The World This Week – 31st July 2020 to 7th August 2020

 Indian Equity Summary-  

·        Reflection of the global volatility was visible in the domestic equity markets .The nifty small cap (+5%) indices outperformed the benchmarkØ indices, Nifty (+1.5%) on WoW basis. The overall market closed with strong market breadth, and lower volatility while the INR marginally weakened. Top gaining sectoral indices includes Bse Metals ,BSE Auto and BSE CD while BSE Bankex and BSE IT were laggards.

·        In the recently conducted MPC meeting RBI maintained status quo on the rates.Ø  

·        Going forward, global factors like development on the US -China relationship front , and domestic factors like the monsoon trajectory andØ remaining earnings season ; will continue to dictate the trend of the domestic equity market. We expect the trading range for Nifty between 10900-11,400 in the near term.

Indian Debt Market-  

·        Government bond prices fell marginally as the yield of the 10-year benchmark 5.79% 2030 paper settled at 5.89% on August 7 as against 5.84%Ø on July 31 .  

·        The Reserve Bank of India (RBI) left the key interest rates unchanged and allowed banks to restructure certain loans as part of efforts to reviveØ the economy.  

·        We expect the 10 year benchmark yield to trade between 5.80-6.05% in near term.Ø

Domestic News  

·        India Manufacturing Purchasing Managers’ Index (PMI) PMI stood at 46 in July, down from 47.2 in June.Ø

·        India posted a trade surplus of $790 million in June, its first in over 18 years, with imports plunging as the coronavirus pandemic depressedØ domestic demand for crude oil, gold and other industrial products, reflecting a slowing economy.  

·        Mutual funds that invest in equity showed a net outflow of 24.80 billion rupees ($331.02 million) in July compared with an inflow of 2.41 billionØ rupees in June, data published on Monday by the Association of Mutual Funds in India (AMFI) showed.

International News  

·        US initial jobless claims tumbled to 1.186 million, a decrease of 249,000 from the previous week's revised level of 1.435 million.Ø

·        Japan first-quarter GDP unchanged at 2.2% annualised contraction after 2nd revision.Ø  

·        Fitch Ratings has affirmed United States' Long-Term Foreign-Currency (LTFC) and Local-Currency (LC) Issuer Default Ratings (IDRs) at 'AAA' andØ revised the Outlooks to Negative from Stable.  

·        SOUTH Korea's manufacturing activity shrank at a much slower pace in July, signalling that a gradual recovery in demand is gaining momentumØ on easing lockdowns, although the resurgence in infections remained a risk.

 

Disclaimer :

The information and views presented here are prepared by Karvy Private Wealth (a division of Karvy Stock Broking Limited) or other Karvy Group companies. The information contained herein is based upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. Karvy Private Wealth is only a distributor of securities and financial market products.

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The World This Week – 24th July 2020 to 31st July 2020

 Indian Equity Summary- 

·         SØ&P BSE Sensex and Nifty 50 fell by 1.4% and 1% respectively on a WoW basis, and the six-week positive trend in Indian equities came to a pause as negative feelings prevailed among market participants, on the back of rising Covid-19 cases as well as a decline in US GDP at an annualized rate of 32.9% in 2Q 2020. Healthcare and IT were the best-performing sectors, while oil & gas and banks were the worst-performing ones on a weekly basis. 

·         Going forward, global factors like development on the US -China relationship front , and domestic factors like the outcome of the RBI MPCØ meeting ( we expect a pause in Repo rate cut in the August RBI MPC meeting) and the monsoon trajectory ; will continue to dictate the trend of the domestic equity market. We expect the trading range for Nifty between 10700-11,100 in the near term.

Indian Debt Market- 

·         Government bond prices fell marginally as the yield of the 10-year benchmark 5.79% 2030 paper settled at 5.84% on July 31 as against 5.82% onØ July 24 .

·         India’s fiscal deficit during the first quarter of this fiscal widened to Rs 6.62 lakh crore or 83.2% of the budget estimates, mainly on account of poorØ tax collections due to the lockdown; fiscal deficit during the corresponding period of last year was 61.4% of the budget estimates. 

·         RBI introduced new 5.77% GS 2030 last week.Ø 

·         We expect the 10 year benchmark yield to trade between 5.80-6.05% in near term.Ø

Domestic News 

·         Deposit growth in the banking system continued to grow at 10.1 per cent on a year-on-year basis, even though banks have reduced their depositØ rates sharply in the absence of credit growth and liquidity induced by RBI due to Covid-19. 

·         India’s factory slump deepened in July as renewed lockdown measures to contain surging coronavirus cases weighed on demand and output,Ø raising the chances of a sharper economic contraction, a private business survey showed on Monday. 

·         Indian power plants used the most gas in at least 3-1/2 years in the June quarter, as operators along the west coast snapped up cheap liquefiedØ natural gas (LNG) imports that have become competitive against coal, government data showed.

International News 

·         US real gross domestic product plummeted at a record annual rate of 32.9% in the second quarter of 2020 following a 5% decline in the firstØ quarter 

·         U.S. manufacturing activity accelerated to its highest level in nearly 1-1/2 years in July as orders increased despite a resurgence in new COVID-Ø 19 infections 

·         Tens of millions of people in and around the Philippine capital will go back to a strict lockdown from Tuesday, threatening incomes and hopesØ for reviving a once dynamic economy as authorities take drastic measures to halt surging virus cases.

 

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ADVICE FOR THE WISE - AUGUST 2020

 FROM THE CEO’s DESK

Dear Investors, “Behind every dark cloud there is an every-shining sun. Just wait. In time, the cloud will pass.” Marianne Williamson. All inclusive, economies are seeing recuperation with pointers, for example, PMI showing an improvement in spite of infection resurgence in a couple of nations. U.S., Euro, and China manufacturing activities have picked up pace, with July numbers in these three regions crossing 50 mark, indicating expansion. Financial and monetary policies remain exceptionally accommodative, and liquidity remains buoyant, which should provide continued support for further economic recovery. Equity market declines provide opportunities to buy better stocks at lower valuations. We foresee this slowdown and the year 2020 from an investment opportunity viewpoint rather than worrying, as the risk-reward ratio in the current scenario is in favour of equity investments. The current positive outlook on the global markets is well backed by negative real rates, expansion of the central bank balance sheet along with growth recovery and medical progress on COVID-19 While there is a growing increase in the number of COVID cases on the domestic front, there has been an improvement in the recovery rate; in India it is about 68.41 percent while 64.05 percent globally. Early signs of pent-up demand are visible in the economy as indicated by high frequency indicators. Expected normal monsoon and higher sowing of Kharif crops YoY gives us the solace that the rural economy will play a major part in the future economic growth. Other macro factors such as low oil prices and stable currency, high forex reserves and current-account surplus will act as tailwinds for the domestic equity market. Expectations of the Q1 FY21 earnings to bottom out by FY21, while the economy and earnings are expected to normalize by FY23 keeping in mind the current low interest rate scenario and high liquidity, supports valuations. With the declining dollar index and humongous global liquidity we expect the money to flow into EMs. In July, the domestic equity market kept witnessing strong FII inflows coupled with steady SIP flows in mutual funds.

 

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The World This Week 10th July 2020 – 17th July 2020

Indian Equity Summary-  

·        Sensex ended higher by 1.2 percent as the bullish trend persisted for the fifth consecutive week in the domestic equity market ,on the back ofØ positive global cues and optimism over the development of Covid-19 vaccine .The focus is now turning to Q1FY21 earning season and more importantly for guidance and viewpoints of management.

·        Going forward, global factors like development on the US -China relationship front , any resurgence of Covid-19 cases globally, as economiesØ have started opening up ; will continue to dictate the trend of the domestic equity market. We expect the trading range for Nifty between 10800-11200 in the near term.

Indian Debt Market-  

·        The bond prices fell as the yield on the latest 10-year benchmark 5.79% 2030 paper settled at 5.80% on Jul 17 compared with 5.76% on Jul 10.Ø  

·        Reserve Bank of India announces the auction of three Government of India 91day, 182 day and 364 day Treasury Bills for an aggregate amount ofØ ₹35,000, to be conducted on 22nd July 2020.  

·        State Governments announced to sell securities by way of an auction to be conducted on 21th July 2020, for an aggregate face value of ₹ 9,000 Cr.Ø  

·        We expect that RBI will be in wait and watch mood before taking any major decision of rate cut on the back of recent inflation print.Ø  

·        We expect the 10 year benchmark yield to trade between 5.80-6.05% in near term.Ø

Domestic News

·        India’s retail trade has suffered a business loss of about Rs 15.5 lakh crore in past 100 days due to the COVID-19 pandemic as per theØ Confederation of All India Traders (CAIT).  

·        The Foreign Direct Investment (FDI) from the US to India has crossed the $40 billion mark as on year to date, reflecting the growing confidence ofØ American companies in the country.

·        Forex reserves rose by $3.1 billion on a WoW basis to hit a record high of $516.36 billion for the week ended July 10, according to Reserve BankØ of India (RBI).  

·        According to the latest data released by the Ministry of StatisticsØ & Programme Implementation (MoSPI), India’s retail inflation(CPI) grew to 6.09% in the month of June as against the prior released figure of 5.84 in April for the month of March.

International News  

·        Hong Kong's April-June unemployment rises to 6.2%, being the highest in over 15 years.Ø

·        Japan’s exports plunged 26.2% in June while Imports fell by 14.4% in June on a year on year basis , as per the data released byØ Ministry of Finance (MOF).  

·        Foreign direct investment (FDI) into China fell 1.3% in the first half of this year from a year earlier to 472.18 billion yuan ($67.47Ø billion)as per China’s commerce ministry.  

·        Gross domestic product (GDP) of China rose to 3.2% in the second-quarter from a year earlier as per the National Bureau ofØ Statistics, faster than the 2.5% forecast by analysts in a Reuters poll, with the easing of lockdown measures and ramping up of stimulus by policymakers to combat the virus-led downturn.  

·        US GDP is expected to contract by an annualised rate of 37% in the Q2 2020 and by 6.6%for 2020 as a whole as per theØ International Monetary Fund (IMF) staff.

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The World This Week - 3rd JULY 2020 to 10th JULY 2020

Indian Equity Summary

· The benchmark Indices Nifty/Sensex closed in green (up by ~1.5% on WoW basis) for four consecutive weeks on the back of early signs ofØ economic recovery, de-escalation of border skirmishes between India & China and steady FII/FPI inflows.On the sectoral front, indices that witnessed the highest gains includes BSE Metals, BSE Bankex and BSE IT.  

· Going forward, global factors like development on the US -China relationship front , any resurgence of Covid-19 cases globally, as economiesØ have started opening up ; will continue to dictate the trend of the domestic equity market. We expect the trading range for Nifty between 10400-10,800 in the near term.

Indian Debt Market

· Government bond prices rose as the yield on the latest 10-year benchmark 5.79% 2030 paper softened by 9 bps, settled at 5.76% on Jul 10Ø compared with 5.85% on Jul 3.  

· Reserve Bank of India announced the auction of three Government of India 91day, 182 day and 364 day Treasury Bills for an aggregate amount ofØ ₹35,000, to be conducted on 16th July 2020.  

· Also, State Governments announced to sell securities by way of an auction to be conducted on 14th July 2020, for an aggregate face value of ₹Ø 11,250 Cr.  

· We expect the 10 year benchmark yield to trade between 5.70-6.90% in near term.Ø

Domestic News  

· Economic Outlook Survey by FICCI, it has projected the country’s annual median GDP growth for 2020-21 at -4.5%.Ø  

· According to data released by RBI, Bank credit and deposits grew 6.18% and 11% to ₹102.45 lakh crore and ₹138.67 lakh crore, respectively, inØ the fortnight ended June 19.  

· Chinese FDI has dipped to $163.78 million in 2019-20 from $229 million in the Fy20 while India’s trade deficit with China fell to $48.66 billion inØ 2019-20 on account of the decline in imports from the China.  

· Recovery of Industries can be concluded from the IIP figures released for India, as the rate of contraction shrinks to over 37% in May as againstØ the month of April when it was over 57%.  

· Thermal coal imports at India’s 12 major ports dropped 34.70 per cent to 17.71 million tonnes (MT) in the the first quarter of the current fiscal,Ø according to the Indian Ports’ Association (IPA).

International News  

· US producer price index for final demand dropped 0.2% last month after rebounding 0.4% in May. However, excluding the volatile food, energyØ and trade services components, producer prices rose 0.3% in June.  

· Moody’s analysts have forecasted that UK’s public debt ratio is expected to rise by 24% of GDP or more relative to 2019 levels whileØ have forecasted for a contraction of 10.1% in the UK’s GDP in 2020 and a relative growth of 7.1% in 2021.  

· The International Energy Agency (IEA) raised its forecast to 92.1 million barrels per day (bpd), up 400,000 bpd from its last month’sØ outlook, citing a smaller-than-expected second-quarter decline.  

· The world’s third-largest economy-Japan, is forecasted to contract 5.3% in FY21, as per a Reuters Poll of over 30 economists.Ø  China’s passenger car sales in June fell 6.5% year on year to 1.68 million units as per the China Passenger Car Association (CPCA)Ø

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The World This Week – 26th June 2020 to 3rd July 2020

Indian Equity Summary-  

·        Expected faster recovery in the rural markets on the back of government subsidies, and above average monsoon and indicative strong tractorØ sales along with strong global buoyed the domestic equity market sentiment. The domestic benchmark Indices Nifty 50 and Sensex moved higher by ~2.16%/2.42% on a WoW basis , where the top performing sectoral indices on WoW basis includes BSE Power ,BSE IT and BSE FMCG that rose by 4.64%, 4.03% and 3.64% respectively.  

·        Going forward, global factors like development on the US -China relationship front , any resurgence of Covid-19 cases globally, as economiesØ have started opening up ; will continue to dictate the trend of the domestic equity market. We expect the trading range for Nifty between 10400-10,800 in the near term.

Indian Debt Market-  

·        Government bond prices rose as the yield on the latest 10-year benchmark 5.79% 2030 paper softened, settled at 5.85% on Jul 3 compared toØ 5.91% on Jun 26.  

·        Reserve Bank of India announces the auction of three Government of India 91day, 182 day and 364 day Treasury Bills for an aggregate amount ofØ ₹35,000.  

·        Also, State Governments announced to sell securities by way of an auction to be conducted on 7th July 2020, for an aggregate face value of ₹Ø 11,500 Cr.  

·        We expect the 10 year benchmark yield to trade between 5.80-6.00% in near term.Ø

Domestic News  

·        The IHS Markit Services PMI in June rose to 33.7 from 12.6 in May as the services activity picked up pace in June from record lows earlier whileØ the India Manufacturing Purchasing Managers’ Index stabilized at 47.2 in June compared with 30.8 in May, however continues to indicate contraction in factory activity by being lower than 50 mark.  

·        The Composite PMI Output Index, which measures combined services and manufacturing output, rose to 37.8 in June, up from 14.8 in May.Ø  

·        As per the Indian Ports Association (IPA),major ports in India witnessed an approx. 20% fall in traffic during the quarter ended June asØ coronavirus lockdowns slowed economic activity.  

·        Electricity Output data reflects signs of recovery in June as the electricity generation declined by a slower rate ie 5.3% during the second half ofØ June as compared with a decline of 14.5% during the first fifteen days of the month.  

·        As per the data released by Centre for Monitoring India economy(CMIE),unemployment rate in India eased to 11% in June from 23.5% in May.Ø

International News  

·        China's services sector grows at fastest pace since April 2010 as the Caixin/Markitservices Purchasing Managers’ Index (PMI) of China rose toØ 58.4 in June as against May’s 55.0.  

·        Britain’s government has drafted a plan to double the number of its job coaches to 27,000 at a cost of 800 million pounds ($997 million), with aØ view to tackle a rise in unemployment triggered by the coronavirus lockdown.  

·        Britain’s house prices fell in annual terms for the first time since 2012 in June, fell by 0.1% YoY ,as the country reeled from the coronavirusØ shock to the economy.  

·        Global tourism revenues are expected to fall by up to $3.3 trillion due to COVID-19 restrictions, with the United States standing to lose the mostØ according to a study by U.N.  

·        US consumer confidence index rose to a reading of 98.1in June from 85.9 in May. However, the confidence index remains 34.5 points below itsØ pre-pandemic level.

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The World This Week 19th June 2020 to 26th June 2020

Indian Equity Summary- 

·         The domestic equity market closed in green on WoW basis as the benchmark indices Nifty/Sensex closed in positive by 1.4%/1.3% respectively.Ø IMF updated its GDP growth forecast for India, and expects during the year, India's economy will contract by 4.5 percent, though in FY22 it is expected to grow by 6%. Negative sentiments like border tension between India and China along with rising Covid- 19 cases may cause intermediate volatility. Above normal expected monsoon will bode well for the Khariff crops. With no fresh talks for further Lockdowns soothed investors' sentiment as well as the business sector , as hint of recovery have already been witnessed in Unlock 1 and going forward Unlock 2.0 hopefully will provide further support . 

·         Going forward, global factors like development on the US -China relationship front , any resurgence of Covid-19 cases globally, as economiesØ have started opening up ; will continue to dictate the trend of the domestic equity market. We expect the trading range for Nifty between 9800-10,500 in the near term.

Indian Debt Market- 

·         Government bond prices fell as the yield on the latest 10-year benchmark 5.79% 2030 paper settled at 5.91% on Jun 26 compared with 5.85% onØ Jun 19.On a review of current and evolving liquidity and market conditions, the Reserve Bank has decided to conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO) for ₹10,000 crores each on July 02, 2020. We expect the 10yr Gsec to soften going forward . 

·         Government of India has announced to launch Floating Rate Savings Bonds, 2020 (Taxable) scheme commencing from July 01, 2020 to enableØ person resident in India/HUF to invest in a taxable bond, without any monetary ceiling. 

·         We expect the 10 year benchmark yield to trade between 5.80-6.05% in near term.Ø

Domestic News 

·         The government announced a Rs 15,000 crore infrastructure development fund with an interest subsidy scheme to promote investment byØ private players and MSMEs in dairy, meat processing and animal feed plants, a move which is expected to create 3.5 million jobs 

·         India may impose anti-circumvention duty on a chemical, used in electrical, electronic, mechanical and chemical from Korea and China with aØ view to guard domestic players from cheap imports from these countries. 

·         The government is considering basic customs duty of around 20 percent on solar energy equipment to provide an edge to domesticØ manufacturers and discourage imports, particularly from China. 

·         Zydus Cadila has received nod from the US health regulator to market generic antihistamine Meclizine hydrochloride tabletsØ

International News 

·         The International Monetary Fund (IMF) forecast a deeper recession for this year and a slower and uncertain recovery for next year after theØ corona virus, or Covid-19, pandemic plunged the global economy into a crisis like no other. The global economy is set to shrink 4.9 percent this year, which is worse than the 3 percent contraction predicted in April, the lender said in an update to its World Economic Outlook. 

·         China left its benchmark lending rates unchanged for the second straight month despite the economy struggling to recover from the impact ofØ the coronavirus crisis. 

·         First-time claims for U.S. unemployment benefits fell by much less than expected in the week ended June 20th to 1.480 million, a decrease ofØ 60,000 from the previous week's revised level of 1.540 million. 

·         US real gross domestic product tumbled by 5.0 percent in the first quarter, unchanged from the estimate provided last month. The steep dropØ in GDP in the first quarter reflects a notable turnaround from the 2.1 percent jump seen in the fourth quarter of 2019.

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