{LONGTERMINVESTORS} Daily Market Report- July 5, 2016

 

Key developments today Prime Minister Narendra Modi inducted 19 new Minister of States into his Government today. Bank of England (BoE) released its half-yearly Financial Stability Report which highlighted the decision of the Financial Policy Committee (FPC) to reduce the UK countercyclical capital buffer rate from 0.5% to 0% of banks' UK exposures, with immediate effect. Domestic market developments Indian equities ended in the red today, in line with their Asian counterparts. Reported profit booking on the back of recent gains weighed on the local indices. Power and automobile stocks proved to be the major laggards. Nifty and Sensex ended down 0.4% each. Indian Rupee weakened against the US Dollar at 67.46 levels vs. yesterday's close of 67.27. Downbeat performance in domestic equities and subdued flows as US markets opened resumed post a holiday reportedly weighing on the currency. Going ahead, movement in the greenback post the release of FOMC minutes and US jobs data (due this week) will remain key. Indian Government bonds ended higher today. Fall in both US Treasury yields and crude prices aided gilts. However, slight caution ahead of the market holiday tomorrow capped the upside. The 10Y benchmark yield ended at 7.39% vs. yesterday's close of 7.42%. RBI withdrew liquidity to the of INR 674.32 bn (net) under LAF (including fixed and variable rate repos and reverse repos), as of July 4th. It injected INR 22.14 bn and 0.55 bn under Special Refinance Facility and Marginal Standing Facility respectively. *Weighted Average (WAR) over the day Global market developments Asian equities ended largely in the red today. Australian stocks came under pressure amid political deadlock facing the country as the recent Federal elections failed to produce a clear winner. Further, strength in the Yen weighed on Japanese stocks today. Nikkei (-0.7%), Hang Seng (-1.5%), Kospi (-0.3%) and Australia's ASX (-1.0%) posted losses. Meanwhile, Shanghai Composite (0.6%) settled higher on the back of upbeat services PMI data print coming in from China for the month of June. The Pound Sterling is trading weaker today, retreating to the crucial 1.31 threshold amid renewed Brexit worries. The Japanese Yen is trading stronger today, falling to its 101 handle amid heightened concerns in global markets. Meanwhile, the Euro is trading ranged vs. the US Dollar today. Further, the greenback is also trading little changed. While caution ahead of FOMC policy minutes, due tomorrow, is keeping the reserve currency ranged-bound, global volatility is capping the downside for the greenback. US 10Y Treasury yield breached record lows amid to trade at 1.39% levels currently. Renewed Brexit concerns in global markets continue to support the safe haven sovereign bonds. Commodity market developments Crude oil is trading steeply lower today. Tempered risk appetite amid elevated global uncertainty is weighing on crude. However, supply outages in Nigeria following reports of recent attacks on the country's oil pipelines are capping the downside. Gold is trading lower, though holding on to the bulk of its recent gains amid overarching global risk-aversion. Regards, ICICI Bank Contact: Niharika Tripathi (+91-22) 4008-1414 (ext: 6943) niharika.tripathi@icicibank.com ​

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CA. Rajesh Desai

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