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A tepid week on trading front with modest gains towards end of the week.
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A tepid week on trading front with modest gains towards end of the week.

Stock markets in India traded the week on a tepid note to finally end with modest gains. Market action was largely influenced by policy action by Central Banks and macro-economic updates at home. The Reserve Bank of India, in its monetary policy review, hiked the repo rate by 25bps to 6.50%. The Central Bank maintained its neutral stance while reiterating that inflation continues to be a major consideration in rate decision. While market reaction to the rate hike was muted, we did see some sharp selling pressure in interest rate sensitive stocks.

MACRO-ECONOMIC UPDATES

According to data released during the week, manufacturing conditions across India improved at a modest and slower pace at the start of the quarter, reflecting softer rises in output, new orders and employment. The Nikkei India Manufacturing Purchasing Managers' Index (PMI) posted 52.3 in July, 2018 down from 53.1 in June, 2018. Although modest, the latest improvement in the health of the manufacturing sector was the second-strongest (behind June) since January, 2018. Additionally, the Indian service sector remained in expansion territory for the second consecutive month in July, 2018. The seasonally adjusted Nikkei India Services Business Activity Index remained above the neutral 50.0 threshold for the second consecutive month in July, 2018. Moreover, rising from 52.6 in June, 2018 to 54.2 in July,2018, the latest reading signalled the strongest rate of output growth since October 2016. Favourable demand conditions were cited by panellists as the key factor behind the latest upturn.

GLOBAL UPDATES

Investors also digested the latest moves from the Bank of England (BoE), which pushed interest rates above their financial crisis lows on Thursday but signalled it was in no hurry to raise them further with an uncertain Brexit on the horizon. BoE raised its main interest rate by 25 basis points to 0.75%, as had been expected. Earlier in the week, the European Central Bank(ECB) left interest rates unchanged and affirmed its plan to end its monthly bond-buying program in December,2018, as had been expected. Across the Atlantic, the US Federal Reserve left interest rates unchanged at 1.75% to 2%, as widely expected, and indicated that it is likely to raise rates next month as the economy remains strong.

The week also saw the emergence of renewed US-China trade concerns. The Trump administration announced that it is looking at the possibility of slapping a 25% tariff on $200 billion worth of imported Chinese goods - from the initial 10% announced earlier.

INSTITUTIONAL ACTIVITY

The month of July, 2018 saw some respite from foreign institutional investor (FII) selling. FIIs net sold Indian equities worth INR 2768.75 crore in July, 2018 which was much lesser than the INR 10249 crore and INR 12359 crore that they sold in June, 2018 and May, 2018, respectively. Domestic institutional investors (DIIs) on the other hand net bought Indian equities worth INR 3845 crore, in July, 2018.

Source:

www.nseindia.com

Bloomberg.com

Disclaimers: The material contained herein has been obtained from publicly available information, internally developed data and other sources believed to be reliable, but BNP Paribas Asset Management India Private Limited (BNPPAMIPL) makes no representation that it is accurate or complete. BNPPAMIPL has no obligation to tell the recipient when opinions or information given herein change. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. This information is meant for general reading purpose only and is not meant to serve as a professional guide for the readers. Except for the historical information contained herein, statements in this publication, which contain words or phrases such as 'will', 'would', etc., and similar expressions or variations of such expressions may constitute 'forward-looking statements'. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. BNPPAMIPL undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof. The words like believe/belief are independent perception of the Fund Manager and do not construe as opinion or advise. This information is not intended to be an offer to sell or a solicitation for the purchase or sale of any financial product or instrument. The information should not be construed as an investment advice and investors are requested to consult their investment advisor and arrive at an informed investment decision before making any investments. The Trustee, Asset Management Company, Mutual Fund, their directors, officers or their employees shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages arising out of the information contained in this document.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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