0.47% -9.10%
S&P BSE Bankex
33118.7 -1.03% -5.40%
S&P BSE CD
22942.9 0.07% -11.27%
S&P BSE CG
17778.6 -1.38% -10.28%
S&P BSE FMCG
11115.9 0.26% -2.17%
S&P BSE HC
12959.2 1.46% 0.70%
S&P BSE IT
15442.4 -0.08% -2.40%
S&P BSE Metal
10077.5 -1.58% -10.54%
S&P BSE Oil & Gas
13526.9 -2.73% -8.96%
Source: Thomson Reuters Eikon
*Value as on Jul 26, 2019
S&P BSE Oil & Gas was the major loser that
fell 2.73% followed by S&P BSE Metal that
fell 1.58%. S&P BSE Capital Goods and S&P
BSE Realty that fell 1.38% and 1.21%,
respectively.
S&P BSE Bankex and S&P BSE Power fell
1.03% and 0.50%, respectively. Non-
performing asset (NPA) problem of banks
weighed on the banking sector. However,
S&P BSE Healthcare was the major gainer
and grew 1.46% followed by S&P BSE Teck
that grew 0.33%.
Indian Derivatives Market Review
Nifty Aug 2019 Futures were at 11,327.00, a premium of 42.70 points, above the spot
closing of 11,284.30. The total turnover on NSE’s Futures and Options segment for the
week stood at Rs. 71.70 lakh crore as against Rs. 57.40 lakh crore for the week to Jul 19.
The Put-Call ratio stood at 0.87 compared with the previous week’s close of 0.94.
The Nifty Put-Call ratio stood at 1.37 against the previous week’s close of 1.05.
Domestic Debt Market
6
Debt Indicators
(%)
Current
Value
1-Wk
Ago
1-Mth
Ago
6-Mth
Ago
Call Rate
5.56 5.70 5.75 6.41
91 Day T-Bill
5.74 5.73 5.98 6.58
07.32% 2024, (5 Yr GOI)
6.46 6.33 6.82 7.29
07.26% 2029, (10 Yr GOI)
6.53 6.36 6.93 7.33
Source: Thomson Reuters Eikon
Value as on Jul 26, 2019
Bond yield rose following the central
bank governor’s comment, which
lowered expectations of deep policy
rate cuts. He said that future interest
rate movement would be driven by
data, which dampened investor
sentiments. In addition, rise in crude
oil prices amid escalating geopolitical
tension in the Middle East following
the detention of British tankers by
Iranian military also pushed the yield
higher.
Yield rose further as investor anxiety
rose after a local media agency
reported that the Prime Minister’s
Office is inclined to issue rupee-
denominated bonds in the foreign
market, instead of issuing foreign
currency notes.
Yields on the 10-year benchmark
paper (7.26% GS 2029) surged 17
bps to close at 6.53% compared with
the previous close of 6.36%.
6.40
6.45
6.50
6.55
22-Jul 23-Jul 24-Jul 25-Jul 26-Jul
Yield in %
10 -Yr Benchmark Bond ( % )
Source: CCIL
Domestic Debt Market (Spread Analysis)
7
Maturity
G-Sec Yield
(%)
Corporate Yield
(%)
Spread
bps
1 Year 6.00 7.78 177
3 Year 6.41 7.71 130
5 Year 6.57 7.81 125
10 Year 6.63 8.18 155
Source: Thomson Reuters Eikon Value as on Jul 26, 2019
Yields on gilt securities surged across the
maturities by up to 23 bps. Yield rose the
most on 13-year paper.
Corporate bond yields increased sharply
across the curve in the range of 10 to 28
bps, barring 15-year that plunged 34 bps.
Yield increased the most on 8-year paper.
Difference between the spread of AAA
corporate bond and gilt expanded across
the segments by up to 22 bps, leaving 10- &
15-year papers that contracted 2 and 49
bps, respectively.
0
6
12
18
5.60
6.10
6.60
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 26-Jul-19 19-Jul-19
Yield in %
Change in bps
Source: Thomson Reuters Eikon
Regulatory Updates in India
8
The RBI governor has introduced Utkarsh 2022, its medium- term strategy framework, in
line with the changing macro-economic setting. The framework was introduced to attain
excellence in the fulfilment of RBI's mandates and to strengthen citizens ' and other
institutions ' confidence, the bank said.
The government has increased the period of doubling money for investments in Kisan Vikas
Patra (KVP) by 1 month to nine years and five months given the falling interest rates. The
funds parked in KVP with effect from Jul 1, 2019, will double in "9 years and 5 months" or
113 months as opposed to "9 years and 4 months" or 112 months previously, said the
finance ministry, amending the Kisan Vikas Patra Rules, 2014.
The Cabinet endorsed formal amendments to the Aadhaar and Other Laws (Amendment)
Bill 2019, enhancing Aadhar in India. It offered a fillip to India's sugarcane farming industry.
The Act offers, subject to authentication, for the use of Aadhaar number as evidence of a
person's identity. The Bill replaces the provision that, by authentication or offline verification,
a person may willingly use his Aadhaar number to create his identity. The Bill also says that
authentication of an individual's identity through Aadhaar may be made compulsory only by
Parliament's law for the provision of any service.
Regulatory Updates in India (contd..)
9
The submission of a panel report on the transfer of Reserve Bank of India’s surplus
reserves to the Centre and the government’s plan to tap the overseas markets with its
maiden offshore sovereign bond/s worth $10 billion could get delayed with the transfer of
former finance secretary to the power ministry. The bureaucracy was reshuffled on Jul 24,
2019, media reports showed.
The government has de-registered 4 lakh shell companies as the Parliament approved the
Companies Amendment Bill 2019. The bill aims to stiffen corporate social responsibility
(CSR) norms and ensure stricter action for non-compliance of the company law regulations.
The finance minister said companies not spending the mandatory 2% profit on CSR
activities for a total period of four years will be required to deposit the amount in a special
account.
Global News/Economy
As the U.S.-China trade conflict continues, the International Monetary Fund (IMF) has again
cut its prediction for worldwide financial development, with Brexit continuing to worry and
inflation muted. In 2019, the global economy is expected to grow by 3.2%. The revised figure
for economic growth is 0.1 percentage points smaller than the IMF's Apr 2019 prediction and
0.3 percentage points lower than the estimate at the beginning of the year.
A report by the Commerce Department showed U.S. economic growth slowed in the second
quarter but still exceeded estimates. Real gross domestic product climbed 2.1% in the
second quarter following 3.1% jump in the first quarter.
A Commerce Department report showed a much stronger than expected rebound in new
orders for U.S. manufactured durable goods in Jun 2019. Durable goods orders spiked 2.0%
in Jun after plunging 2.3% in May 2019.
The European Central Bank (ECB) has left its interest rates unchanged and altered its
forward guidance, signalling they will be reduced in future, and that policymakers are
planning a comprehensive stimulus package. ECB president stressed on the need for
significant stimulus for the euro area economy as policymakers assessed that the outlook
was getting worse.
Cabinet Office data showed Japan's leading index eased more than estimated to the lowest
level in six-and-a-half years in May 2019. The leading index, which measures the future
economic activity, fell to 94.9 in May from 95.9 in Apr 2019.
10
Global Equity Markets
11
Global Indices
Indices
26-Jul-19
1-Week
Return
YTD
Return
Russell 3000
1330.87 1.97% 25.24%
Nasdaq 100
8016.95 2.32% 26.65%
FTSE 100
7549.06 0.54% 12.20%
DAX Index
12419.90 1.30% 17.62%
Nikkei Average
21658.15 0.89% 8.21%
Straits Times
3363.76 -0.42% 9.61%
Source: Thomson Reuters Eikon
Value as on Jul 26, 2019
U.S.
U.S. markets witnessed initial buying
spree, led by positive cues from media
reports stating that the U.S. officials
shall travel to China soon for face-to-
face trade talks. A series of upbeat
corporate earning numbers also buoyed
market sentiments. On the U.S.
economic front, a report showing a
stronger than expected rebound in U.S.
new home sales in Jun.
Europe
The initial optimism about monetary easing by the ECB, which contributed to gains in the
European markets, faded soon after the central bank policy meeting. The ECB
unexpectedly left its interest rates unchanged and cited that the risk of recession is
relatively low. Buying interest was seen following some upbeat earnings reports from U.S.
and Europe.
Asia
Asian markets witnessed a mixed trend over the week. Positive vibes generated from
expectations over aggressive rate cuts by U.S. Federal Reserve was neutralised by ECB’s
decision to keep interest rates unchanged, defying market expectations of rate cut.
Global Debt (U.S.)
12
Yields on the 10-year U.S. Treasury
bond rose 3 bps to 2.08% compared
with the previous week’s close of 2.05%.
U.S treasury prices initially grew as
dovish policy view of ECB and the U.S.
Federal Reserve, supported demand for
government debt. Soon, prices fell on a
report that U.S. negotiators are heading
to China to discuss trade terms, which
increased hopes that the two countries
may curb the trade war that has
weighed on economic growth.
Losses trimmed following European
government bonds, after downbeat
economic data in the region added to
hopes that the ECB will indicate easier
monetary policy. Prices fell further after
ECB President said that the bank sees
a low risk of a recession in the euro
zone, even as he acknowledged a
worsening outlook.
2.01
2.04
2.07
2.10
22-Jul 23-Jul 24-Jul 25-Jul 26-Jul
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) 62.30 61.18
Gold ($/Oz) 1418.31 1424.91
Gold (Rs/10 gm) 34781 35091
Silver ($/Oz) 16.39 16.21
Silver (Rs/Kg) 40811 40624
Source: Thomson Reuters Eikon *Value as on Jul 26, 2019
Gold
Gold price edged lower during the week
on dollar strength after the International
Monetary Fund raised its growth forecasts
for U.S. in 2019. Robust Jun data for new
orders of durable goods in the U.S. also
dented the yellow metal’s appeal.
Brent Crude
Brent crude prices rose amid geopolitical
disturbance in the Middle East following
the recent seizure of British tankers by the
Islamic Revolutionary Guard Corps. This
tensed relations between the U.S., the
U.K. and Iran. Fall in U.S. crude
stockpiles by 10.84 million barrels in the
week ended Jul 19, 2019 also lifted the
commodity.
Baltic Dry Index
The Baltic Dry Index fell on the back of
declining capesize and panamax
activities.
8.50
9.00
9.50
10.00
10.50
11.00
26-Jun-19 6-Jul-19 16-Jul-19 26-Jul-19
Global Commodity Movement
Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl)
Global Commodity Prices
Rebased to 10
Source: Thomson Reuters Eikon
1.83%
-0.46%
1.13%
Currencies Markets
14
Movement of Rupee vs Other Currencies
Currency Last Closing* 1-Wk Ago
US Dollar
69.06 68.82
Pound Sterling
85.85 86.22
EURO
76.94 77.52
100 Yen
63.58 63.93
Source: RBI Figures in INR , *Value as on Jul 26, 2019
Rupee
The Indian rupee weakened against the
greenback likely on concerns over
foreign fund outflows and weakness in
domestic equity markets.
Euro
The euro fell against the dollar after U.S
President and U.S. lawmakers entered a
two-year deal that raises limits on
government borrowing, thereby averting
another partial government shutdown.
Pound
The pound declined against the
greenback, weighed down by European
Commission President’s telling Britain's
new prime minister, that a deal agreed by
his predecessor was the best and the
only Brexit agreement.
Yen
The yen dropped against the dollar after
U.S President and U.S. lawmakers
entered a two-year deal that raises limits
on government borrowing.
9.60
9.80
10.00
10.20
26-Jun-19 6-Jul-19 16-Jul-19 26-Jul-19
USD GBP Euro JPY
Source: Thomson Reuters Eikon
Currency Prices ( in terms of INR)
Rebased to 10
Currency Movement
-0.44%
0.34%
-0.74%
-0.55%
15
The Week that was…
22
nd
July to 26
th
July
The Week that was (July 22 July 26)
16
Date Events
Present
Value
Previous
Value
Monday,
July 22, 2019
Japan Convenience Store Sales (YoY) (Jun) 0.00% 1.70%
U.S. Chicago Fed Nat Activity Index (Jun) -0.02 -0.03
Tuesday,
July 23, 2019
U.S. House Price Index (MoM) (May) 0.10% 0.40%
U.S. Existing Home Sales (MoM) (Jun) -1.70% 2.90%
Wednesday,
July 24, 2019
U.S. New Home Sales (MoM) (Jun) 7.00% -8.20%
Germany Markit Composite PMI (Jul P) 51.4 52.6
Eurozone Markit Composite PMI (Jul P) 51.5 52.2
U.S. MBA Mortgage Applications (Jul 19) -1.90% -1.10%
Thursday,
July 25, 2019
European Central Bank Rate Decision 0.00% 0.00%
U.S. Advance Goods Trade Balance (Jun) -$74.2B -$75.0B
U.S. Durable Goods Orders (Jun P) 2.00% -2.30%
Friday,
July 26, 2019
U.S. Gross Domestic Product Annualized (QoQ) (2Q A) 2.10% 3.10%
U.S. Personal Consumption (2Q A) 4.30% 1.10%
17
The Week Ahead
29
th
July to 02
nd
August
18
The Week Ahead
Day Event
Monday,
July 29, 2019
U.K. Mortgage Approvals (Jun)
Japan Jobless Rate (Jun)
Tuesday,
July 30, 2019
Bank of Japan Rate Decision
Germany Consumer Price Index (YoY) (Jul P)
U.S. Personal Consumption Expenditure Core (YoY) (Jun)
U.S. Consumer Confidence Index (Jul)
U.K. GfK Consumer Confidence (Jul)
Wednesday,
July 31, 2019
U.S. Federal Reserve Rate Decision
U.S. ADP Employment Change (Jul)
China Manufacturing PMI (Jul)
Germany Unemployment Change (000's) (Jul)
Eurozone Gross Domestic Product (YoY) (2Q A)
Thursday,
Aug 01, 2019
Bank of England Rate Decision
U.S. ISM Manufacturing PMI (Jul)
Friday,
Aug 01, 2019
U.S. Change in Non-farm Payrolls (Jul)
U.S. Unemployment Rate (Jul)
U.S. Factory Orders (Jun)
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19
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