Principal Monthly Insight-Mar 2017 · • Regarding advertisement of the mutual fund scheme performance, Securities and Exchange Board of India (SEBI), in a circular, has instructed

March 2017

Monthly Insight

Policy Rates Actual PreviousRepo Rate^ 6.25% 6.25%

Reverse Repo^ 5.75% 5.75%

CRR^ 4.00% 4.00%

Key IndicatorsIndex Of Industrial Production (IIP)

Wholesale Price Index Inflation(WPI)

Export (Y-o-Y)

Import (Y-o-Y)

Current Account Deficit ($ Billions)

Fiscal Deficit FYTD (INR Trillion)

-7.9(Dec-16)

6.06(Feb-17)

Period31-Mar-17

31-Mar-17

31-Mar-17

Actual

Principal Monthly Insight

Economic Releases in March-2017

Previous

-0.10%(Dec-16)

5.25%(Jan-17)

4.32% (Jan-17)

10.70 (Jan-17)

-3.4(Sep-16)

5.64(Jan-17)

Source: RBI, Reuters; ^Based on RBI Bi-monthly Monetary Policy Statement on 08-Feb-2017

2.70%(Jan-17)

6.55%(Feb-17)

17.48% (Feb-17)

21.76% (Feb-17)

• Government data showed that the country’s industrial outputgrew 2.7% in Jan 2017 compared with a contraction of 0.1%in Dec 2016 and a contraction of 1.6% in the same period ofthe previous year. The manufacturing sector grew 2.3% inJan 2017 compared with a contraction of 2.9% in the sameperiod of the previous year.

• Consumer Price Index (CPI)-based inflation accelerated to afour month high of 3.65% during Feb 2017 from 3.17% in theprevious month, majorly contributed by food prices.Consumer Food Price Index rose at a faster pace to 2.01% inFeb from 0.61% in Jan 2017.

• Wholesale Price Index (WPI)-based inflation rose at a fasterpace to 6.55% in Feb 2017, compared with 5.25% in theprevious month and 0.85% contraction witnessed in the year-ago period. Food price inflation rose 2.69% in Feb 2017 asagainst 0.56% contraction in Jan 2017 and 3.91% riserecorded in the year-ago period. Meanwhile, fuel priceinflation stood at 21.02% in Feb 2017 against 18.14% in Jan2017 and contraction of 7.06% in the year-ago period.

• India’s current account deficit (CAD) widened to $7.9 billion(1.4% of GDP) in Q3 of FY17 from $3.4 billion (0.6% ofGDP) in the preceding quarter and $7.1 billion (1.4% of GDP)in the same quarter of the previous fiscal. CAD wideneddespite a slightly lower trade deficit YoY, primarily due todecline in net invisibles receipts. Net services receiptsmoderated YoY, which can be attributed to fall in earningsfrom software, financial services, and charges for intellectualproperty rights.

• India's fiscal deficit from Apr 2016 to Feb 2017 stood at Rs.6.06 lakh crore or 113.4% of budget estimates for FY17.During the same period a year ago, fiscal deficit was 107.1%of the full year budget target. Total revenue receipts stood atRs. 11.47 lakh crore, or 77.5% of the budget estimates for thecurrent year, while expenditure was Rs. 17.53 lakh crore, or87% of the budget estimates.

• Trade deficit expanded to $8.90 billion in Feb 2017 from$6.57 billion in Feb 2016 due to faster rise in merchandiseimports compared with exports. While exports grew 17.48%YoY to $24.49 billion, imports increased 21.76% to $33.39billion in Feb 2017. Cumulatively from Apr 2016 to Feb 2017,trade deficit contracted to $95.29 billion from $114.32 billiona year ago. During the similar period, exports rose 2.52%YoY, while imports declined 3.67%.

Indian Economy

-7.00

-2.00

3.00

8.00

Feb-15 Aug-15 Feb-16 Aug-16 Feb-17

Source: Office of the Economic Adviser, Ministry of Commerce & Industry

Monthly WPI Movement

Gro

wth

( in

%)

-1.70

1.30

4.30

7.30

Feb-16 Jun-16 Oct-16 Feb-17

WPI CPISource: MOSPI

WPI & CPI Movement over last 1-year

Gro

wth

(In

%)

-15.00

-5.00

5.00

15.00

Jan-15 Jul-15 Jan-16 Jul-16 Jan-17

IIP (%MoM) IIP (%YoY)Source: MOSPI

IIP Movement

Gro

wth

(In

%)

Principal Monthly Insight 1 | P a g e March 2017 ...

Index PE Ratio & Returns*Closing Values# 1 Year 3 Year 5 Year

Nifty 50 9,173.75 18.55 11.01 11.60

Nifty 50 PE 21.77 18.42 16.60 14.52

S&P BSE Sensex 29,620.50 16.88 9.77 11.21

S&P BSE Sensex PE 21.36 18.04 17.18 14.47


Source: NSE, BSE, * Returns less than 1 year are absolute, greater than 1 year are Compounded Annualized , # As on 31-Mar-2017

• Indian equity markets rose during the month with Sensexand Nifty surpassing the 29,000 and 9,000 marks,respectively. The promising outcome of the states’ assemblyelections, coupled with the latest developments on theimplementation of Goods and Service Tax (GST) Bill werethe key triggers for the market's rally. However, some stock-specific weaknesses seen later in the month restricted gains toan extent.

• Key benchmark indices S&P BSE Sensex and Nifty gained3.05% and 3.31% to close at 29,620.50 and 9,173.75,respectively. S&P BSE Mid-Cap and S&P BSE Small-Capmoved up 4.02% and 5.43%, respectively.

• During the month, Asia Index Private Ltd, a joint venturebetween S&P Dow Jones Indices and BSE Ltd, launched theS&P BSE SENSEX Next 50 Index. The index is designed tomeasure the performance of the 50 largest and most liquidcompanies within the S&P BSE Large- and Mid-Cap Indexand not under the ambit of the S&P BSE Sensex 50 index.

• According to data from the National Securities DepositoryLtd, foreign portfolio investors remained net buyers ofdomestic stocks worth Rs. 30,906.00 crore as against netpurchase of Rs. 9,902.18 crore in Feb. Domestic mutualfunds remained net buyers in the equity segment to the tuneof Rs. 4,191.40 crore in Mar.

• Sentiments also got support from higher than expected grossdomestic product (GDP) data for 3QFY17. The dataindicated that private final consumption and manufacturingsector expanded in the third quarter despite demonetisation.Market gained further after the Nikkei India ManufacturingPurchasing Managers' Index rose for the second consecutivemonth and stood at 50.7 in Feb 2017 from 50.4 in Jan 2017.

• Benchmark indices touched two-year highs amid positivevibes generated by the outcome of state assembly electionsheld in five states. Victory of the ruling party is seen as anaffirmation of the government’s policies, especially since theassembly polls were held at the backdrop of demonetisation.

• Another major boost for the markets was the growingendeavour to move closer towards launching the long-awaited GST. The GST Council gave its nod to all the fivedraft legislations needed for implementation of the unifiedindirect tax. Later, the finance minister introducedlegislations on GST in the lower house of Parliament and gotapproval for four supplementary Bills of GST followingseveral hours of debate. This paved the way for the launch ofGST from Jul 1, 2017.

Indian Equity Market

-0.74%

-0.47%

-0.10%0.11%

0.22%

1.56%

2.45%

3.05%

3.30%

3.31%

3.58%

4.00%

4.02%

5.35%

5.43%

7.02%

7.26%

10.73%

-6% 1% 8% 15%

S&P BSE Metal

S&P BSE HC

S&P BSE IT

S&P BSE Teck

S&P BSE Oil & Gas

S&P BSE PSU

S&P BSE Auto

S&P BSE Sensex

S&P BSE-100

Nifty 50

S&P BSE Power

S&P BSE Bankex

S&P BSE Midcap

S&P BSE FMCG

S&P BSE Smallcap

S&P BSE Realty

S&P BSE CG

S&P BSE CD

Source: MFI Explorer

200

1,100

2,000

2,900

Mar-07 Mar-09 Mar-11 Mar-13 Mar-15 Mar-17

S&P BSE Mid cap S&P BSE Sensex S&P BSE Small cap

Growth of Rs 1,000 over Last 10-Yrs

Source : MFI Explorer

InR

s.

Growth of Rs 1,000 over Last 10-Yrs

Source : MFI Explorer

InR

s.

Monthly returns as on March 31, 2017

5

30

55

80

Mar-15 Sep-15 Mar-16 Sep-16 Mar-17

P/E

-S&

P BS

E Se

nsex

, N

ifty

50,

Nif

ty M

idca

p 50

Nifty 50 Nifty Midcap 50 S&P BSE Sensex

Domestic Benchmark Indices Trailing P/E

Source : Reuters, NSE



• The outcome of the FOMC’s latest policy meeting tooimpacted buying interest. The cautious stance adopted byinvestors over the U.S. central bank’s policy decision easedafter the U.S. Federal Reserve (Fed) maintained guidance oftwo more hikes this year, while raising interest rates by 25 bps,as was widely anticipated.

• However, certain stock-specific weaknesses across differentsectors restricted market gains during the month. Markets werehit after a major IT company reported layoff of at least 10,000jobs owing to shift in focus from traditional IT services todigital. Worries over regulatory actions by the U.S. Food andDrug Administration against specific domestic pharmacompanies dented market sentiment.

• On the BSE sectoral front, barring S&P BSE Metal, S&P BSEHealthcare and S&P BSE IT, all the indices closed in the green.S&P BSE Consumer Durables was the top gainer, followed byS&P BSE Capital Goods and S&P BSE Realty. S&P BSEFMCG and S&P BSE Bankex also rose during the month.Banking sector gained on the back of reassurance by thefinance minister of a solution to tackle the non-performingasset crisis.

• The Central Bank lowered the limit of disbursing loan against gold in cash given by Non-Banking Finance Companies (NBFCs). The loandisbursed by NBFC now cannot exceed more than Rs. 25,000 in cash against gold. Previously, the provision was Rs. 1 lakh, and above thatloan can be disbursed by cheque. The reduction in the amount of gold loans in cash is in line with the provisions of the Income Tax Act.

• Regarding advertisement of the mutual fund scheme performance, Securities and Exchange Board of India (SEBI), in a circular, hasinstructed asset management companies in the mutual fund industry to advertise their returns in terms of Compounded AnnualizedGrowth Rate (CAGR) for the past one year, three years, five years, and since inception. However, where the scheme has been in existencefor less than one year, past performance shall not be provided. The circular further stated that a point-to-point returns chart on a standardinvestment of Rs. 10,000 must be given to help investors understand the scheme better

• AMFI launched a new multimedia campaign, a part of its investor awareness program, aiming to position mutual funds as a preferredinvestment option. The campaign will run in eight regional languages. With day-to-day situations as the backdrop, the campaign aims toassure prospective investors that mutual funds are the right option for them.

• According to SEBI, mutual fund schemes investing in Real Estate Investment Trust (REITs) and Infrastructure Investment Trusts (InvITs)will have to give 15-day time to unit-holders to exercise exit option. Earlier, the capital market regulator notified norms allowing mutualfunds to invest in REITs and InvITs in order to attract more investors.

• The Central Bank amended the norms on currency hedging to protect multi-national companies and their Indian subsidiaries fromcurrency risks while making current account transactions. As per the new norm, transactions under currency hedging will be covered undera tripartite agreement involving the Indian subsidiary, its non-resident parent / treasury, and the bank. This agreement will include theexact relationship of the Indian subsidiary or entity with its overseas related entity, relative roles and responsibilities of the parties, and theprocedure for the transactions, including settlement.

• The Central Bank issued draft master circular for revised Pre-paid Payment Instruments (PPI) norms. The central bank has ordered allprepaid payment licence holders to convert their minimum Know Your Customer (KYC) wallet accounts into full KYC account by Jun 30.RBI also said that all entities under the Payments and Settlement Systems Act 2007 should have a minimum net worth of Rs. 25 crore as perthe last audited balance sheet and should be maintained at all times.

Regulatory Update

28,700

29,100

29,500

29,900

-2,400

1,000

4,400

7,800

1-Mar-17 11-Mar-17 21-Mar-17 31-Mar-17 S&P

BSE

Sens

ex In

dex

valu

e

Net

Inve

stm

ent b

y FI

I/FP

I &

DII

in R

s. C

r.

FII/FPI Net investment DII Net investment S&P BSE SensexSource: MFI Explorer

Source : Reuters

25,000

26,800

28,600

30,400

-23,000

-4,000

15,000

34,000

Mar-16 Jul-16 Nov-16 Mar-17

FII/FPI Net investment DII Net investment S&P BSE Sensex

Source: MFI Explorer

Net

Inve

stm

ent b

y FI

I/FP

I &

DII

in R

s. C

r.

S&P

BSE

Sens

ex In

dex

valu

e

FII, DII Investment & Sensex - March 2017

FII/FPI, DII Net Investment & Sensex Movement in last 12 Mths


Key Rates (%)Reverse Repo Rate

Repo Rate

CRR

SLR

Bank Rate

Debt Indicators (Yield %)Call Rate

1 Month FBIL Term MIBOR

10-Yr Benchmark Bond

91-Day T-Bill#

182- Day T-Bill#

364-Day T-Bill#

Source: RBI


Current^RBI Policy Rates

6.04% 5.95%

6.35%

6.87%

6.75 6.75

6.69%

6.61%

Previous

^Based on RBI Bi-monthly Monetary Policy Statement on 08-Feb-2017

Feb-17Mar-17

5.75 5.75

6.25 6.25

4.00 4.00

20.50 20.50

# Indicates Monthly Average cut off during Auction

6.20%

6.16%

6.25%

6.25%

6.10%

5.93%

• Bond yields fell during the month after the U.S. Fed in itsmonetary policy review maintained guidance of the rate hiketrajectory projected in Dec 2016, while increasing interestrates as expected. An unexpected decline in core retailinflation in Feb 2017 further supported market sentiment.Short covering by banks earlier during the month and doubtsover the U.S. President’s reform agenda also boostedemerging market debt. However, gains were capped onreports that the government is considering taking steps toabsorb excess liquidity in the banking system.

• Yield on the 10-year benchmark bond (6.97% GS 2026) fell 18bps to close at 6.69% from the previous month’s close of6.87%. During the month, bond yields moved within a widerange of 6.67% to 6.93%.

• Bond yields shot up initially on concerns that the Fed willincrease interest rates in its monetary policy review due onMar 15, 2017. Concerns of protectionist policies from the U.S.President also weighed on the market sentiment. However,the trend reversed and bond yields came down as foreignbanks resorted to short covering. Short covering was anoutcome of state-run banks not lending securities in the repomarket ahead of the 10-year paper’s coupon payment,scheduled on Mar 6, 2017.

• Gains were short lived as bond yields went up after the Fedchief indicated of a possible rate hike in its upcomingmonetary policy review. Supply of state development loansand UDAY bonds also added to the pain. Meanwhile,investors preferred to remain on the sidelines ahead of theoutcome of the Fed’s monetary policy review and the releaseof crucial retail inflation data for Feb 2017.

• The domestic debt market later received support as bondyields came down following an unexpected decline in coreretail inflation in Feb 2017, even though retail inflation roseto a four-month high in Feb. Market experts had pegged coreinflation to fall to around 4.80%-4.90% in Feb 2017 fromnearly 5.10% in Jan 2017.

• Gains were extended after the U.S. Fed in its monetary policyreview maintained guidance of two more hikes this year,while increasing interest rates as apprehended. This easedconcerns of greater monetary tightening and led toexpectations that the Fed moving forward will be lessaggressive in increasing interest rates. Bond yields plungedfurther as market participants grew sceptical of the U.S.President’s reform agenda. Doubts arose after the U.S.administration failed to get enough votes for the passage ofthe new health-care bill, which boosted demand of emergingmarket debt.

Indian Fixed Income

5.90

6.50

7.10

7.70


Source: CCIL

10-Yr Benchmark Bond Yield

Yie

ld (I

n %

)

-90

-60

-30

0

6.00

6.70

7.40

8.10

1 Yr 5 Yr 10 Yr 20 Yr 30 Yr

Cha

nge

in b

ps

Yie

ld (I

n %

)

India Yield Curve Shift (Y-o-Y)

Change in bps Mar-17 Mar-16Source: Reuters

-21

-14

-7

0

6.10

6.60

7.10

7.60

1 Yr 5 Yr 10 Yr 20 Yr 30 Yr

Cha

nge

in b

ps

Yie

ld (I

n %

)

India Yield Curve Shift (M-o-M)

Change in bps Mar-17 Feb-17Source: Reuters



• However, gains were capped on reports that the governmentis considering taking steps to absorb excess liquidity in thebanking system. With credit off-take already muted, thereport dampened market sentiment. The government ismulling implementing a new framework called 'standingdeposit facility' that would drain surplus cash from banks at arate lower than the repo rate without the need for anycollateral. Lack of fresh domestic triggers kept investors onthe sidelines. Market participants also remained cautiousahead of the outcome of Monetary Policy Committee’smonetary policy review, scheduled on Apr 6, 2017.

• The overnight call rate ranged from 5.88% to 6.04% tradedsignificantly below the policy repo rate during the month.Cumulative increase in deposits far outweighed incrementalcredit offtake since demonetisation (since fortnight endingOctober 28, 2016), resulting in substantial and prolongedliquidity surplus. Data from the Central Bank showed thatbanks’ net average lending through the LAF window stood atRs. 26,621.63 crore in Mar 2017 from the previous month’saverage lending of Rs. 5,496.19 crore. Banks’ averageborrowings under the Marginal Standing Facility (MSF)window also came down to Rs. 1,343.00 crore in Mar 2017from the previous month’s average borrowing of Rs. 1,920.46crore.

• To suck out excess liquidity following demonetisation, theCentral Bank conducted variable reverse repo auctions.Average net absorption of liquidity through variable repo rateand reverse repo auctions increased to Rs. 15,6841.52 crore inMar 2017 from Rs. 10,9326.72 crore in Feb 2017. After takinginto account the entire gamut of LAF, MSF, term repo, andreverse repo, the average net absorption of liquidity by RBIstood at Rs. 14,7664.41 crore in Mar 2017, higher than Rs.98,016.43 crore in Feb 2017.

• The Central Bank conducted auctions of 91-, 182-, and 364-days Treasury Bills for a notified amount of Rs. 50,000 crorein Mar 2017 compared with Rs. 40,000 crore in the previousmonth. The cut-off yield stood in the range of 5.82% to6.26% during the month under review compared with that ofthe previous month when the cut-off yield was in the range of6.11% to 6.30%.

• Yield on gilt securities fell across maturities in the range of 5bps to 21 bps barring 2- to 4-year maturities which increasedin the range of 1 bps to 5 bps. Yield on corporate bondsincreased across 1- to 4-year maturities in the range of 2 bpsto 15 bps and contracted across the remaining maturities inthe range of 4 bps to 15 bps. Spread between AAA corporatebond and gilt expanded across maturities in the range of 3bps to 12 bps, barring 6- and 10-year maturities, whichcontracted 5 bps and 3 bps, respectively.

20.00

22.00

24.00

26.00

2.00

5.00

8.00

11.00

Mar-07 Mar-09 Mar-11 Mar-13 Mar-15 Mar-17

Source: RBI Reverse Repo Repo CRR Bank Rate SLR

Movements of Key Policy Rates in India

Rep

o,R

ever

se R

epo,

CR

R, S

LR &

Ba

nk R

ate

(In

%)

SLR

(In

%)

10

50

90

130


5 Year Corporate Bond Spread (for AAA & AA bonds)

AAA Bond Spread (in bps) AA Bond Spread (in bps)Source: Reuters

In b

ps

5

50

95

140


10 Year Corporate Bond Spread (for AAA & AA bonds)

AAA Bond Spread (in bps) AA Bond Spread (in bps)Source: Reuters

In b

ps

-30,000

5,000

40,000

75,000

4.50

6.50

8.50

10.50

Mar-15 Sep-15 Mar-16 Sep-16 Mar-17

Call Rate Net Borrowings

Liquidity Monitor - Call Rate and Net Borrowings

Cal

l Rat

e (I

n %

)

Source: Reuters

LAF

(In

Rs.

Cr.

)


64.84 66.74 67.95 66.33

69.25 70.72 71.62 75.10

80.88 83.05 83.42 95.09

57.96 59.35 58.22 59.06

1 Wk Ago1 Mth Ago

6 Mths Ago

1 Year Ago

Crude Brent($/Barrel)

52.16 4.51 -0.55 7.26 39.84

Gold ($/Oz) 1,248.63 0.39 0.01 -5.10 1.35

Gold (Rs./10 gm) 28,527 -0.90 -3.60 -8.49 -1.90

Silver ($/Oz) 18.22 2.65 -0.47 -4.83 18.19

Silver (Rs./Kg) 41,717 1.77 -3.45 -8.29 13.82


1 Mth Ago

3 Mths Ago

Movement of Major Currencies (Denominated in Indian Rupee)

Source: RBI

Currency

INR/1 USD

INR/1 EURO

INR/1 GBP

INR/ 100 YEN

1 Year Ago

Value(as of 31-Mar-

2017)

Performance of various CommoditiesReturns (in %)Value(as

of 31-Mar-2017)

Source: Reuters, MCX

Commodities

INR• The rupee strengthened against the U.S. dollar on

expectations that the government would spur reform agendafollowing the outcome of state-level elections. Gains werefurther extended after the U.S. Fed did not indicate a fasterpace of monetary tightening in 2017, while increasing interestrates. Domestic currency reached a 17-month high against theglobally-weak greenback on uncertainty over the U.S.President’s reform agenda after his failure to securelawmakers’ approval for a healthcare bill.

Euro• Euro gained against the U.S. dollar after the U.S. Fed did not

indicate a faster pace of monetary tightening in the currentyear, while increasing interest rates. It rose further onuncertainties over U.S. President’s ability to roll out futurepolicy reforms after his failure to pass a major healthcarereform bill. However, by the end, gains retreated on strongU.S. economic data and on comments from a U.S. Fed officialthat reinforced expectations of more U.S. rate hikes. Politicaluncertainties surrounding Britain's exit from the EuropeanUnion (EU) also pressured the euro.

Currency

Crude• Brent crude prices slipped as investors were apprehensive that

the potential of supply curbs by chief oil-producing countriescould be weaker compared with growth in U.S. drillingactivities. The Organization of the Petroleum ExportingCountries (OPEC) also said that oil inventories continue torise despite the effort to reduce global output and raised itsproduction forecast in 2017 from producers outside thegroup. Towards the end of the month, oil prices managed torecover much of the losses as investors turned optimistic thatOPEC may extend its production-cut deal beyond Jun 2017.Supply disruption in Libya following geopolitical tension,further supported oil prices.

Gold• Gold prices witnessed pressure prior to the U.S. Fed’s policy

meeting because of speculations of a rate hike by the U.S.central bank. Later, the U.S. Fed went in for a rate hike, aswas widely expected, but the policy decision was consideredas less hawkish in terms of the rate hike trajectory projectedby Fed. This, in turn, prevented further slippage in thebullion’s prices. Towards the end, the safe-haven appeal ofthe metal improved after the U.S. President failed to pass akey healthcare bill and the U.K. government initiated formal“Brexit” procedures. However, the upside was limited asstronger than expected U.S. economic data raised optimismover the economy, thereby boosting the risk appetite ofinvestors.

Commodity

64

66

68

70Mar-16 Jul-16 Nov-16 Mar-17

Rupee Versus Dollar during the year

Rup

eepe

r D

olla

r

Source: RBI

70

100

130

160


Movement of Commodity Prices Over 1 Year (Rebased to 100)

Gold (US$) Silver (US$) Brent CrudeSource:Reuters

In U

.S.D

olla

r



Performance of Major International Markets (as on March 31,2017)

Asia Pacific1.00

3.37

-0.72

U.S.

U.S.

U.S.

United StatesNasdaq 100

S&P 500

DJ Industrial Average

1 MthCountryIndices

Source: MFI Explorer & Reuters

3.28

1.56

S. Korea

Hong Kong

NIKKEI 225

India

Australia

0.82

5.43

U.K.

France

Japan

China

1.99

-0.04

Thailand

Indonesia

Singapore 2.54

-1.10

SET IDX

JSX Composite

FTSE Straits Times

KOSPI

Hang Seng

FSE DAX

Europe

4.04Germany

-0.59

3.05

2.67

Shanghai SE Composite

S&P BSE Sensex

S&P/ASX 200

FTSE 100

CAC 40

United States • U.S. President’s scheduled address before a joint session of

Congress kept investors worried initially, but later thePresident’s speech instilled confidence among investors.Markets also welcomed improved jobs data and the Fed’sdecision to raise interest rates. But, gains were limited afterthe U.S. President failed to pass a key healthcare bill and theG20 finance ministers failed to agree on a commitment tokeep global trade free and open.

Europe• European markets gained after the U.S. President laid out the

agenda for his Presidency in a less combative tone atCongressional address. Improved key economic data andECB's growth and inflation forecasts for the euro area alsohelped sentiment. However, geo-political concerns in someEuropean countries, G20 finance ministers’ meeting, failure topass new healthcare bill in U.S., and initiation of Brexitprocedure weighed on sentiment.

Asia• Most of the Asian markets got support from U.S. President’s

speech to Congress and encouraging economic data fromChina and Japan. However, some cautiousness was witnessedfollowing U.S. President’s failed attempt at passing a newhealthcare bill, formal commencement of Brexit, and after theG20 finance ministers meeting. Worries over tighteningliquidity in China dented sentiment.

• Yield on the 10-year U.S. Treasury bond rose 5 bps to close at2.41% in Mar 2017 compared with the previous month’s closeof 2.36%. During the month, the yield moved in a range of2.36% to 2.61%.

• U.S. Treasury prices fell initially on increased expectationsthat the U.S. Fed will hike interest rates at its Mar meeting.Prices fell further after release of upbeat U.S. private sectorjobs data for Feb.

• However, the trend reversed in the middle of the month afterthe U.S. Fed increased interest rates, but did not indicate afaster pace of monetary tightening in 2017. Also, failure of theU.S. President to secure lawmakers’ approval for a keyhealthcare bill supported U.S. Treasury prices.

• However, prices retreated towards the end after the U.S.consumer confidence index surged to a 16-year high in Mar2017 and the final fourth-quarter U.S. gross domestic productnumber was upwardly revised.

Global Equity Market

Global Fixed Income - U.S.

0

13

26

39

0.00

1.20

2.40

3.60

1 M

onth

3 M

onth

s

6 M

onth

s

1 Y

ear

2 Y

ears

3 Y

ears

5 Y

ears

7 Y

ears

10 Y

ears

30 Y

ears

Cha

nge

in b

ps

Yie

ld (I

n %

)

U.S. Treasury Yield Curve Shift (M-o-M)

Change in bps 31-Mar-17 28-Feb-17Source: Reuters

1.30

1.80

2.30

2.80


Yie

ld (

In %

)

U.S. 10 Year Treasury Yield

Source: Reuters

Movement during the Month


been


Source for data, graphs and analysis, unless otherwise specified: ICRA Online Research

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Documents

Principal Monthly Insight-Mar 2017 · • Regarding advertisement of the mutual fund scheme performance, Securities and Exchange Board of India (SEBI), in a circular, has instructed