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Marketwire
MF investments in markets down 43 percent. FIIs also net sellers in equity in December
Mutual Fund Live

Market Review for December 2017 from MF Live.



MACROECONOMIC INDICATORS


CPI inflation: The retail inflation surpassed the RBI’s target of 4% in Decemeber’17. The inflation rose to 4.9% than 3.6% in November’17. Higher inflation came in due to pick up in food inflation and higher oil prices.


WPI inflation: During the month, the wholesale price index (WPI) based inflation rate rose to 3.9% from 3.6% registered a month ago. The increase can in part be ascribed to rising food and fuel inflation.


Industrial Production: The Index of Industrial Production (IIP) in the month of December’17 increased at a subdued rate of 2.2% than 3.8% in Sept’17.


Core sector growth: The core sector output in the eight core sector industries, comprising coal, crude oil, natural gas, refinery products, fertilizer, steel, cement and electricity, accounting for nearly 40.3% of IIP, expanded at 6.8% in November 2017, much higher than 4.7% growth recorded in Oct’17.


Trade deficit: The trade deficit of India widened in November’17 to $14.09 billion. The month witnessed high growth in exports by 29.2% than the contraction of -1.1% in October 2017. Imports also registered higher growth at 19.6% than 7.6% in the previous month.


Rupee exchange rate: The rupee strengthened in December 2017 partly due to weakness in the dollar in the overseas markets. The average monthly exchange rate of rupee reached to Rs. 64.24 per dollar, appreciation by 0.9% than the average of Rs. 64.86 per dollar in the previous month. It ranged between Rs. 63.87-64.57 per dollar during the month.


Forex reserves: In December 2017, the foreign exchange reserves of India reached to $ 409.4 billion, which was $4.4 billion higher than a week ago levels. The increased foreign assets were mainly due to increased foreign investment in the country.



EQUITY MARKET REVIEW:


Share market: In December 2017, Indian markets advanced with buoyant investor sentiments. Sensex and Nifty rose by around 3% during the month partly due to results of Gujarat and Himachal Pradesh assembly elections, rebound in GDP in the second quarter and continued investment by the domestic institutional investors. However, rising inflation, lackluster GST revenue collection, government’s announcement of increased borrowings and fiscal slippage capped the overall gains in the markets. Globally, rising crude oil prices also weighed down the investors sentiments.










FPIs/FIIs and Mutual Fund: After two months of inflows, the foreign institutional investors (FIIs) turned net sellers in the month of December’17. Net FIIs outflows amounted to $ 550 million during the month. The inflows in the debt segment of the market were offset by the outflows from the equity segment of the market. The debt segment of the market witnessed inflows to the tune of $366 million whereas the equity saw an outflow of $916 million during the month.







Mutual funds (MFs) continued to pump in investments in the markets, though the quantum of the investment has been lower than that in the previous month. In December’17, the total mutual fund investments in the market aggregated to Rs. 27,331 crore, 43% lower than the investments in the previous month. Nearly 70% of the MF investments were made in the debt segment of the market amounting Rs. 18,998 crore, while the remaining Rs. 8,333 crore was invested in the equity segment of the market.







DEBT MARKET REVIEW:


Liquidity situation: The month of December’17 witnessed increased repo borrowings by the commercial banks. The average daily repo borrowings by the commercial banks increased by 124% to Rs. 10,718 crore compared with that in the previous month. The average daily reverse repo borrowings also increased by 35% to Rs. 19,063 crore than the average daily reverse repo borrowings seen in the previous month.


In December’17, the repo auctions manifold and were registered worth Rs. 2.35 lakh crore, Rs. 1.65 lakh crore higher than the repo auctions held in the previous month. The average yield for these auctions was at 6.03%, 2 bps higher than the average yield a month ago. The reverse repo auctions in December’17 aggregated to Rs. 2.25 lakh crore lesser than Rs. 3.14 lakh crore in the previous month. The average yield was 5.98%, very close to the yield recorded in November’17.



Call rate and MIBOR: The average call rate in the month of December’17 has been recorded at 5.90%, 5 bps higher than the average call rate recorded in the previous month. During the month, it ranged between 5.76% and 6.02%. Mumbai Interbank Offer Rate (MIBOR) was registered at 6.04% on an average in December’17, 4 bps higher than the average MIBOR in November’17. It varied in the range of 5.9% and 6.25%.







G Sec market: In December’17, the government securities amounting to Rs. 34,000 crore were auctioned which was Rs. 11,000 crore lesser than the notified amount during the month (Rs. 45,000 crore). Due to increased cost of borrowing the RBI had cancelled auctions of securities towards the end of the month. The G-sec auctioned during the month was also Rs. 41,000 crore or 55% lower than the G-Sec auctioned in the previous month. The average yield for these auctions has been registered at 7.35%, 22 bps higher than the average yield in the previous month.


The average yields on 10 year government securities continued to increase during the month. The average yield stood at 7.17%, 20 bps higher than the average yield of 6.97% in November’17. It ranged between 7.03% and 7.40%.






T-bills market: In December’17, the auctions of treasury bills of various maturities amounting to Rs. 44,000 crore were undertaken, Rs. 10,000 crore lesser than the auctions undertaken a month ago. The average yield of these auctions was registered at 6.28%, 9 bps higher than the average yield in the previous month.


The yields of treasury bills (T-Bills) across maturity increased in the month of December’17. The average yield of 91-days T-bills was registered at 6.16%, 5 bps higher than the average yield in the previous month. On similar lines, the average yield of 181-days T-Bills stood at 6.27% while that of 364-days was at 6.32%. These yields were respectively 9 bps and 8 bps higher than average yield exhibited a month ago.






Commercial paper: By mid-December’17, the commercial papers issued by various corporates aggregated to Rs. 15.86 lakh crore, 28% higher than the CPs issued in the comparable period in the last fiscal (Rs. 12.43 lakh crore). The yields on various maturity commercial papers continued to decline. The average yield of 180-days CP was 6.93%, 67 bps lower while that of 364-days CPs was at 7.14%, 69 bps lower than the average yield registered in the comparable period in FY17.



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