TTTF

September 2019
Volume. 1, Issue 9
Market Pulse
A monthly review of Indian markets
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Market Pulse
September 2019 | Vol. 1, Issue 9
Table of Contents
Executive Summary ........................................................................................................................................................ 3
Story of the month........................................................................................................................................................... 4
Q1FY20 Quarterly Results Review: Yet another weak quarter........................................................................ 4
Chart of the month ........................................................................................................................................................ 12
INR fall in August is an EM story ............................................................................................................................ 12
Market Round up ........................................................................................................................................................... 15
Thought Leadership Article ......................................................................................................................................... 17
Macro economy .............................................................................................................................................................. 19
Q1FY20 GDP: Growth nosedives to 5%, the lowest in six years ................................................................... 19
.......................................................................... 23
Industrial production softens further in June .................................................................................................... 27
Trade deficit narrows sharply in July ................................................................................................................... 30
August MPC Policy Minutes: Growth over inflation for now; transmission to gather pace ..................... 32
................................................................................... 34
PSU Bank mergers: Unlocking potential .............................................................................................................. 36
Lower capex keeping fiscal deficit under check at 78% of BE during Apr-July 2019 .............................. 39
RBI accepts the revised ECF framework; Govt. garners an additional Rs 580bn ..................................... 43
Insights ............................................................................................................................................................................ 46
Global Securities Market Review: Concentrated markets, with divergent segments .............................. 46
Research paper: Do Investors Value Sustainability? ....................................................................................... 56
Market performance across asset classes .............................................................................................................. 57
Market Statistics: Primary market ............................................................................................................................ 61
Funds mobilised in the primary market ............................................................................................................... 61
New listings in the month ........................................................................................................................................ 61
Market Statistics: Secondary market ....................................................................................................................... 62
Institutional flows across market segments ...................................................................................................... 62
Segment-wise total turnover.................................................................................................................................. 63
Average daily turnover ............................................................................................................................................. 64
Turnover of top traded symbols ............................................................................................................................. 65
.................................................................................................. 66
Client category-wise participation in total turnover ........................................................................................ 69
Region-wise distribution of new investors registered ..................................................................................... 71
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Region-wise distribution of individual investors turnover in the cash market .......................................... 72

Asset category wise open interest (average daily volume)............................................................................. 73
Internet-based trading ............................................................................................................................................ 74
Record statistics ........................................................................................................................................................ 74
Investment through mutual funds in India ......................................................................................................... 74
Policy developments .................................................................................................................................................... 75
Economic calendar for the month for major countries ......................................................................................... 77
Annual Macro Snapshot ............................................................................................................................................... 78
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Executive Summary
Markets remain volatile, macro outlook worsens, reform push in focus
Indian markets witnessed another weak month, accompanied with heightened volatility, as muted corporate
performance and sustained concerns over global and domestic growth continued to weigh on market sentiments. On
the positive side, strong reform push by the Government, particularly roll-back of higher surcharge on capital gains and
a mega bank consolidation program, provided a much-needed, albeit a short-lived support to the markets. The debt
market also witnessed profit-booking last month, after a solid show over June-July. Global markets also ended in the
red amid escalating worries over global trade and growth, with continued flight of capital to safe havens leading to a
sharp decline in global bond yields. Market Round- section
on page 14 Market performance across asset classes section on page 55.
The section, this time, features an analysis of corporate performance for the Nifty 50 and Nifty 500
companies for the quarter gone by. Corporate earnings in Q1FY20 have remained tepid across sectors, as a subdued
demand environment, production cuts and liquidity crisis in shadow banking sector weighed on Indian corporates. This
in turn has led to a 12% cut in the 2019 Nifty 50 Consensus EPS estimates since the beginning of this year. With
consensus estimates still factoring in a 17% earnings growth for the Nifty 50 companies, further downgrades are not
ruled out, going by historical performance. More on this on page 4.
Our Thought Leadership section features an interesting article by Vikram Limaye, MD, NSE, highlighting the importance
of effective risk management in capital markets, best practices and techniques and next generation requirements.
On the macro front, Q1FY20 GDP growth declined to a six-year low of 5.0%, thanks to a sustained drop in consumption,
muted private investments and tight financial conditions. On the positive side, inflation has remained broadly steady and
evolved in- led by a sharp decline in imports, even as exports
growth also remained quite modest. As a response to slowing growth, the Government announced a slew of measures
to boost business and market sentiments, including taxation measures for investors and start-ups, upfront capital
infusion into PSBs, measures to revive NBFCs, MSMEs, and automobile and infrastructure sectors, amongst others. The
mega bank merger plan, announced late last month, would go a long way in strengthening the banking sector, crucial in
making India a US$5trn economy.
Market Pulse this time has also analysed the distributional pattern of global trade in the securities market across regions.
We notice that the securities market is mostly concentrated in a few exchanges, but with a diverse distributional pattern
across segments. As part of our endeavour to highlight relevant research in the field of financial markets, we have
summarised the research paper co-authored by Hartzmark and Sussman (2019) which tries to find out the value that
sustainability holds for investors in their investment decisions. More on these in our Insights section on page 44.
With an inverted yield curve in the US raising recession worries, and the macro outlook back home turning adverse,
markets are increasingly hoping for an aggressive monetary easing by central banks across the globe. Even as the room
seems limited at this juncture, it will be interesting to see how policy actions unfold over the next few months. We hope
you find this issue of Market Pulse useful, and as always, we look forward to feedback and comments.
Dr. Tirthankar Patnaik
Chief Economist
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Story of the month

Q1FY20 Quarterly Results Review: Yet another weak quarter
Corporate performance in the first quarter of FY20 has remained tepid across sectors, as subdued demand environment,
production cuts and liquidity crisis in shadow banking sector weighed on Indian corporates. Net sales growth for Q1FY20
for the Nifty 50/Nifty 500 companies, excluding Financials and Energy, came in at a muted 3.6%/5.6% YoY the lowest
in eight quarters, while PAT growth witnessed an YoY decline of 8.1%/4.1%. The weak results can largely be attributed
to Consumer Discretionary (weak auto sales), Materials (sharp dip in metal prices) and Energy (weak refining margins
amid volatile crude oil prices). On the positive side, Health Care and Utilities reported a strong profit growth.
The Consensus1 Nifty 50 EPS estimate for 2019 has been downgraded by nearly 12% since the beginning of this year.
However, the consensus estimates still point to a 17% earnings growth and is prone to further downgrades, going by
historical performance. This is evident in the Earnings Revision Indicator2 trend for Nifty 50 which has moved further
deep into the negative zone, implying a higher number of downgrades than upgrades.
 Moderation in sales growth across sectors: Aggregate net sales growth for Nifty 50/Nifty 500 companies, ex-
Financials/Energy, came in at muted 3.6%/5.6% YoY in Q1 FY20. Stress in revenue growth was largely evident
in Consumer Discretionary (weak auto sales), Materials (declining metal prices owing to China slowdown) and
Consumer Staples (softening rural demand in the wake of late onset of South-west monsoon). Sales growth in
export-oriented sectors, particularly Information Technology, has also moderated amid weak global demand.
 Margin tailwinds from lower commodity prices partly offset weak demand: EBITDA growth for the Nifty
50/Nifty 500 companies, ex-Financials/Energy, was a tad better at 4.2%/8.8% YoY in Q1 FY20. This was
primarily due to a decline in commodity prices owing to weak global growth outlook, thereby aiding operating
profits for non-commodity companies, partly offset by weak domestic and global demand. Sectors that dragged
down the EBITDA growth and margins are Consumer Discretionary (lower input costs failed to compensate for
weak demand), Energy (refining margins hit by heightened volatility in crude oil prices), and Materials (sharp dip
in metal prices). Sectors that drove EBITDA growth are Communication Services, Health Care, and Industrials.
 Financials drive PAT growth: Aggregate PAT growth for the Nifty 50/Nifty 500 companies slowed down sharply
to 2.5%/8.2% YoY, partly offset by a strong growth in Financials sector, thanks to a low base due to heavy
provisions in the same period last year. Excluding Financials, aggregate PAT growth declined by 12.8%/10.2%
YoY. Profitability of the Energy sector also declined by 19.8%/23.5% YoY in the Nifty 50/Nifty 500 universe on
account of huge margin compression. Excluding Energy and Financials, PAT growth declined by 8.1%/4.1% YoY
for Nifty 50/Nifty 500 companies.
 Downgrades gathering pace: Weak quarterly results have led to a 12% cut in the 2019 Nifty 50 Consensus EPS
estimates since the beginning of this year. The current consensus earnings growth estimate of 17% looks quite
optimistic and faces significant downside risk given the current macro overhang, historical performance on the
back of similar macro conditions and finally, weak global growth outlook translating into lower exports (negative
for export-focussed companies) and subdued commodity prices (hurting top-line). The Earnings Revision
Indicator has fallen deep into the negative zone, signalling that downgrades have outnumbered upgrades.
 Light at the end of tunnel? On the positive side, domestic liquidity conditions have eased, with nearly 110bps
cut in the policy rates in the year thus far,
economic growth should provide some fillip to consumption demand. Further, a resurgent South-west monsoon,
coupled with a renewed focus on the farm sector, bodes well for rural demand. Banking NPAs also seem to have
peaked out, and with provisioning for stressed assets nearly adequate, earnings growth for the banking sector
1
Consensus here implies IBES (Institutional Brokers' Estimate System) estimates from Refinitiv Datastream.
2
Earnings Revision Indicator over a period is calculated as (no of upgrades – no of downgrades)/(total number of upgrades and
downgrades). A value less than zero indicates downgrades outnumbering upgrades.
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should improve going forward. Key downside risks here include further deterioration in domestic and global
economic activity and increase in slippages in the banking sector.
Figure 1: Net sales growth of Nifty 50 companies in Q1FY20
%Growth QoQ growth YoY growth
Sector Jun-18 Mar-19 Jun-19 Jun-18 Mar-19 Jun-19
Communication Services 2.1 0.7 0.7 (7.3) 6.6 5.2
Consumer Discretionary (5.3) 18.5 (17.2) 29.4 7.8 (5.7)
Consumer Staples 8.9 10.9 (1.9) 16.7 18.0 6.3
Energy 28.1 8.2 4.8 57.8 32.9 8.7
Financials 4.8 14.5 (1.3) 19.2 24.3 17.0
Health Care 4.7 (0.1) 4.0 14.0 9.6 8.9
Industrials (32.9) 20.4 (30.1) 10.8 5.8 10.2
Information Technology 5.4 1.2 0.2 12.5 16.9 11.2
Materials 9.4 26.2 (10.9) 47.7 27.6 3.9
Utilities 7.7 (1.2) 4.0 29.9 11.1 7.3
Nifty50 10.5 11.7 (3.0) 35.6 22.6 7.6
Nifty50 ex-energy 1.4 13.8 (7.5) 24.1 17.2 6.9
Nifty50 ex-fin 11.6 11.2 (3.3) 39.0 22.2 6.0
Nifty50 ex-energy and fin 0.3 13.6 (9.6) 25.9 15.0 3.6
Source: CMIE Prowess, Refinitiv Datatream, NSE
Figure 2: Net sales YoY growth trend of Nifty 50 companies

YoY sales growth trend of Nifty 50 companies
50%
Nifty 50 Nifty 50 ex-Energy Nifty 50 ex-Fin Nifty 50 ex-energy ex-Fin
40%
30%
20%
10%
0%
-10%
-20%
Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19
Figure 3: EBITDA growth and margin of Nifty 50 companies in Q1FY20

EBITDA growth EBITDA margin
Sector QoQ YoY % QoQ (bps) YoY (bps)
Communication Services 26.5 21.9 45.9 934 628
Consumer Discretionary (26.8) (18.2) 11.1 (145) (169)
Consumer Staples 4.6 13.6 34.7 213 225
Energy (12.9) (10.9) 13.2 (269) (291)
Financials 8.6 30.7 70.6 647 737
Health Care 33.7 23.3 26.8 596 313
Industrials (21.3) 23.5 24.6 274 263
Information Technology 0.2 11.3 26.8 (1) 1
Materials (18.2) (2.5) 19.9 (176) (130)
Utilities 238.4 4.0 35.7 2474 (112)
Nifty50 1.5 10.1 26.9 119 60
Nifty50 ex-energy 43.8 16.8 35.9 453 304
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Nifty50 ex-fin (3.2) (1.6) 18.3 1 (141)

Nifty50 ex-energy and fin 2.8 4.2 23.0 278 13
Figure 4: EBITDA growth trend of Nifty 50 companies

EBITDA growth trend for Nifty 50 companies
50% Nifty 50 Nifty 50 ex-Energy Nifty 50 ex-Fin Nifty 50 ex-energy ex-Fin
40%
30%
20%
10%
0%
-10%
-20%
Figure 5: PAT growth and margin of Nifty 50 companies in Q1FY20

PAT growth PAT margin
Communication Services NA (71.0) 2.1 449 (563)
Consumer Staples (0.6) 11.2 21.4 26 95
Energy (18.4) (19.8) 5.6 (158) (198)
Financials 21.6 129.7 11.9 224 582
Health Care 74.1 28.9 16.2 650 251
Industrials (42.1) 38.1 8.9 (184) 179
Information Technology (4.7) 6.9 17.6 (91) (70)
Materials (38.5) (21.3) 5.9 (263) (188)
Utilities (27.7) 5.2 12.8 (561) (26)
Nifty50 (14.5) 2.8 7.9 (107) (37)
Nifty50 ex-energy (12.9) 15.6 9.4 (59) 71
Nifty50 ex-fin (22.1) (12.8) 7.1 (172) (154)
Nifty50 ex-energy and fin (24.1) (8.1) 8.5 (163) (109)
Figure 6: PAT growth trend of Nifty 50 companies
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PAT growth trend for Nifty 50 companies

80%
60%
40%
20%
0%
-20%
-40%
Figure 7: Net sales growth of Nifty 500 companies in Q1FY20

QoQ growth YoY growth
Sector Mar-19 Jun-19 Mar-19 Jun-19
Communication Services (0.7) (0.6) 24.4 16.6
Consumer Discretionary 8.8 (8.0) 6.7 (2.5)
Consumer Staples 10.3 5.9 20.9 11.3
Energy 5.1 3.4 27.5 7.0
Financials 15.0 (1.3) 24.5 13.2
Health Care 0.9 (0.1) 14.0 13.3
Industrials 19.9 (21.7) 12.8 6.6
Information Technology 1.4 (1.1) 15.7 10.8
Materials 15.8 (9.0) 20.0 3.0
Real Estate 45.1 (25.3) 17.2 13.0
Utilities 1.9 12.2 18.8 15.5
Nifty500 9.7 (3.0) 19.7 7.5
Nifty500 ex-energy 11.4 (5.2) 17.2 7.7
Nifty500 ex-fin 8.5 (3.5) 18.5 6.1
Nifty500 ex-energy and fin 10.1 (6.8) 14.7 5.6
Figure 8: Net sales YoY growth trend of Nifty 500 companies

Sales growth trend for Nifty 500 companies
40%
30%
20%
10%
0%
-10%
Figure 9: EBITDA growth and margin of Nifty 500 companies in Q1FY20

EBITDA growth EBITDA margin
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Communication Services 35.0 43.3 38.7 1022 719
Consumer Staples 7.7 14.9 23.9 40 75
Energy (17.9) (13.4) 11.8 (305) (277)
Financials 27.2 27.4 63.2 1415 704
Health Care 6.8 23.8 24.8 160 210
Industrials (22.6) 15.4 17.9 (20) 137
Information Technology (0.4) 10.3 23.6 16 (12)
Materials (11.7) (0.3) 19.7 (61) (65)
Real Estate (10.4) 11.3 37.5 625 (57)
Utilities 107.3 12.3 34.1 1563 (98)
Nifty50 9.6 13.5 27.0 311 143
Nifty50 ex-energy 14.7 18.4 32.7 570 297
Nifty50 ex-fin (3.3) 2.7 17.5 4 (57)
Nifty50 ex-energy and fin 2.2 8.8 20.5 180 61
Figure 10: EBITDA growth trend of Nifty 500 companies

EBITDA growth trend for Nifty 500 companies
30%
20%
10%
0%
-10%
-20%
Figure 11: PAT growth and margin of Nifty 500 companies in Q1FY20
PAT growth PAT margin
Communication Services NA NA 6.9 293 501
Consumer Discretionary (57.0) (46.0) 2.0 232 163
Consumer Staples (5.3) 12.0 13.9 165 9
Energy (26.1) (23.5) 4.8 193 192
Financials NA 223.7 7.3 977 472
Health Care 9.5 22.8 11.4 100 88
Industrials (44.9) 5.2 5.5 230 7
Information Technology (6.4) 5.1 15.1 85 83
Materials (23.1) (13.1) 6.7 123 125
Real Estate (27.8) (6.9) 12.1 41 258
Utilities 28.4 34.6 10.6 134 151
Nifty500 13.9 8.2 6.4 96 4
Nifty500 ex-energy 32.3 21.1 7.0 200 78
Nifty500 ex-fin (20.4) (10.2) 6.2 132 113
Nifty500 ex-energy and fin (18.1) (4.1) 7.0 97 70
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Figure 12: PAT growth trend of Nifty 50 companies

PAT growth trend for Nifty 500 companies
150%
100%
50%
0%
-50%
-100%
Earnings revision analysis

Nifty 50 Earnings Revision Indicator falling deep in the negative zone: The Earnings Revision Indicator (ERI) for the
Nifty 50 universe has remained in the negative zone for over five years now, implying more downgrades of earnings
estimates than upgrades. In fact, the 12-month moving average trend points to a negative ERI since 2011. The number
of downgrades peaked out in March 2016 and has kept on declining until September 2018. However, the pace of
downgrades increased since October 2018, thanks to worsening domestic and global economic activity, declining
commodity prices and tightness in domestic liquidity post the IL&FS crisis, leading to ERI falling back deep into the
negative zone.
Figure 13: Nifty 50 Earnings Revision Indicator
Source: Refinitiv Datatream, NSE
Nifty 50 2019 Consensus EPS downgraded by 12% since the beginning of this year: The chart below shows how
Consensus estimates usually begin the year (calendar/fiscal) with a bullish view on earnings, but are then brought back
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to terra firma with downgrades, year after year, as the macro environment overhang prevails over optimism. Corporate
earnings estimates were the most optimistic in 2014, partly explained by increasing hopes of a decisive BJP victory in
the 2014 General Elections. While electoral expectations were comfortably met that year, corporate earnings failed to
pick up, with 2016 earnings eventually coming in 17% lower than the estimate at the beginning of the year.
While the market believed that corporate performance has hit bottom and is bound to witness a strong recovery, first
the Bank AQR (Asset Quality Review) weighed on systemic credit growth, followed by Demonetisation and then the
-breaking GST reform in 2017 delayed a broad-based recovery. The current
ongoing domestic and global slowdown, coupled with tight domestic liquidity (that has only recently opened up thanks
made matters worse, leading to a ~12% downgrade in the 2019 NIFTY 50 Consensus
EPS estimate since the beginning of this year and nearly 6% since the beginning of July.
Figure 14: Yearly trend of NIFTY 50 Consensus EPS estimates
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Consensus earnings, going by their historical performance on the back of an

inimical macro environment do not seem to be done with the downgrade cycle yet. Despite a 12% cut in 2019 earnings
estimate this year, the Street (consensus estimates) is still factoring in an earnings growth of nearly 17% for the Nifty
50 companies this year. As the chart above illustrates, such estimates are prone to further downgrades amid slowing
domestic economy and weak global growth outlook, with the latter translating into lower exports (negative for export-
focussed companies) and subdued commodity prices (hurting top-line).
On the positive side, domestic liquidity conditions have eased, with nearly 110bps cut in the policy rates in the year
thus far and expected improvement in transmission to bank lending rates to provide some fillip to the consumption
demand Further, a resurgent South-west
monsoon, coupled with renewed government focus on the farm sector, should provide some relief to the rural demand.
Banking system NPAs also seem to have peaked out, and with provisioning for a large part of stressed assets been
already done, earnings growth trajectory for the banking sector should improve over coming quarters. Key downside
risks to earnings include further deterioration in domestic and global economic activity and increase in slippages in the
banking sector.
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Market Pulse
Chart of the month

INR fall in August is an EM story
The Indian Rupee depreciated sharply in August, down 3.6% to a low of 72.01 (August 26th), before stabilizing around
71.4 by the end of the month. That relief turned out to be short-lived as the GDP data on August 30th ensured a sub-72
opening in September
shared year but was in line with the Polish Zloty
(-2.8%), the Chinese Yuan (-3.7%), and compared favourably vs. the Turkish Lira (-4.5%), the Russian Rouble (-4.6%),
the Mexican Peso (-4.9%), the South African Rand (-6.6%) and finally, the Brazilian Real (-
drop was truly off the charts (-25.8% in August), thanks to its sovereign default woes.
The sharp drop in the currency also raised its volatility above long-term levels (6.1% vs. 4.9% annualized), but the
relatively stable movement of the currency rendered comparisons favourable with regional EM peers.
Figure 15: Movement in the INR and key EM currencies vs. the USD in August
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Figure 16: Movement in the INR and key Asian currencies over last 12 months
Figure 17: Movement in the INR and key Asian currencies over last 12 months
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Figure 18: 3-month currency volatility for key emerging markets
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Market Round up
Bearish mood continues accompanied with high volatility
Indian equity markets ended in the red for the third consecutive month, albeit outperforming the broader emerging
market pack, as intensifying economic slowdown, reflected in the six-year low Q1 GDP print, weaker-than-expected
corporate earnings and sustained global trade war concerns continued to dampen market sentiments. On the positive
side, the measures announced by the government to revive the economy, particularly roll-back of enhanced surcharge
on capital gains, provided some comfort. The fixed income market also gave up some of the gains from the previous two
declining global bond yields. This was primarily on account of the Government putting its plan to meet a part of its
borrowing requirement from overseas on hold.
 Domestic equity market remains weak for yet another month: The domestic equity markets declined for the
third consecutive month, with the Nifty 50 index registering a modest 0.9% decline in August to 11,023 (YTD:
+1.5%), even as it outperformed the emerging market (EM) pack. The mid- and small-cap indices (Nifty Midcap
50 and Nifty Smallcap 50) marginally underperformed the Nifty 50 index, declining by 2.2% and 1.2%
(VIX) rising by a strong 19.8% in August, following a sharp decline in the previous three months. Average daily
turnover in the cash markets increased by 8.7% MoM in August to Rs337bn (+2.4% vs. YTD average daily
turnover). Derivative turnover ranged between Rs641bn and Rs1.7trn, to average Rs962bn for the month
(+15.8% MoM).
Among sectors, Metals reported the highest loss, falling by 11.5% in August, followed by Banks (-5.0%), and
Media (-2.2%). Sectors that ended the month in green include Information Technology (+2.5%), Autos (+2.3%;
YTD: -24.1%) and Pharma (+1.1%).
 Fixed income market giving up gains: Following a buoyant performance over the previous two months, the
fixed income market saw some profit booking in August. This was despite a higher-than-expected 35bps rate
cut by the MPC, fiscal support to the Government of the tune of Rs5
significant revival in the Southwest monsoon (deviation of cumulative SW monsoon from long-period average
fell from ~9% as of July end to near-0% by August 31st) and decline in global bond yields. The benchmark 10-
year G-sec yield inched up by 19bps to end the month at 6.56% (-81bps in 2019 thus far), primarily on account
of the Government putting its plan of issuing bonds in the overseas markets to meet a part of its borrowing
requirement on hold, thereby leading to supply overhang worries. On the other hand, global bond yields
continued to move south amid heightened concerns over US-China trade tensions and global growth. While the
US 10-year yield declined by nearly 50bps to close the month at 1.5% the lowest in over three years, the
German bunds fell deeper into the negative territory to close the month at near all-time low levels at -0.7%.
 FIIs remained net sellers in equity markets in August but buyers of Indian debt: Foreign institutional
investors (FIIs) remained net sellers in Indian equity markets for the second consecutive month, with net
outflows at US$2.2bn the highest in ten months (YTD: US$7.2bn). This was largely on account of negative
sentiments around the enhanced surcharge levied on long and short-term capital gains, which was rolled-back
by the Government in late August. Domestic institutional investors, however, remained strong buyers, with net
inflows at ~US$3bn in August. FIIs were strong buyers in the fixed income market for the third consecutive
month, with net inflows at US$1.1bn in August, translating into net YTD inflows of US$4.8bn.
 Global markets decline amid growth worries: After generating positive returns over the previous two months,
global equity markets declined in August amid escalating worries over global trade and growth. Markets were
start of an easing cycle. However, the inversion of the yield curve the first time since 2007 is increasingly
pointing towards a potential recession. Amid magnifying growth concerns, other central banks have also
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Market Pulse
signalled towards loosening of monetary policy. While the developed market index (MSCI World) fell by 2.0%
the emerging market index (MSCI EM) underperformed at -4.9%.
US: The US equity market declined in August but outperformed other major markets. The S&P500 Index fell by
1.8% (YTD: 16.7%), with the Dow Jones Index also falling by a modest 1.9%. This was largely on account of
rising growth concerns amid trade worries, as reflected in the inversion of the
reluctance to ease rates aggressively further dampening market sentiments. Meanwhile, data indicated a
slowdown in economic growth. The US GDP growth for Q2 was revised downwards from 2.1% to 2.0% led by
declining exports and a smaller inventory build, partly offsetting strong consumer spending, as also reflected in
robust retail sales. Job market remained strong, with healthy growth in the non-farm payrolls and wage growth
of 3.2% YoY.
Europe: The European markets also ended lower in August. While DAX index fell by 2.0%, FTSE 100 index
declined by 5.0
from the European Union kept equity market sentiments muted. The manufacturing PMI reading remained well
in the contraction zone (<50), with the print of 47 in August 2019 being the second lowest reading since April
2013 and the seventh consecutive contraction in factory activity. Weakening manufacturing activity, along with
declining inflation reading (1.0% in July vs. 1.3% in June), significantly strengthened expectations of a monetary
stimulus, including rate cuts or a fresh round of quantitative easing (QE).
Asia: Asian equity markets fell sharply in August. While China marginally outperformed, despite a deterioration
in trade disputes, with the benchmark Shanghai Composite Index declining by 1.6%, the Hang Seng index fell
by a strong 7.4% in August, as protests continued to hurt market sentiments. On the
manufacturing PMI moved back to the expansion zone, rising from 49.7 in July t0 50.4 in August. Meanwhile,
Japanese equity market fell sharply in August, mirroring the currency market, thanks to weakening US-China
trade relationship, partly offset by better-than-expected GDP growth for the June quarter (1.8% which was later
revised downwards to 1.3% on lower capital expenditure).
 Crude declines but gold rallies on rising trade tensions and weakening global growth: In the commodity
segment, Brent crude oil fell by 7.3% in August to end the month at US$60.4/bbl. Industrial metals also declined
amid rising demand concerns in China. Precious metals (gold/silver) continued to rally amid global risk-off
environment on account of trade war concerns and weak global growth.
 EM currencies fall amid negative global cues: The US Dollar Index rose by 0.4% in August despite a 25bps
rate cut by US Fed, as the policy statement provided no hint of future rate cuts. In fact, the Fed Chair Powell
- -and-watch approach for future cuts.
Meanwhile, euro declined for yet another month, down 0.8% in August following a 2.2% decline in July, hit by
weak economic data and expectations of an aggressive monetary policy easing by the ECB. Meanwhile, INR also
felt the heat of dollar strengthening and rising global trade disputes, and declined by 3.8% in August, in-line with
Yuan and other EM currencies (please see page 11 for details),
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Thought Leadership Article

Risk management in capital markets3
The next generation of risk management will include near real-time calculations, aggregation and reporting of risks
across the entire capital markets value chain, and more granular categorisations of risks.
In the Indian financial services landscape, risk management has always been seen as a focus area for banking and
capital markets players. Our regulators have set appropriate guidelines and policies that achieve the dual objectives of
market development together with prudent risk management and consumer protection. While risk management and its
importance in lending is well understood and discussed in public circles (this may be attributed to the current high levels
of NPAs), risk management in capital markets is a less discussed topic.
Capital markets, globally and in India, are at risk of many violations including market manipulation, money laundering
and fraudulent reporting among others. Recent changes in global capital markets have forced participants across the
ecosystem -- buy-side and sell-side participants, custodians, market infrastructure and financial technology providers -
- to reassess their strategies, business models and risk frameworks. This results in movement in revenue pools where
risk resides and players are best positioned to succeed. All participants are being forced to adapt their business models
as a result.
The changes in the capital markets ecosystem also affect the risk across the value chain for market participants and
consequently the development of appropriate processes to mitigate these new risks will become critical. As a result,
increased scrutiny will be placed on risk management frameworks as well as recovery and resolution plans.
Best practice elements of a capital markets risk management architecture can be broken broadly into two buckets: a)
Risk governance, policies and procedures; and b) risk modelling, measurement, and reporting.
Risk governance refers to mechanisms that firms use to assess and implement decisions related to market, liquidity,
credit and operational risks inherent in capital markets. Capital market firms typically organise and govern their risk
management practices using a three-lines-of-defence model. This usually includes risk taking, risk oversight and risk
assurance activities.
Broadly, the first line is composed of risk takers business line heads who must own and track the risks they generate.
The second line is typically an independent body, usually the capital markets risk function, that sets limits for taking
risks and ensures that all risks are being appropriately managed across the organisation. The third line, usually the
internal audit function, verifies the efforts of the first two to ensure that nothing is out of line from the defined policies,
controls and processes.
The effectiveness of the three-lines-of-defence model depends on the clarity of roles, responsibilities and accountability
of all stakeholders, a clear segregation of duties to ensure independence in risk management, and review and challenge
built into the governance framework across all levels.
The capital markets risk function must outline its approach to risk management and set limits to quantify the amount of
risk the firm is willing to take, through a risk appetite statement. Capital markets risk management procedures and
processes translate policies into specific and tangible steps, according to which day to day activities can be performed.
The procedures also need to ensure that the firm has an effective system of controls, reasonably designed to identify
and mitigate risks.
3
This article was published in Business Standard on February 21st, 2019.
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Translating risk policies and procedures into action requires capital market firms to effectively model all risk types
(credit, market, liquidity, operational etc.), regular monitoring of risks and reporting to ensure efficient decision making
across the organisation.
The foundational elements of risk modelling comprise key elements including decomposing risk into discrete parts,
balancing effectiveness and efficiency of the risk models and aligning methodology with regulatory requirements and
firm strategy. A robust market risk modelling function would typically entail execution of the following processes:
 Development of modelling methodology for calculating the Value-at-Risk (VaR) and Stressed Value-at-Risk (SVaR)

purview
 Development of scenarios for stress testing
 Model calibration and measurement of model performance

all material risk types. The frequency of risk management report generation and distribution is set to enable periodic
measurement and to keep pace with the speed at which risks can change. The risk measurement reports play a crucial
role in contributing to sound risk management and effective management decision making.
Risk reporting is a key capability within organisations that comprises processes including signing off on results (such as
daily VaR results) to maintain accuracy of risk management and confirm that results are accurate for reporting and
disclosure purposes; producing results that accurately convey all risk data at an aggregate level (the reports should
ideally include a fine balance between risk data, analysis of risk, and qualitative explanations); producing reports for
regulatory purposes usually entails multiple checks and reviews by senior risk managers to ensure that all data is
accurate and exhaustive to meet regulatory requirements.
The next generation of risk management will include near real-time calculations, aggregation and reporting of risks
across the entire capital markets value chain, and more granular categorisations of risks. For future capital markets risk
functions to be successful, they would require sophisticated tools to synthesise complex information and generate
insightful alerts and reports in real-time situations.
Vikram Limaye
MD & CEO
National Stock Exchange
(Views expressed are personal)
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Macro economy
Q1FY20 GDP: Growth nosedives to 5%, the lowest in six years
for the sixth consecutive quarter, with Q1FY20 GDP rising by 5.0% (vs. 5.7% est. 4) the
lowest in over six years, pointing to a pervasive weakness in the economy. Private consumption the mainstay of the
economy has been the biggest drag, rising by a muted 3.1%, with its contribution to the GDP growth being the weakest
since 2014, even as public spending has remained the only saviour for yet another quarter. At a sector level, agriculture
sector growth improved, manufacturing sector growth saw a sharp deceleration, dragging down the industrial sector
growth, while Services sector growth held up relatively strong.
While a favourable base over the next few quarters is likely to support GDP growth, any tangible recovery would be
driven by the pace of monetary tr
therefore may take 2-3 quarters to materialise. On the positive side, crude prices remaining weak bode well on the
external front, and plentiful rains should help rural incomes. The current pace of growth, and the expected inflation
trajectory also calls for a fresh look at the extent of monetary easing this year.
 GDP growth disappoints even weak expectations: First quarter GDP growth disappointed at 5.0% (5.8% in
Q4FY19 and 8.0% in Q1FY19) the lowest in 25 quarters as sustained drop in domestic consumption, muted
Added (GVA) growth also dropped to sub-5% level at 4.9% in Q1FY20 (vs. 5.7% in Q4FY19 and 7.7% in Q1FY19)
the lowest in 21 quarters largely led by a sharp deceleration in the manufacturing sector growth, albeit off a high
base, even as services sector growth remained relatively strong.
 Government spending the only saviour: The Q1 GDP growth was severely dragged down by lacklustre private
consumption, which grew at an 18-quarter low of 3.1% (vs. 7.2% in Q4FY19 and 7.3% in Q1FY18) reflecting a
pervasive weakness in the economy, that is unlikely to disappear soon. This is also evident from the weak sub-
5% growth in imports. In a consumption-led economy, the contribution of private consumption to the GDP growth
has been the weakest since 2014. Investment growth has also remained weak, with GFCF (Gross Fixed Capital
Formation) growing at a muted 4.0% (vs. 3.6% in Q4FY19 and 13.3% in Q1FY19). Government spending has
remained the mainstay for yet another quarter, with GFCE (Govt. Final Consumption Expenditure) growing at a
strong 8.8%, excluding which GDP growth was 4.5%.
 Sector-wise, Manufacturing remains a drag: Among the sectors, agriculture sector showed an improvement,
after contracting in Q4FY19, and grew at 2.0%, even as it was much lower than the average 3.4% growth in the
June quarter over last seven years. However, with a meaningful revival in the South-west monsoon over July-
August, the agricultural output could likely improve over the next few quarters. Further, industrial growth fell to
two-year low of 2.7% in Q1 from 4.2% in Q4FY19, thanks to a sharp deceleration in the manufacturing sector
growth (0.6% vs. 3.1% in Q4FY19), partly offset by a strong growth in the Utilities sector. The only saviour to the
GVA growth was the Services sector, which grew at a relatively strong 6.9%, even as the growth has come off.
 Grow GDP growth has declined for the sixth consecutive quarter, and while it is
expected to improve over the next few quarters, a large part of it would be because of a favourable base. The
efforts taken by the Government and the Central Bank would take a few quarters to bear fruit. On the positive
side, a resurgent South-west monsoon, coupled with a renewed focus on the farm sector, bodes well for rural
demand and agriculture sector. Further, domestic liquidity conditions have eased, and with improving monetary
policy transmission in the economy, consumption demand should get a fillip.
 The current growth trajectory warrants a revision of the
RBI’s views on cost of funding in the economy. While the stance of the RBI remains accommodative and the
monetary transmission mechanism takes a few quarters to work its way through, we now expect policy rates to
be lowered further, with the central bank’s focus shifting decisively towards reviving growth.
4
Bloomberg Consensus Forecasts.
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Figure 19: Quarterly growth trend (2011-12=100) (%YoY)

Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20
Gross Domestic Product (GDP) 8.0 7.0 6.6 5.8 5.0
Private Consumption 7.3 9.8 8.1 7.2 3.1
Government Consumption 6.6 10.9 6.5 13.1 8.8
Gross Fixed Capital Formation 13.3 11.8 11.7 3.6 4.0
Net trade of goods and services 14.9 84.8 3.9 33.4 (1.9)
Gross Value Added (GVA) 7.7 6.8 6.3 5.7 4.9
Agriculture 5.1 4.2 2.8 (0.1) 2.0
Industry 9.8 6.7 7.0 4.2 2.7
Mining and Quarrying 0.4 (2.1) 1.8 4.2 2.7
Manufacturing 12.1 6.9 6.4 3.1 0.6
Electricity 6.7 8.7 8.3 4.3 8.6
Construction 9.6 8.5 9.7 7.1 5.7
Services 7.1 7.4 7.2 8.4 6.9
Trade, Hotels, Transport, Storage, Comm. 7.8 6.9 6.9 6.0 7.1
Fin. Svcs, Real Estate & Business Svcs. 6.5 7.2 7.2 9.5 5.9
Community, Social & Personal Svcs. 7.5 8.7 7.5 10.7 8.5
Source: CSO, NSE
Figure 20: Annual growth trend (% YoY)

FY16 FY17 FY18 FY19
Gross Domestic Product (GDP) 8.0 8.2 7.2 6.8
Private Consumption 7.9 8.2 7.4 8.1
Government Consumption 7.5 5.8 15.0 9.2
Gross Fixed Capital Formation 6.5 8.3 9.3 10.0
Net trade of goods and services (9.1) (7.2) 263.1 31.0
Gross Value Added (GVA) 8.0 7.9 6.9 6.6

Agriculture 0.6 6.3 5.0 2.9
Industry 9.6 7.7 5.9 6.9
Services 9.4 8.4 8.1 7.5
Source: CSO, NSE
Figure 21: India quarterly GDP growth on a downtrend (%)
Source: Refinitiv Datastream, NSE
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Figure 22: GDP sector quarterly growth trend (%YoY)
Figure 23: GDP sector quarterly growth trend (%YoY)
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Figure 24: Gross value added (GVA) across sectors
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Inflation
in June. This was primarily on account of a sharp decline in fuel and light inflation (the lowest since January 2012), even
as food inflation was broadly stable. A meaningful revival in the Southwest monsoon in July provided upside support to
food inflation. On the other hand, core inflation (ex-food, ex-fuel) inched up from 4.1% in June to 4.3% in July, reversing
the declining trend witnessed over the previous seven months. This was due to an increase in inflation of transportation
& communication, personal care and recreation & amusement. Wholesale price inflation declined further to 25-month
low of 1.1% (NSE est.: 1 .8%, Bloomberg poll: 1.9%) in July led by decline in prices across the board.
deteriorating economic activity, even as it remains quite comfortable on the inflation trajectory over the next 12 months.
While the MPC has reduced policy rates by 110bps in this year thus far, weak growth-inflation dynamics, as evident from
the recent Q1 GDP print, offers room for further monetary easing.
 Headline retail inflation remains stable Retail inflation (CPI) was largely unchanged at 3.15% in July 2019,
marginally lower than our estimate of 3.2%, led by a sharp decline in fuel & light inflation to -0.4% the lowest
yoy price increase in this category in the new series. Food inflation remained broadly stable at 2.3% in July as
lower inflation in vegetable, sugar and eggs more than offset the high inflation in meat and pulses. With the
monsoon having picked up further in August deviation of cumulative SW monsoon from long-period average
falling from ~9% as of July end to near-0% by August 31st, vegetable prices are likely to remain under check. The
is expected to remain within
-2% over the next 12 months.
 Core inflation (ex-food ex-fuel), on the other hand, inched up from

4.1% in June to 4.3% in July, as decline in the inflation of household goods & services, health and education was
more than offset by an increase in inflation of transportation & communication, personal care and recreation &
amusement. Housing inflation remained unchanged at 4.8%. Weak aggregate demand in the economy is likely to
provide an upside support to core inflation in the near-term.
 Room available for further monetary easing: While CPI is seen rising moderately in the near-term, we believe
and 3.5-3.7% in H2FY20 is likely to be met, and
-2%. Further, while the RBI pruned its FY20
GDP growth estimate by 10bps to 6.9% in the recent policy review, risks remain on the downside. As such, reviving
easing we expect at least 25bps rate cut in the second half of the fiscal, ceteris paribus.
Figure 25: Consumer price inflation (%YoY)

Weight (%) Jul-19 Jul-19E Jun-19 Jul-18 Apr-Jul Apr-Jul
CPI 3.1 3.2 3.2 4.2 3.1 4.6
Food & Beverages 45.9 2.3 2.5 2.4 1.7 2.0 2.8
Pan, Tobacco & Intoxicants 2.4 4.9 5.1 4.2 6.3 4.3 7.6
Clothing & Footwear 6.5 1.6 1.4 1.5 5.3 1.7 5.4
Housing 10.1 4.9 4.5 4.8 8.3 4.8 8.4
Fuel & Light 6.8 (0.4) 2.4 2.2 8.0 1.7 6.5
Miscellaneous 28.3 4.7 4.3 4.5 5.8 4.7 5.5
Source: CSO, NSE
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Figure 26: India inflation vs. interest rates
Figure 27: India consumer price inflation (CPI)
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 Wholesale inflation continues to decline: Wholesale price inflation (WPI) continued to move south, falling to 25-
month low of 1.1%, lower than our estimate of 1.8%. This was led by a decline across the board. While food
inflation fell to 4.5% in July from 5.0% in June, fuel and power category remained in the deflation mode for the
second consecutive month, coming at a 35-month low of -3.6% in July (vs. -2.2% in June). Manufactured products
inflation also fell to more than four-year low of 0.3% in July from 0.9% in June. Weak oil and commodity prices is
likely to keep WPI inflation benign in the near-term. Further, with domestic demand remaining weak, the drop in
wholesale prices would continue to feed into retail prices, keeping CPI inflation under check.
Figure 28: Wholesale price inflation (%YoY)

Weight (%) Jul-19 Jul-19E Jun-19 Jul-18 Apr-Jul Apr-Jul
WPI 1.1 1.8 2.0 5.3 2.3 4.8
Primary articles 22.6 5.0 6.8 6.7 2.0 6.3 3.3
Fuel & power 13.2 (3.6) (2.7) (2.2) 18.1 (0.1) 13.8
Manufactured products 64.2 0.3 0.6 0.9 4.5 1.2 4.0
Food group 24.4 4.5 5.0 5.0 (0.8) 4.9 0.7
Source: CSO, NSE
Figure 29: India wholesale price inflation (WPI)
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Industrial production softens further in June

The index of industrial production (IIP) softened further to come in at a 4-month low of 2.0% in June (NSE est.: 1.5%,
Bloomberg poll: 1.4%) led by weakness in mining and manufacturing sectors, while electricity sector production
surprised positively, and came in higher than the eight-core electricity print. Capital and consumer goods production,
however, remained lacklustre, signalling weak investment and consumption demand.
 Industrial production softens further in June: Industrial production growth fell to four-month low of 2.0% in
June from the upwardly revised 4.6% in May, slightly above our estimate of 1.5%. While mining and manufacturing
production growth continued to decline, falling to 1.6% and 1.2% respectively (vs. 2.4% and 4.5% in May),
electricity production growth surprised positively, registering a strong gain of 8.2% in May the highest growth in
eight months, vs. 7.4% in May. This was higher than the eight-core electricity print of 7.3% in June. Among
manufacturing sectors, just 8/23 sectors reported positive growth with basic metals, food products, and tobacco
products leading the pack, while paper & paper products, furniture and motor vehicles, trailers & semi-trailers
were the laggards.
 Capex remains weak: The slowdown in investment was visible in the tepid performance of capital goods sector
production which declined by 6.5% YoY in June vs. 1.4% drop in May. Consumer goods production growth also
registered a modest 1.6% growth, down from 4.6% in May, led by a 5.5% YoY decline in durables, signalling weak
domestic and global demand, even as non-durables registered a strong growth for the second consecutive month
(7.8%/8.1% in June/May 2019).
 Economic activity to remain soft for now: Amid subdued domestic and global consumption demand as well as
weak domestic business sentiments, industrial production is expected to remain soft in the near-term. On the
positive side, lower cost of funds in the economy, thanks to improving transmission on account of excess liquidity
in the system, is expected to provide support to the economic activity, albeit with a lag. Recent measures
announced by the government, and potentially more in the offing, also bodes well for business sentiments and
industrial activity.
Figure 30: India industrial production for June 2019 (%YoY)

Weight (%) Jun-19 Jun-19E May-19 Jun-18 Apr-Jun
IIP 2.0 1.5 4.6 7.0 3.6
Sector- Mining 14.4 1.6 1.0 2.4 6.5 3.0
based Manufacturing 77.6 1.2 0.8 4.5 6.9 3.2
indices Electricity 8.0 8.2 7.3 7.4 8.5 7.2
Primary Goods 34.0 0.5 0.7 2.2 9.2 2.6
Capital Goods 8.2 -6.5 -1.4 -1.4 9.7 -2.4
Intermediate Goods 17.2 12.4 0.4 13.7 1.5 9.4
Use-based
Infra/Construction Goods 12.3 -1.8 3.4 1.8 9.4 2.3
Goods
Consumer Goods 28.2 1.6 2.9 4.6 6.0 3.5
Consumer Durables 12.8 -5.5 -2.8 0.3 13.6 -1.1
Consumer Non-durables 15.3 7.8 7.8 8.1 0.2 7.3
Source: CSO, NSE
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Figure 31: India industrial production (3MMA)
Figure 32: India industrial production use-based goods (3MMA)
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Figure 33: India eight-core sector growth (3MMA)
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Trade deficit narrows sharply in July

narrowed sharply to US$13.4bn the lowest in four months, led by a sharp decline in imports, even
as exports growth also remained quite modest. While oil and gold imports fell sharply, registering their sharpest yoy
decline in 36 and 31 months respectively, non-oil non-gold imports also contracted for the seventh consecutive month,
reflecting weak domestic demand.
We expect deficit to widen in the coming months as gold imports normalise, with sharp rise in gold prices adding to the
bill, even as subdued crude oil prices amid weak global demand environment may keep oil imports under check.
 : Exports grew by a modest 2.2% in July to US$26.3bn led by a strong growth
in exports of electronic goods and readymade garments. Electronic goods exports have grown at an average pace
of 32.5% since last 18 months and at a much higher 40.5% over last 10 months. This has been largely coming
from exports of telecom instruments (accounting for ~40% of electronic goods exports), which have grown at
123%YoY during Apr-July 2019 (average growth of 156% over last 12 months). Excluding electronics goods and
readymade garments (accounting for ~9% of total exports in July), exports growth was muted at 0.6% YoY. This
was largely on account of YoY decline in exports growth of petroleum products (-5.3% YoY), engineering goods (-
1.7% YoY) and gems and jewellery (-6.8% YoY). For the fiscal so far, exports growth remained muted at -0.4%
YoY, compared to a strong 14.9% growth for the same period in FY19.
 Imports fell sharply for second month in a

row, contracting by 10.4% YoY to US$39.8bn the sharpest decline in 35 months. This was largely on account of
lower oil and gold imports. While oil imports declined by 22.2% YoY, reflecting lower oil prices, gold imports fell
by a huge 42.2%, but off a high base (40% YoY growth in July 2018). Non-oil non-gold imports also declined by a
modest 2.2% YoY in July negative growth for the seventh consecutive month clearly reflecting the slowdown
in consumption demand in India. This was largely led by decline in imports of transport equipment (-17% YoY),
chemical products (-7% YoY), electronic goods (-2% YoY) and ores & minerals (-1% YoY).
 resulting in narrowing of trade deficit: A sharp decline in gold and oil imports led to trade deficit narrowing to
US$13.4bn in July 2019, much lower than the monthly run-rate of US$15.3bn in the first quarter. Trade deficit is
expected to widen going ahead as gold imports normalise, with sharp rise in gold prices adding to the import bill.
On the positive side, subdued domestic demand and benign crude oil prices are likely to keep oil imports under
check.
Figure 34: India monthly trade balance for July 2019

Trade
Exports Imports
balance
Non-oil Gold
Total Oil imports
US$bn %YoY %YoY %YoY imports %YoY Import %YoY US$bn
(US$ bn) (US$bn)
(US$bn) (US$bn)
Jul-19 26.3 2.2 39.8 -10.4 9.6 -22.2 30.2 -5.9 1.7 -42.2 -13.4
Jun-19 25.0 -7.9 40.3 -10.0 11.1 -13.3 29.3 -8.7 2.7 13.0 -15.3
Jul-18 25.8 15.5 44.4 29.7 12.3 60.3 32.1 20.9 3.0 40.4 -18.6
FY20TD 107.4 -0.4 166.8 -3.6 44.5 -5.6 122.4 -2.8 13.2 15.4 -59.4
Source: Ministry of Commerce, NSE
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Figure 35: India monthly trade balance
Figure 36: India forex reserves and import cover trend
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August MPC Policy Minutes: Growth over inflation for now; transmission to gather pace
Committee in its August policy review meeting decided to reduce policy rates by an
unconventional 35bps, with a vote of 4:2 (four in favour of 35bps hike and two for 25bps), citing decelerating economic
activity and benign inflation outlook. The Committee also unanimously chose to maintain the extant policy stance as
accommodative. All MPC members viewed supporting economic growth at this juncture through a calibrated monetary
policy action as the utmost priority. The MPC acknowledged that there has been inadequate transmission of the previous
rate cuts to bank lending rates, even as expected to gather pace over the next few months, facilitated by a surplus
liquidity in the system.
With a disappointing Q1FY20 GDP growth print

combating inflation to boosting aggregate demand in order to close the output gap, amidst expectations of a comfortable
inflation trajectory over the next 12 months. This is likely to keep the room open for further monetary easing, even as
effective monetary policy transmission remains crucial for economic revival.
Figure 37: Word cloud of the minutes of June 2018 and August 2019 MPC review meetings
We have compared the word clouds of the minutes of the recent MPC review meeting (August 2019) with the one in
June 2018 when the MPC hiked the policy rates by 25bps for the first time in nearly five years in the wake of rising
concerns on inflation. The analysis shows that while inflation continues to feature the most in the commentary of all
MPC members even now, and understandably so, several growth-related terms (viz. activity, demand etc.) have now
gained significantly more eyeballs, signalling a decisive shift of focus towards addressing growth concerns in the
economy.
June 2018 MPC review meeting August 2019 MPC review meeting
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Figure 38: Views of MPC members

Members June 2019 MPC August 2019 MPC
Dr. Chetan Ghate
Global economic growth remains tepid.
Compared to the last review, several indicators are flagging
Growth Domestically, a variety of growth indicators have weakened
red, reflected in a further widening in the output gap.
further.
Headline inflation in-line with projections but uptick in food Benign inflation conditions continue to be manifested in CPI-
Inflation inflation posing upside risk. Remain watchful of the risk posed headline. A pick-
by INR and crude on core inflation. core inflation.
Policy action 25bps cut; stance: accommodative (erstwhile neutral) 25bps cut; stance: accommodative
Dr. Pami Dua
Q4 GDP fell to 5-year lows on weak investment and private Economic activity has softened due to muted consumption and
Growth consumption. A sharper dip in exports reflects weak global investment activity. Concerns regarding global slowdown and
demand, trade tensions and global uncertainties. trade tensions still persist.
Headline inflation stable, increase in food/fuel offset by dip in
Inflation is benign; projected to remain below target in 2019-
Inflation core inflation; projected headline inflation to remain below the
20.
target in 2019-20.
Dr. Ravindra H. Dholakia
Growth has seriously dipped and expected to remain below- Growth impulses are weak. Investment activity needs a boost
Growth potential for next 3-4 quarters. Real policy rates should be through economic reform measures and correction of high real
brought down to 1.5% sooner than later. interest rates.
Inflationary expectations are getting anchored. Core inflation
Recent inflation readings as per RBI projections. Inflationary
Inflation is on a declining trend and is likely to continue to fall over time
expectations for one-year ahead have been declining.
because of weak growth.
Dr. Michael Debabrata Patra
High frequency indicators point to a broad-based slowdown. Economy has weakened since June. While investment remains
Growth The evolving macroeconomic configuration imparts urgency to weak, private consumption is also losing momentum, reflected
strong policy support. in declining imports.
Inflationary expectations are better anchored than before.
Deteriorating economic activity visible in inflation outcomes.
Risks to the target are distinctly on the ebb. If FY20
Inflation Core inflation has persisted softness, mirroring the weakening
projections materialise, inflation will be at or below the MPC's
of domestic demand.
target for four years in a row.
Shri Bibhu Prasad Kanungo
Domestic growth slowing down. Moderation in private
Growth consumption, as signalled from continued contraction in
rural/urban demand indicators, is worrisome.
Inflation trajectory has evolved on expected lines; expected to
Inflation
remain below 4% for the next four quarters.
Policy action 35bps cut; stance: accommodative
Shri Shaktikanta Das
Economic activity clearly losing traction, with Q4 GDP growth Economic activity has weakened since the June MPC meeting.
Growth slowing down to 5.8%, thanks to a sharp deceleration in Several high frequency indicators have either slowed down or
investment activity. contracted in recent months.
CPI inflation remained unchanged, though there were
Household inflation expectations down by a total of 180/190
significant compositional shifts. Moderation in core inflation
Inflation bps for 3M/1Y horizon over last five surveys, suggesting better
was broad-based. Household inflationary expectations
anchoring of inflationary expectations.
softening.
Dr. Viral Acharya
Growth has slowed down but easing financial conditions
Growth should support growth and help investment activity revive on
steadily improving capacity utilisation.
Compared to the April policy, short-term headline inflation
Inflation trajectory has risen but 6-to-12-month trajectory has
softened. Fiscal slippage remains a key risk.
Policy action 25bps cut; stance: accommodative (erstwhile neutral)
Source: RBI
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In the wake of a pervasive economic slowdown and worsening investor sentiments, the Finance Minister announced a
slew of measures across sectors last month, with more in the offing, to revive economic growth which has fallen to six-
year low levels. These include taxation measures for investors and start-ups, upfront capital infusion into public sector
banks (PSBs), measures to revive NBFCs, MSMEs, automobile and infrastructure sectors and financial market reforms.
While sustained monetary easing and consequent lower interest rates in the economy is expected to boost aggregate
demand, the measures taken by the Government, particularly upfront bank recapitalisation, additional liquidity support
to NBFCs and faster disbursal of refunds to MSMEs are likely to increase the credit flow in the economy, shore up
business confidence and boost growth in the near-term. On the global front, lower interest rates and benign crude oil
prices are expected to provide further support.
 Withdrawal of angel tax and enhanced surcharge on capital gains to encourage investments: The Government
rolled-back the enhanced surcharge levied on long and short-term capital gains, announced in the Union Budget.
This should boost investment sentiments and encourage foreign portfolio inflows, which otherwise have remained
quite weak since the Budget announcement (net FII outflows of ~Rs 4.1bn from equity markets during July-
August). The Government also exempted registered start-ups and their investors from angel tax and decided to
set up a dedicated cell for faster resolution of income-tax related issues faced by them.
 Upfront liquidity to PSBs, greater transparency and efficiency:

upfront to PSBs should provide additional lending and liquidity to the tune of Rs 5trn, thereby aiding monetary
transmission. Further, return of loan documents within 15 days of loan closure, online tracking of loan applications
by customers and a transparent One Time Settlement (OTS) policy will bring in greater efficiency, transparency
and ease to customers.
 Liquidity support to NBFCs: The Government also announced measures to provide much-needed credit support
to NBFCs including additional liquidity support to HFCs of Rs 200bn by NHB (taking the total support to Rs 300bn),
strengthened monitoring of Partial Credit Guarantee Scheme (announced in the Union Budget) and prepayment
notices issued to NBFCs by banks. NBFCs will be permitted to use the Aadhaar authenticated bank KYC to enable
easier and fast-tracked on-boarding of customers. PSBs will capitalise on the last mile customer connect of NBFCs
by fast tracking collaboration for loans to MSMEs, small traders and Self Help groups in coordination with NBFCs.
 Better credit flow to MSMEs: All pending GST refunds due to MSMEs shall be disbursed within 30 days, with all
future settlements to happen within 60 days from the date of application. This, along with enhanced market for
bill discounting for MSMEs through the use of the GSTN system and decision making on UK Sinha
recommendations within 30 days, is expected to result in faster credit flow to MSMEs.
 Financial market reforms: The Government announced a slew of measures to increase capital flow and
strengthen the financial markets. These include a) establishment of an organisation to provide credit
enhancement for infrastructure and housing projects, b) development of credit default swap markets in
consultation with the RBI, c) measures to improve domestic bond market, d) removal of the requirement of
creation of a Debenture Redemption Reserve (DRR) of outstanding debentures for listed companies, NBFCs and
HFCs, e) increased access to foreign funds through ADR/GDRs for Indian companies through operationalization
of the Depository Receipt Scheme 2014, f) use of Aadhaar-based KYC for opening demat accounts and making
investments in mutual funds, g) simplified KYC procedure for foreign investors, and h) brining offshore rupee
market to domestic stock exchanges and permitting trading of USD-INR derivatives in GIFT IFSC, in coordination
with the RBI.
 Addressal of delayed payment roadblock in infrastructure sector: An inter-ministerial task force will be formed
to finalise the pipeline of infrastructure projects. This, along with monitoring and performance review of delayed
payments as well as monitoring and implementation of contractual disputes by the Government or CPSEs, is
expected to accelerate capital expenditure in the economy.
34
Market Pulse
 Auto sector reforms: A slew of measures were announced to address the slowdown in the Auto sector, with more
in the offing. These include a) continuation of BS IV vehicles purchased till March 31, 2020, b) deferment of one-
time registration fees till June 2020, c) higher depreciation of additional 15% on all vehicles, to increase to 30%
for all vehicles acquired during the period from now until March 31, 2020, d) enhanced focus on setting up of
infrastructure for development of ancillaries/components including batteries for export, e) lifting ban on the
replacement of old vehicles with new ones, and f) consideration of scrappage policy.
 Facilitating wealth creators: The CSR violations will no longer be treated as criminal offence, with the
government providing some relaxation to companies for completing ongoing CSR projects. The Government also
announced steps to address the complaints of harassment on account of issue of IT orders, notices, summons
and letters through a centralised system.
35
Market Pulse
PSU Bank mergers: Unlocking potential

In a mega consolidation announcement, the Government chose to merge 10 public sector banks into four larger,
financially stronger banks, taking into consideration technology platforms, culture, geographical presence and scale.
These four large PSBs account for 82% of the overall PSB business and 56% of the commercial bank business. Post the
mergers, the country will have 12 large public sector banks. The Government also announced several governance
reforms, empowering the boards of PSBs, strengthening Board Committee System, enhancing effectiveness of non-
official Directors (NoDs) and developing leadership plan. The consolidation, along with the upfront capital infusion into
PSBs, will help in reviving and revitalising the banking sector dealing with high level of stressed assets, thereby making
economy. Having said that, there are challenges in the near-term in terms of integration of processes and functions,
rationalisation of bank branches and responsibilities of key management personnel, which may result in a long transition
period.
 Merger of 10 PSBs into four large PSBs: In the third round of banking sector consolidation, the Government has
announced merger of 10 PSBs into four sets: a) Punjab National Bank (anchor bank) + Oriental Bank of Commerce
(OBC) + United Bank, b) Canara Bank (anchor bank) + Syndicate Bank, c) Union Bank (anchor bank) + Andhra Bank
+ Corporation Bank, and d) Indian Bank (anchor bank) + Allahabad Bank. This was done considering potential
synergy benefits arising from technology platforms, scale, geographical presence and culture. In 2017, the
Government had merged five associates of State Bank of India with SBI itself, followed by merger of Vijaya Bank
and Dena Bank with Bank of Baroda, making Bank of Baroda the third largest PSB. The Other six PSBs Indian
Overseas Bank, UCO Bank, Bank of Maharashtra, Punjab and Sind Bank, Bank of India and Central Bank of India
will continue as separate entities. Post mergers, the banking sector will have larger, financially stronger 12 PSBs
as compared to 27 in 2017.
 Reforms introduced to improve current governance practices at PSBs: In addition to the mega merger plan,
the Government also announced a slew of measures to strengthen the current governance framework of PSBs.
Key measures include empowering boards to recruit, compensate and appraise senior management personnel as
well as to enhance sitting fees of Non-official Directors (NODs) among others, enhancing effectiveness of NODs
and leadership development.
 Consolidation to result in enhanced lending capacity with wider reach and operational efficiency: The
consolidation will create four larger, financial stronger banks, with enhanced capacity to increase credit, strong
national presence and global reach as well as operational efficiencies. The banks will also have enhanced risk
appetite, ability to offer wide range of customised products and better access to market resources.
 Integration risks may lead to a long transition period: While consolidation is inevitable given persistent
structural issues with the public sector banks, consolidation has its own challenges. In the near-term, this may
lead to integration and implementation issues, particularly in terms of integration of processes and functions,
rationalisation of the branches, segregation of responsibilities of management personnel, amongst others. This
may lead to a long transition period, which may remain an overhang in the near term.
Figure 39: Merger of 10 PSBs into four larger, financially stronger banks
Anchor Bank Amalgamating Banks Business size (Rs trn) PSB rank by size
Punjab National Bank Oriental Bank of Commerce 17.9 2
United Bank of India
Canara Bank Syndicate Bank 15.2 4
Union Bank of India Andhra Bank 14.6 5
Corporation Bank
Indian Bank Allahabad Bank 8.1 7
Source: Government of India
36
Market Pulse
Figure 40: Set 1: PNB, OBC and UBI

Punjab National Bank Oriental Bank of Commerce United Bank of India Amalgamated bank
Total business (Rsbn) 11,822 4,042 2,081 17,945
Gross advances (Rsbn) 5,062 1,715 731 7,509
Deposits (Rsbn) 6,760 2,326 1,350 10,437
CASA ratio 42.2% 29.4% 51.5% 40.5%
Domestic branches 6,992 2,390 2,055 11,437
PCR 61.7% 56.5% 51.2% 59.6%
CET-I ratio 6.2% 9.9% 10.1% 7.5%
CRAR ratio 9.7% 12.7% 13.0% 10.8%
Net NPA ratio 6.6% 5.9% 8.7% 6.6%
Employees (#) 65,116 21,719 13,804 100,649
Figure 41: Set 2: Canara and Syndicate Bank

Canara bank Syndicate Bank Amalgamated bank
Total business (Rsbn) 10,432 4,770 15,203
Gross advances (Rsbn) 4,442 2,171 6,614
Deposits (Rsbn) 5,990 2,599 8,589
CASA ratio 29.2% 32.6% 30.2%
Domestic branches 6,310 4,032 10,342
PCR 41.5% 48.8% 44.3%
CET-I ratio 8.3% 9.3% 8.6%
CRAR ratio 11.9% 14.2% 12.6%
Net NPA ratio 5.4% 6.2% 5.6%
Employees (#) 58,350 31,535 89,885
Figure 42: Set 3: Union, Andhra and Corporation Bank

Union Bank Andhra Bank Corporation Bank Amalgamated bank
Total business (Rsbn) 7,413 3,985 3,196 14,594
Gross advances (Rsbn) 3,254 1,784 1,350 6,388
Deposits (Rsbn) 4,159 2,198 1,846 8,203
CASA ratio 36.1% 31.4% 31.6% 33.8%
Domestic branches 4,292 2,885 2,432 9,609
PCR 58.3% 68.6% 66.6% 63.1%
CET-I ratio 8.0% 8.4% 10.4% 8.6%
CRAR ratio 11.8% 13.7% 12.3% 12.4%
Net NPA ratio 6.9% 5.7% 5.7% 63.0%
Employees (#) 37,262 20,346 17,776 75,384
Figure 43: Indian and Allahabad Bank

Indian Bank Allahabad Bank Amalgamated bank
Total business (Rsbn) 4,300 3,779 8,079
Gross advances (Rsbn) 1,879 1,636 3,514
Deposits (Rsbn) 2,421 2,143 4,564
CASA ratio 34.7% 49.5% 41.7%
Domestic branches 2,875 3,229 6,104
PCR 49.1% 74.2% 66.2%
CET-I ratio 11.0% 9.7% 10.4%
CRAR ratio 13.2% 12.5% 12.9%
Net NPA ratio 3.8% 5.2% 4.4%
Employees (#) 19,604 23,210 42,814
37
Market Pulse
Figure 44: Governance reforms for public sector banks

To make management accountable to Board, Board committee of the nationalised banks to
appraise performance of GM & above (including MD)
To make span of control manageable in large PSBs, post consolidation, Boards given flexibility to
introduce the CGM level as per business needs
To recruit Chief Risk Officer from market, at market- linked compensation to attract best available
PSB Boards empowered
talent
To enable Succession Planning, Boards to decide system of individual Development Plans for all
senior executive positions
To ensure sufficient tenure, Boards given flexibility to prescribe residual service of two years for
appointment of GM and above
Flexibility given to Boards of large PSBs to enhance sitting fees of Non- Official Directors (NODs)
For better Board committee functioning, Boards given mandate to reduce/ rationalise Board
committees
Risk Management Committee given mandate to fix accountability for compliance of Risk Appetite
Strengthening Board
Framework
Committee System
Longer term to Directors on Management Committee of Board(MCB) to enable them to contribute
effectively
MCB loan sanction thresholds enhanced by up to 100%, to enable focused attention to higher
value loan proposals
NODs to perform role analogous to independent director
Enhancing effectiveness of
Boards given mandate to training of directors, both for induction and for specialised purposes
Non-official Directors (NODs)
Boards given mandate to evaluate NOD performance annually on peer-review basis
Executive Directors' strength in larger banks raised to 4, for better functional focus and thrust to
Leadership development technology
Creation of leadership pipeline under BBB's Leadership Development Programme
38
Market Pulse
Lower capex keeping fiscal deficit under check at 78% of BE during Apr-July 2019
-July 2019, accounting for 77.8% of the annual budgeted
target, vs. 86.5% in the same period last year. While net tax revenues grew by a strong 15.8% YoY, thanks to lower
t lower than the required 25.3% growth (on actual FY19 figures) to meet the budgeted targets, non-
tax revenue growth came in at a muted 1.4%. Overall, cumulative revenue receipts in the fiscal thus far have been in-
line with the trend seen in the same period last year. Contrary to the trend seen over last few years, the government
refrained from front-loading expenditure this year, with total expenditure growing at a muted 6.5% the lowest in five
years primarily led by subsidies, even as capital expenditure declined by 3.4% in the fiscal thus far.
The trend in direct and indirect tax collections so far, when looked in conjunction with the budgeted targets, suggests
significant pressure on government finances this year. While one-time revenue measures this year, particularly in the
form of transfer of dividend and surplus of Rs 1.76trn by the RBI, is likely to provide some respite, it remains to be seen
how that money will be transferred and utilised. Nevertheless, expected revenue shortfalls in a slowing economy,
particularly in the wake of optimistic targets, may lead to expenditure compression for yet another year.
 -July 2019
came in at Rs 5.5trn or 77.8% -year budgeted target an improvement over 86.5% in the
same period last year. On the Revenue deficit, however, has already reached 94% of the full-year target, amid
high subsidy outgo during the first four months. On the positive side, cumulative fiscal deficit as a % of GDP has
~65% over the last 10 years.
 Gross tax revenues during the first four months

of the fiscal grew by a muted 6.6% YoY to Rs 5.4trn, accounting for 21.9% of the budgeted target, a tad lower
than 22.3% in the same period last year. While direct tax collections grew at 5.8%, growth in indirect tax
collections was also muted at 7.3%, vs. the budgeted growth target if 18.6% and 19.1% respectively, reflecting
slowdown in the economy.
 GST collections falling short of target: GST collections in August fell to Rs 982bn the lowest monthly collections
in the last six months, implying a YoY growth of 4.5% the weakest pace of growth over last one year. The average
monthly run-rate of GST collections in FY20 thus far stood at Rs 1.03trn, falling 7.7% short of the average required
monthly run-rate of Rs 1.11trn5 to meet budget estimates. While a part of the decline in August is attributed to
in specific sectors viz. Autos and Real Estate, that have been bigger culprits behind faltering GST collections.
 Government refrains from front-loading expenditure; subsidy outgo huge while capex declines: Total
expenditure during April-July 2019 grew by 6.5%, much lower than the budgeted target of 20.5%. This has been
largely on account of lower interest expenses, thanks to declining sovereign bond yields, and a 3.4% YoY decline
in capital expenditure a matter of concern in a slowing economy where private investments have remained weak.
On the other hand, subsidy outgo on major items (food, fertilizer and petroleum) has risen by 19.7% YoY, lower
than 13.3% YoY budgeted growth rate, led by fertilizer (+49.6% YoY) and petroleum (+136.3% YoY).
 The trend of tax collections thus far

have significantly fallen short of budgeted targets for the year. While additional revenues to the tune of Rs 526bn
Committee on Economic Capital Framework of the RBI, is expected to provide some respite, an expenditure cut
looks inevitable amid faltering tax collections and weak market sentiments, making it difficult for the government
to successfully implement its divestment plan.
5
Required average gross monthly GST collections (including refunds) in FY20 to meet the year’s budget estimate is based on the
assumption that the ratio of gross GST to net GST collections by the Centre remains the same as that in FY19.
39
Market Pulse
Figure 45:
Figure 46: Gross fiscal deficit as % of budget targets during April-July period
% Gross fiscal deficit as % of budget targets during Apr-July period
100 92.4
85.7 87.0 86.5
90
77.8
80 73.7
69.3
70 62.8 61.2
58.1
60 55.4
51.3 51.5
50
39.5
40
30 23.8
20
10
0
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Source: CMIE Economic Outlook, CGA, NSE
40
Market Pulse
Figure 47: Direct tax collections trend during April- Figure 48: Indirect tax collections trend during April-
July period July period
Rsbn Direct tax collections during Apr-July period % Rsbn Indirect tax collections during Apr-July period %
Direct tax collections during Apr-July Indirect tax collections during Apr-July % YoY (R)
2500 % YoY (R) 40 3500 45
35 40
3000
2000 30
35
25 2500
30
1500 20
2000 25
15
1000 10 1500 20
5 15
1000
500 0 10
-5 500
5
0 -10 0 0
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Source: CMIE Economic Outlook, CGA, NSE
Figure 49: Gross tax collections trend during April-July Figure 50: Monthly trend of GST collections
period
Rsbn Gross tax collections during Apr-July period % Rs bn Monthly trend of GST collections %
Gross tax collections during Apr-July FY19
6000 30 1200 %YoY (R) 12.0
% YoY (R)
10.1 Required monthly target
5000 25 1150 10.0
Required monthly run-rate: Rs 1.11trn
4000 20 1100 6.7 8.0
5.8
3000 15 1050 6.0
4.5 4.5
1,139
2000 10 1000 4.0
1,021
1000 5 950 1,003 999 2.0
982
0 0 900 0.0
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 April May June July August
Source: CMIE Economic Outlook, CGA, PIB, NSE
Figure 51: Revenue and capital expenditure trend Figure 52: Trend of share of revenue and capital
expenditure in total expenditure during April-July
Rs trn Revenue and capital expenditure trend % % Share of revenue and capital expenditure in total
expenditure during Apr-July period
10 Capital exp 100 Revenue expenditure Capital expenditure
Millions
Rev exp 100

1.1
% YoY growth in rev exp 1.1 13.3 11.5 12.3 13.0 12.3 14.3 10.9 11.8 12.5 11.4
8 75
% YoY growth in capital exp 1.0 80
6 0.7 50
0.9 60
0.7 0.6
4 0.5 8.4 25
0.4 7.1
7.8
40 86.7 88.5 87.7 87.0 87.7 85.7 89.1 88.2 87.5 88.6
0.4 5.9
5.1
2 4.5 4.4 0
3.3 3.8
2.9 20
0 -25
0
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Source: CMIE Economic Outlook, CGA, PIB, NSE
41
Market Pulse
Figure 53: A snapshot of government finances for April-July 2019

Items (Rs bn) Apr-Jul 2018 Apr-Jul 2019 FY20BE
Rs bn % of BE Rs bn % of BE % YoY Rs bn % YoY over FY19A

Net tax revenues 2,926 19.8 3,387 20.5 15.8 16,495 25.3
Gross tax revenues 5,055 22.3 5,391 21.9 6.6 24,611 18.3
Of which:
Direct Tax 2,053 17.9 2,171 16.3 5.8 13,350 18.6
Corporation tax 838 13.5 884 11.5 5.5 7,660 15.4
Income tax 1,215 23.0 1,288 22.6 6.0 5,690 23.3
Indirect Tax 2,959 26.5 3,176 28.4 7.3 11,192 19.1
Goods and service tax 1,883 25.3 2,103 31.7 11.7 6,633 13.6
Custom Duties 429 38.1 517 33.2 20.6 1,559 32.2
Excise Duties 611 23.5 548 18.3 -10.2 3,000 29.9
Others 43 82.5 43 62.7 0.9 69 -54.6
States Share -2,124 27.0 -1,999 24.7 -5.9 -8,091 6.3
Transferred to NCCD -5 18.4 -5 18.2 -1.7 -25 37.9
Non-Tax Revenue 431 17.6 439 14.0 1.8 3,132 27.2
Dividends and profits 1 0.1 3 0.2 219.7 1,635 44.2
Other non-tax revenues 430 31.2 436 29.2 1.4 1,497 12.7
Central govt. revenue receipts 3,357 19.5 3,826 19.5 14.0 19,627 25.6
Non-Debt Capital Receipts 137 14.9 171 14.2 24.3 1,198 16.5
Recovery of Loans 45 37.0 47 31.7 4.3 148 -16.9
Misc. Receipts (inc. divestment) 92 11.5 124 11.8 34.0 1,050 23.5
Total Receipts 3,495 19.2 3,997 19.2 14.4 20,825 25.0
Revenue Expenditure 7,784 36.3 8,397 34.3 7.9 24,478 21.9
Interest Payments 1,808 31.4 1,835 27.8 1.5 6,605 13.4
Major subsidies 1,417 53.6 1,697 56.2 19.7 3,017 13.3
Food 1,078 63.7 1,085 58.9 0.7 1,842 7.5
Fertilizer 219 31.2 328 40.9 49.6 800 14.1
Petroleum 120 48.2 284 75.7 136.3 375 50.9
Capital Expenditure 1,113 37.1 1,076 31.8 -3.4 3,386 11.8
Total Expenditure 8,897 36.4 9,473 34.0 6.5 27,863 20.5
Fiscal Deficit 5,403 86.5 5,476 77.8 1.4 7,038 9.1
Fiscal Deficit/GDP 2.9 2.9 3.3
Source: CMIE Economic Outlook, CGA, Budget Documents, NSE
42
Market Pulse
RBI accepts the revised ECF framework; Govt. garners an additional Rs 580bn
The RBI has decided to transfer a surplus of Rs 1.76trn to the Government in FY20, based on the recommendations by
the Bimal Jalan Committee on the Economic Policy Framework of the RBI 6. This includes a dividend transfer of Rs
1.23trn includes interim dividend of Rs 280bn which was already transferred in March 2019, and one-time transfer of
income from the RBI in FY20, the additional income for the Government is expected at Rs 580.5bn or 0.3% of GDP.
While modalities with respect to the transfer and utilisation of this excess income are unclear at this juncture, prima
facie it should provide some breather to the Government in the wake of rising concerns on the fiscal front, thanks to
weak tax collections. Nevertheless, this is unlikely to translate into any fresh fiscal stimulus by the Government.
 Major Recommendations of the Committee with regard to risk provisioning and surplus distribution: The
cross-country comparison
environment on its balance sheet and the risks involved.
o The Committee recommended having a clearer distinction between the two
components of economic capital realised equity and revaluation balances. While realised equity can be
used for meeting all risks/losses as they are primarily built from retained earnings, revaluation balances can
only act as risk buffers against market risks and hence cannot be distributed. Further, while any shortfall in
revaluation balance vs. the market risk RTL (risk tolerance level) needs to be provided for from net income,
the surplus in revaluation balances cannot be used to cover shortfall in provisions for other risks.
o Provisioning for market risk: The Committee recommended the adoption of Expected Shortfall (ES)
methodology using a confidence level of 99.5% keeping in view the macroeconomic stability requirements
(vs. 99% confidence level adopted by global central banks)
the Stressed-Value at risk method used earlier.
o Size of realised equity: The Committee recognised that the cent is the country’s savings for
a ‘rainy day’ (a monetary/financial stability crisis such as the GFC), making it crucial for the RBI to maintain
an appropriate level of risk buffers. The Committee recommended it to be maintained in the range of 5.5-
6.5% of the RBI’s balance sheet, comprising 4.5-5.5% for monetary and financial stability risks and 1.0% for
credit and operational risks. Further, any shortfall in revaluation balances vs. the market risk RTL (risk
tolerance limit) would add to the requirement for realised equity.
o Surplus distribution policy: the level of
realised equity that needs to be maintained by the RBI, within the overall level of its economic capital vs.
the extant policy of targeting economic capital alone. If the available realised equity (ARE) is above the upper
bound of the requirement, entire net income will be transferred to the government. If the ARE falls below
the lower bound (5.5%), risk provisioning will be made to the extent necessary and only the residual income,
if any, will be transferred. There unrealised revaluation balances should not be transferred.
 Other recommendations: The Committee recommended aligning the the fiscal year of
the Government for greater cohesiveness. Also, interim dividend to the Government in future years may be paid
only under exceptional circumstances. The Committee also recommended a periodic review of the framework
 Revised framework translates into fresh impetus of Rs 580.5bn to the Government: The ARE as of June 2019
stood at 6.8% of the balance sheet, higher than the required range of 5.5 to 6.5%. The RBI decided to maintain
the realised equity level at the lower bound, translating into excess risk provisions of Rs 526.37bn to be written
6
Please click here for the Bimal Jalan Committee Report.
43
Market Pulse
back. of June 30, 2019 stood at 23.5%, within the required 20-24.5% range as
per the revised framework, based on the level of realised equity maintained and availability of revaluation
balances. Given financial resilience being within the desired range, the entire net income of Rs 1234.14bn will
be transferred to the Government, of which Rs 280bn has already been transferred as an interim dividend in
March 2019. This translates into a total surplus transfer of Rs 1.76trn in FY20. Given that the Government had
already budgeted for a surplus transfer of Rs 900bn from the RBI in FY20, the additional revenues amount to Rs
580.5bn.
 Given the Government tax collections are under significant pressure,
thanks to economic slowdown and optimistic targets, this additional income stream does provide some respite,
even as the modalities in terms of its usage are unclear at this point. Nevertheless, this is unlikely to translate
into any ramp-up in government spending.
Figure 54: Glossary of key terminologies
Terms Description
Economic capital/Risk buffers

Asset Development Fund (ADF), and revaluation balances.
Realized equity/Available realized
equity ADF)
Requirement for realized equity The Contingent Risk Buffer plus any shortfall in revaluation balances vs. their target requirement.
Contingent Risk Buffer (CRB)

operational risks.
The unrealized gains, net of losses, resulting from fx, gold price and interest rate movements, on account
Revaluation balances
of periodic MTM (mark-to- fx assets, gold, foreign dated securities and rupee securities
Provisions for meeting unexpected and unforeseen contingencies, including depreciation in the value of
Contingency Fund securities, risks arising out of monetary/ exchange rate policy operations, systemic risks and any risk
arising on account of the special responsibilities enjoined upon the RBI.
Asset Development Fund Provisions for investments in subsidiaries/associated institutions and to meet internal capital expenditure
Figure 55:
Extant ECF Revised ECF
Contingent risk buffer
Market Credit Operational
CRB Total Market risk Financial & monetary Credit Operational Total
risk risk risk
stability risk risk risk
24.4 3-4 0.4 0.3 28.1-29.1 18.9-15.3 4.5-5.5 0.6 0.3 25.4-20.8
# The CRB requirement has been rounded-up from 5.4-6.5% to 5.5-6.5% (Lender of Last Resort) risk is 4.6% and
the sum of credit and operational risk is 0.9%. Thus, the lower bound of the CRB is to be maintained at 5.5% with an upper bound of 6.5%.
Figure 56: risk provisions under extant and revised Economic Capital Framework
Extant ECF Revised ECF
Available risk Required Net Available risk Required risk
Net position Excess
buffers risk buffers position buffers buffers
Market risk 19.6* plus 4.8** 24.4 - 19.6 18.9 (RTL: 15.3) (+) 0.7 VB: 0.7
Financial & monetary 3 (medium- (-) 1.3 [(- (+) 0.8 to (+)
1.7 6.3 4.5 to 5.5 RE: 0.8 to 1.8
stability risk term: 4) )2.3] 1.8
Credit risk 0.4 0.4 - 0.6 0.6 - -
Operational risk 0.3 0.3 - 0.3 0.3 - -
(-) 1.3 [(- (+) 1.5 to (+) VB: 0.7 + RE
Total risk/buffers 26.8 28.1 [29.1] 26.8 20.8 to 25.4 #
)2.3] 2.5^ 0.7 to 1.7#
* VB: Revaluation balances ** RE: Realized equity ^ Excess is in the form of 0.7% revaluation balances and 0.8-1.8% realized equity.
% and the sum of credit and operational risk is 0.9%, the lower bound of the CRB is to be maintained
at 5.5% with an upper bound of 6.5%. Consequently, the excess RE is 0.7 to 1.7%.
44
Market Pulse
Figure 57
Rs bn 2017-18 2018-19
Income
Interest 739 1,068 Higher domestic holdings on account of OMOs and higher global interest rates
Includes provision write-back of Rs 526.2bn (as per Jalan Committee) and exchange
Other income 44 862
gain from forex transaction of Rs 291.4bn (as per Malegam Committee)
Total income 783 1,930
Expenditure
Printing of notes 49 48
Agency charges 39 39
Employee cost 38 69
Others 156 15
Total expenditure 283 170
Available balance 500 1,760
Interim dividend 100 280
Surplus payable to the Govt. 400 1,480
Figure 58
Liabilities 2017-18 2018-19 Assets 2017-18 2018-19
Capital 0.05 0.05 Assets of Banking Department
Reserve fund 65 65 Notes and rupee coins 0.09 0.09
Other reserves 2.28 2.3 Gold coin and bullion 697 883
Deposits 6,526 7,649 Investments - Foreign 7,984 6,965
Other liabilities & provisions 10,463 11,625 Investments - Domestic 6,297 9,899
of which Bills purchased and discounted 0.0 0.0
Contingency Fund (CF) 2,321 1,963 Loans and advances 1,639 932
Asset Development Fund (ADF) 228 229 Investment in subsidiaries 34 20
Currency & Gold Revaluation Account 6,916 6,645 Other assets 406 643
Surplus transferable to the Govt. 500 1,760
Liabilities of Issue Department Assets of Issue Department
Notes issued 19,120 21,688 Gold coin & bullion (as backing for Note issue) 743 792
Rupee coin 9.3 8.3
Investments - Foreign 18,367 20,888
Investments - Domestic 0.0 0.0
Domestic Bills of Exchange and other CPs 0.0 0.0
Total liabilities 36,176 41,029 Total assets 36,176 41,029
45
Market Pulse
Insights
Global Securities Market Review: Concentrated markets, with divergent segments
In this edition of the Market Pulse, we have analysed the distributional pattern of global trade in securities markets
across different regions, viz., the Americas, Asia-pacific and EMEA (Europe, the Middle East and Africa) using data from
World Federation of Exchanges (WFE) over the period January 2018 June 2019. A total of 86 exchanges are covered
in the analysis; 15 from the Americas, 21 from Asia-Pacific and the rest from the EMEA region.7 Starting from a region-
wise analysis of domestic market capitalisation, utilisation of listing platforms and resource mobilisation through IPOs,
what follows is a comprehensive analysis of trading activity in the cash/spot markets and different derivatives markets
Equity, Interest rate, Currency and Commodity segments. Key takeaways of the analysis are as follows:
 NSE ranked tenth globally based on domestic market capitalisation (DMC) in Jun'19: held
top position with 28% of market share globally, followed by Nasdaq US (14% market share) and Japan Stock
Exchange (7% market share). Notably, NSE ranked 10th with DMC of ~US$2.18tn over the month that
contributed around 3% of global DMC.
 Total resource mobilisation through IPOs declined since H1 2018: Resource mobilisation through IPOs fell
significantly across all regions except Americas. This resulted in an overall decline in investment flows through
IPOs by 22% in H1-2019 on a YOY basis. Total investment flows through IPOs halved in EMEA region and it
declined by 32% in Asia-Pacific region, whereas the Americas registered a 19% growth in capital raised over
the period.
 Cash market is vividly skewed across regions: While the Cash market is concentrated in the Americas region
in terms of total turnover with a market share of ~49% in H1-2019, it is skewed towards Asia-Pacific region in
terms of trade volume with 68% of trade share.
 NSE ranked third globally in terms of number of trades in Cash market: NSE has been able to maintain its
rank amongst the top four
month, after Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE). Data also reveals the
volatility of total trades has increased significantly in SSE and SZSE, whereas it remained stable for NSE.
 Distibution of total trade volume is quite diverse across regions for Stock options vs. Stock futures: Global
trade of single stock options are largely concentrated in Americas with 82% trade share in H1-2019, whereas
Asia-Pacific and EMEA regions have market share of 10% and 8%, respectively. In contrast, stock futures are
fully concentrated in Asia-Pacific and EMEA regions with 57% and 43% trade share respectively. NSE ranked
third globally in Stock futures and fifth in Stock options in terms of number of contracts traded.
 NSE maintained its top position in equity index options with ~67% of trade Moreover,
equity index options market has risen significantly over last two years.
 BM&FBOVESPA topped in the Equity index
futures market since June 2018 with more than 20% share in terms of number of contracts traded. Out of total
trade volume in June 2019, about 34% are traded in BM&FBOVESPA followed by 19% in CME group, 16% in
EUREX and 7% in Japan stock exchange. NSE ranked 9th with a market share of less than 2% in the month.
7
The World Federation of Exchanges, H1 2019 Market Highlights, https://focus.world-exchanges.org/statistics/articles/world-
federation-exchanges-publishes-h1-2019-market-highlights.
Note: HKEX - Hong Kong Exchanges and Clearing, SSE - Shanghai Stock Exchange, JPX - Japan Exchange Group Inc. SZSE - Shenzhen
Stock Exchange, KRX - Korea Exchange, ISE - International Securities Exchange, MIAX - Miami International Securities Exchange,
MOEX - Moscow Exchange, BIST - Borsa Istanbul, TFEX - Thailand Futures Exchange, BME - Spanish Exchanges, JSE - Johannesburg
Stock Exchange, SGX - Singapore Exchange, TASE - Tel-Aviv Stock Exchange, ASX - Australian Securities Exchange, MX - Bourse de
Montreal, CBOE - Chicago Board Options Exchange, TSE - Tehran Stock Exchange, SFX-Shanghai Futures Exchange, MOEX-Moscow
Exchange, ZCX-Zhengzhou Commodity Exchange, DCX-Dalian Commodity Exchange, MCX-Multi Commodity Exchange of India.
46
Market Pulse
 Multi Commodity Exchange (MCX) holds largest share of global trade in India:
sixth in the Commodity futures segment globally with 6% market share. Other exchanges in the country have
negligible share in commodity trades.
 In contrast, NSE holds top position in both Currency futures and options market: NSE topped in the segment
with 88% trade share in Options and 31% in Futures.
1. Distribution of global domestic market capitalisation across regions

Growth of domestic market capitalisation (DMC) recovered in H1-2019 from a sharp decline in H2-2018 across all
regions: After a significant slowdown in H2-2018, global DMC jumped up by 17.8% to reach US$86tn in H1-2019 from
US$73tn in H2-2018. Overall, DMC maintained a 1.6% growth in H1-2019 on YOY basis, which was largely contributed
by the Americas region with 4.4% growth over the period.
Global DMC is concentrated in the Americas region and the level of concentration has increased over the period:
Though, DMC is skewed globally in the Americas region with a 45% market share, and it raised significantly in Americas
with a growth rate of 4.4% in H1-2019 (YOY) whereas both DMCs of EMEA and Asia-Pacific declined by 1.2% and 0.3%
respectively over the period.
NSE ranked tenth globally based on DMC in Jun'19: Global DMC is concentrated further in few exchanges globally. In
US (14% market share) and
Japan Stock Exchange (7% market share). Notably, NSE ranked tenth with DMC of ~US$2.18tn over the month that
contributes around 3% of global DMC.
Figure 59: Domestic market capitalisation (US$bn)

Region-wise comparison Comparison across exchanges
NYSE
EMEA Nasdaq - US
H1 2019 H2 2018 H1 2018
JPX
Asia-Pacific SSE
Euronext
HKEX
Americas Jun'19 Jun'18
LSE Group
SZSE
Total TMX Group
NSE
0 20,000 40,000 60,000 80,000 1,00,000 0 10,000 20,000 30,000
US$bn US$bn
Source: WFE Market Highlights- H1 2019.
2. Allocation of listed companies across regions and resource mobilisation through

IPOs
A majority of listed companies are based in Asia-Pacific region: Overall distribution of total listed companies across
- 9. Data shows, about 54% of all listed companies are situated in
the Asia-Pacific region, whereas 27% in EMEA and 19% in Americas. Still, global DMC is concentrated in Americas as
merely two exchanges from the region NYSE and Nasdaq US holds 42% of global market share.
47
Market Pulse
Fewer companies have listed in H1-2019 than last year and a majority of them are listed through IPOs: Globally,
989 companies were listed in H1-2019 which was ~17% lower than H1-2018. Listing through IPOs was down by 35%,
whereas listing through other means increased 21% over the same period.
As a result, there is a downward trend in total resource mobilisation through IPOs since H1 2018: Total resource
mobilisation through IPOs fell significantly across all regions except Americas. This has resulted an overall decline in
investment flows by 22% over the period. Total investment flows halved in EMEA region and it declined by 32% in Asia-
Pacific region, whereas Americas registered a 19% increase in total investment flows through IPOs.
Figure 60: Number of listed companies
H1-2018 H1-2019
14,437, 9,688, 19% 14,099 , 9,823, 19%

28% 27%
27,334, 27,463,
53% 54%
Americas Asia-Pacific EMEA Americas Asia-Pacific EMEA
Figure 61: Trends of newly listed companies
Number of newly listed companies Investment flows through IPOs (US$bn)

1,400 H1 2018 H2 2018 H1 2019 100 H1 2018 H2 2018 H1 2019
90
1,200
80
1,000 70
60
800
50
92.6
89.4
1,215
1,191
600 40
72.2
989
30
806
804
400
52.3
40.1
20
521
33.1
468
27.9
27.3
409
24.6
24.6
387
200
12.6
11.8
10
0 0
Total IPOs Other Total Americas Asia Pacific EMEA
3. Trading pattern in the Cash market

Cash market is vividly skewed across regions: While Cash market is concentrated in the Americas region in terms of
total turnover with a share of ~49% in H1-2019, it is skewed towards Asia-Pacific region in terms of trade volume with
a share of 68%.
Cash turnover in Americas has declined significantly amid global slowdown: With the backdrop of both global
slowdown, Sino-US trade war and increase in market risk, the Cash market slowed down in Americas region over the
48
Market Pulse
period. Here, Cash turnover declined by ~17% to reach US$22tn in H1-2019 from ~US$26tn in H1-2018. Similar trend
is visible in Cash volume as well, which in turn, has declined its share in the global market.
However, Cash market grew significantly in the Asia-pacific region: In the region, Cash turnover grew by 5.5% to
reach ~US$18tn in H1-2019 from ~US$17tn in H1-2018, whereas Cash volume jumped up ~24% over the same period.
NSE ranked third globally in terms of number of trades in Cash market: NSE has been able to maintain its rank below
four for quite a long period in terms of number o
214mn trades over the month, after Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE). Data also
reveals the volatility of total trades has increased significantly in SSE and SZSE, whereas it remained stable for NSE.
like NYSE, Nasdaq, SSE and SZSE as shown

in Figure 65.
Figure 62: Trading pattern in the Cash market across regions

Turnover ($bn) Number of trades (mn)
60,000
H1 2018 H2 2018 H1 2019 14,000 H1 2018 H2 2018 H1 2019
50,000 12,000
40,000 10,000
8,000
30,000
6,000
20,000
4,000
10,000
2,000
0 0
Total Americas Asia-Pacific EMEA Total Americas Asia-Pacific EMEA
Figure 63: Region-wise trade share in the Cash market (H1-2019)
Share of turnover (US$bn) Share of trade volume (mn)

EMEA
EMEA,
7%
5,401 , 12%
Americas
Americas,
25%
21,934 ,
49%
Asia-Pacific ,
17,645 , Asia-Pacific
39% 68%
49
Market Pulse
Figure 64: Trading pattern in Cash market across exchanges

Number of trades - Cash market (mn)
600 600
SZSE NSE KRX
550 BATS Global Markets Nasdaq - US SSE
500
500
450
400
400
350 300
300
200
250
200
100
150
100 0
Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19
Source: WFE Monthly statistics.
Figure 65: Turnover in Cash market across major exchanges
Total turnover - Cash market (US$bn)

NSE BSE NYSE KRX SSE SZSE NASDAQ 100
2,000 2,000
1,800 1,800
1,600 1,600
1,400 1,400
1,200 1,200
1,000 1,000
800 800
600 600
400 400
200 200
0 0
Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19
Source: Bloomberg.
4. Trading pattern in the Derivatives market

Equity derivatives
Distibution of total trade volume is quite diverse across regions for Stock options vs. Stock futures: Global
trade of single stock options are largely concentrated in Americas with 82% trade share in H1-2019, whereas Asia-
Pacific and EMEA regions have trade share of 10% and 8%, respectively. In contrast, stock futures are fully
concentrated in Asia-Pacific and EMEA regions with 57% and 43% market share respectively during the same time
period.
Three out of top six exchanges in the stock options market are located in Americas and all top five exchnages
are from EMEA and Asia-Pacific region: Three exchanges from Americas CBOE, NYSE and Nasdaq US are
amongst top six exchanges in terms of number of traded contracts of Stock options, whereas top five exchanges
viz., KRX, MOEX, EUREX, NSE and BIST are from EMEA and Asia-Pacific region in the stock futures segment.
NSE ranked third globally in Stock futures and fifth in Stock options in terms of number of contracts traded.
50
Market Pulse
Figure 66: Trading volume of stock derivatives across regions
Single stock options Single stock futures
EMEA
H1 2019 EMEA H1 2019
H2 2018 H2 2018
Asia-
H1 2018
Pacific Asia-Pacific H1 2018
Americas
Americas
Total
Total
0 500 1,000 1,500 2,000 2,500 0 200 400 600 800 1,000
Volume (mn of contracts)
Figure 67: Trading volume of stock derivatives across exchanges
Number of contracts traded - Stock options Number of contracts traded - Stock futures
(mn) (mn)
TSE BM&FBOVESPA KRX EUREX NSE

120
CBOE Nasdaq - US 70
MOEX BIST
100 NYSE NSE
60
80 50
60 40
30
40
20
20
10
0
0
In the stock index options segment, trading happens mostly in Asia-Pacific region: Asia-Pacific region holds
80% trade share of Stock index options, followed by Americas with 11% and EMEA with 9%. In costrast, total
trade of index fututure is skewed towards Americas region with more than 50% of total trades.
NSE maintained its top position in stock index options with ~67% of market share
the Stock index options market has risen significantly over last two years.
In the Stock index futures segment BM&FBOVESPA topped in the Equity index
futures market since June 2018 with more than 20% market share in terms of number of contracts traded. Out of
total trade volume in June 2019, about 34% are traded in BM&FBOVESPA followed by 19% in CME group, 16% in
EUREX and 7% in Japan stock exchange. NSE ranked merely 9th with a market share of less than 2% in the month.
t is more inclined towards Stock futures whereas the situation remains quite opposite in the
options segment.
51
Market Pulse
Figure 68: Trading volume of index derivatives across regions
Stock index options Stock index futures
EMEA H1 2019 EMEA

H1 2019
H2 2018
H2 2018
H1 2018
Asia-Pacific Asia-Pacific H1 2018
Americas Americas
Total
Total
0 500 1,000 1,500 2,000 2,500

0 1,000 2,000 3,000 4,000
Volume (mn of contracts) Volume (mn of contracts)
Figure 69: Trading volume of index derivatives across regions
Number of contracts traded - Stock index Number of contracts traded - Stock index
options (mn) futures (mn)
NSE KRX CBOE EUREX TAIFEX
200 BM&FBOVESPA CME Group
400
EUREX JPX
350 SGX HKEX
300 150 KRX MOEX
NSE
250
200 100
150
100 50
50
0
0
Interest rate derivatives market

More than 50% of total trades of Interest rate derivatives happened in Americas: For Options, about 83% were
traded in Americas whereas remaining 17% were traded in EMEA. The distribution is similar for futures as well,
with 66% trade share in Americas and 27% trade share in EMEA region. Trade share of Asia-Pacific region remains
negligible in these segments.
Total trade of interest rate derivatives is further concentrated in few exchnages: CME group captures around
91% of total trade in Options and 69% in futures, followed by Eurex with 8% trade share in options and 18% trade
share over the period of H1-2019.
NSE holds merely 1% trade share for futures: NSE ranked seventh in the interest rate futures segment with merely
1% trade share globally in H1-2019.
52
Market Pulse
Figure 70: Trading volume of interest rate derivatives across regions
Interest rate options Interest rates futures
EMEA H1 2019 EMEA H1 2019

H2 2018 H2 2018
Asia- H1 2018 H1 2018
Asia-
Pacific
Pacific
Americas
Americas
Total
Total
0 100 200 300 400 500

0 500 1,000 1,500 2,000
Source: WFE Market Highlights- H1 2019, NSE
Figure 71: Number of contracts traded of interest rate derivatives across exchanges (H1-2019)
Interest rate futures

Interest rate options
1%
1% 3%
0%
6%
8%
18%
69%
91%
CME Group EUREX ASX

BM&FBOVESPA KRX NNX
CME Group EUREX NNX Others NSE Others
Commodity derivatives market

Commodity derivatives market grew significantly in H1-2019 on YOY basis: Global trade of commodity futures
grew by ~14% in H1-2019 annually, whereas commodity options raised by 6% on YOY basis.
Commodity are largely traded in Americas for Options and Asia-Pacific for futures: About 66% of total trade
of Commodity options happened in Americas, followed by EMEA with 22% trade share and 11% in Asia-Pacific.
The distribution is quite different for Commodity futures where Asia-Pacific holds 60%, EMEA 21% and Americas
18%.
Total trade is concentrated in few exchanges: CME Group captures 72% of total trade in Commodity options,
while ICE Futures and Dalian Commodity Exchange contributed 6% each in H1-2019. In the Futures segment,
global trade is somewhat equally distributed among Shanghai Futures, Zhengzhou Commodity, AME Group and
Dalian Commodity Exchanges with 19% market share on average during the same time period.
53
Market Pulse
Multi Commodity Exchange (MCX) holds the largest share of trade within India: ranked sixth in
the futures segment globally with 6% market share. Though NSE opened its platform in the Commodity futures
segment, its contribution remains negligible till now.
Figure 72: Trading volume of commodity derivatives across regions
Commodity options Commodity futures
EMEA EMEA
H1 2019 H1 2019
H2 2018 H2 2018
Asia- Asia-Pacific H1 2018
Pacific H1 2018
Americas Americas
Total Total
0 500 1,000 1,500 2,000 2,500 3,000 3,500

0 50 100 150
Figure 73: Trading volume of commodity derivatives across exchanges

Commodities options Commodities futures
4% 5%
6% 12% 7% 22%
11%
6%
18% 19%
72%
18%
CME Group ICE Futures US DCX ZCX Others SFX ZCX CME Group DCX MSX MCX Others
Source: WFE Monthly statistics
Currency derivatives market

Currency market is largely concentrated in Asia-Pacific region: Out of total trade of Currency options, about
93% were traded in Asia-Pacific region. Similar trend can be seen for Futures as well.
NSE holds top position in both Currency futures and options market: Within the Asia-Pacific region, trades are
further concentrated in few exchange. NSE topped in the segment with 88% trade share in Options and 31% in
Futures.
Figure 74: Trading volume of currency derivatives across regions
54
Market Pulse
Currency options Currency futures
H1 2019 H2 2018 H1 2018 H1 2019 H2 2018 H1 2018

EMEA EMEA
Asia- Asia-Pacific
Pacific
Americas Americas
Total
Total
0 200 400 600 800 1,000 1,200 1,400

0 200 400 600 800
Figure 75: Trading volume of currency derivatives across exchanges
Number of contracts traded - Currency Number of contracts traded - Currency

options (mn) futures (mn)
NSE JSE MOEX TASE CME Group NSE BM&FBOVESPA
70 MOEX CME Group
80
60
50 60
40
40
30
20 20
10
0
0
Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19
Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19
Source: WFE Monthly statistics
55
Market Pulse
Research paper: Do Investors Value Sustainability?8

Firms planning to invest in sustainability over short term return, are usually interested in knowing investor interest in the
sustainability of a firm while making their investment decisions. In this edition of Market Pulse we have tried to answer
this question, Do Investors Value Sustainability? -authored by Hartzmark and
Sussman (2019). They have used panel data modelling technique using mutual funds data from Morningstar during the
period January 2015-January 2017 to how investment flows changes in different segments of mutual funds with
sustainability index. Besides, a natural experiment was conducted to find out the driving forces underlying the demand
for mutual funds with high sustainability ratings.
The study reveals that the sustainability index has significant impact on net investment flows in mutual funds. Funds
with highest globe rating received substantial inflows (~4% of total fund) over the next 11 months, while lowest rated
funds experienced outflows i.e. ~6% of the fund. Moreover, the natural experiment of a large quasi-exogenous shock
equivalent to 40% of NYSE market cap examined the causal impact of the sustainability rating along a variety of margins.
 Morningstar first published global sustainability rating for all US domiciled open-end funds on monthly
basis: Morningstar, a leading financial research company, published sustainability ratings of more than 20,000
mutual funds since March 2016. The funds were ranked for the first time on a percentile basis and given a globe
the top 10% of the funds in
 Highest-rated funds received substantially more web traffic than others: During the post-publication period,
mutual funds with highest sustainability index received more attention from investors than other funds.
 Net investment flows of mutual funds significantly depend on their sustainability index: Over the period of
Mar 6- mutual funds experienced an outflow of 0.4% per month on average, while the outflow was
quite high for funds with lowest sustainability index (~0.9%) compared to merely 0.1% for highest rated funds.
 The comparison of pre- and post-publication period shows a significant change in the pattern of
investment: The sustainability index was simulated for the pre-publication period as well to show whether the
globing ratings would have had a similar impact on the investment pattern of funds. The study found no
significant difference in flows to funds across different groups before the publication. Mutual funds rated five
globes received more inflows than funds with one globe over five out of nine pre-publication months, whereas
remaining months show opposite pattern. During the post-publication period, the trend becomes stronger and
less volatile.
 Economic impact was quite large for all mutual funds over the post-publication period: Total economic
impact is measured using back-of-the-envelope analysis by considering all funds with one-globe and five-
globes. Their prior publication fund size were multiplied with the regression coefficient to obtain an estimate for
how much higher or lower flows were because of a globe rating. For one-globe funds the regression coefficient
varies between -0.352 and -0.457. Using these estimates, one-globe funds lost between US$12bn and
US$15bn investment flows in the 11 months after publication. Similarly, using estimated coefficients of five-
glove funds, 0.281 (lowest) and 0.379 (highest), these funds received inflows between US$24bn and US$32bn
as a result of the publication.
 Driving forces underlying the demand for mutual funds with high sustainability ratings: To understand why
investors value sustainability, a natural experiment was conducted on 576 participants which suggests that
investors have a strong belief that higher global rating would lead to greater return in the future, which in turn,
increases demand for mutual funds with highest global rating. Hence, investors prefer mutual funds with higher
global ratings irrespective of their categories (institutional vs. non-institutional).
8
Hartzmark, S. M. and Sussman, A. B. (2019) Do Investors Value Sustainability? A Natural Experiment Examining Ranking and Fund
Flows. The Journal of Finance. 09 August 2019. https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12841
56
Market Pulse
Market performance across asset classes

Figure 76: Performance across equity indices, fixed income, currency and commodities
Indicator name Aug-19 1M ago 3M ago 12M ago 1M (%) 3M (%) 6M (%) 12M (%) YTD (%)
Equity
NIFTY 50 11,023 11,118 11,923 11,681 -0.9 -7.5 2.1 -5.6 1.5
NIFTY 500 8,978 9,045 9,805 9,992 -0.8 -8.4 0.2 -10.2 -2.1
MSCI INDIA 1,265 1,259 1,356 1,381 0.5 -6.7 0.5 -8.4 0.2
INDIA VOLATILITY INDEX (%) 16 14 16 13 19.8 1.3 -10.9 29.3 1.8
MSCI WORLD 2,139 2,188 2,046 2,175 -2.2 4.5 2.5 -1.7 13.5
S&P 500 COMPOSITE 2,926 2,980 2,752 2,902 -1.8 6.3 5.1 0.9 16.7
DOW JONES INDUSTRIALS 26,403 26,864 24,815 25,965 -1.7 6.4 1.9 1.7 13.2
HANG SENG 25,725 27,778 26,901 27,889 -7.4 -4.4 -10.2 -7.8 -0.5
FTSE 100 7,207 7,587 7,162 7,432 -5.0 0.6 1.9 -3.0 7.1
NIKKEI 225 20,704 21,522 20,601 22,865 -3.8 0.5 -3.2 -9.5 3.5
Fixed Income
India 10YR Govt. Yield (%) 6.6 6.4 7.0 8.0 19bps -48bps -104bps -140bps -81bps
India 5YR Govt. Yield (%) 6.4 6.3 6.8 7.8 6bps -48bps -72bps -143bps -73bps
India 1YR Govt. Yield (%) 5.8 5.9 6.3 7.3 -13bps -49bps -80bps -157bps -105bps
India AAA Corporate Bond Yield (%) 7.7 7.7 8.2 8.7 2bps -50bps -106bps -105bps -84bps
India T-Bill Yield Curve 3 Months (%) 5.4 5.7 6.1 6.8 -23bps -70bps -97bps -138bps -132bps
US 10YR Govt. Yield (%) 1.5 2.0 2.1 2.9 -52bps -63bps -122bps -136bps -119bps
Germany 10YR Govt. Yield (%) -0.7 -0.4 -0.2 0.3 -26bps -50bps -88bps -105bps -94bps
China 10YR Govt. Yield (%) 3.1 3.2 3.3 3.6 -10bps -23bps -12bps -55bps -25bps
Japan 10YR Govt. Yield (%) -0.3 -0.2 -0.1 0.1 -12bps -18bps -25bps -38bps -27bps
Currency
USD/INR 71.4 68.8 69.7 70.9 3.8 2.5 0.4 0.7 2.3
EUR/USD 1.1 1.1 1.1 1.2 -1.1 -1.2 -3.3 -5.4 -3.7
GBP/USD 1.2 1.2 1.3 1.3 -0.5 -3.4 -8.4 -6.3 -4.4
USD/YEN 106.1 108.6 108.6 110.9 -2.2 -2.2 -4.6 -4.3 -3.3
USD/CHF 1.0 1.0 1.0 1.0 0.1 1.7 0.7 -2.3 -0.4
USD/CNY 7.1 6.9 6.9 6.8 3.8 3.5 6.9 4.6 4.1
Commodities
Brent Crude Oil (US$/bbl) 60.4 65.2 64.5 77.8 7.8 6.7 9.3 28.7 -11.0
LME Aluminum (US$/tonne) 1,753 1,799 1,795 2,132 -2.6 -2.3 -8.3 -17.8 -5.0
LME Copper (US$/tonne) 5,652 5,927 5,830 6,066 -4.6 -3.1 -13.2 -6.8 -5.2
LME Lead (US$/tonne) 2,017 2,010 1,805 2,072 0.3 11.7 -6.2 -2.7 -0.2
LME Nickel (US$/tonne) 17,900 14,490 12,017 13,285 23.5 49.0 37.2 34.7 67.4
LME Tin (US$/tonne) 16,350 17,315 18,715 19,195 -5.6 -12.6 -24.5 -14.8 -16.0
LME Zinc (US$/tonne) 2,205 2,444 2,524 2,468 -9.8 -12.6 -20.6 -10.6 -10.6
SGX Iron Ore 1M Future (US$/tonne) 81 107 91 64 -23.9 -10.3 8.7 26.8 25.5
Gold Spot Price (US$/troy ounce) 1,520 1,414 1,306 1,200 7.5 16.5 15.8 26.7 18.5
Silver Spot Price (US$/troy ounce) 18 16 15 15 13.0 25.9 17.7 26.3 18.6
Platinum Spot Price (US$/ounce) 934 865 794 790 8.0 17.6 7.2 18.2 17.4
Palladium Spot Price (US$/ounce) 1,534 1,520 1,328 970 0.9 15.5 -0.8 58.1 21.5
Source: Refinitiv Datastream, Bloomberg, NSE
57
Market Pulse
Figure 77: Performance across NSE sector indices

Indicator Name Aug-19 1M ago 3M ago 12M ago 1M (%) 3M (%) 6M (%) 12M (%) YTD (%)
Auto 7,009 6,852 8,176 11,009 2.3 -14.3 -16.1 -36.3 -24.1
Bank 27,428 28,876 31,375 28,062 -5.0 -12.6 2.4 -2.3 1.0
FMCG 29,257 29,066 29,850 32,912 0.7 -2.0 -0.0 -11.1 -4.1
Information Technology (IT) 16,010 15,620 16,161 15,811 2.5 -0.9 1.8 1.3 10.9
Media 1,915 1,958 2,204 2,840 -2.2 -13.1 -22.3 -32.6 -25.4
Metals 2,290 2,588 2,900 3,643 -11.5 -21.1 -20.3 -37.2 -27.4
Pharmaceuticals 8,072 7,988 8,455 10,391 1.1 -4.5 -9.2 -22.3 -9.0
Real Estate 267 267 284 276 -0.1 -5.9 16.1 -3.1 15.0
Figure 78: NIFTY sector performance over the last month (rebased to 0)
58
Market Pulse
Figure 79: India 10-year benchmark G-sec yield long- Figure 80: India 10-year benchmark G-sec yield
term trend movement over last 12 months
India 10-year benchmark g-sec yield-long-
India 10-year benchmark g-sec yield
term trend
12 8.5
movement over last one year
10 8
7.5
8
7
6
6.5
4 6
Source: Bloomberg, NSE
Figure 81: Sovereign yield curve across G20 countries as of August 31st, 2019
Aug 2019 3m 6m 1y 2y 3y 4y 5y 6y 7y 8y 9y 10y 30y
US 1.99 1.88 1.77 1.51 1.43 1.39 1.46 1.51 1.97
Japan (0.16) (0.26) (0.27) (0.31) (0.33) (0.35) (0.35) (0.37) (0.38) (0.37) (0.32) (0.28) 0.14
Germany (0.73) (0.75) (0.85) (0.92) (0.96) (0.97) (0.95) (0.92) (0.89) (0.82) (0.79) (0.71) (0.22)
France (0.59) (0.71) (0.74) (0.84) (0.87) (0.83) (0.77) (0.70) (0.63) (0.56) (0.49) (0.41) 0.42
UK 0.75 0.72 0.46 0.40 0.34 0.35 0.33 0.28 0.30 0.35 0.41 0.48 1.02
Italy (0.33) (0.29) (0.25) (0.16) 0.02 0.21 0.42 0.54 0.65 0.78 0.81 1.03 2.06
Canada 1.62 1.62 1.54 1.35 1.29 1.25 1.19 1.17 1.16 1.43
EU (0.73) (0.75) (0.85) (0.92) (0.96) (0.97) (0.95) (0.92) (0.89) (0.82) (0.79) (0.71) (0.22)
Argentina 31.94 48.78 24.81 25.25
Australia 0.89 0.73 0.67 0.68 0.68 0.73 0.78 0.83 0.88 0.89 1.48
Brazil 5.77 5.41 5.36 5.84 6.38 6.99 7.27 7.44
China 2.54 2.67 2.82 2.93 3.10 3.07 3.71
India 5.42 5.62 5.77 5.84 6.06 6.25 6.37 6.57 6.43 6.67 6.67 6.56 7.00
Indonesia 5.90 6.00 6.23 6.63 6.78 7.35 8.06
South Korea 1.15 1.22 1.17 1.26 1.23 1.27 1.27
Mexico 7.83 7.66 7.42 6.86 6.87 6.95 6.97 7.48
Russia 7.03 7.05 6.75 6.78 6.80 6.88 7.03 7.16
South Africa 6.75 6.59 7.28 8.23 9.92
59
Market Pulse
Figure 82: Sovereign yield curve across G20 countries as of July 31st, 2019
July 2019 3m 6m 1y 2y 3y 4y 5y 6y 7y 8y 9y 10y 30y
US 2.09 2.10 2.01 1.89 1.85 1.85 1.93 2.02 2.53
Japan (0.12) (0.25) (0.18) (0.21) (0.22) (0.24) (0.24) (0.25) (0.25) (0.23) (0.19) (0.16) 0.35
Germany (0.53) (0.61) (0.70) (0.78) (0.81) (0.79) (0.75) (0.70) (0.66) (0.59) (0.56) (0.44) 0.13
France (0.54) (0.56) (0.63) (0.70) (0.73) (0.70) (0.62) (0.54) (0.45) (0.36) (0.28) (0.18) 0.75
UK 0.76 0.76 0.50 0.43 0.35 0.37 0.38 0.39 0.45 0.52 0.50 0.61 1.32
Italy (0.24) (0.17) (0.17) (0.02) 0.29 0.52 0.83 0.97 1.09 1.25 1.30 1.55 2.67
Canada 1.65 1.68 1.70 1.55 1.52 1.48 1.45 1.46 1.48 1.70
EU (0.53) (0.61) (0.70) (0.78) (0.81) (0.79) (0.75) (0.70) (0.66) (0.59) (0.56) (0.44) 0.13
Argentina 31.88 42.92 24.03 24.65
Australia 0.99 0.86 0.82 0.84 0.87 0.95 1.03 1.10 1.18 1.21 1.87
Brazil 5.94 5.60 5.46 5.72 6.18 6.82 7.09 7.25
China 2.59 2.78 2.89 3.00 3.20 3.18 3.85
India 5.73 5.83 5.90 6.02 6.21 6.24 6.30 6.55 6.52 6.72 6.63 6.37 6.83
Indonesia 5.90 5.95 6.22 6.43 6.82 7.38 8.02
South Korea 1.29 1.30 1.29 1.33 1.33 1.39 1.37
Mexico 8.10 8.08 7.92 7.23 7.27 7.43 7.51 7.89
Russia 7.13 7.09 6.69 6.90 6.96 7.10 7.19 7.30
South Africa 6.64 6.45 7.42 8.33 9.93
Figure 83:
Rs bn
Net lending under RBI's liquidity adjustment facility
4000
3000 Figure greater than

zero indicates deficit
2000
liquidity in the system
1000
-1000
Figure less than zero
-2000
indicates surplus Systemic liquidity has
-3000 liquidity in the system remained in surplus since
June 2019, which in turn
-4000 should aid monetary
-5000 transmission
-6000
Aug-2013 Aug-2014 Aug-2015 Aug-2016 Aug-2017 Aug-2018 Aug-2019
Source: Bloomberg, NSE
60
Market Pulse
Market Statistics: Primary market

Funds mobilised in the primary market
In August 2019, Indian firms utilized NSE platform to raise Rs375bn through primary market, which is about 9% lower
than the previous month. Total fund raised through public issue of debt during August was Rs25bn, substantially higher
than the Rs848m raised in a quiet July. However, private placements continue to be the most preferred channel in the
primary market to mobilise resources. Firms utilized this route to raise mobilise Rs281bn, which contributed ~75% of
total funds raised in the primary segment over the month.
Unlike the previous month, firms preferred IPOs to raise fund from the market compared to other options in the equity
through
preferential allotment, one firm raised Rs19bn through QIP and one raised Rs1bn through rights issue.
Figure 84: Fund mobilised
Particulars Aug-19 Jul-19
No. of Amount Raised Amount Raised No. of Amount Raised Amount Raised
Issues (Rsm) (USDm) Issues (Rsm) (USDm)
Equity
IPOs 4 45,183 635 2 4,883 71
Rights Issue 1 1,019 1 1 14,850 216
Preferential Allotment 8 3,195 4 11 42,450 617
QIP 1 19,305 27 1 21,000 305
Debt
Public issue of NCDs 18 24,977 351 9 848 12
Private Placement 29 280,847 3948 44 326,504 4748
Total 374,525 5,138 410,535 5,970
Note: In case of debt issuances, the above table reports no. of ISINs instead of issues.
Source: NSE
New listings in the month

Out of four companies listed afresh in August through IPO, three were listed in the main board and one on the SME
Emerge platform. Among others, five companies migrated from the SME segment to the main board during the month.
Listing proved to be profitable for all but two stocks, with the rest gaining ~11% on average over the month.
Figure 85: Companies listed in NSE in August

Listing Gain Market Cap Gross Turnover
Listing Date Security Name Listing
% (Rsm) (Rsm)
02-Aug-19 Shrenik Ltd. 6.1 6518 17 Migrated to NSE Main Board
05-Aug-19 Creative Peripherals and Distribution Ltd. 4.7 785 0 Migrated to NSE Main Board
06-Aug-19 Wonder Fibromats Ltd. 4.5 746 14 SME-IPO
08-Aug-19 Affle (India) Ltd. 24.3 22275 7414 IPO
19-Aug-19 Spandana Sphoorty Financial Ltd. (3.6) 54409 3728 IPO
19-Aug-19 Zota Health Care Ltd. 2.8 5023 8 Migrated to NSE Main Board
20-Aug-19 Sterling And Wilson Solar Ltd. (9.5) 116453 3331 IPO
22-Aug-19 Krishana Phoschem Ltd. 18.2 1296 0 Migrated to NSE Main Board
22-Aug-19 Madhya Bharat Agro Products Ltd. 18.6 1698 1 Migrated to NSE Main Board
Source: NSE
61
Market Pulse
Market Statistics: Secondary market

Institutional flows across market segments
Overall net inflows of foreign institutional investors (FIIs) in debt and equity segments (in US$bn) over the last five
(fiscal) years are illustrated in the following charts. Flows differ substantially not just across fiscal years there is
significant divergence between the two main segments in their patterns of capital inflows as well. In FY16, FII net flows
remained low in both equity and debt segments, but FY17 saw a significant net inflow in equities with over US$11bn,
while debt flows became negative towards the end of the fiscal year. In contrast, there was a significant jump in net
inflows in FY18 with US$19bn in the debt segment, while net inflows remained muted in equities. In FY19, net flows
were negative initially across both debt and equities and ended the year with net outflows. FY20 is also set to be another
year with divergent flows where the trends of FII net inflows in equity segment is quite different than the debt segment.
Notably, FII inflows through the equity channel continued to decline in August after a sedate July driven by enhanced
market risks globally, further signals of the economic slowdown, and budget-related tax proposals on FPIs registered
as trusts. Changes announced in the proposed revision of the tax structure for FPIs have not had a material impact on
preference turning towards debt over equity over the last couple of months, for reasons mentioned above.
Figure 86: Overall net inflows across both FIIs and DIIs for India

* FII/FPI trading activity on NSE, BSE and MSEI. **DII flows are for India as a whole in equity only.
62
Market Pulse
For domestic institutional investors (DIIs), net inflows remain largely positive in the last five (fiscal) years (see chart
above), including FY20. Though trends were quite similar during first half of all these (fiscal) years, they differ
substantially during the latter halves. Specifically, DII inflows increased significantly in FY16 and FY19 to reach Rs633bn
and Rs834bn respectively, reversing a decline towards Rs54bn in FY17. DIIs started FY20 as net sellers given the
ongoing uncertainty about the General Elections and a gradual slowdown i
flows turned positive to reach Rs152bn partly driven by the stable mandate of the NDA Government return to power.
Unlike FIIs, net inflows remained ele 19, and increased further during July- .
In the cash market, net outflow of FIIs invested through NSE remained high in August as well, driven down by factors
mentioned above. On the contrary, FIIs were net buyers in both equity derivatives and currency derivatives and their net
inflows increased rapidly over the month. In the equity derivatives segment, FII net inflows increased from Rs106bn in
July to Rs179bn in August, whereas it increased from Rs9bn to Rs168bn in currency derivatives during the same time
period.
The trend is quite different for DIIs, where net investment tracked through NSE declined over last month, but
remained positive in the Cash segment. In contrast, their net outflows increased sharply in the equity derivatives
segment from Rs12bn in July to Rs36bn in August.
Figure 87: Foreign and domestic institutional flows (Rsbn)

Month Aug-19 Jul-19
Category Buy Sell Net Buy Sell Net
Cash Market
DII 826 634 192 888 688 200
FII 1,019 1,179 (159) 890 1,056 (166)
Futures & Options
DII 839 875 (36) 809 822 (12)
FII 60,684 60,505 179 54,987 54,881 106
Currency Derivatives
DII 110 110 (0) 58 55 3
FII 1,009 841 168 562 553 9
Source: NSE *DII Domestic Institutional Investors, FII Foreign Institutional Investors
Segment-wise total turnover
month compared to July (23 in July vs. 20 in August). Total cash turnover declined by 5.5% over the month, whereas
equity futures turnover declined marginally by 0.5%. Despite of fewer trading days in the month, total turnover of
Currency futures increased by 54% and Equity options by 25%, which has resulted an overall increase in total turnover
of NSE (up by 4.4% over the month).
Figure 88: Total turnover in different segments (Rsbn)

Segment Apr-19 May-19 Jun-19 Jul-19 Aug-19
Cash Market 6,403 7,883 5,962 7,130 6,737
Equity futures turnover 15,654 19,587 15,283 18,224 18,135
Equity options premium 717 978 721 891 1,113
Currency futures turnover 3,613 3,568 3,018 3,146.4 4,839
Currency options premium 11 10 6 7 16
Interest rate futures turnover 241 227 361 461 325
Commodity futures turnover 5 4 4 5 15
Source: NSE
63
Market Pulse
Average daily turnover

The average daily turnover in the Cash market increased by 8.7% (to Rs337bn) over the previous month, perhaps due
to increase in uncertainty and volatility in the market. The sharp increase in total turnover of Reliance and HDFC has
helped to increase average turnover in the segment.
Stock derivatives activity also maintained a decent growth over the month, to reach at Rs603bn and Rs9bn average daily
turnover in futures and options respectively. Equity futures turnover increased mainly because of increase in gross
turnover of Reliance and HDFC futures, whereas in the premium segment total turnover of Reliance, SBI and Indiabulls
Housing Finance Ltd. have contributed a significant rise in the segment.
Figure 89a: Average daily turnover in Cash market (Rsmn)

Product Aug-19 Jul-19 % Change Current FY Previous FY YTD
Cash Market 336,858 310,004 8.7 331,215 320,583 328,140
Exchange Traded Funds 2,244 2,414 (7.0) 2,012 1,748 2,097
SME Emerge 41 68 (39.3) 69 169 81
Sovereign Gold Bonds 18 8 127.0 8 5 8
InvITs 58 28 106.0 41 47 44
Mutual Funds (Close Ended) 1 1 (21.1) 1 6 1

Source: NSE
Nifty and Bank Nifty are the top traded indices at NSE in both futures and options segments. In futures segment, average
turnover of Nifty and Bank Nifty increased by ~37% over the month. Similar trends are seen in options as well, where
average premium turnover of Nifty and Bank Nifty jumped up by 53% and 51% respectively over the month.
Figure 89b: Average daily turnover in Equity derivatives (Rsmn)

Single stock derivatives

Stock futures 603,459 571,231 5.6 594,670 651,089 591,515
Stock options 8,934 8,004 11.6 8,000 8,065 7,977
Index futures
Bank Nifty 118,696 86,800 36.7 99,605 93,381 91,803
Nifty 184,461 134,203 37.4 149,059 130,636 142,989
Nifty IT 120 114 4.8 182 320 236
Index options
Bank Nifty 23,981 15,844 51 18,230 13,659 16,759

Nifty 22,753 14,898 53 16,691 12,716 15,572
Nifty IT 0 0 - 0 0 0
Source: NSE *premium turnover for options
Among currency futures, USDINR share has increased from ~87% of total turnover in July to ~91% in August, followed
by GBPINR and EURINR. Recent rise in volatility of exchange rate may have resulted a ~85% rise in average futures
turnover of USDINR to reach Rs219bn over the month. Other currency futures also accounted sharp increase in average
turnover in August except GBPUSD. In the options segment, USDINR contributed about 100% of total premium turnover,
which has further jumped up with 154% growth to reach Rs795m in August from Rs312m in the previous month.
64
Market Pulse
Figure 89c: Average daily turnover in Currency derivatives (Rsmn)

Currency futures
EURINR 7,170 5,034 42.4 5,756 7,167 5,730
EURUSD 580 481 20.7 509 1,755 542
GBPINR 10,310 9,926 3.9 10,584 9,274 10,451
GBPUSD 310 386 (19.6) 420 1,385 609
JPYINR 3,863 1,916 101.6 2,730 2,422 2,632
USDINR 219,708 1,19,046 84.6 158,261 169,509 161,690
USDJPY 15 11 42.1 12 49 13
Currency options
EURINR 0.02 0.02 (14.9) 0.03 0.33 0.03

EURUSD 0.00 0.00 - 0.00 - 0.00
GBPINR 0.07 0.06 16.7 0.09 0.30 0.10
GBPUSD 0.00 0.00 - 0.00 - 0.00
JPYINR 0.00 0.00 - 0.02 0.05 0.02
USDINR 795.03 312.51 154.4 488.33 600.51 523.83
USDJPY 0.00 0.00 - 0.00 - 0.00
Source: NSE. *premium turnover for options
Figure 89d: Average daily turnover in Interest rate futures (Rsm)

668GS2031 0 0 - 7 14 8
717GS2028 39 1,598 (98) 6,620 8,296 7,999
726GS2029 16,044 18,312 (12) 8,926 73 5,937
795GS2032 165 120 38 270 319 277
Source: NSE
Turnover of top traded symbols

Figure 90a: Top 10 symbols based on total turnover of Cash market (Rsmn)
Symbol Aug-19 Jul-19 %Change
RELIANCE 293,406 198,267 48.0
YESBANK 265,717 310,930 (14.5)
IBULHSGFIN 259,296 218,854 18.5
HDFCBANK 200,450 165,817 20.9
SBIN 193,936 158,924 22.0
HDFC 180,931 131,231 37.9
ICICIBANK 169,124 146,233 15.7
MARUTI 148,977 135,199 10.2
AXISBANK 140,110 161,592 (13.3)
INDUSINDBK 138,460 161,389 (14.2)
Source: NSE
65
Market Pulse
Figure 90b: Top 10 symbols based on total turnover of Stock futures (Rsm)
RELIANCE 594,360 480,583 23.7
SBIN 589,501 536,459 9.9
HDFC 410,466 341,277 20.3
HDFCBANK 382,776 334,905 14.3
ICICIBANK 365,493 345,863 5.7
BAJFINANCE 343,800 487,276 (29.4)
AXISBANK 341,777 382,334 (10.6)
IBULHSGFIN 324,278 292,970 10.7
INFY 269,125 318,694 (15.6)
MARUTI 251,156 254,746 (1.4)
Source: NSE
Figure 90c: Top 10 symbols based on total turnover of Stock options (Rsmn)
RELIANCE 17,099 10,479 63.2
SBIN 15,400 10,735 43.5
IBULHSGFIN 11,850 8,855 33.8
YESBANK 8,568 13,209 (35.1)
MARUTI 6,540 6,262 4.4
BAJFINANCE 5,805 8,574 (32.3)
TATAMOTORS 5,357 4,916 9.0
TATASTEEL 4,918 4,423 11.2
AXISBANK 4,659 5,590 (16.7)
ICICIBANK 4,452 3,684 20.8
Source: NSE
After stellar growth in 2017 and 2018, turnover growth at NSE has eased in the current year, partially due to the ongoing
economic slowdown in the economy, increase in uncertainty in the global financial market and the ongoing Sino-US trade
war. While inflation at the consumer level remains under control, real sector indicators like the IIP portend a clear
decline in the growth trajectory that usually does not bode well for trading activity in general and market benchmarks
like the NIFTY have also tended to move in line, as illustrated in the chart below.
However, the impact of global indicators on the growth of Cash turnover is not quite clear. The trend of crude oil price is
somewhat coincided with the market movement since latter half of 2018, but it may not have necessarily reflected in
the turnover growth of Cash market.
In the Equity derivatives segment, the movement of turnover growth may have less to do with macroeconomic factors
than recent regulatory changes, like the phased implementation of mandatory physical settlement for stock derivatives.
The currency derivatives market has turned more integrated with global market sentiments since 2018, as trends of
global market indicators like exchange rate and crude oil price coincide with the growth rate of currency derivatives
turnover.
66
Market Pulse
Figure 91: Growth of NSE cash turnover vs. Nifty 50, IIP and CPI Inflation
Figure 92: Growth in NSE cash turnover vs. crude oil price and exchange rate
67
Market Pulse
Figure 93: Growth of NSE equity derivatives turnover vs. Nifty 50, IIP and CPI Inflation
Figure 94: Growth in NSE equity derivatives turnover vs. crude oil price and exchange rate
68
Market Pulse
Figure 95: Growth in NSE currency derivatives turnover vs. crude oil price and exchange rate
Client category-wise participation in total turnover

Distribution of total turnover across different client categories remains largely stable in the cash segment in the last five
financial years. In August 2019, proprietary traders contributed ~23% of total turnover in Cash market, followed by FIIs
(16%), DIIs (11%) including retail investors and HNIs have contributed around 45% of
total turnover in August compared to 47% in the previous month. The FII participation, which had dropped in July,
increased 270 bps during August. The share of proprietary traders and DIIs dropped marginally by 30 and 20 bps
respectively during the same period.
In Equity derivatives, there is a significant change in composition of total turnover across client categories. The share of
proprietary trades has reduced gradually from 51% of the total turnover in FY15 to 33% in the current fiscal. The drop
in the share of proprietary participation during last five financial years has been offset by increase in share of FIIs and
s and DIIs has been stable during this period. The proprietary traders contributed 34%
of total turnover during August, which is ma %). Besides, FIIs traded about ~20% of total
turnover followed by corporates (~9%), and DIIs ~0.3% over the month. The low share of DII activity can be attributed
to regulatory restrictions on derivative activity.
Among other segments, proprietary trading accounted for 75% and 60% of total turnover in Interest rate futures and
Currency derivatives respectively.
Figure 96: Share of client participation across market segments of NSE (%)**
Client category Aug-19 Jul-19 Change Current FY Previous FY YTD
Cash market
Corporates 5.0 4.9 0.1 5.1 6.4 5.3

DII 10.8 11.1 (0.2) 10.2 10.3 10.2
FII 16.3 13.6 2.7 15.4 15.4 15.5
PRO 23.1 23.4 (0.3) 23.0 21.5 22.5
Others 44.7 47.0 (2.3) 46.4 46.4 46.5
69
Market Pulse
Equity derivatives
Corporates 8.6 9.4 (0.8) 9.6 10.9 10.0
DII 0.3 0.3 (0.0) 0.3 0.4 0.3
FII 19.9 19.2 0.6 19.7 13.7 18.5
PRO 33.8 33.8 (0.0) 32.9 37.6 33.7
Others 37.5 37.2 0.3 37.4 37.3 37.5
Currency derivatives
Corporates 7.7 9.4 (1.7) 9.1 10.8 9.2
DII 1.1 0.9 0.2 1.3 1.7 1.5
FII 9.0 8.8 0.3 9.1 9.1 9.4
PRO 59.9 56.1 3.8 57.5 60.5 57.4
Others 22.3 24.8 (2.5) 23.0 18.0 22.5
Interest rate futures
Corporates 12.6 13.5 (0.9) 16.4 23.6 19.2
DII 4.7 3.3 1.4 4.7 3.5 5.2
FII 1.2 2.3 (1.1) 1.5 2.0 1.6
PRO 75.4 76.8 (1.4) 72.3 67.4 69.9
Others 6.1 4.1 2.0 5.0 3.5 4.1
Source: NSE. **DII Domestic Institutional Investors, FII Foreign Institutional Investors, PRO Proprietary Traders, Others includes retail clients and HNIs
Figure 97: Share of client participation across market segments of NSE in last 5 (fiscal) years (%)**
Cash Segment Equity Derivatives
120 120
Corporates DII FII PRO Others Corporates DII FII PRO Others
100 100
27 28
80 40 37 80 36 37 37 37
41 45 46 46
60 60
21 17
21
18 51 49 33
22 23 40 42 42 38
40
23 21 16
21
15 15 20
20 11 12 14 20
9 9 10 10 14 12
10 10 0.3 0.5 0.4 0.5 0.4 0.3
9 10 12 11 6 10 11 8 8 11 10
0 5 0
FY15 FY16 FY17 FY18 FY19 FY20* FY15 FY16 FY17 FY18 FY19 FY20*
Interest Rate Futures Currency Derivatives

120 120
Corporates DII FII PRO Others Corporates DII FII PRO Others
100 4 3 5 100
6 8 9 15 14 14 15 18 23
80 80
60 57 70 67 60
74 67 72
68 71 70 72 60 57
40 40
2
4
0.3 3 2
3
20 0.0 1.3 3 2 20
0.8 5 0.2 9
27 1
0.1 3
0.3 3 2 9
19 23 20 24 16 16 0.7 1
14 13 10 11 9
0 0
FY15 FY16 FY17 FY18 FY19 FY20* FY15 FY16 FY17 FY18 FY19 FY20*
Source: NSE
*Data up to Aug 2019
**DII Domestic Institutional Investors, FII Foreign Institutional Investors, PRO Proprietary Traders, Others includes retail clients and HNIs
70
Market Pulse
Figure 98: Total turnover of banks in different segments (Rsmn)

Segment Apr-19 May-19 Jun-19 Jul-19 Aug-19
Cash market 45,092 23,990 15,995 14,680 16,928
Equity derivatives 80 208 164 278 32
Currency derivatives 905,036 911,811 921,268 865,568 1,390,584
NBF bond futures II 102,948 94,815 130,646 193,181 119,443

Source: NSE
Region-wise distribution of new investors registered

The following figure shows that the distributional pattern of registration remains similar across regions during the current
financial year. Out of 2.5lakh investors registered in August 7% are from western India. Among others,
about 27% of total investors are registered in the southern region, followed by north (22%) and east India (14%). Over
the month, total registration declined largely in the northern and western region (14% and 11%, respectively) compared
to east and south India.
Total registration is further concentrated in few districts. Around 8.1% of all investors are from Mumbai, which is
marginally higher than Delhi (including NCR) (7.3%). Among others, Bangalore and Pune have accounted for ~3% of
total investors registered over the month.
Figure 99: Region-wise distribution of new investors registered

300 Apr-19 May-19 Jun-19 Jul-19 Aug-19
249.5
250
200
thousand
150
92.7
100
68.4
54.0
50 34.4
0
East India North India South India West India Grand Total
Source: NSE
Figure 100: Top five districts based on number of new investors registered
25
Apr-19 May-19 Jun-19 Jul-19 Aug-19
20.2
20 18.2
15
thousand
10
7.0 6.9
4.8
5
0
Mumbai (MH/TN/RG) Delhi - NCR Bangalore Pune Ahmedabad
Source: NSE
Note: Top five districts
71
Market Pulse
Region-wise distribution of individual investors turnover in the cash market

The following figures show that the share of total turnover of individual investors across regions remain same during the
current financial year. The Western region has contributed around 43% of their total turnover in August
higher than south India (25%) and north India (21%), whereas the Eastern region has accounted for ~12% of total
individual investors turnover. Investors from major cities like Mumbai, Delhi, Bangalore, Ahmedabad and Pune
contributed a significant share of total individual investors turnover (~34%) over the month.
Figure 101: Region-wise distribution of individual Figure 102: Region-wise distribution of individual
investors turnover in cash market investors traded
Region wise - Percentage of turnover Region wise - Percentage of clients traded

100% 100%
44% 43% 43% 43% 43%
80% 80% 47% 46% 47% 46%
50%
60% 60%
24% 24% 25% 25% 25% 22% 22% 22% 23%
40% 40% 21%
20% 21% 21% 21% 21% 21% 20% 18% 19% 19% 19% 19%
11% 12% 11% 12% 12% 12% 12%

12% 12% 12% 0%
0%
Apr-19 May-19 Jun-19 Jul-19 Aug-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19
East India North India South India West India East India North India South India West India
Figure 103: Top five districts based on individual Figure 104: Top five districts based on individual
investors turnover in July 2019 investors traded in July 2019
Percentage of Cash turnover of individual Top five districts

investors 13%
14%
16% 12%
14% 13%
10% 9%
12%
10% 8%
10%
8% 6% 5%
4%
3%
6% 5% 4% 4%
4% 3%
2%
2%
0%
0%
Mumbai Delhi - NCR Ahmedabad Bangalore Pune
Mumbai Delhi - NCR Bangalore Ahmedabad Pune
(MH/TN/RG)
(MH/TN/RG)

Source: NSE
Note: Individual investors include Individual / Proprietorship firms and HUF.
72
Market Pulse
Asset category wise open interest (average daily volume)
Figure 105a: Average daily volume of open interest in Equity derivatives (million contracts)
Category Aug-19 Jul-19 % Change Current FY Previous FY YTD
Equity Derivatives
FUTSTK 4,170 3,949 5.6 4,408 5,044 4,534
OPTSTK 1,559 1,228 26.9 1,386 1,518 1,433
Equity Derivatives - Index Futures
BANKNIFTY 1.9 1.8 2.3 1.9 2.2 2.0
NIFTY 21.5 20.0 7.1 20.3 25.2 21.7
NIFTYIT 0.0 0.0 (33.4) 0.0 0.0 0.0
Equity Derivatives - Index Options
BANKNIFTY 15.8 14.0 13.1 14.6 20.0 15.6
NIFTY 108.6 92.5 17.4 100.2 117.1 102.6
NIFTYIT 0.0 0.0 15.0 0.0 0.0 0.0

Source: NSE
Figure 105b: Average daily volume of open interest in Currency derivatives (no of contracts)
Futures
EURINR 72,256 75,214 (4) 68,271 106,749 71,504
EURUSD 52,793 52,733 0 50,104 28,985 43,584
GBPINR 52,747 73,768 (28) 56,037 59,593 55,010
GBPUSD 5,606 5,296 6 5,154 7,762 4,837
JPYINR 72,906 43,506 68 48,981 39,262 47,023
USDINR 3,773,506 2,192,686 72 2,686,566 3,010,919 2,567,131
USDJPY 309 449 (31) 367 1,164 415
Options
EURINR 202 490 (58.7) 622 4,834 642
EURUSD - - - - 20 -
GBPINR 405 343 18.0 729 3,450 937
GBPUSD - - - - 0 -
JPYINR 31 226 (86.4) 137 1,252 226
USDINR 3,380,817 2,613,124 29.4 2,674,910 2,649,910 2,647,683
Source: NSE
Figure 105c: Average daily volume of open interest in NSE bond futures II (no of contracts)
668GS2031 13 - - 554 494 914
717GS2028 4,524 20,827 (78.3) 43,903 65,579 59,485
726GS2029 1,40,584 1,23,422 13.9 83,960 2,144 56,334
795GS2032 30,251 30,000 0.8 28,713 13,092 26,261

Source: NSE
73
Market Pulse
Internet-based trading
Average daily turnover of internet-based trading increased in all segments except Interest rate futures. Notably, average
daily turnover of Currency derivatives jumped up by 53% in August 59bn, followed by Equity derivatives
(24%) and Cash market (4%). In case of NBF bond futures, average daily turnover of internet-based trading declined
sharply by 32% to reach Rs976m in August.
Figure 106: Average daily turnover of internet based trading (Rsm)
Segment Aug-19 Jul-19 % Change Current FY Previous FY YTD
Cash market 48,350 4.1 50,833 50,360 50,721

50,332
Equity derivatives 1,844,593 23.7 1,903,563 1,419,219 1,764,494
2,281,552
Currency derivatives 38,777 52.6 44,487 30,766 43,262
59,170
NBF bond futures II 1,431 (31.8) 1,077 208 726
976
Source: NSE
Record statistics
On the day of the General Election result (May 23, 2019), Index futures recorded their highest turnover of Rs612bn. This
coincided with the benchmark Nifty50 vaulting over 12,000 points for the first time. Despite of current slowdown in the
economy, Index options traded a record amount of Rs27tn on Aug 01, 2019.
Figure 107: Segment-wise record turnover till Aug 31, 2019

Segment Turnover (Rsbn) Trading Date
Cash market 661 21-Sep-18
Index futures 612 23-May-19
Stock futures 1,954 25-Jan-18
Index options 26,816 01-Aug-19
Stock options 1,030 21-Sep-18

Source: NSE
Investment through mutual funds in India

Net investment through mutual funds remained stable in August despite the ongoing macro slowdown. Total investment
of folios maintained a steady rise over the last three months. Data also shows a
-Rs1.5trn). The trend has
reversed since, with net inflows of Rs871bn in in Jul
Figure 108: Monthly trend of total investment through mutual funds

Funds
Fund AUM * as AAUM** mobilized
Repurchase/Redem Net No. of
No. of No. of mobilized on end of for the through
Month ption during the Inflows new
Schemes Folios (mn) during the the month month new
month (Rsbn) (Rsbn) Schemes
month (Rsbn) (Rsbn) (Rsbn) schemes
(Rsbn)
Apr-19 1,967 82.7 18,735 17,731 1,005 24,788 25,276 11 13
May-19 1,954 83.2 22,873 22,103 770 25,936 25,432 17 32
Jun-19 1,940 83.8 18,675 20,273 (1,598) 24,250 25,814 12 21
Jul-19 1,929 84.8 23,087 22,216 871 24,536 25,810 23 158
Aug-19 1,918 85.3 19,206 18,181 1,025 25,476 25,639 9 14
Source: AMFI. * AUM- Asset under Management. **AAUM-Average Asset under Management.
74
Market Pulse
Policy developments
India
Designing the guidelines for imposition of all fines for false/incorrect reporting of margins or non-reporting of
margins by Trading Member/Clearing Member (SEBI, August 01, 2019)
SEBI directed stock exchanges and clearing corporations to rationalise the guidelines of imposing of fines for
false/incorrect reporting of margins or non-reporting of margins by Trading Member/Clearing Member. The stock
exchanges and all clearing corporations shall discuss to come up with a standard framework for imposition of fines on
the Trading Member/ Clearing Member for incorrect/false reporting and non-reporting of margin collected from the
clients. The fines should be based on the intensity of non-compliance done by the members which can be measured by
several factors like, number of instances, repeated violations, etc. The exchanges can impose a fine up to 100% of such
false/incorrectly/non reported amount of margin and/or suspension of trading for appropriate number of days.
Recognised stock exchanges dealing in commodity derivatives segment shall constitute a Product Advisory
Committee (PAC) for each group/complex of commodities (SEBI, August 07, 2019)
In order to bring transparency in the design process for commodity derivatives contract so that it caters to the needs of
the physical market participants, the Commodity Derivatives Advisory Committee (CDAC) has suggested that each
recognised stock exchange dealing in commodity derivatives segment must constitute a Product Advisory Committee
(PAC) for each group/complex of commodities having common stakeholders/value chain participants, on which
derivatives are traded or being proposed to be traded on the exchange. The contract design should fulfil the industry
needs. For example, it should align with the quality and quantity specifications of the product in the physical market.
Exchanges should review and monitor the state of the market, delivery centres, and performance of existing contracts
on regular basis.
Disclosure of reasons for encumbrance by promoter of listed companies (SEBI, August 07, 2019)
In order to bring great transparency in the market, SEBI prescribed additional disclosures to all promoters regarding
reasons for encumbrance, particularly when they hold a significant portion of their encumbrance is with persons acting
in concert (PACs) with him. According to the circular, they are entitled to disclose additional information if the existing
cumulative encumbrance with PACs is either more than or equal to 50% of their shareholding in the company, or 20%
or more of the total share capital of the company as on September 30, 2019. They have to make the disclosure by
October 04, 2019.
SEBI designed a guideline the provisions for governing investments by Alternative Investment Funds operating in
IFSC (SEBI, August 09, 2019)
Based on the discussion with all stakeholders, SEBI harmonises the provisions for governing investments by Alternative
Investment Funds operating in International Financial Services Centres (IFSC) with domestic AIFs.
Parking of Funds in Short Term Deposits of Scheduled Commercial Banks by Mutual Funds Pending deployment
(SEBI, August 16, 2019)
In this circular, SEBI has clarified that Trustees/Asset Management Companies (AMCs) should ensure that it has not
parked its fund in short term deposits (STD) of a bank which has invested in the scheme until the scheme has STD with
such bank.
Non-compliance with certain provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018
(SEBI, August 19, 2019)
SEBI issued the circular that specifies the fines to be imposed by stock exchanges with certain violations of ICDR
regulations. (i) Stock exchange shall impose a fine of Rs20,000 per day if a company delay in completion of bonus issue
within 15 days from the date of approval of the issue by its board of directors, (ii) within 2 months from the date of
75
Market Pulse
the meeting of its board of directors when they announced the decision of bonus issue was taken subject to
l, including others. The amount of fine will be credited to the Investor Protection Fund.
Global
Amendments to Rules for Nationally Recognized Statistical Rating Organizations (US SEC, Aug 7, 2019)
The Securities and Exchange Commission has amended few rules for the nationally recognized statistical rating
organizations that provides an exemption with respect to credit ratings if the issuer of the security or money market
instrument referred to in the rule is not a U.S. person. They have also decided that all offers and sales of such security
or money market instrument by any issuer, sponsor, or underwriter linked to such security or money market instrument
will occur outside the United States.
76
Market Pulse
Economic calendar for the month for major countries

Date Country Indicator Name Period Reuters Poll Prior Period
1 Sep 2019 India IHS Markit Mfg PMI Sep 2019 51.4
1 Sep 2019 United Kingdom Markit/CIPS Mfg PMI Sep 2019 47.4
1 Sep 2019 United States ISM Manufacturing PMI Sep 2019 49.1
5 Sep 2019 United States ADP National Employment Aug 2019 149,000 person 156,000 person
5 Sep 2019 United States Factory Orders MM Jul 2019 1.0 0.6
5 Sep 2019 United States ISM N-Mfg PMI Aug 2019 54.0 53.7
6 Sep 2019 Euro Zone Employment Final YY Q2 2019 1.1 1.1
6 Sep 2019 Euro Zone GDP Revised YY Q2 2019 1.1 1.1
6 Sep 2019 United States Non-Farm Payrolls Aug 2019 158,000 person 164,000 person
6 Sep 2019 United States Unemployment Rate Aug 2019 3.7 3.7
6 Sep 2019 United States Average Earnings YY Aug 2019 3.1 3.2
6 Sep 2019 China (Mainland) PBOC Reserve Req Ratio 16 Sep 13.5
8 Sep 2019 China (Mainland) Trade Balance USD Aug 2019 US$ 43.0bn US$ 45.1bn
8 Sep 2019 Japan GDP Rev QQ Annualised Q2 2019 1.3 1.8
9 Sep 2019 United Kingdom GDP Estimate YY Jul 2019 0.8 1.0
10 Sep 2019 China (Mainland) CPI YY Aug 2019 2.6 2.8

10 Sep 2019 United Kingdom ILO Unemployment Rate Jul 2019 3.9 3.9
10 Sep 2019 China (Mainland) Outstanding Loan Growth Aug 2019 12.4 12.6
10 Sep 2019 India Trade Deficit Govt -USD Aug 2019 US$ 13.6bn US$ 13.4bn
12 Sep 2019 Euro Zone Industrial Production YY Jul 2019 -1.3 -2.6
12 Sep 2019 Euro Zone ECB Refinancing Rate Sep 2019 0.0 0.0
12 Sep 2019 Euro Zone ECB Deposit Rate Sep 2019 -0.5 -0.4
12 Sep 2019 India CPI Inflation YY Aug 2019 3.3 3.2
12 Sep 2019 India Industrial Output YY Jul 2019 2.3 2.0

12 Sep 2019 United States CPI YY, NSA Aug 2019 1.8 1.8
13 Sep 2019 India Current Account/GDP (Q) Q2 2019 -0.7

16 Sep 2019 China (Mainland) Industrial Output YY Aug 2019 5.2 4.8
16 Sep 2019 India WPI Inflation YY Aug 2019 1.0 1.1
17 Sep 2019 United States Industrial Production YoY Aug 2019 0.5
18 Sep 2019 United Kingdom CPI YY Aug 2019 2.1
18 Sep 2019 Euro Zone HICP Final YY Aug 2019 1.0 1.0
18 Sep 2019 United States Fed Funds Target Rate 18 Sep 2.1
19 Sep 2019 United Kingdom BOE Bank Rate Sep 2019 0.8 0.8
19 Sep 2019 Japan JP BOJ Rate Decision 19 Sep -0.1
26 Sep 2019 United States GDP Final Q2 2019 2.0

26 Sep 2019 Japan CPI, Overall Tokyo Sep 2019 0.6
27 Sep 2019 United States PCE Price Index YY Aug 2019 1.4
30 Sep 2019 United Kingdom GDP YY Q2 2019 1.2
30 Sep 2019 Euro Zone Unemployment Rate Aug 2019 7.5
Source: Refinitiv Datastream
77
Market Pulse
Annual Macro Snapshot

National income
GDP (Current) Growth (%) 15.5 19.9 14.4 13.8 13.0 11.0 10.5 11.6 11.3 11.2
GDP (Current) (Rs trn) 63.7 76.3 87.4 99.4 112.3 124.7 137.7 153.6 171.0 190.1
GVA (Constant) Growth (%) 6.9 8.0 5.2 5.4 6.1 7.2 8.0 7.9 6.9 6.6
Agriculture growth (%) -0.9 8.8 6.4 1.5 5.6 -0.2 0.7 6.3 5.0 2.9
Industry growth (%) 8.8 7.9 3.6 3.3 3.8 7.0 9.6 7.7 6.0 6.9
Services growth (%) 8.7 7.8 5.9 8.3 7.7 9.8 9.4 8.4 8.1 7.5
Per Capita GDP (Curr) (Rs) 54,414 64,372 71,609 80,518 89,796 98,405 1,07,341 1,18,263 1,29,901 1,42,719
Prices
CPI Inflation (%) 10.1 9.4 5.8 4.9 4.5 3.6 3.4
CPI Rural (%) 10.6 9.6 6.2 5.6 5.0 3.6 3.0
CPI Urban (%) 9.4 9.1 5.5 4.1 4.0 3.6 3.9
WPI Inflation (%) 3.8 9.6 9.0 6.9 5.2 1.3 -3.7 1.7 2.9 4.3
Primary articles (%) 12.6 17.8 9.8 11.4 9.9 2.2 -0.4 3.4 1.4 2.7
Fuel & power (%) -2.3 12.3 13.9 7.1 7.1 -6.1 -19.7 -0.3 8.2 11.5
Manuf. prods (%) 2.2 5.7 7.3 5.3 3.1 2.6 -1.8 1.4 2.8 3.7
Money, banking & interest rates
Money supply (M3) growth (%) 16.9 16.1 13.5 13.6 13.4 10.9 10.1 10.1 9.2 10.5
Aggregate deposit growth (%) 17.2 15.9 13.5 14.2 14.2 10.7 9.3 15.3 6.2 10.0
Bank credit growth (%) 16.9 21.5 17.0 14.1 14.0 9.1 10.9 8.2 10.0 13.3
Non-food credit growth (%) 17.1 21.3 16.8 14.0 14.2 9.3 10.9 9.0 10.2 13.4
Public Finance
GOI rev. receipts growth (%) 6.0 37.7 -4.7 17.0 15.4 8.6 8.5 15.0 4.4 20.5
Tax receipts growth (%) 3.2 27.0 12.1 16.5 9.9 9.3 16.9 17.9 11.8 17.2
GOI Expenditure growth (%) 15.9 16.9 8.9 8.1 10.6 6.7 7.6 10.3 8.4 14.7
Subsidies growth (%) 9.0 22.7 25.7 18.0 -1.0 1.4 2.3 -11.1 -4.4 33.3
Interest expense growth (%) 10.9 9.8 16.7 14.7 19.5 7.5 9.7 8.8 10.0 11.1
External transactions
Exports growth (%) -2.6 40.7 21.9 -1.8 4.9 -1.5 -15.5 5.1 10.1 8.6
POL exports growth (%) 4.3 47.8 34.9 8.7 4.3 -10.7 -46.1 3.4 18.8 23.9
Non-POL exports (%) -3.8 39.3 19.3 -4.2 5.1 0.8 -8.6 5.4 9.0 6.4
Imports growth (%) -3.9 28.5 32.4 0.2 -8.4 -0.3 -15.0 1.0 21.2 10.2
POL exports growth (%) -5.1 21.9 46.4 5.7 0.7 -16.4 -40.1 5.3 25.0 29.8
Non-POL exports growth (%) -3.4 31.3 26.8 -2.3 -13.0 9.1 -3.8 -0.2 20.1 4.3
Net FDI (US$bn) 18.0 11.3 21.9 19.8 21.6 31.3 36.0 35.6 30.3 30.7
Net FII (US$bn) 32.4 30.3 17.2 26.9 4.8 42.2 -4.1 7.6 22.1 -0.6
Trade Balance (US$bn) -118.4 -127.2 -189.7 -195.7 -147.6 -144.9 -130.1 -112.4 -160.0 -180.3
Current Acc. Balance (US$bn) -38.4 -47.9 -78.2 -87.8 -32.4 -26.7 -22.1 -15.2 -48.7 -57.2
Forex Reserves (US$bn) 279.1 304.8 294.4 292.6 303.7 341.4 355.6 370.0 424.4 411.9
Exchange rate (USDINR) 47.42 45.57 47.95 54.45 60.5 61.15 65.46 67.09 64.45 69.89
Source: Refinitiv Datastream
78
Market Pulse
Economic Policy & Research
Tirthankar Patnaik, PhD tpatnaik@nse.co.in +91-22-26598149

Prerna Singhvi, CFA psinghvi@nse.co.in +91-22-26598316
Runu Bhakta, PhD rbhakta@nse.co.in +91-22-26598163
Ashiana Salian asalian@nse.co.in +91-22-26598163
Marketing
Rajesh Jaiswal rjaiswal@nse.co.in +91-22-26598380
Disclaimer
This report is intended solely for information purposes. This report is under no circumstances intended to be used or
considered as financial or investment advice, a recommendation or an offer to sell, or a solicitation of any offer to buy
any securities or other form of financial asset. The Report has been prepared on best effort basis, relying upon information
obtained from various sources, but we do not guarantee the completeness, accuracy, timeliness or projections of future
conditions provided herein from the use of the said information. In no event, NSE, or any of its officers, directors,
employees, affiliates or other agents are responsible for any loss or damage arising out of this report. All investments are
subject to risk, which should be considered prior to making any investment decisions. Consult your personal investment
advisers before making an investment decision.
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September 2019

Region-wise distribution of individual investors turnover in the cash market .......................................... 72

Dr. Tirthankar Patnaik

Story of the month

Figure 2: Net sales YoY growth trend of Nifty 50 companies

Figure 3: EBITDA growth and margin of Nifty 50 companies in Q1FY20

Nifty50 ex-fin (3.2) (1.6) 18.3 1 (141)

Figure 4: EBITDA growth trend of Nifty 50 companies

Figure 5: PAT growth and margin of Nifty 50 companies in Q1FY20

Figure 6: PAT growth trend of Nifty 50 companies

PAT growth trend for Nifty 50 companies

Source: CMIE Prowess, Refinitiv Datatream, NSE

Figure 7: Net sales growth of Nifty 500 companies in Q1FY20

Figure 8: Net sales YoY growth trend of Nifty 500 companies

Figure 9: EBITDA growth and margin of Nifty 500 companies in Q1FY20

Sector QoQ YoY % QoQ (bps) YoY (bps)

Figure 10: EBITDA growth trend of Nifty 500 companies

Figure 12: PAT growth trend of Nifty 50 companies

Earnings revision analysis

Figure 13: Nifty 50 Earnings Revision Indicator

Source: Refinitiv Datatream, NSE

Figure 14: Yearly trend of NIFTY 50 Consensus EPS estimates

Source: Refinitiv Datatream, NSE

Consensus earnings, going by their historical performance on the back of an

Chart of the month

Source: Refinitiv Datatream, NSE

Source: Refinitiv Datatream, NSE

Source: Refinitiv Datatream, NSE

Figure 18: 3-month currency volatility for key emerging markets

Source: Refinitiv Datatream, NSE

Thought Leadership Article

National Stock Exchange

(Views expressed are personal)

Figure 19: Quarterly growth trend (2011-12=100) (%YoY)

Figure 20: Annual growth trend (% YoY)

Gross Value Added (GVA) 8.0 7.9 6.9 6.6

Figure 21: India quarterly GDP growth on a downtrend (%)

Source: Refinitiv Datastream, NSE

Figure 22: GDP sector quarterly growth trend (%YoY)

Source: Refinitiv Datastream, NSE

Figure 23: GDP sector quarterly growth trend (%YoY)

Source: Refinitiv Datastream, NSE

Figure 24: Gross value added (GVA) across sectors

Source: Refinitiv Datastream, NSE

 Core inflation (ex-food ex-fuel), on the other hand, inched up from

Figure 25: Consumer price inflation (%YoY)

Figure 26: India inflation vs. interest rates

Source: Refinitiv Datastream, NSE

Figure 27: India consumer price inflation (CPI)

Source: Refinitiv Datastream, NSE

Figure 28: Wholesale price inflation (%YoY)

Figure 29: India wholesale price inflation (WPI)

Source: Refinitiv Datastream, NSE

Industrial production softens further in June

Figure 30: India industrial production for June 2019 (%YoY)

Figure 31: India industrial production (3MMA)

Source: Refinitiv Datastream, NSE

Figure 32: India industrial production use-based goods (3MMA)

Source: Refinitiv Datastream, NSE

Figure 33: India eight-core sector growth (3MMA)

Source: Refinitiv Datastream, NSE

Trade deficit narrows sharply in July