market pulse · our market pulse report last month had expressed hope that india had managed to...

May 2020

Volume 2, Issue 5

Market Pulse A monthly review of Indian markets

Market Pulse May 2020 | Vol. 2, Issue 5

Indian

Economy and

Markets A M

on

thly

Re

vie

w

Volume 2, Issue 5

This monthly publication is a review of

major developments in the economy and

financial markets during the month.

Online: www.nseindia.com

NATIONAL STOCK EXCHANGE OF INDIA LIMITED


Market Pulse

Published by Economic Policy and Research, National Stock Exchange of

India Ltd.

Copyright © 2020 by National Stock Exchange of India Ltd. (NSE)

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Table of Contents Executive Summary ........................................................................................................................................................ 1

Story of the month ........................................................................................................................................................... 3

Who owns India Inc.? FII ownership shrinks sharply; DMF share rises further ...................................... 3

Chart of the month ........................................................................................................................................................ 21

Coronavirus pandemic: Exponential spread, but fatalities in check ............................................................ 21

Market Round up ........................................................................................................................................................... 30

Macro economy .............................................................................................................................................................. 33

Atmanirbhar Package: Empowerment over entitlement and near-term spending................................... 33

RBI cuts policy rates by a further 40bps; eases liquidity and financial stress .......................................... 42

Food inflation rises in April amid supply bottlenecks ...................................................................................... 47

Industrial production contracts sharply in March ............................................................................................. 52

Trade deficit contracts to near four-year lows, reflecting the severity of lockdown impact .................. 57

FY20 fisc overshoots RE by 80bps to 4.6%; revenue receipts in April fall sharply ................................... 61

Q4FY20 GDP growth at a 11-year low of 3.1%; FY20 at 4.2%, revising FY21E to -6.0% ....................... 66

Insights ............................................................................................................................................................................ 76

Invited article: Earning trust through long-term integrated thinking .......................................................... 76

The impact of COVID-19 on the agricultural economy of India and the way ahead ................................. 83

Did restrictions on short-selling decline risks in the equity market? ........................................................... 86

Market performance across asset classes .............................................................................................................. 91

Market Statistics: Primary market ............................................................................................................................ 96

Funds mobilisation in the primary market .......................................................................................................... 96

New listings in the month ........................................................................................................................................ 97

Market Statistics: Secondary market ....................................................................................................................... 98

Institutional flows across market segments ...................................................................................................... 98

Segment-wise total turnover ................................................................................................................................ 101

Average daily turnover ........................................................................................................................................... 101

Turnover of top traded symbols during the month.......................................................................................... 104

................................................................................................ 105

Client category-wise participation in total turnover ...................................................................................... 111

Region-wise distribution of new investors registered ................................................................................... 116

Region-wise distribution of individual investor turnover in the cash market .......................................... 118

Asset category-wise open interest (average daily volume) .......................................................................... 120


Internet-based trading .......................................................................................................................................... 121

Investment through mutual funds in India ....................................................................................................... 122

Policy developments .................................................................................................................................................. 124

Comparison of trading activities across major exchanges globally ................................................................ 126

Economic calendar for major countries (June 2020) .......................................................................................... 130

Annual Macro Snapshot ............................................................................................................................................. 131


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Executive Summary

In the wake of the coronavirus: Markets and Macro stall; Slowdown here to stay

The specter of the COVID-19 pandemic continues to haunt us three months after initial worries surfaced in China, and

then spread across the world. At the risk of sounding repetitious, one must record that the fight against the novel

Coronavirus continues for now. As the number of cases continues to rise, the economic consequences of lockdown

restrictions force a rethink on the way forward, with substantial relaxation across the country on various economic

activities, like domestic flights, railways and e-commerce, to name a few, with more on the cards. Lots to read in the

Macro section this month, including revised expectations of FY21 growth, in the wake of new GDP data. The econ

downward trajectory is here to stay for a while.

Our Chart of the Month showcases some of the salient features of the pandemic across Indian states. Indian markets

have followed global peers in April on the hope trade (the S&P 500 rising 12.5% in the best monthly rally since 1987),

but the rally fizzled as the number of infections continued to rise, concentrating in major urban areas with a

disproportionate impact on output. The benchmark Nifty 50 and Nifty 500 Index rallied by 14.7% and 14.5%

respectively in the month of April, followed by a soft May, down 2.8% to 9580.

Fixed income markets rallied as global central banks stepped up policy measures through rate cuts and asset purchasing

programs to cushion the economic shock from the coronavirus pandemic. The Government and RBI announced a slew

of policy measures amounting to Rs20trn or 10% of GDP to cushion the economic shock from the pandemic. Excess

systemic liquidity and reverse repo rate cut brought down yield across various tenors. Indian Rupee recovered from its

all-time low of 77 against the dollar on April 21st to end the month at 75.1, as RBI intervened by selling dollars. The

Indian rupee has fallen 6.1% since the beginning of the year amid heavy FII selling in equity as well as debt markets.

Our story of the month features quarterly shareholding in the Indian listed corporate universe. Reminiscent of similar

events before, any significant move in markets reflects in ownership shifting across major institutional groups. March

2020 saw the steepest sequential fall in FPI on the back of the record outflows in the quarter, with the part of the space

ceded taken up by domestic investors. Mutual funds ownership reached a record high on the back of SIP inflows (that

eventually subsided in April). The quarter also saw a rising concentration of ownership into larger companies in a risk-

off environment. Foreign institutional selling in equities was the highest ever in a month in March at US$16bn but has

abated since then with April (+US$904m) and May (+US$1.7bn) seeing modest inflows. It has been a different story in

debt, however, with selling resuming in May (-US$3.2bn) after some positive inflows in April (+US$1.7bn).

-

reliant India) in a mix of measures that could broadly be categorized into fiscal spend, monetary measures and long-

term reforms, adding up to ~10% of GDP. Five tranches announced over an equal number of days focused on all crucial

sectors and segments of the economy including MSMEs, Power, Agriculture, Coal, Defence, Civil

Aviation and Healthcare, to name a few. Besides actual fiscal outgo on higher MGNREGS spending, extended EPF

contribution and food grain distribution amongst others, the package proposed a series of structural changes, including

amendments to the Essential Commodities Act and the APMC structure in Agriculture, measures to enhance ease of

doing business, opening up of notified strategic sectors to private companies and privatisation of PSEs in non-strategic

sectors and modifications to labour laws.

Given truly tight fiscal conditions (FY20 fiscal deficit has been revised to 4.59% from the earlier 3.8% of GDP, as we

shall see in the Macro section), much of the government's support has been through its credit line, in the form of

guarantees. Overall, the policy strategy has favoured empowerment of various segments across multiple sectors over

entitlements and near-term spending. Such an approach may be driven by fiscal constraints and its impact may be low

in the short-term but would be significant in the long-term if carried out in a time-bound manner.

lowered policy rates even further with another 40bps cut in the overnight repo rate to 4.0% (with

commensurate cuts on the reverse repo, and the bank/MSF rates), anticipating weaker economic conditions ahead in

FY21, but stopped short of providing an estimate of GDP growth, or headline inflation. The extended nature of the


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lockdown means that initial estimates of national income for FY21 (Our estimate at 0.8%) is now revised lower to -6.0%,

the lowest India has seen since 1979. While the 4th quarter (FY20) numbers (At 3.1%, the lowest in over four years,

taking the FY20 GDP growth figure to 4.2% provide some guidance on the slowdown both pre- and

during COVID-19 the significant revisions to figures of earlier quarters point are confusing. Amidst the gloom, Agri

growth at 5.9% stood out.

To understand this sector better, we hosted a webinar on May 27th, featuring an eminent panel of experts consisting of

Prof. Ashok Gulati, the Infosys Chair Professor for Agriculture at ICRIER, Dharmakirti Joshi, the Chief Economist at

CRISIL and Simon Wiebusch, the Chief Operating Officer for the Crop Science Division of Bayer in India, Bangladesh and

Sri Lanka. We summarize key takeaways from the discussion in this report.

Sharp movements in markets usually attract regulatory action that takes the form of raising margin requirements, a ban

on short-selling, or outright restrictions on trading in the form of reduced market timings. This month we feature

an interesting paper (in our Insights section) by the World Federation of Exchanges that takes a hard look at the

consequences of a ban on short-selling across multiple markets across the world. The authors examine to the extent to

which such bans meet the policy objectives of lower volatility, and find limited justification posed by empirical evidence.

Our invited article this month from the Arguden Academy features a truly germane topic of interest these days in the

field of corporate governance, the loss of and therefore the need to recognize importance of trust in field of finance in

general and in fund management in particular. Rising awareness about conservation and use of limited resources poses

increased responsibility on investors, fund managers for stewardship of sustainable action.

Our Market Pulse report last month had expressed hope that India had managed to avoid the worst of the outbreak thus

far, with ~30,000 cases and ~1000 dead. A month later compels us to make a more sober assessment, as the number

of affected cases and the number of lives lost have both risen 5x, with India well and truly in the top 10 most affected

countries globally. The total number of affected cases globally has risen from 3m in the same period to over

5.6m. However, many countries across the world have seen the peak of the outbreak and the number of recoveries

covery rate at 40%+ should also rise substantially in the next few weeks, going by global

evidence.

We hope you find this issue of the Market Pulse useful, and as always, we look forward to your comments and

suggestions.

Dr.Tirthankar Patnaik

Chief Economist


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Story of the month

Who owns India Inc.? FII ownership shrinks sharply; DMF share rises further1

In this edition of 2, we extend our analysis of ownership trends and patterns in Indian

companies to include the data available for the quarter ending Mach 2020. We note 1) A contraction in the Government

ownership to all-time low levels, reflecting efforts to expand public ownership and garner higher revenues; 2) An

increase in private promoter ownership amidst a sharp market sell-off in the March quarter; 3) The steepest sequential

(QoQ) drop in FII3 (foreign institutional investors) ownership since 2001, reflecting the record high FII outflows during

the quarter; 4) A rise in DMF (domestic mutual funds) ownership for yet another quarter, touching new record high,

thanks to sustained SIP inflows, even as other domestic institutional investors remained on the side-lines; 5) FIIs

maintained their out-sized bet on Financials4 despite a drop in portfolio allocation to the sector and turned incrementally

cautious on Consumer Staples; 6) DMFs increased their underweight5 (UW) position on Consumer Staples and IT, but

remained positive on the investment theme with a strong overweight (OW) position on Industrials; 7) Incrementally

higher concentration of institutional money in larger companies, reflecting a heightened risk-off environment.

▪ Private promoters raise stake amid market sell-off; Government

share declines to all-time low levels: Promoter ownership rose

meaningfully in the March quarter as a sharp equity market sell-off

provided an opportunity to promoters to increase their stakes. Nearly

20% of the NSE-listed universe saw promoter acquiring shares in the

March quarter, resulting in total buying of ~Rs119bn. Government

ownership (promoter and non-promoter), however, has come off

further and is currently hovering at all-time low levels, reflecting the

expand public partnership in the ownership

of CPSEs (Central Public Sector Enterprises) and augment its

resources for higher expenditure towards economic development.

▪ FIIs ownership drops sharply amidst record-high outflows: FII

ownership fell by a huge 210bps, 136bps and 133bps QoQ to 26.3%,

21.6% and 20.8% in the Nifty 50, Nifty 500 and the overall NSE-

listed universe respectively, marking the steepest sequential (QoQ)

decline since the beginning of the analysis (2001). In fact, the FII

ownership in Nifty 50 is now the lowest in the last six years. This

reflects the record-high foreign capital outflows of US$7bn in the

March quarter due to flight of capital to safe havens amid

strengthening concerns of an ensuing global recession.

The overall FII sector positioning has remained steady in the March

quarter. The out-sized bet on Financials was maintained with a

reduced absolute portfolio allocation, largely explained by a

significant underperformance of the sector with respect to the index.

Consumer Staples, Materials and Industrials continued to remain the

most under-owned sectors, reflecting the FIIs cautious view on

1 This is an excerpt of our detailed report on the topic released on May 29th. Please click here to access the report. 2 The report examines ownership trends and patterns in Indian companies listed on the NSE since 2001. The report also

analyses ownership trends of institutional investors in top 10% listed companies by market capitalization to gauge investment concentration. 3 FII ownership includes ownership through depository receipts held by custodians. 4 Sector weights and comparisons here are based on the respective indices as benchmarks. 5 in the index. An

OW/UW position on a sector implies a more than 100bps higher/lower allocation to the sector than its weight in the Index. A neutral position on a

sector implies an allocation to the sector within +/-

Who owns India Inc.? NSE-listed in

FII ownership in NSE-listed companies

DMF ownership in NSE-listed companies

Source: CMIE Prowess, AMFI, NSE.

Pvt.

promoters,

44.4

Govt.,

6.9

DMFs,

7.9

FIIs,

20.8

Banks, FIs &

Insurance,

5.5

Retail,

8.4

Others,

6.0

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FII share ex-Financials

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DMF share in NSE-listed cos

https://static.nseindia.com/s3fs-public/inline-files/Indian%20ownership%20report_March%202020.pdf


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▪ DMF share inches up further to touch new record-high: DMFs

continued to ride on the SIP wave, as their ownership in the Nifty 500

and the overall NSE-listed universe inched up further by 18bps and

14bps QoQ to 8.1% and 7.9% respectively in the March quarter the

highest since the beginning of the analysis (2001). DMF ownership in

Nifty 50 remained steady at 8.4%. Despite a sharp market correction

amid a worsening Coronavirus scare, retail participation through the

SIP route has remained unscathed. In fact, SIP inflows in the month

of March were the highest ever despite a 23% fall in the Indian equity

markets (Nifty 50) during the month, translating into cumulative

inflows of Rs10trn in FY20, +8% YoY. Direct retail participation in

equity markets, however, has remained broadly steady for quite

some time now.

Sector-wise, DMFs have maintained their OW position on Financials

within the Nifty 50 space but remained cautious on smaller

banks/NBFCs given a modest UW position on the sector in the Nifty

500 Index. Un

story with an OW position on Industrials, Utilities and Materials.

However, DMFs echo the FIIs view on consumption, with a big UW

position on Consumer Staples.

▪ Concentration of institutional ownership to larger companies

rises: The drop in FII ownership in the overall NSE-listed universe

excluding Nifty 500 stocks was much higher than that in Nifty 500 in

the quarter ending March 2020. Further, an increase in DMF

ownership in the NSE-listed space last quarter was led by Nifty 500

companies; excluding Nifty 500, DMF ownership in the NSE-listed

universe fell meaningfully in the March quarter. Moreover, the top

10% companies by market cap accounted for 93% of the FII holding,

up ~450b

of 86.7% of their investments made towards top 10% companies, it

has risen by a sharp 276bps QoQ and is now hovering at near 17-

year high levels.

FII and DMF portfolio OW/UW in Nifty 500 vs.

the index (March 2020)

FII and DMF holding in top 10% companies

by market cap

Source: CMIE Prowess, NSE.

251

157

136

97

82

69

-15

-98

-139

-254

-291

-190

-8

-118

-262

68

-142

24

769

61

39

-245

-500 0 500 1000

Industrials

Utilities

Healthcare

Materials

Comm Svcs.

Cons. Disc.

Realty

Financials

Energy

IT

Cons. Staples

bps

FIIs

DMFs

60

68

76

84

92

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Ownership pattern March 2020

Ownership pattern of the NSE-listed universe (March 2020): Total promoter ownership

in the NSE-listed universe shot up by ~110bps QoQ to near 5-year high of 50.9%, largely

led by a 100bps QoQ jump in private promoter ownership (Indian and foreign combined)

to a 14-year high of 44.4% as promoters rushed to raise their stakes in their companies

amid a sharp sell-off seen in the March quarter. Around 360 out of 1,784 listed companies

saw promoters acquiring shares in the March quarter, resulting in total buying of

~Rs119bn. Government ownership (promoter as well as non-promoter) in the NSE-listed

space, however, has been coming off since 2010, in-

garner higher revenues through the disinvestment route, with the share in the March

quarter falling by 126bps QoQ to 14-year low of 6.6%.

Amongst institutional investors, FII ownership fell by a huge 133bps QoQ to a five-quarter

low of 20.8%, marking the highest sequential decline on a quarterly basis over the last 19

years reflecting the surge in foreign capital outflows in the March quarter (US$7bn the

highest ever). This was largely owing to a huge decline in FII ownership in Financials and

understandably so given the big overweight position on the sector, even as FII ownership

in the listed universe excluding Financials has inched up on a sequential basis.

modest 14bps QoQ to 7.9% the highest since the beginning of the analysis (2001). The

share of Banks, Financial Institutions and Insurance inched up by a modest 10bps QoQ to

5.5% but is a mere 32bps above lowest share in the last two decades. Individual retail

investors holding remained broadly steady at 8.4%.

In terms of floating stock, FII ownership fell by 174bps QoQ to 42.5% in the March quarter

following a strong 350bps rise in 2019, marking the highest sequential decline on a

quarterly basis in more than 11 years and is now 3.2pp shy of the highest share since

2001 (in March 2014). That said, FIIs continue to remain the biggest owners of India Inc.

after promoters. DMFs also continue to increase their share in the NSE-listed floating

stock, with current ownership at 16.1% (+63bps QoQ) being the highest since the

beginning of the analysis (2001). Retail ownership has seen the highest QoQ gain of 49bps

in the last four years to 17.2%, even as it is just 68bps above the lowest share in the last

two decades.

Figure 1: NSE-listed universe: Ownership pattern by

total market cap (%, March 2020)

Figure 2: NSE-listed universe: Ownership pattern by

free float market cap (%, March 2020)

Source: CMIE Prowess, NSE. *FII ownership includes ownership through depository receipts held by custodians.

Private Indian

promoters, 33.2

Govt., 6.9

Foreign

promoters, 11.1 DMFs, 7.9

FIIs, 20.8

Banks, FIs &

Insurance, 5.5

Other institutional

Non-promoter

corporate, 3.3

Retail, 8.4 Other non-institutional

non-promoters, 2.4

DMFs, 16.1

FIIs, 42.5 Banks, FIs &

Insurance, 11.2

Other institutional

non-promoters, 0.8

Non-promoter

corporate, 6.7

Retail, 17.2

Other non-institutional

non-promoters, 4.8

Non-promoter

Govt., 0.8

March quarter saw a huge

jump in private promoter

ownership as a sharp

market sell-off provided an

opportunity to promoters to

raise their stakes.

FII ownership in the March

quarter saw the highest

QoQ decline in the last 19

years reflecting record

high foreign capital

outflows.


6/133

Figure 3: Top 20 companies by value of shares bought by promoters in the March quarter

Companies Sectors Promoter stake (%) Shares bought

Dec-19 Mar-20 QoQ chg. (bps) Number (mn) Value (Rsmn)*

Tata Consumer Products Consumer Staples 34.5 34.7 23 102.2 30,129

Vinati Organics Materials 74.0 74.0 4 38.1 29,490

Piramal Enterprises Health Care 46.1 46.1 1 12.2 11,429

Mphasis Information Technology 52.2 56.2 399 7.5 4,971

Tata Steel Materials 33.1 34.4 129 15.5 4,188

H C L Technologies Information Technology 60.0 60.3 35 9.6 4,170

D F M Foods Consumer Staples 38.3 73.9 3568 17.9 3,123

Hindustan Foods Consumer Staples 61.9 62.6 76 4.9 2,767

Bajaj Electricals Consumer Discretionary 62.7 63.2 50 7.7 2,054

Tata Chemicals Materials 31.1 34.6 351 8.9 1,999

GMR Infrastructure Industrials 63.6 65.3 172 103.7 1,695

Adani Ports & Special Economic Zone Industrials 62.5 62.8 33 6.7 1,680

JSW Steel Materials 42.0 42.3 38 9.2 1,344

Sun Pharmaceutical Inds. Health Care 54.6 54.7 13 3.1 1,085

JBM Auto Consumer Discretionary 62.0 67.5 550 6.6 924

Maruti Suzuki Consumer Discretionary 56.2 56.3 7 0.2 905

Tata Power Utilities 36.2 37.2 101 27.3 896

Godrej Industries Industrials 61.4 62.2 82 2.8 781

Bajaj Auto Consumer Discretionary 53.5 53.7 13 0.4 777

Music Broadcast Communication Services 73.9 74.1 12 51.5 768

Source: CMIE Prowess, NSE. * Value of shares bought in the March quarter is based on the quarter-end price.

Figure 4: NSE-listed universe: Ownership trend across key stakeholders by total market cap over last three years

% Private Indian

promoters Govt.

Foreign

promoters

Domestic

MFs

Banks, FIs

& Insurance FIIs *

Non-promoter

corporate Retail

Jun-17 30.4 10.1 9.2 5.3 6.1 20.9 5.1 9.4

Sep-17 31.0 10.0 9.1 5.6 5.9 20.9 5.6 9.4

Dec-17 31.5 10.4 9.4 5.9 5.7 19.8 5.4 9.2

Mar-18 31.3 10.1 9.4 6.1 5.6 20.1 5.6 9.0

Jun-18 31.4 9.5 9.7 6.4 5.7 20.5 5.2 8.7

Sep-18 32.0 9.2 9.5 6.4 5.8 20.4 5.1 8.6

Dec-18 31.3 9.1 10.0 7.0 5.8 20.4 5.0 8.7

Mar-19 31.5 9.2 9.2 7.2 5.5 21.0 5.0 8.6

Jun-19 31.4 9.3 9.3 7.3 5.5 21.3 4.7 8.4

Sep-19 32.2 7.9 10.1 7.7 5.5 21.8 3.6 8.5

Dec-19 32.2 8.2 9.8 7.8 5.4 22.2 3.5 8.4

Mar-20 33.2 6.9 11.1 7.9 5.5 20.8 3.3 8.4

QoQ change 101bps -126bps 133bps 14bps 10bps -133bps -17bps 6bps

Source: CMIE Prowess, NSE. *FII ownership includes ownership through depository receipts held by custodians


7/133

Figure 5: NSE-listed universe: Long-term ownership trend across key stakeholders by total market cap


Ownership pattern of the Nifty 50 universe (March 2020): Overall promoter ownership

in the Nifty 50 Index also increased sharply by 2pp QoQ to 44% in the quarter ending

March 2020. This was largely on account of a sharp 3.1pp QoQ increase in private

promoter ownership, Indian and foreign combined, to a 14-year high of 37.8%, as a sharp

equity market sell-off provided an opportunity to promoters to increase their stakes.

Within the Nifty 50 universe, 12 companies saw a jump in the promoter stake in the March

quarter, translating into total promoter buying of Rs16bn. Government ownership,

however, declined for yet another quarter and is currently hovering at a 14-year low of

6.4% (-108bps QoQ).

Institutional ownership has fallen for the Nifty 50 universe as well, down by 219bps QoQ

to 44.05%, largely led by a 210bps QoQ fall in FII holding to a six-year low of 26.3%. In

fact, the sequential decline in FII ownership in the Nifty 50 universe is the steepest since

the period of the analysis on this sample (2006). That said, FII share excluding Financials

actually rose by 40bps QoQ in the March quarter. DMF ownership, on the other hand,

remained steady at 8.4%, thanks to steady SIP inflows. The share of Banks, Financial

Institutions and Insurance fell for yet another quarter by 11bps QoQ to near 12-year lows

of 7.1%. Retail ownership has remained steady over the last few years, with current share

at 7.8% being just 66bps shy of their share in the overall NSE-listed space.

In terms of floating stock, FII share in the Nifty 50 Index fell by 195bps QoQ to 47.0% in

the March quarter, following a 277bps increase in 2019 and is now 4.8pp lower than the

peak share since 2006. Share of DMFs in the floating Nifty50 stock, however, rose by

55bps QoQ to all-time high of 15%, translating into a total increase of ~6.2pp over the last

three years.

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r-1

9

Ma

r-2

0

% Ownership trend of listed companies across key stakeholders by total market cap

Promoters DMFs FIIs Banks, FIs & Insurance Non-promoter corporate Retail

Private promoter ownership

in the Nifty50 Index rose

sharply in the March quarter

while that of Government

continued to decline.

FII share in the Nifty50

floating stock fell by 195bps

QoQ, while that of DMFs rose

by 55bps to 15%.


8/133

Figure 6: Nifty 50: Ownership pattern by total market

cap (%, March 2020)

Figure 7: B: Nifty 50: Ownership pattern by free float

market cap (%, March 2020)


Figure 8: Nifty 50: Ownership trend across key stakeholders by total market cap over the last three years

% Private Indian

promoters Govt.

Foreign

promoters

Domestic

MFs

Banks, FIs

& Insurance FIIs *

Non-promoter

corporate Retail

Jun-17 23.4 11.6 7.6 5.3 8.7 27.6 4.2 7.1

Sep-17 24.0 11.5 7.8 5.8 8.1 28.0 5.0 7.2

Dec-17 24.2 11.3 8.1 6.2 8.1 27.1 4.9 7.0

Mar-18 24.1 10.6 7.8 6.4 8.0 27.6 5.1 7.0

Jun-18 26.0 9.5 6.9 6.7 7.8 27.4 5.2 7.4

Sep-18 27.2 9.5 6.2 6.7 7.8 26.6 5.2 7.3

Dec-18 26.1 9.0 6.6 7.4 7.8 27.0 5.2 7.6

Mar-19 26.5 8.7 6.3 7.6 7.6 27.4 4.9 7.6

Jun-19 26.8 9.0 6.3 7.7 7.5 27.5 4.5 7.5

Sep-19 27.0 7.6 7.7 8.2 7.4 27.8 3.5 7.7

Dec-19 27.2 7.4 7.5 8.4 7.2 28.4 3.3 7.7

Mar-20 28.1 6.4 9.7 8.4 7.1 26.3 3.1 7.8

QoQ change 96bps -108bps 217bps 1bps -11bps -210bps -17bps 11bps


Private Indian

promoters, 28.1

Govt., 6.4

Foreign


FIIs, 26.3

Banks, FIs &

Insurance, 7.1

Other institutional

non-promoters, 0.3

Non-promoter

corporate, 3.1 Retail, 7.8 Other non-institutional

non-promoters, 2.9 DMFs, 15.0

FIIs, 47.0

Banks, FIs &

Insurance, 12.7

Other institutional

non-promoters,

0.5

Non-promoter

corporate, 5.6

Retail, 13.9


non-promoters, 5.1


9/133

Figure 9: Nifty 50: Long-term ownership trend across key stakeholders by total market cap


Ownership pattern of the Nifty 500 universe (March 2020): In-line with Nifty 50,

Promoter ownership in the Nifty 500 Index increased by 121bps QoQ to five-year high of

50.5%, a tad lower than the promoter holding in the overall NSE-listed universe. While

private promoter ownership, Indian and foreign combined, increased by 253bps QoQ to

14-year high of 43.9%, government ownership fell by 131bps QoQ to all-time low of

6.9%. Within the Nifty 500 universe, 93 companies saw an increase in shares owned by

private promoters in the March quarter, translating into total buying of ~Rs103bn.

a modest 18bps QoQ to 8.1%, marking the new high since 2001, FII ownership fell by

136bps QoQ to 21.6% nearly 164bps shy of the peak share since 2001. This was largely

led by Financials; excluding Financials, FII share went up by 35bps QoQ to a six-quarter

high of 13%. The share of Banks, Financial Institutions and Insurance fell by a modest

7bps QoQ to 5.5% the lowest in the last two decades. Retail investors owned 8.1% of

the Nifty 500 Index as of March-end, up by a modest 13bps QoQ, but has broadly

remained at these levels for five years now.

In terms of floating stock, FII ownership in the Nifty 500 Index fell by 163bps QoQ to

43.6%, following a 330bps increase in 2019, marking the steepest QoQ decline since the

Global Financial Crisis. DMF ownership of the Nifty 500 floating stock, however, has

improved by 75bps QoQ to a two-decade high of 16.4%. Retail ownership also rose by

66bps QoQ to a 10-quarter high of 16.4% of the Nifty 500 free float stock.

0

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% Ownership trend of Nifty 50 universe key stakeholders by total market cap

Promoters DMFs FIIs

Banks, FIs & Insurance Non-promoter corporate Retail

Private promoter ownership

inched up in the Nifty 500

universe, in-line with Nifty50

and overall NSE-listed space.

FII share in the Nifty500

floating stock fell sharply in

the March quarter the

steepest fall since the GFC.

DMF share, however, inched

up further in the March

quarter to remain at all-time

high level.


10/133

Figure 10: Nifty 500: Ownership pattern by total market

cap (March 2020)

Figure 11: B: Nifty 500: Ownership pattern by free float

market cap (March 2020)


Figure 12: Nifty 500: Ownership trend across key stakeholders by total market cap over last the three years

% Private Indian

promoters Govt.

Foreign

promoters

Domestic

MFs

Banks, FIs

& Insurance FIIs *

Non-promoter

corporate Retail

Jun-17 29.5 10.8 9.2 5.5 6.5 22.3 4.6 8.4

Sep-17 29.9 10.7 9.1 5.8 6.2 22.4 5.1 8.4

Dec-17 30.2 10.7 9.2 6.2 6.1 21.6 4.9 8.2

Mar-18 30.1 10.1 9.2 6.4 6.0 22.0 5.1 8.2

Jun-18 30.4 9.6 9.3 6.6 6.0 21.8 5.1 8.2

Sep-18 31.3 9.7 9.1 6.6 6.0 21.3 5.0 8.1

Dec-18 30.7 9.5 9.5 7.1 6.1 21.3 4.9 8.2

Mar-19 30.9 9.6 8.8 7.3 5.7 21.8 4.9 8.1

Jun-19 30.9 9.6 8.9 7.5 5.7 22.1 4.6 8.0

Sep-19 31.7 8.1 9.9 7.9 5.7 22.5 3.5 8.1

Dec-19 31.8 8.3 9.6 7.9 5.6 22.9 3.3 8.0

Mar-20 32.8 6.9 11.2 8.1 5.5 21.6 3.1 8.1

QoQ change 97bps -131bps 155bps 18bps -7bps -136bps -25bps 13bps


Figure 13: Nifty 500: Long-term ownership trend across key stakeholders by total market cap


Private Indian

promoters, 32.8

Govt., 6.9

Foreign


FIIs, 21.6

Banks, FIs &

Insurance, 5.5

Other institutional

non-promoters, 0.4

Non-promoter

corporate, 3.1 Retail, 8.1 Other non-institutional

non-promoters, 2.3

DMFs, 16.4

FIIs, 43.6

Banks, FIs &

Insurance, 11.1

Other institutional

non-promoters, 0.7

Non-promoter

corporate, 6.2

Retail, 16.4


non-promoters, 4.7

Non-promoter

Govt., 0.8

0

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30

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% Ownership trend of Nifty 500 universe key stakeholders by total market cap

Promoters DMFs FIIs Banks, FIs & Insurance Non-promoter corporate Retail


11/133

Sector-wise ownership pattern and allocation to key stakeholders

Sector-wise ownership of the Nifty 50 universe (March 2020): In the quarter ending

March 2020, Information Technology had the highest promoter ownership at 56.6% (-

31bps QoQ), followed by Communication Services at 56.1% and Energy at 51.8% (-92bps

QoQ). Utilities and Energy remained the top sectors in terms of Government ownership at

52.7% (-290bps QoQ) and 18.3% (-285bps QoQ) respectively. DMF ownership is the

highest in Industrials at 14.3% (-22bps QoQ), followed by Utilities at 14.3% (+221bps

QoQ) and Financials at 12.5% (+55bps QoQ). FIIs are the biggest non-promoter owners

of Financials at 44.8% (-49bps QoQ), followed by Communication Services at 25.0% (-

40bps QoQ) and Consumer Discretionary at 22.9% (-138bps QoQ). In terms of overall

foreign ownership (including foreign promoters), Consumer Staples leads with a 64.4%

(+526bps QoQ) foreign share, followed by Financials at 45.0% (-79bps QoQ) and

Communication Services at 42.4% (+37bps QoQ).

Figure 14: Nifty 50: Sector-wise ownership pattern across key stakeholders (March 2020)

Source: CMIE Prowess, NSE.

* FII ownership includes ownership through depository receipts held by custodians. **Others include other institutional and

non-institutional non-promoter investors.

38.7

24.2 33.7

18.0

38.2

14.3

55.0 47.2

-

5.9

18.3

5.9

52.7

17.4

18.6

50.0

4.3

5.2

1.6

3.1 -

9.4

6.6 4.8 6.3

12.5

11.4

14.3

5.4

7.7

14.3

25.0

22.9 14.3

21.9

44.8 19.1

21.1

20.7

17.3

19.7

4.7

7.5

10.1

7.2 5.5

7.0

16.6

6.4

5.7

9.6

3.1

1.4 7.6

3.1 2.5

4.0

1.5

6.3

9.7 11.5 7.0 8.3 9.2

15.2

5.2 8.7

2.3 6.7 11.5

5.2 3.6

0

10

20

30

40

50

60

70

80

90

100

Comm Svcs. Cons. Disc. Cons. Staples Energy Financials Healthcare Industrials IT Materials Utilities

% Sector-wise ownership of the Nifty 50 universe

Private Indian promoters Govt. Foreign promoters

DMFs FIIs* Banks, FIs & Insurance

Non-promoter corporate Retail Others**

Industrials has the highest

DMF ownership within the

Nifty50 universe, followed by

Utilities and Financials

FIIs are the biggest non-

promoter owners of

Financials in the Nifty 50

universe as well, followed by

Communication Services and

Consumer Discretionary.


12/133

Figure 14: Sector allocation of the Nifty 50 universe for key stakeholders (March 2020)

% Private

Indian

promoters

Govt. Foreign

promoters

Domestic

MFs FIIs*

Banks, FIs

&

Insurance

Non-

promoter

corporate

Retail

Communication Services 5.9 0.0 7.6 4.8 4.1 2.8 4.3 0.4

Consumer Discretionary 5.1 5.6 11.5 4.7 5.2 6.3 2.7 7.5

Consumer Staples 0.0 0.0 72.5 8.1 7.7 19.9 34.3 20.7

Energy 18.5 44.5 0.0 11.7 12.9 15.6 15.3 13.9

Financials 16.7 24.3 0.5 38.8 44.4 20.2 20.6 27.8

Health Care 3.5 0.0 1.2 3.5 1.9 2.5 3.3 3.0

Industrials 1.3 0.1 1.3 4.3 2.0 5.8 1.2 4.8

Information Technology 36.7 0.1 3.0 12.2 14.8 16.9 2.8 12.6

Materials 12.3 0.2 2.4 6.8 4.8 5.9 15.0 8.2

Utilities 0.0 25.2 0.0 5.2 2.3 4.1 0.5 0.9

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0


DMFs reduced their exposure to Financials but maintained an overweight stance:

DMFs bps QoQ to 38.8% in the March quarter

but the overweight (OW) stance with respect to the index was maintained, even as the

OW position has come off over the last few quarters. This has come at the expense of

increase in exposure to Consumer Staples and IT, even as DMFs have maintained a huge

underweight position on these sectors, and incrementally more so, for yet another

quarter. While DMFs reduced their OW position on the Industrials sector, they have turned

incrementally more bullish on Communication Services.

Figure 15: DMF sector allocation of the Nifty 50 universe

(March 2020 vs. December 2019)

Figure 16: DMF sector-wise OW/UW in Nifty 50 relative

to sector weight in the index (March 2020)

Source: CMIE Prowess, NSE

2.9

5.0

5.2

3.1

4.4

6.4

6.4

11.4

10.7

44.6

3.5

4.3

4.7

4.8

5.2

6.8

8.1

11.7

12.2

38.8

0 10 20 30 40 50

Healthcare

Industrials

Cons. Disc.

Comm Svcs.

Utilities

Materials

Cons. Staples

Energy

IT

Financials

% DMF sector allocation of the Nfity 50 universe

Mar-20

Dec-19

250

229

134

92

78

27

-93

-116

-288

-315

197

262

56

120

78

22

-153

-149

-211

-222

-400 -300 -200 -100 0 100 200 300

Utilities

Financials

Comm Svcs.

Industrials

Healthcare

Materials

Cons. Disc.

Energy

IT

Cons. Staples

bps DMF sector-wise OW/UW in Nifty 50

Dec-19

Mar-20

DMFs maintained a huge OW

position on Financials

despite a reduction in

allocation and have

incrementally turned more

cautious on Consumer

Staples and IT.


13/133

Figure 17: DMF vs. Nifty 50 Sector-wise OW/UW trend (bps)


FIIs retained a huge OW position on Financials for yet another quarter: Overall sector

positioning for FIIs in the Nifty 50 index has been unchanged on a sequential basis in the

March quarter. In-line with DMFs, a sharp fall in share prices of Financial sector

companies led to FII allocation to the sector falling by 552bps QoQ, as evident in an

x. FIIs have retained their huge

OW position on Financials for yet another quarter. Despite an increase in exposure to

Consumer Staples, partly driven by relative outperformance, FIIs have turned

incrementally more bearish on the sector. FIIs have also maintained an UW stance on

Materials and Industrials for yet another quarter, with marginal changes.

Figure 18: FII sector allocation of the Nifty 50 universe

(March 2020 vs. December 2019)

Figure 19: FII sector-wise OW/UW in Nifty 50 relative to

sector weight in the index (March 2020)


-1,500

-1,000

-500

0

500

1,000

1,500

2,000

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p-0

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p-1

9

Ma

r-2

0

bps Sector-wise OW/UW trend for DMFs vs. Nifty 50 Index

Communication Services Consumer Discretionary Consumer Staples Energy

Financials Health Care Industrials Information Technology

Materials Utilities

1.4

2.3

2.1

3.1

4.6

6.2

5.5

12.5

12.3

50.0

1.9

2.0

2.3

4.1

4.8

5.2

7.7

12.9

14.8

44.4

0 20 40 60

Healthcare

Industrials

Utilities

Comm Svcs.

Materials

Cons. Disc.

Cons. Staples

Energy

IT

Financials

% FII sector allocation of the Nfity 50 universe

Mar-20

Dec-19

793

60

2

-24

-41

-42

-85

-133

-362

799

48

-36

-44

-32

-49

-68

-144

-316

-500 -250 0 250 500 750 1000

Financials

Comm Svcs.

Energy

IT

Utilities

Cons. Disc.

Healthcare

Industrials

Cons. Staples

bps FII sector-wise OW/UW in Nifty 50

Dec-19

Mar-20

FIIs have maintained their

out-sized bet on Financials in

the Nifty 50 universe and

have turned incrementally

more cautious on Consumer

Staples.


14/133

Figure 20: FII vs. Nifty 50 Sector-wise OW/UW trend (bps)


Sector-wise ownership of the Nifty 500 universe (March 2020): As of March 2020, Real

Estate sector had the highest promoter shareholding at 67.4% (-27bps QoQ), followed

by Information Technology at 57.4% (-7bps QoQ), and Materials at 57.2% (+155bps

QoQ). Utilities, Energy, Financials and Industrials had the highest Government ownership

at 34.4% (-60bps QoQ), 17.5% (-281bps QoQ), 9.8% (-108bps QoQ) and 9.5% (-81bps

QoQ) respectively.

In terms of DMF ownership, Industrials sector leads at 11.0% share (+11bps QoQ),

followed by Utilities at 10.3% (+153bps QoQ) and Financials at 10.3% (+55bps QoQ).

FIIs remained the biggest non-promoter owners of Financials at 35.2% (+12bps QoQ),

followed by Communication Services at 24.5% (-10bps QoQ), Energy at 21.8% (+32bps

QoQ) and Real Estate at 20.4% (-28bps QoQ).

In terms of overall foreign ownership (including foreign promoters), Consumer Staples

leads with a 50.7% foreign share (+330bps QoQ), followed by Communication Services at

40.4% (+110bps QoQ) and Financials at 37.9% (+15bps QoQ).

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

Se

p-0

6

Ju

n-0

7

Ma

r-0

8

De

c-0

8

Se

p-0

9

Ju

n-1

0

Ma

r-1

1

De

c-1

1

Se

p-1

2

Ju

n-1

3

Ma

r-1

4

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4

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5

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6

Ma

r-1

7

De

c-1

7

Se

p-1

8

Ju

n-1

9

Ma

r-2

0

bps Sector-wise OW/UW trend for FIIs vs. Nifty 50 Index



Materials Utilities

Sector-wise, Industrials leads

in terms of DMF ownership

within the Nifty 500 universe,

in-line with the Nifty 50 and

overall listed space.

FIIs are the biggest non-

promoter owners of

Financials in the Nifty 500

universe as well, followed by

Communication Services and

Energy.


15/133

Figure 21: Nifty 500: Sector-wise ownership pattern across key stakeholders (March 2020)

Source: CMIE Prowess, NSE. * FII ownership includes ownership through depository receipts held by custodians.

**Others include other institutional and non-institutional non-promoter investors.

Sector allocation of the Nifty 500 universe for key stakeholders (March 2020): The

table below shows the sector allocation for key stakeholders in Nifty 500 companies as of

March 2020. The concentration of Government ownership in Financials, Energy and

Utilities sector is at 79.1%, a tad higher than that in the overall listed universe. In case of

institutional investors, DMFs have a much lower allocation to Financials sector at 31.1%

than FIIs at 39.8%, even as both have seen a dip in allocation in the March quarter owing

to sharp fall in share prices of Financial companies.

39.6

29.9

19.0

34.3

24.1

41.6

25.4

52.2 47.1

66.2

20.7

3.0

17.5

9.8 9.5

5.1

34.4

15.8

3.1 9.6

8.9 5.1 6.6

10.3

9.3 11.0

5.6 7.6

4.0

10.3

24.5

17.7 14.3 21.8

35.1

15.9 14.0

19.9 12.5

20.4 18.0

3.9

5.1 7.3

7.0 4.5 3.6

6.7

6.0

4.6

7.0

3.2 2.1 2.2

9.7 10.5 7.1 8.2 10.2 10.0

5.6 9.2 5.4

3.6 3.0 1.6 2.4 2.2 3.3 4.5 4.8 2.8

0

10

20

30

40

50

60

70

80

90

100

Comm

Svcs.

Cons. Disc. Cons.

Staples

Energy Financials Healthcare Industrials IT Materials Reality Utilities

% Sector-wise ownership of the NSE 500 universe

Private Indian promoters Govt. Foreign promoters

DMFs FIIs* Banks, FIs & Insurance

Non-promoter corporate Retail Others**


16/133

Figure 22: Sector allocation of the Nifty 500 universe for key stakeholders (March 2020)

% Private

Indian

promoters

Govt. Foreign

promoters

Domestic

MFs FIIs*

Banks,

FIs &

Insurance

Non-

promoter

corporate

Retail

Communication Services 4.0 0.0 4.7 3.9 3.7 2.3 3.4 0.9

Consumer Discretionary 7.0 3.3 13.3 8.4 6.3 7.1 8.2 9.1

Consumer Staples 8.1 0.7 45.9 8.9 9.3 18.6 24.9 18.1

Energy 10.8 26.1 0.2 8.4 10.5 13.1 10.1 9.1

Financials 17.9 34.6 6.0 31.1 39.8 20.0 23.1 24.6

Health Care 8.0 0.0 7.5 7.2 4.7 4.1 5.9 7.9

Industrials 4.9 8.5 9.3 8.5 4.1 7.6 4.9 7.7

Information Technology 20.6 0.8 5.7 9.0 11.9 14.0 2.6 8.9

Materials 14.5 7.5 6.3 9.4 5.8 8.4 13.9 11.4

Real Estate 1.8 0.0 0.1 0.4 0.8 0.1 0.5 0.6

Utilities 2.4 18.5 1.0 4.8 3.1 4.7 2.5 1.7

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0


DMFs remained cautious on smaller financial companies: DMFs allocation to

Financials declined by 514bps QoQ in the March quarter, in line with the fall in the

in the relative UW position being maintained. This

cautious view on smaller banks and NBFCs for yet another quarter.

DMFs have continued to play the investment theme in the economy, maintaining a strong

OW position on Industrials within the Nifty 500 space for yet another quarter, even as the

extent of OW positioning has come off meaningfully over the years. While DMFs turned

incrementally more bullish on Utilities and Healthcare, they turned more cautious on

Consumer Staples and IT, despite an increase in absolute allocation to the sectors,

thanks to the outperformance of these sectors with respect to the overall market in the

March quarter.

Figure 23: DMF sector allocation of the Nifty 500

universe (March 2020 vs. December 2019)

Figure 24: DMF sector-wise OW/UW in Nifty 500

relative to sector weight in the index (March 2020)


0.5

2.9

4.1

5.6

9.3

8.3

9.0

6.8

8.0

9.2

36.3

0.4

3.9

4.8

7.2

8.4

8.4

8.5

8.9

9.0

9.4

31.1

0 10 20 30 40

Realty

Comm Svcs.

Utilities

Healthcare

Cons. Disc.

Energy

Industrials

Cons. Staples

IT

Materials

Financials

% DMF sector allocation of the Nfity 500 universe

Mar-20

Dec-19

251

157

136

97

82

69

-15

-98

-139

-254

-291

256

114

95

104

41

60

-20

-82

-149

-188

-232

-400 -300 -200 -100 0 100 200 300

Industrials

Utilities

Healthcare

Materials

Comm Svcs.

Cons. Disc.

Realty

Financials

Energy

IT

Cons. Staples

bps DMF sector-wise OW/UW in Nifty 500

Dec-19

Mar-20

DMFs remained cautious on

smaller banks and NBFCs.

The OW stance on Industrials

was retained despite a cut in

allocation.

Under-owned sectors for

DMFs remained Consumer

Staples, IT and Energy.


17/133

Figure 25: DMF vs. Nifty 500 Sector-wise OW/UW trend (bps)


FIIs maintained a huge OW stance on Financials in the Nifty 500 Index as well: The

relative sector positioning of FIIs in the Nifty 500 Index has remained broadly stable in

the March quarter. The out-sized bet of FIIs on Financials was maintained for yet another

quarter but with a 510bps QoQ lower exposure of 39.8% the lowest in the last six

quarters, weight in the index.

Financials aside, FIIs have a neutral or negative stance on all other sectors. Contrary to

DMFs, FIIs have perennially remained negative on the investment theme in the economy,

maintaining their UW stance on Industrials and Materials since 2006. FIIs have also

ly so

given the weak domestic and global demand environment and are underweight on both

Consumer Staples and Discretionary sectors. While they have turned incrementally

cautious on Healthcare within the Nifty 500 Index, they have maintained a neutral stance

with respect to the Index on Communication Services, Energy, Information Technology,

Real Estate and Utilities.

-1,500

-1,000

-500

0

500

1,000

1,500

Se

p-0

6

Ju

n-0

7

Ma

r-0

8

De

c-0

8

Se

p-0

9

Ju

n-1

0

Ma

r-1

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De

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p-1

8

Ju

n-1

9

Ma

r-2

0

bps Sector-wise OW/UW trend for DMFs vs. Nifty 500 Index



Materials Real Estate Utilities

FIIs are largely playing the

India growth story through

Financials, with an out-sized

OW position on the sector in

the Nifty 500 Index.

Apart from Financials, FIIs

have maintained a neutral or

UW on all other sectors.


18/133

Figure 26: FII sector allocation of the Nifty 500

universe (March 2020 vs. December 2019)

Figure 27: FII sector-wise OW/UW in Nifty 500 relative

to sector weight in the index (March 2020)


Figure 28: FII vs. Nifty 500 Sector-wise OW/UW trend (bps)


0.9

2.9

3.0

4.4

3.7

5.7

7.3

7.0

10.1

10.1

44.9

0.8

3.1

3.7

4.1

4.7

5.8

6.3

9.3

10.5

11.9

39.8

0 10 20 30 40 50

Realty

Utilities

Comm Svcs.

Industrials

Healthcare

Materials

Cons. Disc.

Cons. Staples

Energy

IT

Financials

% FII sector allocation of the Nfity 500 universe

Mar-

20

769

68

61

39

24

-8

-118

-142

-190

-245

-262

780

56

34

15

25

-4

-91

-139

-205

-217

-254

-400 -200 0 200 400 600 800 1000

Financials

Comm Svcs.

Energy

IT

Realty

Utilities

Healthcare

Cons. Disc.

Industrials

Cons. Staples

Materials

bps FII sector-wise OW/UW in Nifty 500

Dec-19

Mar-20

-1,000

-500

0

500

1,000

1,500

2,000

Se

p-0

6

Ju

n-0

7

Ma

r-0

8

De

c-0

8

Se

p-0

9

Ju

n-1

0

Ma

r-1

1

De

c-1

1

Se

p-1

2

Ju

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3

Ma

r-1

4

De

c-1

4

Se

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6

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r-1

7

De

c-1

7

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8

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9

Ma

r-2

0

bps Sector-wise OW/UW trend for FIIs vs. Nifty 500 Index



Materials Real Estate Utilities


19/133

Institutional ownership concentration analysis

Institutional money gets incrementally more concentrated in large-caps amidst a

risk-off environment: The charts below depict how institutional money is largely

concentrated in the larger companies and the trend has strengthened in the March quarter

in the wake of a sharp drop in investor risk appetite. As of March 2020, while FII

ownership (including ownership through depository receipts) of the floating stock of Nifty

50/Nifty 500 fell by 195bps/163bps QoQ to 47.0%/43.6%, the ownership in the listed

universe excluding the Nifty 500 companies declined by a much higher 274bps remained

steady at 5.6% the lowest in last three years.

DMFs have also incrementally turned more cautious on smaller companies as reflected in

the sharp decline in their ownership in listed companies excluding Nifty 500 (-243bps

QoQ to 8.9% of the floating stock in March 2020). Moreover, their share in the floating

stock of Nifty 500 Index is nearly 140bps higher than that in the Nifty 50 Index, signalling

a relatively more diversified portfolio allocation.

Figure 29: Institutional ownership of floating stock across indices and stock universe (Mar 2020 vs. Dec 2019)


Concentration of FII money to top 10% listed companies by market cap surges to 16-

year high: The FII concentration in the Indian equity markets reduced significantly

between 2001 and 2006, with the share of FII investments in the top 10% listed

companies (by market cap) as a percentage of their overall investments in the listed

universe declining from 98% in December 2001 to the lows of 85.3% in March 2006.

However, since the financial crisis, the FII concentration has been gradually rising, with

the top 10% companies now accounting for 93.2% of the FII holding in the quarter ending

March 2020 the highest in the last 16 years.

The concentration of investments by Banks, FIs & Insurance to larger companies is even

higher with a 94% investment share in top 10% companies in the March 2020 quarter.

While DMFs have a relatively lower share of 86.7% of their investments made towards top

10% companies, it has risen by a sharp 276bps QoQ and now hovering at near 17-year

high levels.

48.9

14.4

47.0

15.0

47.1

15.1

44.8

15.8

45.2

15.6

43.6

16.4

44.2

15.5

42.5

16.1 14.9 11.3 12.1

8.9

0

10

20

30

40

50

60

FII DMFs FII DMFs

% Institutional ownership of free float market cap across universes

Nifty 50 Top 10% listed cos by market cap Nifty 500 All listed All listed ex Nifty 500

December 2019 March 2020

Within the NSE-listed space,

nearly 93% of the FII money

is invested in top 10%

companies by market cap

the highest share in the last

16 years.


20/133

Figure 30: Trend of FII investment share in top 10%

companies by total market cap

Figure 31: Trend of DMF investment share in top 10%

companies by total market cap


Ownership concentration in terms of number of companies with holding greater than

5%: The number of NSE-listed companies where FII holding is more than 5% fell sharply

in the March quarter reflecting the consequence of a pervasive risk-off sentiment and

flight of capital from riskier asset classes including Indian equities. These companies

(565) accounted for 31.8% of the number of NSE-listed companies in the March quarter

the lowest in ~15 years.

For DMFs, the number of companies with holding greater than 5% has more than doubled

since March 2014, increasing from 209 companies, accounting for 13% of the number of

listed companies, to 445 companies in the March 2020 quarter or one-fourth of the listed

universe. However, while the number of such companies was much lower at 331 in March

2001, its share in the listed universe was much higher at 33%.

Figure 32: Number of listed cos. with FII holding >5%

Figure 33: Number of listed cos. with DMF holding >5%


80

84

88

92

96

100

Ma

r-0

1

Ma

r-0

2

Ma

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3

Ma

r-0

4

Ma

r-0

5

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r-0

6

Ma

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7

Ma

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8

Ma

r-0

9

Ma

r-1

0

Ma

r-1

1

Ma

r-1

2

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r-1

3

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r-1

4

Ma

r-1

5

Ma

r-1

6

Ma

r-1

7

Ma

r-1

8

Ma

r-1

9

Ma

r-2

0

% FII investment share in top 10% companies by market

cap

60

65

70

75

80

85

90

95

Ma

r-0

1

Ma

r-0

2

Ma

r-0

3

Ma

r-0

4

Ma

r-0

5

Ma

r-0

6

Ma

r-0

7

Ma

r-0

8

Ma

r-0

9

Ma

r-1

0

Ma

r-1

1

Ma

r-1

2

Ma

r-1

3

Ma

r-1

4

Ma

r-1

5

Ma

r-1

6

Ma

r-1

7

Ma

r-1

8

Ma

r-1

9

Ma

r-2

0

% DMF investment share in top 10% companies by market

cap

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0

100

200

300

400

500

600

700

Ma

r-0

1

Ma

r-0

2

Ma

r-0

3

Ma

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4

Ma

r-0

5

Ma

r-0

6

Ma

r-0

7

Ma

r-0

8

Ma

r-0

9

Ma

r-1

0

Ma

r-1

1

Ma

r-1

2

Ma

r-1

3

Ma

r-1

4

Ma

r-1

5

Ma

r-1

6

Ma

r-1

7

Ma

r-1

8

Ma

r-1

9

Ma

r-2

0

%# # of listed cos with FII share>5%

% of NSE listed cos (R)

5%

10%

15%

20%

25%

30%

35%

100

150

200

250

300

350

400

450

500

Ma

r-0

1

Ma

r-0

2

Ma

r-0

3

Ma

r-0

4

Ma

r-0

5

Ma

r-0

6

Ma

r-0

7

Ma

r-0

8

Ma

r-0

9

Ma

r-1

0

Ma

r-1

1

Ma

r-1

2

Ma

r-1

3

Ma

r-1

4

Ma

r-1

5

Ma

r-1

6

Ma

r-1

7

Ma

r-1

8

Ma

r-1

9

Ma

r-2

0

%# # of listed cos with DMF share>5%

% of NSE listed cos (R)

FIIs have more than 5%

holding in nearly 32% of the

listed universe as compared

to 25% for DMFs.


21/133

Chart of the month

Coronavirus pandemic: Exponential spread, but fatalities in check

The unprecedented coronavirus pandemic has infected over 5.69m people worldwide

and taken 356 thousand lives as of May 28th, while many countries imposed

partial/complete lockdown on non-essential activities. This may result into a global

recession which is predicted to be worse than the Global Financial Crisis of 2008. India is

not an exception in this matter with over 165 thousand Covid-19 cases and more than

4,531 casualties so far. Overall, India has performed quite well in terms of both number

of cases and fatality rates while comparing with other developed countries including US,

Spain and Italy. However, the biggest concern is that the country could not flatten the

curve of spreading the disease even after imposing a strict 60-day nationwide lockdown.

In the previous edition of our Market Pulse, we have shown how total number of Covid-

19 positive cases has risen in India as compared to other major countries in the world. In

this edition, we dig down further to see how different states in India have performed till

now while controlling overall spread of the disease. Among states, Maharashtra remains

to be the epicentre of the country with 36% share of total Covid-19 positive cases

followed by Tamil Nadu (11.71%) and Delhi (9.84%) as on May 28, 2020. The distribution

remains similar in terms of number of fatalities as well, as 42.07% of total casualties

happened in Maharashtra.

The nonlinear (exponential) behaviour of the outbreak can best be illustrated in three

charts here, in increasing order of severity, using the total affected cases state-wise as a

metric, juxtaposed with doubling times in number of days.

Figure 34: Daily rise in affected cases vs. doubling times, till May 27th, 2020

Source: www.covid19india.org

-

100

200

300

400

500

600

700

800

900

1,000

15-Apr-20 25-Apr-20 5-May-20 15-May-20 25-May-20

(Cumulative, <1000) cases till May 27th, 2020

2x in 5 Days

7 Days

10 Days

12 Days

15 Days

17 Days

20 Days

25 Days

Assam

Kerala

Uttarakhand

Jharkhand

Chattisgarh

Himachal Pradesh


22/133

Figure 35: Daily rise in affected cases vs. doubling times, till May 27th, 2020


Figure 36: Daily rise in affected cases vs. doubling times till May 27th, 2020


-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000


(Cumulative, 1000-5000) till May 27th, 2020

2x in 5 Days

7 Days

10 Days

12 Days

15 Days

West Bengal

Bihar

Andhra Pradesh

Karnataka

Telengana

Jammu & Kashmir

Punjab

Haryana

-

10,000

20,000

30,000

40,000

50,000

60,000


(Cumulative, 5000+) till May 27th, 2020

2x in 5 Days

7 Days

10 Days

Maharashtra

Tamil Nadu

Delhi

Gujarat

Rajasthan

Madhya Pradesh

Uttar Pradesh


23/133

Figure 37: Share of states in total, recovered and deceased cases (%)


Daily new cases are increasing exponentially, while fatality rate remains under

control: Even after 60-day nationwide lockdown, total number of cases is increasing

exponentially with a new record number in every alternative day. With 165 thousand

cases, India has become 4th highest in terms of new cases globally as on May 26 with

second highest growth rate of novel coronavirus. Maharashtra, Tamil Nadu, Gujrat, Delhi

and Madhya Pradesh continued to record highest number of cases. On the positive side,

their recovery rates are improving over time and fatality rates have improved in recent

weeks in major states except Gujarat. Notably, Punjab showed one of the best recovery

rates in India, over 90% people cured and the North-eastern states and the Union

Territories have not been affected much. For instance, Sikkim and Mizoram reported only

case each while Lakshadweep has not reported a single case till now.

0 5 10 15 20 25 30 35 40 45

Maharashtra

Tamil Nadu

Delhi

Gujarat

Rajasthan

Madhya Pradesh

Uttar Pradesh

West Bengal

State Unassigned

Andhra Pradesh

Bihar

Karnataka

Telangana

Punjab

Jammu and Kashmir

Odisha

Haryana

Kerala

Share in total deceased cases

Share in total recovered cases

Share in total positive cases


24/133

Figure 38: State-wise cumulative new cases, recoveries and fatality rate of COVID-1919 cases

0%

1%

2%

3%

4%

5%

6%

7%

8%

0

10,000

20,000

30,000

40,000

50,000

60,000

14-Mar-

20

1-Apr-

20

19-Apr-

20

7-May-

20

25-May-

20

Maharashtra

0%

1%

2%

3%

4%

5%

6%

0

4,000

8,000

12,000

16,000

20,000

14-Mar 1-Apr 19-Apr 7-May 25-May

Tamil Nadu

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

4000

8000

12000

16000

20000


Delhi

0%

2%

4%

6%

8%

10%

0

4,000

8,000

12,000

16,000


Gujarat

0%

1%

1%

2%

2%

3%

3%

4%

0

2,000

4,000

6,000

8,000

10,000


Rajasthan

0%

2%

4%

6%

8%

10%

0

2000

4000

6000

8000


Madhya Pradesh

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

1,000

2,000

3,000

4,000

5,000


West Bengal

0%

1%

1%

2%

2%

3%

3%

0

2000

4000

6000

8000


Uttar Pradesh

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

500

1,000

1,500

2,000

2,500

3,000


Karnataka

0%

2%

4%

6%

8%

10%

0

500

1,000

1,500

2,000

2,500


Telangana

0%

10%

20%

30%

40%

50%

60%

0

500

1000

1500

2000

2500


Punjab

0%

2%

4%

6%

8%

10%

12%

0

100

200

300

400

500


Jharkhand

0%

1%

1%

2%

2%

3%

0

500

1000

1500

2000


Odisha

0%

1%

1%

2%

2%

0

500

1000

1500


Haryana

0%

1%

2%

3%

4%

5%

6%

7%

8%

0

500

1000

1500

2000

2500


Jammu & Kashmir


25/133


0%

0%

0%

1%

1%

1%

0

200

400

600

800

1000

1200


Kerala

0%

20%

40%

60%

80%

100%

0

10

20

30

40

50

60


Puducherry

0%

5%

10%

15%

20%

25%

30%

35%

0

50

100

150

200

250

300


Himachal Pradesh

0%

10%

20%

30%

40%

50%

60%

0

500

1000

1500

2000

2500

3000

3500


Bihar

0%

1%

2%

3%

4%

0

200

400

600

800

1000


Assam

0%

20%

40%

60%

80%

100%

0

0.5

1

1.5

2

2.5


Arunachal Pradesh

0%

1%

1%

2%

2%

0

50

100

150

200

250

300


Chandigarh

0%

20%

40%

60%

80%

100%

0

50

100

150

200

250

300


Tripura

0%

5%

10%

15%

20%

25%

30%

0

100

200

300

400


Chattisgarh

0%

1%

1%

2%

2%

0

400

800

1200

1600


Haryana

0%

1%

1%

2%

2%

0

100

200

300

400

500


UTTARAKHAND

0%

20%

40%

60%

80%

100%

0

20

40

60

80


Goa


26/133

Higher tests per million population (TPM) may have helped to identify more cases: We

have illustrated the relationship between tests and positive cases per million across

states in the following charts. The first chart shows states with fairly large population

(66m-224m) and the second one illustrated states with smaller population (1.1m 13m).

The relationship is somewhat positive barring few outliers like Karnataka, Rajasthan and

Goa. Notably, Maharashtra, Tamil Nadu and Jammu & Kashmir have a large number of

positive cases per million where tests per million is quite high. On the other side, states

like Uttar Pradesh, West Bengal, Madhya Pradesh and Bihar have identified fewer cases

partly because their tests per million remain significantly low. At the same time,

Rajasthan, Karnataka and Goa seem to be in a good position with high TPM and lower

number of positive cases per million.

Figure 39: Positive cases vs tests per million for high and low population states


Uttar Pradesh

Maharashtra

BiharWest Bengal

Madhya PradeshRajasthan

Tamil NaduGujarat

Karnataka

0

50

100

150

200

250

300

350

400

450

500

0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 6000

Po

siti

ve

ca

ses

pe

r m

illi

on

Tests per million

Postive cases vs tests per million (states with high population)

Q1 - High Positive cases, Low TPM

Q2 - Low Positive cases, Low TPM

Q3 - High Positive cases, High TPM

Q4 - Low Positive cases, High TPM

Jammu and

Kashmir

Uttarakhand

Himachal

PradeshManipur

Nagaland

Goa

Arunachal

Pradesh

Puducherry

Chandigarh

0

50

100

150

200

250

300

0 2000 4000 6000 8000 10000 12000

Po

siti

ve

ca

ses

pe

r m

illi

on

Tests per million

Positive cases vs tests per million (states with low population)

Q1 - High Positive cases, Low TPM

Q2 - Low Positive cases, Low TPM

Q3 - High Positive cases, High TPM

Q4 - Low Positive cases, High TPM


27/133

Tests per million have increased sharply across all states: Over the last month, India

has been able to ramp-up tests per million across all states, as shown in the following

chart. Notably, J&K increased total tests from 1,496 per million as on April 30th to 10,995

as on May 27th. Similar increment can be seen for Delhi, Goa, Andhra Pradesh, Tamil Nadu,

remains to be the most affected state in the country.

Figure 40: State-wise comparison of no. of tests per million population as on April 30th, 2020 and May 27th, 2020


Figure 41: State-wise comparison of no. of positive cases per mn population as on April 30th, 2020 and May 27th,

2020


148171190

294304347

461507

589611

710726

782840

914942973984

1,1111,3191,342

1,4961,5641,582

1,8112,383

0 1,000 2,000 3,000

ManipurWest Bengal

BiharJharkhand

NagalandUttar Pradesh

Arunachal PradeshMadhya Pradesh

UttarakhandChhattisgarh

PunjabOdishaKerala

Himachal PradeshKarnataka

GujaratChandigarh

HaryanaMaharashtra

GoaRajasthan

Jammu and KashmirPuducherryTamil Nadu

Andhra PradeshDelhi

As on April 30, 2020

5717231,069

1,4821,7181,7771,9352,0652,1522,203

2,4272,854

3,1203,316

3,6533,6723,674

4,2264,279

4,5274,538

5,8526,365

9,0339,305

10,995

0 4,000 8,000 12,000

BiharNagaland

Uttar PradeshJharkhand

West BengalMadhya Pradesh

KeralaChhattisgarhUttarakhand

ManipurPunjabGujaratOdisha

MaharashtraHaryana

KarnatakaChandigarh

Himachal PradeshArunachal Pradesh

PuducherryRajasthan

Tamil NaduAndhra Pradesh

GoaDelhi

Jammu and Kashmir

As on May 27, 2020

111333555589

10121416

27313233

476365

81177

0 50 100 150 200

NagalandManipur

Arunachal PradeshChhattisgarh

JharkhandOdisha

BiharGoa

UttarakhandPuducherry

Himachal PradeshWest Bengal

KarnatakaUttar Pradesh

HaryanaKeralaPunjab

Andhra PradeshTamil Nadu

Madhya PradeshRajasthan

Jammu and KashmirChandigarh

GujaratMaharashtra

Delhi

As on April 30,2020)

14

121314252931363737394043444853

7288101

145224

237245

448770

0 300 600 900

Arunachal PradeshNagaland

JharkhandChhattisgarh

ManipurBihar

KeralaUttar Pradesh

OdishaKarnataka

Himachal PradeshUttarakhandPuducherry

West BengalGoa

HaryanaAndhra Pradesh

PunjabMadhya Pradesh

RajasthanJammu and Kashmir

GujaratChandigarhTamil Nadu

MaharashtraDelhi

As on May 27,2020


28/133

Tests per confirmed case (TPCC) is declining in most affected states: TPCC, i.e. the

inverse of test positivity rate is decreasing over time in Maharashtra, Gujarat, Tamil Nadu,

Bihar and Odisha, which may indicate the presence of undetected cases and the need to

increase test per million population. On the other have, Madhya Pradesh, Punjab, West

Bengal, Jammu Kashmir, Andhra Pradesh and Jharkhand have increased their

containment control of the pandemic with increasing TPCC along with high test per 1000

persons.

Figure 42: State-wise comparison of no. of tests per confirmed case


0 20 40 60 80 100 120 140 160

Maharashtra

Gujarat

Chandigarh

Delhi

Madhya Pradesh

Punjab

West Bengal

Tamil Nadu

UP

Rajasthan

Kerala

Haryana

Andhra Pradesh

Odisha

Karnataka

Jharkand

May 25th

May 20th

May 15th


29/133

: India has started to relax

its lockdown norms in areas other than containment zone even though the number of

cases has shot up significantly over the past few days. This relaxation is growing a scope

of increasing the spread even at a higher rate. Besides, the reverse migration to less

developed states with inferior health infrastructure may turn green zones into red, and

simultaneously there is greater likelihood of rising mortality rate in these newly affected

regions. Moreover, Kerala, which could contain the virus for a while, is again facing new

cases in the precious weeks after evacuating many Indians from abroad.

Figure 43: State-wise one week average growth rate of new COVID-19 cases as on May29th, 2020

Source:www.covid19india.org

0% 10% 20% 30% 40% 50%

Punjab

Gujarat

Rajasthan

Madhya Pradesh

Andhra Pradesh

Tamil Nadu

Uttar Pradesh

Telangana

Goa

Maharashtra

Delhi

West Bengal

Jammu and Kashmir

Chandigarh

Karnataka

Odisha

Haryana

Tripura

Bihar

Kerala

Jharkhand

Meghalaya

Ladakh

Himachal Pradesh

DNHDD

Manipur

Puducherry

Chhattisgarh

Arunachal Pradesh

Uttarakhand

Assam


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Market Round up

Global equity markets recoup parital losses in April

Global equity markets recovered from their March lows, thanks to drop in infection rate, improvement in recovery rate,

prompt policy interventions and easing of lockdown restrictions to commence business activities. Developed markets

outperformed with MSCI World gaining 10.8% compared to MSCI EM which gained 9%. The S&P 500 Index and Dow

Jones Index increased by 12.5% and 11.1% in April the best monthly rally since 1987. Back home, the Nifty 50 and

Nifty 500 Index rallied by 14.7% and 14.5% respectively in the month of April. The rally, however, was cut short with

markets tumbling in May as infections continued to rise in major urban areas within the country. As of May 27 th, the

number of positive cases in India had crossed 150K with four major states accounting for more 60% of the cases.

Fixed income markets rallied as global central banks stepped up policy measures through rate cuts and asset purchasing

programs to cushion the economic shock from the coronavirus pandemic. The Government and RBI announced a slew

of policy measures amounting to Rs20trn or 10% of GDP to mitigate the coronavirus impact. Excess systemic liquidity

and reverse repo rate cut brought down yield across varios tenors. Indian Rupee recovered from its all-time low of 77

against the dollar on April 21st to end the month at 75.1, as RBI intervened by selling dollars. The Indian rupee has fallen

6.1% since the beginning of the year amid heavy FII selling in equity as well as debt markets.

• Domestic equity markets recovered in April after a sharp correction in March:

Indian equity markets partially recovered the losses incurred in March by end of

April, as the looming growth concerns were partly offset by active policy

intervention, commencement of limited economic activities in green and orange

zones and rise in recovery rate for COVID-19 cases. The Nifty 50 and Nifty 500

Index ended the month 14.7% and 14.5% higher respectively. The markets,

however, fell in May, as emergence of tensions between United States and China,

weak economic data and rise in infections weighed on investor sentiments. The

Rs20tn stimulus package announced by the government to support the economy

failed to provide a boost to market sentiments amid imminent growth concerns.

As of May 27th, 2020 Nifty 50 and Nifty 500 Index traded ~23% below December

2019 levels. The Mid- and Small-cap indices also ended higher by 15.4% and

13.4% respectively in April. Market volatility index India VIX fell 47.2% in April

and a further 17.8% in May, after rising sequentially for previous three months.

Volatility, however, continued to remain significantly higher than last year.

In cash markets, average daily turnover increased by 5% MoM to Rs503bn

nearly 38% higher than the average daily turnover during FY2019-20 and 17%

higher than the YTD average. Average daily derivative turnover, on the contrary,

witnessed a 15% decline MoM, touching an average of Rs940bn in April from

Rs1,107bn in the previous month nearly 2% higher than the average daily

turnover during FY2019-20 and 4% lower than the YTD average.

All sectors ended the month with positive returns in April, with gains led by

Pharma (+30%), Real Estate (-37.4%), Auto (+24.7%), Metals (+17.3%) and Bank

(+12.5%). Other heavy-weight sectors such as, IT and FMCG also reported gains

by 10.5% and 4.9% respectively during the month.

The Nifty 50 and Nifty 500

Index surged 14.7% and

14.5% respectively in April.

The markets, however, fell in

May following emergence of

tensions between the US and

China and rise in COVID-19

infections.

India VIX fell 47.2% in April

and a further 17.8% in May,

after rising sequentially for

previous three months.


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• Fixed income market rallied on aggressive monetary easing: Fixed income

markets rallied in April as global central banks stepped up policy measures

through rate cuts and asset purchasing programs to cushion the economic shock

from the coronavirus pandemic. The RBI, along with other policy measures aimed

at injecting liquidity into the system, cut policy repo rate by 115 bps reverse repo

rate (the de-facto policy rate in current surplus liquidity environment) by 155bps

in the fiscal thus far. Surplus systemic liquidity and steep cut in policy rates

brought down yield across various tenors. However, the decline was more

pronounced at the shorter-end, while the longer-end remains elevated amid

growth and fiscal pressures, leading to significant steepening of the yield curve.

While the 10-year G-sec yield declined by a meagre 3bps in April and is down

57bps YTD (as of May 27th) to 6.0%, the 1-year and 5-year G-sec yields have fallen

by a much higher 190bps and 106bps YTD respectively.

On the global front, while China and Germany 10-year bond yields fell by 15bps

(-46bps YTD) and 13bps (-23bps YTD) in April to close the month at 2.5% and -

0.6% respectively, Japan and US 10-year yields fell marginally ending the month

6bps and 3bps lower at -0.04% and 0.63% respectively.

• FIIs remained sellers in Indian equities as well as debt in April but turned

buyers in equities May: Foreign institutional investors (FIIs) continued to sell

Indian equities and debt in April, with net outflows at US$904mn and US$1.7bn

respectively (source: Refinitiv) after selling securities worth US$16bn in March

the highest ever monthly outflow. The equity market witnessed FII buying worth

US$1.7bn in May thus far (as of May 27th). The selling in debt, however, continued

in May with net outflows of US$3.2bn. After going on a buying spree in the first

quarter of 2020, Domestic institutional investors (DIIs) were modest sellers in

Indian equities in April, with net outflows at Rs8bn, but turned buyers again in

May with net inflows at Rs102bn in the month thus far (May 27th).

• Global equity correct sharply in March: After a sharp correction in March, global

benchmark indices recovered in April, thanks to proactive global fiscal and

monetary policy interventions and flattening of daily rise in COVID-19 cases.

Markets reacted positively as lockdown restriction eased and economic activities

resumed in some economies. While the developed market index (MSCI World

Index) increased by 10.8% in April, the emerging market index (MSCI EM)

increased by 9%.

US: The S&P 500 Index and Dow Jones Index increased by 12.5% and 11.1% in

April the best monthly rally since 1987 due to expansion in stimulus measures

and drop in infection rate. The rally continued in May with S&P and Dow rising

4.2% and 4.9% respectively (as of May 27th) amid optimism over easing of

lockdown and vaccine prospects partially offset by flare up in US-China

geopolitical tensions.

On the macro front, unemployment jumped to 14.7% in April from 4.4% in March,

as lay-offs rose during the standstill in business activities due to the pandemic.

The economy shrank 5% in the first quarter as per second estimate the biggest

quarterly decline since GFC. Industrial production fell a record 11.2% in April as

manufacturing output contracted 13.7%.

Europe: European markets also witnessed a rally in April, as the COVID-19

outbreak showed signs of decline and lockdown restrictions were eased

Fixed income markets rallied

in April as global central

banks stepped up policy

measures through rate cuts

and asset purchasing

programs to mitigate

economic growth concerns.

After going on a buying spree

in the first quarter of 2020,

DIIs sold equities worth

Rs8bn in April. FIIs continued

to sell equities in April but

turned buyers in May.

Developed markets

outperformed emerging

World gained 10.8% in April,

MSCI EM gained 9%.


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subsequently. While the FTSE 100 rose 4.4% in April, DAX and CAC 40 increased

9.3% and 4% respectively. The Eurozone GDP declined 3.8% if the first quarter,

with France and Spain contracting 5.8% and 5.2% respectively. On the policy

front, ECB is prepared to expand stimulus if needed to counter the impact of the

lockdown on the economy. The Bank of England kept policy rate at an all-time low

of 0.1% after cutting rates twice from the start of the outbreak and rejected the

Asia: Asian markets also ended the month in green. While the Hong Kong market

(Hang Seng Index) and Chinese market (SSE Composite Index) gained 4.4% in

April, the Japanese market (Nikkei 225 Index) and Indian market (Nifty 50 Index)

fell by 6.8% and 14.7% respectively.

In India, while the industrial production in March shrank 16.6% YoY as a result of

the lockdown, merchandise exports and imports declined 35%/60% and

29%/59% YoY in March/April 2020. The manufacturing PMI for April stood at an

all-time low of 27.4 and services PMI at 5.4. Although certain economic activities

were allowed to resume in green and orange zones, major consumption centres

surged 3.9% in April compared to -1.1% in March as economic activities resumed.

The the state of emergency in Japan was extended by another month till end of

May although the economy was not under a formal compulsory lockdown.

• Crude prives fell to negative values in futures market on supply glut far in

excess of demand: May futures on the US-based WTI crude traded in negative

territory and June futures fell 50% in April, as traders sold aggressively to avoid

taking deliveries. Although oil prices have recovered from their March lows due to

coordinated production cuts by oil producing economies, the sharp drop in futures

prices points to a weak demand outlook for crude in view of the global growth

concerns and recent developments in US-China geopolitical tensions. As of May

21st, Brent crude traded 47.6% lower than end of 2019 prices.

Safe haven commodities gold and silver ended the month gaining 5.8% and 7.5%

from March. As of May 27th, the precious metals have returned 32.3% and 18.7%

in the year thus far.

• INR depreciates as FII outflows continue: INR recovered by end of April to 75.1

against the dollar after reaching an all-time low of 77 on April 21st, as RBI

intervened by selling dollars to arrest the depreciation in rupee. The key factor

attributing to this fall is massive foreign capital outflows from equity as well as

debt markets. As of May 27th, the INR has fallen 6.1% since the beginning of the

year. Rate cuts by global central banks and flight to safety have contributed to

depreciation of major currencies against the dollar.

Oil prices have recovered

from their March lows due to

coordinated production cuts

by oil producing economies.

The key factor attributing to

the fall in rupee aganst the

dollar is the large outflow of

FII funds from equity and

debt markets.


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Macro economy

Atmanirbhar Package: Empowerment over entitlement and near-term spending

Package announced in five tranches over a five-day period focused on

all crucial sectors and segments of the economy including MSMEs, Power, Agriculture and allied sectors, Coal, Defence,

Civil Aviation, Healthcare, Education, and Public Sector Enterprises (PSEs). Besides actual fiscal outgo on higher

MGNREGS spending, extended EPF contribution and food grain distribution, amongst others, the package focussed a

great deal on bringing in a slew of structural reforms including amendments to the Essential Commodities Act and the

APMC structure, measures to enhance ease of doing business, opening up of the notified strategic sectors to private

companies and privatisation of PSEs in non-strategic sectors and modifications to labour laws. A conditional increase in

state borrowing limits from 3% to 5% of state GDP for FY21, contingent on reform actions, was also announced, thereby

helping states manage their finances better.

Given tight fiscal conditions, much of the government's support has been through its credit line, in the form of

guarantees. Overall, the policy strategy has favoured empowerment of various segments across multiple sectors over

entitlements and near-term spending. Such an approach may be driven by fiscal constraints and its impact may be low

in the short-term but would be significant in the long-term if carried out in a time-bound manner.

The total fiscal support announced by the Government as a part of this package, including the previous measures, adds

up to ~Rs13trn, with direct fiscal impact limited to ~Rs2trn, some of it spread over the next few years. Even as there is

still limited clarity on the extent of fiscal slippage one may expect this year, the shortfall in revenue collections is

expected to overshoot the additional central borrowing of Rs4.2trn planned for this year.

Tranche 1: MSMEs, DISCOMs and EPF

• Liquidity support of Rs3.7trn for MSMEs: To address funding requirements of

MSMEs, the Government has announced a fully guaranteed emergency credit line

worth Rs3trn from banks/NBFCs for standard borrowers having an outstanding

credit of up to Rs250mn and turnover of up to Rs1bn. The loans would have a tenor

of four years with a 12-month moratorium on principal repayment, cap on interest

rates, and no requirement of any fresh collateral. The Scheme can be availed until

October 31st, 2020 and would benefit nearly 4.5mn units.

For stressed MSMEs, the Government would facilitate provision of Rs200bn

subordinate debt by providing partial credit guarantee support to banks through

CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises), entailing a

spend of Rs40bn for the Government. This would benefit nearly 0.2mn MSMEs. The

Government has also announced setting up of a Fund-of-Funds with an initial equity

infusion of Rs100bn, which would be leveraged to provide a total liquidity support

of Rs500bn. This would not only help MSMEs expand their size and capacity but

also encourage them to get listed on the stock exchange. Other measures

announced for MSMEs include a) disallowing global tenders in Government

procurement tenders up to Rs2bn, b) e-marketplace for MSMEs better marketing,

and c) release of Government/CPSE dues to MSMEs within 45 days.

To widen the pool of MSMEs benefiting from these schemes, the Government has

revised the MSME definition by raising the investment limit, introducing turnover

criteria and doing away with the distinction between manufacturing and services.

• Extended Provident Fund support of Rs92.5bn: As part of the Pradhan Mantri

Garib Kalyan Package (PMGKP) worth Rs1.7trn announced on March 26th, the

Government had decided to bear the entire 24% provident fund contribution of

both employer and employee for the months of March, April and May for people

employed in businesses with an employee base of less than 100 and earning a

monthly income of up to Rs15,000. This support has been extended by another

The Government has

provided liquidity support

worth Rs 3.7trn to MSMEs

largely in the form of

complete/partial

guarantees on loans and

equity infusion through

Fund-of Funds.


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three months, entailing a cost of Rs25bn for the Government. As an additional

liquidity relief worth Rs67.5bn, the Government has also reduced the mandatory

EPF contribution of both employer and employee for employees earning more than

Rs15,000/month from 12% to 10% for all establishments covered by EPFO, except

CPSEs/state PSUs, for the next three months.

• Liquidity support of Rs750bn for NBFCs/HFCs/MFIs: The Government has also

announced a much-awaited liquidity support for the ailing non-banking sector,

including non-banking financial companies (NBFCs), housing finance companies

(HFCs) and micro finance institutions (MFIs). This includes a Special Liquidity

Scheme worth Rs300bn, under which investment will be made in primary as well

as secondary market transactions in investment grade papers of these companies

which would be fully guaranteed by the Government.

For lower-rated companies (AA-rated and below including unrated paper), the existing

Partial Credit Guarantee Scheme announced in the last Union Budget has been

extended to cover primary issuances of bonds/commercial papers of such

companies with an increase in the guarantee limit from 10% to 20% of the first loss.

This would provide an additional liquidity support of Rs450bn to the NBFC sector.

• Liquidity support of Rs900bn for DISCOMs: To address the cash flow issues for

power distribution companies (DISCOMs) arising out of a sharp slump in industrial

-19-induced lockdown, the power financing

companies viz. Power Finance Corporation (PFC) and Rural Electrification

Corporation (REC) would infuse liquidity worth Rs900bn into DISCOMs against

receivables. Additionally, state governments would provide guarantees on DISCOM

loans availed exclusively to pay dues to power generation companies.

• Liquidity support of Rs500bn through TDS/TCS cut: The rates of Tax Deduction

at Source (TDS) and Tax Collection at Source (TCS) for payments pertaining to

contract, professional fees, interest, rent, dividend, commission and brokerage has

been reduced by 25% of the existing rate for the rest of FY21. This would provide

liquidity support of Rs500bn to non-salaried tax-payers.

• Relief to contractors/real estate developers: As a significant relief to contractors,

the Government has decided to provide an extension of up to six months on Central

Government projects without any cost to the contractor and partially release bank

guarantees in line with project completion. For real estate developers, RERA

timelines on project completion and registration date have been extended by six

months for all registered projects expiring on or after March 25th, 2020, with a

clause of a further three-month extension at the discretion.

• Other direct tax measures: Other measures on the tax front include a) immediate

release of pending refunds to charitable trusts and non-corporate businesses and

professions, b) extension of due dates of income-tax return filing for FY20 from July

31st, 2020 to November 30th, 2020 and tax audit from September 30th, 2020 to

October 31st, 2020, c) extension of date of assessments getting barred on

September 30th, 2020 and March 31st, 2021 by six months, and d) extension of the

period of Vivad se Vishwas Scheme for payment without additional amount to

December 31st, 2020.

Complete Government

guarantee on investment

grade papers issued by

NBFCs/HFCs/MFIs would

provide much-needed

liquidity support to these

entities and regain

confidence in the market.

Liquidity infusion by

PFC/REC to the tune of Rs

900bn into DISCOMs

would help ease their cash

flow problems.

TDS/TCS cut by 25% of the

existing rate for the rest of

FY21 to release liquidity

worth Rs 500bn for non-

salaried tax-payers.


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Tranche 2: Poor, migrant labour and farmers

• Free food grain distribution extended to migrants: Following up on the measures

undertaken over the last couple of months to support migrants by providing food

and shelter as well as employment via MGNREGS scheme, the Government

extended the free food grain distribution to migrants who are neither registered

under the National Food Security Act (NFSA) or holders of ration cards. Around

800mn migrants would get 5 kgs of grains (wheat/rice) per person and 1 kg Chana

per family per month for the next two months, entailing of cost of Rs35bn for the

exchequer. Additionally, the migrants would be able to access ration from any Fair

Price Shop in India by March 2021 (One Nation One Ration Card).

• Relief of Rs65bn for small businesses/street vendors: In addition to the support

provided by the RBI through loan moratorium, the Government would provide

interest subvention of 2% to small businesses on MUDRA-Shishu loans (maximum

loan amount of Rs50,000; total outstanding credit at Rs1.6trn) for a period of 12

months, translating into a total relief of Rs15bn. The Government has also decided

to create a Special Credit Facility within a month to provide an initial working capital

of up to Rs10,000 to nearly 5mn street vendors. This would provide a liquidity

support of Rs50bn to street vendors who have got severely hit due to COVID-19.

• Employment support for tribal people: Funds worth Rs 60bn under the

Compensatory Afforestation Management & Planning Authority (CAMPA) would be

used by state governments for providing employment opportunities to tribal people

in forestry jobs including afforestation and plantation works, artificial & assisted

natural regeneration, forest management & protection and wild-life related

projects, among others.

• Liquidity support of Rs2.3trn to farmers: To meet the funding requirement of

small and marginal farmers, NABARD would extend an additional working capital

funding support of Rs 300bn to Rural Cooperative Banks (RCBs) and Regional Rural

Banks (RRBs) over and above the Rs900bn to be extended by NABARD in FY21

through the normal route. This would benefit nearly 30mn small and marginal

farmers with their Rabi harvest and Kharif sowing requirements over the next two

months. Additionally, the Government would also provide concessional credit of

nearly Rs2trn to 25mn farmers through Kisan Credit Cards.

• Affordable rental accommodation for migrants/urban poor: To improve living

standards of migrant workers and urban poor, the Government would launch a

scheme under the Pradhan Mantri Aawas Yojna (PMAY) that would provide

affordable rental accommodation by a) converting the Government-funded houses

into Affordable Rental Housing Complexes (ARHCs) under the public-private

partnership mode, and b) incentivising industries/manufacturing units/other

institutions as well as central/state agencies to develop and operate ARHCs.

• Extension of credit-linked housing subsidy scheme for middle-income group:

The Government has also extended the deadline for the affordable housing Credit

Linked Subsidy Scheme (CLSS) by a year till March 31st, 2020, thereby benefiting

nearly 250,000 middle income households during FY21. This would provide an

investment boost of Rs700bn to the housing sector, besides creating jobs and

benefiting related sectors such as steel, transport and construction materials.

Food security measures

extended to migrants who

are not NFSA/state card

beneficiaries.

Liquidity support provided

to businesses/street

vendors through interest

subvention on MUDRA-

Shishu loans/working

capital assistance.

Liquidity support worth

Rs2.3trn provided to

farmers through NABARD

and Kisan Credit Card.

The affordable housing

Credit Linked Subsidy

Scheme extended by

another year until March

31st, 2020.


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Tranche 3: Agriculture and allied sectors

• Financing facility of Rs1trn for building agricultural infrastructure: Wastage of

farm produce due to inadequate cold chain infrastructure has been a big concern.

Estimates suggest that nearly 16% of perishables and nearly 10% of cereals/

pulses/oilseeds get wasted every year. To improve the post-harvest supply chains,

the Government would set up an Agriculture Infrastructure Fund worth Rs1trn for

funding storage and post-harvest infrastructure at farm-gate/aggregation points.

• Support of Rs100bn for Micro Food Enterprises: For promoting and marketing

local brands, the Government would launch a scheme to provide support of

Rs100bn to nearly 0.2mn Micro Food Enterprises to assist them in attaining FSSAI

food standards, thereby helping them build and market their brands. This would be

premised on a cluster-based approach to help local value added products to reach

global markets tureal exports.

• Relief package of Rs200bn for fisheries: For sustainable and inclusive

development of marine and inland fisheries, the Government announced the launch

of Pradhan Mantri Matsya Sampada Yojana (PMMSY), first proposed in the 2019-

20 Union Budget, with an outlay of Rs200bn. This would comprise of Rs110bn for

activities in marine and inland fisheries and aquaculture and the remaining Rs90bn

for infrastructure development. This would help check gaps in the fisheries value

chain, increase production and exports as well as generate employment.

• Support of Rs155bn for animal husbandry and beekeeping: The Government

announced setting up of a Rs150bn Animal Husbandry Infrastructure Development

Fund to support private investment in dairy processing and cattle feed infra, with

added incentives for establishing plans for export of niche products. Additionally, a

new scheme with a Rs5bn outlay would be implemented to support beekeeping

with respect to infrastructure, capacity building, and development of quality stock.

• Outlay of Rs40bn for herbal cultivation: The Government plan to cover nearly

1mn hectare area under herbal cultivation over the next two years with an outlay of

Rs40bn, thereby providing an income support of Rs50bn for farmers. The

Government also plan to build regional mandis for medicinal plants.

• Logistics and storage support of Rs5bn for perishable farm produce: The

Operation Green scheme launched in the 2018-19 Union Budget for integrated

development of Tomato, Onion and Potato (TOP) value chain has been extended to

all fruits and vegetables (TOTAL) with an outlay of Rs5bn. The scheme, comprising

of 50% subsidy on transportation of produce and 50% subsidy on storage, would

be launched on a pilot basis for six months. This would help in reducing post-

harvest losses at the farm-gate level and enhance value realisation for farmers.

• Long-term governance and administrative reforms: Apart from these, the third

tranche also provides some long-term guidelines to reform the sector in terms of

governance and administration. These include a) Amendment of Essential

Commodities Act to enhance price realisation for farmers by deregulating select

agriculture food stuffs including cereals, pulses, edible oils, oilseeds, onions and

potato, b) Formulation of a central law to bring about agriculture marketing reforms

to provide marketing flexibility to farmers which is currently restricted to APMCs

(Agriculture Produce Marketing Committees) and c) Facilitate a legal framework

focused on risk mitigation and price and quality assurance for farmers.

Tranche 3 focuses on

development of agriculture

infrastructure,

formalization of Micro Food

Enterprises, support for

allied agriculture activities

(animal husbandry/

fisheries/beekeeping)

among others.

Long-term governance and

administrative reforms

announced including

amendments to the

Essential Commodities Act,

the APMC structure, and

the creation of an enabling

legal framework for

farmers.


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Tranche 4: Structural reforms to push investments

• Liberalisation of the Coal sector: The Government announced some crucial policy

reforms to liberalise the coal sector with an aim to reduce imports and attract

private sector participation. These include a) introduction of commercial mining in

the coal sector on a revenue sharing basis with liberalised entry norms and no end-

use restrictions, facilitated by the passage of the Minerals Law (Amendment) Bill in

March 2020. Nearly 50 blocks would be offered immediately, including partially-

explored blocks, with earlier-than-scheduled production to receive rebates in

revenue-share, b) extension of rebates in revenue-share for gasification or

liquefaction of coal to reduce economic impact, c) investment of Rs500bn for

building evacuation and transfer (conveyor belts) infrastructure, d) auction of

Coal Bed Methane extraction rights from Coal India, e) simplification of guidelines

and format for preparation of mining plan for faster clearances approval process

already made online with approval period slashed from 90 days to 30 days, and f)

concessions in commercial terms worth Rs50bn extended to Coal India customers.

• Reforms in the Mining sector: With an aim to enhance private investments in the

mining sector and improve efficiency and production, the Government announced

a seamless composite exploration-cum-mining-cum-production regime to provide

an end-to-end solution. Open and transparent auction of 500 mining blocks and

joint auction of bauxite and coal mineral blocks would be offered. The distinction

between captive and non-captive mines would be removed to allow lease transfer

and sale of surplus minerals. Additionally, a Mineral Index would be developed and

stamp duty payable at the time of award of mining leases would be rationalised.

• Reforms to increase defence production: Several measures were announced to

increase defence manufacturing and local procurement, thereby reducing defence

import bill. These include a) increase in Foreign Direct Investment (FDI) limit from

49% to 74%, b) time-bound defence procurement process and faster decision

making by setting up a dedicated contract management unit, realistic setting of

requirements and overhauling trial and testing procedures and c) corporatisation of

Ordnance Factory Board.

• Aviation sector reforms auctioning of airports and reducing flying cost: The

Government announced several measures to support the aviation sector one of

the worst-hit sectors by COVID-19. These include a) optimal utilisation of airspace

to reduce flying cost to bring benefits worth Rs10bn/year to the sector, b) auction

of six airports for operation and maintenance on public-private partnership (PPP)

basis in the 3rd round, and c) rationalisation of tax regime of Maintenance, Repair

and Overhaul (MRO) system to reduce maintenance cost for airlines.

• Power sector reforms privatisation of DISCOMs: To improve performance of

power distribution and supply and bring about operational and financial efficiency,

the Government announced privatisation of power distribution companies in the

Union Territories. A Tariff Policy would also be laid out to protect consumer rights

against DISCOM inefficiencies and inadequate service and improve competition,

transparency and sustainability of the sector.

• Boosting private investments in social infrastructure, space and atomic energy:

infrastructure projects of up to 30% of the project cost with a total outlay of Rs81bn

would enhance private investment in the sector. Measures were also announced to

boost private participation in space activities by providing level-playing field and

Aviation sector reforms: a)

Six new airports to be

auctioned, b) optimal

utilisation of airspace and

c) make India an MRO hub.

FDI in defence raised from

49% to 74% to boost

local manufacturing.

Policy reforms in the coal

sector include commercial

mining, investment in

evacuation and transfer

infrastructure and

simplification of Mining

plan.

VGF of up to 30% for social

infrastructure projects to

boost private investment.


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clear policy and regulatory environment as well as opening exploration/space travel

to the private sector. Reforms were also announced to open up nuclear energy

space to the private sector for cancer research and food preservation.

Tranche 5: NREGA, state finances and ease of doing business

• Increased allocation to MGNERGS: Following up on the measures announced over

the last couple of months, including wage hikes, the Government increased the

allocation to MGNERGS

scheme by Rs400bn, taking the total allocation to Rs1.01trn for the fiscal the

highest ever. This would particularly provide job opportunities to migrant labourers

in the current weak business environment.

• Enhanced borrowing for states but with conditions: Considering a sharp drop in

revenues for states, the Centre has increased the borrowing limit of states from 3%

to 5% of state GDP for FY21, translating into extra resources of Rs4.3trn

equivalent to the additional borrowing announced by the Centre. This is in addition

to the liquidity relief provided by the RBI (60% increase in Ways & Means Advance

limits, extension of overdraft facility) and timely payment of dues by the Centre.

However, the enhanced limit would be partly (1.5% of the 2%) linked to reforms

undertaken by the states in the area of PDS portability, ease of doing business,

power distribution and urban local body revenues.

• Relaxation of IBC norms: To enhance ease of doing business, the Government

announced relaxation of IBC norms including a) an increase in the minimum

threshold to initiate insolvency proceedings from Rs0.1mn to Rs100mn, thereby

supporting MSMEs, b) suspension of fresh initiation of insolvency proceedings

extended by another six months and c) exclusion of COVID-19 related debt from

• Relief on technical/procedural defaults: With an aim to provide relief to

corporates in meeting technical/procedural requirements, the Govt. decriminalised

the Companies Act violations involving minor technical and procedural defaults

pertaining to CSR reporting, board report, filing defaults and delay in holding AGMs.

This would particularly alleviate stress faced by smaller companies due to fear of

litigation and criminal proceedings in events of such defaults.

• Easier listing norms and other measures to support business environment: A

slew of measures were announced to ease listing norms including a) direct listing

of Indian securities in overseas jurisdictions, b) NCDs of private companies listed

on stock exchange would not be regarded as listed companies, c) creation of

additional/specialised benches for NCLAT (National Company Law Appellate

Tribunal) and d) lower default penalties for small companies, one-person

companies, producer companies and start-ups.

• Opening all sectors to private companies through Public Sector Enterprise

Policy: The Government expressed the intention of opening the private sector to

all sectors of the economy facilitated by creation of a coherent Public Sector

Enterprise (PSE) Policy. Through this policy, the Government would open the

notified strategic sectors of the economy to the private sector, with presence of at

least one and up to four PSEs in these sectors. Other PSEs in these notified sectors

would be privatised or merged or brought under holding companies. Additionally,

PSEs in all non-strategic sectors will be privatised at an opportune time.

MGNERGS allocation

increased to Rs1.01trn

the highest ever.

IBC norms relaxed

increase in minimum

threshold, suspension of

fresh proceedings by one

year and provision of

COVID-related exemptions.

State borrowing limits

raised from 3% to 5% of

GDP, contingent on reform

actions to provide extra

resources of Rs4.3trn.

Limiting the number of

PSEs in notified strategic

sectors to four, coupled

with privatisation of PSEs

in non-strategic sectors,

would go a long way in

improving governance,

efficiency and

administration of PSEs.


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• Increased spending on healthcare and education:

step up spending on public healthcare infrastructure, particularly at the grass-root

levels, including health and wellness centres, infectious disease hospital blocks in

all districts and public health labs in all districts and blocks, is a step in the right

direction and would prepare India for dealing with any future pandemics. Moreover,

the Govt. has proposed an extensive use of technology to deliver education in the

post-COVID environment by leveraging digital platforms, TV channels and radio.

Figure 44: Details of measures announced in the fifth tranche of the Rs20trn economic package

S. no. Measures Total stimulus

(Rs bn)

Fiscal cost

(Rs bn)

1 Increase in MGNERGS allocation 400.0 400.0

2 Increased investments in public healthcare 0.0 0.0

3 Leveraging technology to deliver education in the post-COVID environment 0.0 0.0

4 Relaxation of IBC norms 0.0 0.0

5 Decriminalisation of Companies Act defaults 0.0 0.0

6 Easier listing norms and other measures to support businesses 0.0 0.0

7 Public Sector Enterprise Policy 0.0 0.0

8 Enhanced borrowing for states 0.0 0.0

Total 400.0 400.0

% of GDP 0.2% 0.2%

Source: Government, NSE.

Figure 45: Details of measures announced in the fourth tranche of the Rs20trn economic package


(Rs bn)

Fiscal cost

(Rs bn)

1 Reforms in the coal sector Commercial mining, diversified opportunities, liberalised regime 0.0 0.0

2 Enhancing private investments in the mining sector 0.0 0.0

3 Augmenting domestic defence production and procurement 0.0 0.0

4 Aviation reforms--airport auctions, efficient airspace management, MRO 0.0 0.0

5 Power sector reforms--Tariff Policy, DISCOM privatisation in UTs 0.0 0.0

6 Promoting private investment in social infrastructure 81.0 81.0

7 Boosting private participation in space activities 0.0 0.0

8 Opening nuclear energy to private sector for cancer research and food preservation 0.0 0.0

Total 81.0 81.0

% of GDP 0.04% 0.04%


Figure 46: Details of measures announced in the third tranche of the Rs20trn economic package


(Rs bn)

Fiscal cost

(Rs bn)

1 Agriculture Infrastructure Fund for farm-gate infrastructure 1,000.0 0.0

2 Formalisation of Micro Food Enterprises (MFEs) 100.0 100.0

3 Pradhan Mantri Matsya Sampada Yojana (PMSSY) for fisheries 200.0 200.0

4 National Animal Disease Control Programme 0.0 0.0

5 Animal Husbandry Infrastructure Development Fund 150.0 0.0

6 Promotion of Herbal Cultivation 40.0 40.0

7 Beekeeping initiatives 5.0 5.0

8 Extension of Operation Greens to all fruits and vegetables 5.0 5.0

9 Amendments to Essential Commodities Act 0.0 0.0

10 Agriculture marketing reforms 0.0 0.0

11 Agriculture produce price and quality assurance 0.0 0.0

Total 1,500.0 350.0

% of GDP 0.8% 0.2%



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Figure 47: Details of measures announced in the second tranche of the Rs20trn economic package


(Rs bn)

Fiscal cost

(Rs bn)

1 Free food-grain distribution to migrants for two months 35.0 35.0

2 100% national portability of Public Distribution System by March 2021 0.0 0.0

3 Interest subvention of 2% for MUDRA-Shishu loans for 12 months 15.0 15.0

4 Special credit facility for street vendors 50.0 50.0

5 Affordable rental housing complexes for migrant workers/urban poor 0.0 0.0

6 Employment push using CAMPA funds 60.0 0.0

7 Additional emergency working capital funding for farmers through NABARD 300.0 0.0

8 Concessional credit through Kisan Credit Cards 2,000.0 0.0

9 Extension of Credit Linked Subsidy Scheme 700.0 0.0

Total 3,160.0 100.0

% of GDP 1.6% 0.05%


Figure 48: Details of measures announced in the first tranche of the Rs20trn economic package


(Rs bn)

Fiscal cost

(Rs bn)

1 Emergency Credit Line to standard MSMEs 3,000.0 0.0

2 Subordinate debt for stressed MSMEs 200.0 40.0

3 Fund of Funds for equity infusion into MSMEs 500.0 100.0

4 Disallowing global tenders in Government procurement 0.0 0.0

5 Extended PF contribution 28.0 25.0

6 Reduction in statutory PF contribution 67.5 0.0

7 Special Liquidity Scheme for NBFCs/HFCs/MFIs 300.0 0.0

8 Partial Credit Guarantee Scheme 2.0 for NBFCs 450.0 0.0

9 Liquidity infusion by PFC/REC into DISCOMs 900.0 0.0

10 Relief to contractors 0.0 0.0

11 Extension of RERA timelines for real estate projects 0.0 0.0

12 TDS/TCS reduction 500.0 0.0

13 Immediate release of pending refunds to charitable trusts/non-corporate businesses & professions 0.0 0.0

14 Extension of due date of income-tax return and tax audit 0.0 0.0

15 Extension of date of assessments getting barred 0.0 0.0

16 Extension in payment date for Vivad se Vishwas Scheme 0.0 0.0

Total 5,945.5 165.0

% of GDP 3.0% 0.08%



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Figure 49: Details of overall stimulus package announced under Atmanirbhar Bharat Scheme

Measures Announcement date Amount (Rs trn)

Fiscal measures

Tranche 1 on MSME, DISCOMs and ETFs 13-Apr-20 5.95

Tranche 2 on poor, migrant labour and farmers 14-Apr-20 3.10

Tranche 3 on agriculture and allied sectors 15-Apr-20 1.50

Tranche 4 on structural reforms to push investments 16-Apr-20 0.08

Tranche 5 on NREGA, state finances and ease of doing business 17-Apr-20 0.40

Revenue loss due to tax concessions since March 22nd, 2020 0.08

Pradhan Mantri Garib Kalyan Package 26-Mar-20 1.70

Spending on healthcare 0.15

Total fiscal measures 12.95

% of GDP 6.5%

Total monetary measures (actual) 8.02

% of GDP 4.0%

Total stimulus provided by Atmanirbhar Bharat package 20.97

% of GDP 10.5%

Source: RBI, Government, Media, NSE.


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RBI cuts policy rates by a further 40bps; eases liquidity and financial stress

In another off-cycle policy meet concluded on May 22nd, the Monetary Policy Committee (MPC) reduced rates by another

40bps, citing the need to address growth concerns sooner than later in the wake of a much adverse macroeconomic

impact of COVID-19 than envisaged earlier. This takes the repo and the reverse repo (the de facto policy rate in the

current surplus liquidity environment) rates to 4% and 3.35%, translating into a total cut this year of 115bps and 155bps

respectively. While refraining from giving estimates, the RBI expects Indian economy to contract in FY21 and inflation

to remain elevated in H1FY21 amid persisting supply dislocations.

A host of other measures were also announced, extensions to some already announced in the past, to improve

availability of liquidity further, support foreign trade and ease financial stress of corporates as well as state governments.

The moratorium on term loans and working capital facilities was extended by three months on expected lines.

Additionally, the exclusion of moratorium/deferment period from asset reclassification and resolution timeline would

serve to alleviate stress on the banking sector.

The Central Bank has remained proactive in taking swift policy actions to mitigate the liquidity shock caused by COVID-

19, with

short-end have accordingly dropped meaningfully (3M/1Y G-sec yield down 235/175bps YTD), spreads at the long-end

remain elevated, probably reflecting the supply overhang. In this context, we expect more open market purchases at

the long-end (or Operation Twist), including potential partial monetisation of the fiscal deficit in a weak demand

environment and a benign inflation trajectory ahead. On policy rates, space remains available for another 25-50bps cut

in this fiscal, ceteris paribus, but effectiveness is contingent on transmission..

• Policy rates slashed by 40bps: In an off-cycle policy meet today, the MPC decided

to cut policy rates by 40bps with a 5:1 vote, citing the need to address growth

concerns sooner than later in the wake of a much adverse macroeconomic impact

of COVID-19 than envisaged earlier. This takes the repo and the reverse repo (the

de facto policy rate in the current surplus liquidity environment) rates to 4% and

3.35%, translating into a total cut this year of 115bps and 155bps respectively. The

Marginal Standing Facility (MSF) and Bank rate stand reduced to 4.25%. The MPC

expects GDP to contract in FY21, even as it refrained from giving forecasts given

heightened uncertainty, and inflation trajectory to remain benign barring near-term

pressure owing to persisting supply dislocations. Further, the MPC has voted to

maintain an accommodative stance for as long as necessary to revive growth,

thereby keeping the room open for further rate cuts.

• RBI announces measures to ease financial stress: The RBI also announced

several measures to make debt servicing easier and improve access to working

capital. These include a) Extension of moratorium on instalments on term loans

outstanding as on March 1, 2020 by another three months until August 31st, 2020,

without resulting in asset classification downgrade, b) Easier working capital

financing and servicing: Deferment period on interest payment on working capital

facilities has been extended by another three months until August 31st, 2020,

without resulting in asset classification downgrade or an adverse impact on the

permitted to be converted into a funded interest term loan to be repaid by the end

of the current financial year. Lending institutions may also recalculate drawing

power of borrowers by reducing margins and/or reassessing working capital cycle

till the extended period, c) Extension of resolution timeline: Lending institutions are

permitted to exclude the moratorium/deferment period from the calculation of

review and resolution periods, and d) Group exposure limit under the Large

Exposures Framework increased

base, applicable until June 30, 2021.

RBI cuts policy rates by

40bps, translating into

cumulative cuts in

repo/reverse repo rate this

year by 110bps/135bps

Our reports on earlier

measures announced by

the RBI:

1. COVID-19 policy

response: Rs1.7trn fiscal

push, Rs3.74trn liquidity

boost (March 27th, 2020)

2. RBI stems up policy

response, over to the

Government now ( April

17th, 2020)

https://static.nseindia.com/s3fs-public/inline-files/India%20Policy%20response%20to%20COVID19_20200327.pdf




https://static.nseindia.com/s3fs-public/inline-files/RBI%20policy%20measures_20200417.pdf




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• Measures to improve functioning of markets and support foreign trade: To

facilitate SIDBI to meet long-term funding requirements of small industries, the

RBI decided to rollover the special refinancing facility of Rs150bn announced on

April 17th by another three months. The RBI has extended the deadline for FPIs to

utilise at least 75% of the allotted limit under the Voluntary Retention Route (VRR)

from three months to six months. A slew of measures were announced to support

foreign trade in the wake of a sharp drop in domestic/external demand and global

supply chain disruptions including a) an extension in the permissible period of

export credit from 12 months to 15 months for disbursements made up to July 31st,

2020, b) a credit facility of Rs150bn to the EXIM Bank for 90 days with rollover up

to one year to meet its foreign exchange requirements, and c) extension of time of

payment for imports from six months to 12 months from the shipment date for

imports made on or before July 31st, 2020.

• Liquidity support of Rs133bn for states: To ease the stress on State Government

finances, the RBI has relaxed the withdrawal rules from the Consolidated Sinking

Fund a fund maintained by State Governments with the RBI as a buffer for

repayment of their liabilities, thereby enabling States to deal with the redemption

pressures. This would provide an additional funding of Rs133bn to States.

• Expect more OMOs/deficit monetisation; transmission critical: The RBI, on

contain the

economic and liquidity shock caused by COVID-19 pandemic. This is reflected in

the proactive policy response by the RBI thus far. The liquidity easing measures

s up to Rs9.4trn or 4.6% of GDP. Consequently, while

rates at the short-end have come off meaningfully (3M/1Y G-sec yield down

235/175bps YTD), spreads at the long-end remain elevated, probably reflecting the

supply overhang. In this context, we expect the RBI to do more open market

purchases at the long-end (or Operation Twist), and/or partly monetise fiscal deficit

particularly given a collapsed demand environment and a benign inflation trajectory

ahead (The RBI expects inflation to fall to sub-4% by Q3FY21). On policy rates,

25-50bps cut in this fiscal, ceteris paribus, but

its effectiveness is contingent on speedy transmission.

Figure 50: Changes in key policy rates Key rates Previous value Current value

Repo Rate 4.4% 4.0%

Reverse Repo Rate 3.75% 3.35%

Marginal Standing Facility (MSF) Rate 4.65% 4.25%

Bank Rate 4.65% 4.25%

Cash Reserve Ratio (CRR) 3% 3%

Statutory Liquidity Ratio (SLR) 18.0% 18.0%

Source: RBI


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Figure 51: Policy rates slashed by 40bps: repo/reverse repo rates now at 4%/3.35%

Cumulative cuts in repo and reverse repo rates in 2020 thus far stand at 110bps/155bps.

Source: RBI, CMIE Economic Outlook, NSE.

Figure 52 dity Adjustment Facility

Systemic liquidity has remained in surplus since June and has increased sharply over the last couple of months, thanks

to continued liquidity injection by the RBI through various conventional as well as unconventional measures. Net liquidity

dity Adjustment Facility has averaged at Rs4.9trn during the period March 27-May 20th.

The amount of outstanding money parked by banks with the RBI surged to as high as Rs 8.5trn on May 5 th, averaging at

Rs 7.3trn during the same period.

Source: CMIE Economic Outlook, NSE

4.03.35

4.25

3.0

2

3

4

5

6

7

8

9

10

%Movement in key policy rates

Repo rate Reverse repo rate Bank rate Cash Reserve Ratio

-9000

-7000

-5000

-3000

-1000

1000

3000

Ja

n-1

8

Fe

b-1

8

Ap

r-1

8

Ma

y-1

8

Ju

l-1

8

Se

p-1

8

Oc

t-1

8

De

c-1

8

Ja

n-1

9

Ma

r-1

9

Ma

y-1

9

Ju

n-1

9

Au

g-1

9

Se

p-1

9

No

v-1

9

Ja

n-2

0

Fe

b-2

0

Ap

r-2

0

Rs bnNet lending under RBI's Liquidity adjustment facility

Outstanding amount under repo operations

Outstanding amount under reverse repo operations

Net lending under LAF

Figure less than zero indicates

surplus liquidity in the system

Figure greater than zero

indicates deficit liquidity in

the system

Surplus liquidity in the banking

system has increased sharply,

averaging at Rs 4.9trn during Mar

27-May 28


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Figure 53: India sovereign yield curve

The India sovereign yield curve has steepened over the last couple of months, with the drop in yields seen only up to

three-year maturity papers, thanks to a steep 155bps cut in reverse repo rate which has effectively become the policy

rate in surplus liquidity conditions. A slew of liquidity easing measures taken by the RBI, including the LTROs and TLTROs

(Targeted Long-term Repo Operations) and a huge surplus systemic liquidity, have brought the shorter-end of the yield

curve lower. The longer-end, however, has remained steady a reflection of strengthened growth concerns, massive FPI

outflows and a huge demand-supply mismatch amid heavy supply of G-secs. With the combined fiscal deficit expected

to significantly overshoot budget estimates in FY21, supply of central as well as state papers is expected to be huge this

year, thereby putting continued pressure on the long-end of the curve.

Source: Refinitiv Datastream, NSE.

Figure 54: Spreads between 10-year G-sec and repo rate

Source: RBI, Refinitiv Datastream, NSE.

7.1

5.1

3.1

6.7

2.4

3.2

4.0

4.8

5.6

6.4

7.2

8.0

3M 6M 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 11Y 12Y 13Y 14Y 15Y 19Y 24Y 30Y

% India sovereign yield curve

31-Dec-19 28-Feb-20 27-May-20

0

50

100

150

200

250

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

10-year G-sec yield vs. Repo rate

10-year G-sec yield Repo rate Spread (R)


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Figure 55: Bank lending rates vs. policy rate

The weighted average lending rate for fresh loans fell by a steep 43bps in March alone (-46bps in 1Q 2020) even as

lending rate on outstanding loans fell by a meagre 11bps (-14bps in 1Q 2020). A pick-up in monetary transmission in

the credit markets is crucial for the cut in policy rates to be effective in reducing the cost of borrowing for the real

economy.

Source: RBI, Refinitiv Datastream, NSE.

10.0

8.8

4.4

6.1

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

% Bank lending rates, G-sec rates and policy rate

MCLR on outstanding loans MCLR on fresh loans Repo rate 10-year G-sec yield


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Food inflation rises in April amid supply bottlenecks

The decline in food inflation witnessed over the last couple of months has been expectedly halted, albeit temporarily,

owing to lockdown-induced supply-side bottlenecks. Food inflation (36.7% of the CPI basket) picked up by ~80bps MoM

to 8.6% led by a jump across the board (except fruits). Within core inflation, while health inflation moderated to series-

low levels, housing inflation inched up modestly. Price collection of other categories has not happened owing to

unavailability of transaction data.

A meaningful deterioration in consumption demand, coupled with a sharp drop in commodity prices including crude oil,

is expected to keep core inflation benign. With inflation unlikely to emerge as a concern (RBI expects inflation to ease

to sub-4% in the second half of the current fiscal) and growth expected to fall to unprecedented low levels, we expect

the RBI to cut rates further this fiscal, by at least another 25-50bps, ceteris paribus, and continue injecting liquidity in

the system.

• Lockdown impacts data collection: Retail prices are collected from field visits to

selected 1114 urban and 1181 villages in the country on a weekly roster. In the

wake of nation-wide lockdown, price collection through personal visits were

suspended w.e.f. March 19th. Data collection for the month of April has taken place

from 674 urban and 524 villages for commodities that were transacted and were

available during the lockdown. Due to limited transactions in April, price movement

for several sub-groups were not compiled.

• Food inflation picks up amid supply bottlenecks: The lockdown-induced supply-

side bottlenecks have temporarily halted the decline in food inflation witnessed

over the previous few months. Food inflation (36.7% of the CPI basket) picked up

by ~80bps MoM to 8.6% led by a jump across the board (except fruits). Among

major food items, inflation in cereals/pulses (~12% of the CPI basket) jumped to

71/45-month high of 7.8%/22.8%, spices inflation surged to the series-high (since

-month high of 10.8%.

While fruit inflation moderated for third month in a row, vegetable inflation

d supply constraints. Within core

inflation, while health inflation moderated to series-low levels, housing inflation

inched up by a modest 25bps MoM to 3.9%. Price collection in other categories has

not happened due to limited transaction data.

• RBI to ease further: Even as data collection is expected to be a challenge in

April/May, other high frequency indicators viz. auto sales, merchandise trade and

PMI, amongst others, confirm the extent of economic shock caused by COVID-19

and attendant measures undertaken to contain the spread. Food inflation is

expected to temporarily remain elevated amid supply constraints, but a significant

deterioration in domestic demand, coupled with a sharp drop in commodity prices

included crude oil, is likely to keep core inflation benign. The RBI expects headline

inflation to fall to the sub-4% in the second half of the fiscal, partly supported by a

favourable base. With inflation unlikely to be an impediment to rate cuts, we expect

the RBI to slash policy rates by another 25-50bps, ceteris paribus, with particular

focus on ensuring adequate systemic liquidity through conventional as well as

unconventional tools.

Food inflation picked up in

April amid supply-side

bottlenecks.


48/133

Figure 56: Consumer price inflation in April 2020 (%YoY) Weight (%) Apr-20 Mar-20 Apr-19 FY20 FY19

CPI NA 5.8 3.0 4.8 3.4

Core CPI inflation* 44.9 NA 3.9 4.6 4.0 5.8

Food & Beverages 45.9 8.6 7.8 1.4 6.0 0.7

Cereals and products 9.7 7.8 5.3 1.2 2.1 2.8

Egg 0.4 9.0 5.6 1.9 2.3 4.5

Milk and products 6.6 9.4 6.5 0.4 1.8 2.9

Oils and fats 3.6 10.8 7.5 0.7 2.1 2.9

Fruits 2.9 2.7 3.6 (4.9) 2.3 0.7

Vegetables 6.0 23.6 18.6 2.9 (5.2) 21.3

Pulses and products 2.4 22.8 15.8 (0.8) (8.3) 9.9

Sugar and confectionary 1.4 10.3 3.9 (4.0) (7.0) 0.8

Spices 2.5 12.8 9.8 0.8 2.2 4.4

Non-alcoholic beverages 1.3 2.2 2.2 3.2 2.6 2.6

Pan, Tobacco & Intoxicants 2.4 NA 4.7 4.3 4.2 6.2

Clothing & Footwear 6.5 NA 2.1 2.0 1.6 4.1

Housing 10.1 3.9 3.7 4.8 4.5 6.7

Fuel & Light 6.8 NA 6.6 2.6 1.3 5.7

Miscellaneous 28.3 NA 4.4 5.1 4.4 5.8

Health 5.9 2.8 4.2 8.4 6.3 7.1

Source: CSO, NSE. * Headline inflation excluding food & beverages, pan, tobacco & intoxicants and fuel & light. NA = Not Available.

Figure 57: India inflation vs. interest rates

Source: Refinitiv Datastream, NSE


49/133

Figure 58: India consumer price inflation (CPI)



50/133

Figure 59: Category-wise contribution to India consumer price inflation (CPI)


Figure 60: Category-wise contribution to India Food and Beverages inflation (CPI)



51/133

• WPI inflation moderates in-line with retail inflation: Wholesale price inflation

(WPI) also declined further in March a four-month low of 1.0%. This was mainly due

to a significant decline in primary (+3.7% YoY 14-month low) and fuel & power (-

1.8% YoY) inflation. Within primary articles, food inflation fell to a 13-month low of

4.9%, -290bps MoM, non-food primary articles inflation declined by a huge 490bps

MoM to 1.9%, and crude, petroleum & natural gas remained in deflation for the

second month in a row at -7.8% YoY owing to a sharp drop in crude oil prices. Fuel

& power category was pulled into deflation by mineral oils, registering a price

decline of -8.2% YoY, partly offset by higher electricity inflation (+9.9% the

highest in the series). Manufactured products inflation remained steady at a modest

0.3% YoY.

The gap between retail and wholesale inflation widened to a four-month high of of

(45.9%) as compared to the wholesale basket (15.3%), where price drop has been

quite sharp over the last couple of months and b) a higher weightage of

manufactured goods in the wholesale basket (64.2%) as compared to the retail

basket, where prices have remained broadly steady but are expected to fall owing

a significant deterioration in domestic demand due to COVID-19 contagion.

Figure 61: Wholesale price inflation for March 2020 (%YoY) Weight (%) Mar-20 Feb-20 Mar-19 FY20TD FY19TD

WPI 1.0 2.3 3.1 1.7 4.3

Primary articles 22.6 3.7 6.7 4.9 6.9 2.7

Fuel & power 13.2 (1.8) 3.4 4.6 (1.7) 11.5

Manufactured products 64.2 0.3 0.4 2.2 0.3 3.7

Food group 24.4 5.5 7.3 3.6 6.9 0.6

Source: CSO, NSE

Figure 62: India wholesale price inflation (WPI)


WPI inflation moderated to

a four-month low of 1% in

March 2020.


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Industrial production contracts sharply in March

The modest recovery in industrial activity seen over the last few months is expected to get significantly derailed, thanks

to the nation-wide lockdown due to COVID-19 outbreak as well as global supply disruptions impacting production of

industries like pharmaceuticals, automobiles, electronics and other industrials which rely heavily on global markets for

inputs. the steepest decline ever, and much lower than the

Consensus Estimate of -8.7% (source: Refinitiv Datastream), translating into a drop of 0.7% in FY20. This was led by a

sharp dip in manufacturing activity as well as decline in electricity production owing to low industrial/commercial

demand, even as mining production remained largely steady. However, with the response rate being lower than usual,

revisions to March figures are inevitable. Industrial production is expected to witness a much sharper contraction in April

given the extended and stringent lockdown for the entire month. Moreover, a significant deterioration of domestic

demand is also likely to weigh on industrial production over the coming months.

• Lockdown impacts data collection: Like consumer prices, data flow from factories

and establishments has also got impacted due to lockdown. The weighted average

response in March was 73%, much lower than than 88% in the first revision for

February and 94% in the final revision for December.

• Industrial production declines sharply owing to lockdown: After improving to a

seven-month high of 4.6% in February, industrial production growth fell sharply to

-16.6% in March 2020 the steepest decline in the new series and much lower than

the Consensus estimates (-8.7% as per Refinitiv Datastream poll). This translates

into a decline of 0.7% in FY20 vs. +3.8% in FY19. The sharp drop in March was

largely led by a 20.6% YoY contraction in manufacturing output and a 6.8% YoY

decline in electricity production amid low demand from industrial and commercial

establishments, even as mining production remained largely steady as compared

to the same period last year. All sub-sectors within the manufacturing space

witnessing a contraction, with biggest laggards being motor vehicles, trailers &

semi-trailers (-50% YoY), computer, electronic & optical products (-42% YoY),

fabricated metal products (-33% YoY) and machinery & equipment (-32%).

On the use-based side, capital goods and consumer durables got impacted the

most, contracting by 36% and 33% YoY in March, translating into a drop of 11.5%

and 6.2% in FY20 respectively.

• Investment as well as consumption activity have deteriorated sharply: The

deterioration in investment activity seen over last many months has got

accentuated by COVID-19 outbreak as visible in a sharp 35.6% YoY decline in

capital goods production, despite a low base (-9.1% YoY in Apr ), marking the

15th consecutive month of contraction, translating into a fall of 11.5% YoY in FY20.

Infrastructure/construction sector production also registered a strong 23.8% YoY.

Weak consumption demand in the economy has also worsened, with consumer

goods production registering a decline of 23.2% YoY, led by a huge drop in

consumer durables production (-33.1% YoY).

• Industrial recovery derailed: The modest recovery in industrial activity seen over

the last few months has got singinifcantly, thanks to a nation-wide 54-day

lockdown due to COVID-19 outbreak -end in some

states as well as global supply disruptions impacting production of industries like

pharmaceuticals, automobiles, electronics and others which rely heavily on global

markets for raw materials/inputs. Further, a significant deterioration of domestic

demand is also likely to weigh on industrial production over the coming months. On

Both investment as well as

consumption demand has

significantly worsened due

to COVID-19 and is

unlikely to revive in a hurry.

Industrial production

declined by 16.6% in

March 2020 the steepest

decline in the new series.

Contraction in April is

expected to be much

sharper amid an extended

and stringent lockdown

during the entire month.


53/133

the positive side, a coordinated monetary and fiscal response should help mitigate

the economic shock to some extent.

Figure 63: India industrial production for March 2020 (%YoY) Weight (%) Mar-20 Feb-20 Mar-19 FY20TD FY19TD

IIP (16.6) 4.6 2.7 (0.7) 3.8

Sector-

based

indices

Mining 14.4 - 9.7 0.8 1.7 2.8

Manufacturing 77.6 (20.6) 3.1 3.1 (1.3) 3.8

Electricity 8.0 (6.8) 11.5 2.2 1.1 5.2

Use-based

Goods

Primary Goods 34.0 (3.1) 8.3 2.6 1.2 3.5

Capital Goods 8.2 (35.6) (9.5) (9.1) (11.5) 5.7

Intermediate Goods 17.2 (18.5) 19.4 12.4 11.9 (0.2)

Infra/Construction Goods 12.3 (23.8) (0.1) 5.1 (2.0) 8.2

Consumer Goods 28.2 (23.2) (1.5) (0.5) (1.4) 5.6

Consumer Durables 12.8 (33.1) (5.8) (3.2) (6.2) 6.5

Consumer Non-durables 15.3 (16.2) 1.5 1.4 2.2 4.9

Source: CSO, NSE:

Figure 64: India industrial production (3MMA)



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Figure 65: Long-term industrial production trend (12MMA)



55/133

Figure 66: India industrial production use-based goods (3MMA)



56/133

Figure 67: India eight-core sector growth (3MMA)


Figure 68: India manufacturing and Services PMI fell deep into the contraction zone in April 2020


-

10.0

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30.0

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Manufacturing and Services PMI

Manufacturing PMI Services PMI


57/133

Trade deficit contracts to near four-year lows, reflecting the severity of lockdown impact

The severity of economic shock caused by the lockdown is now clearly visible in the underlying merchandise trade

figures for April 2020, even as the significant contraction in trade deficit to four-year lows of US$6.8bn would help

. Following a 35% YoY drop in March when domestic lockdown was effective for

the steepest fall witnessed in the last two decades. While the

decline was broad-based, labour-intensive sectors such as gems & jewellery and textiles saw a 90% drop. Imports also

fell by 58.6% YoY led by an equivalent contraction in oil as well as non-oil imports, with hardly any gold imports during

the month. Imports excluding oil and gold fell by 52% YoY. The contraction in exports has been severe than imports as

large-scale disruptions in global supply chains as well as demand destruction caused by COVID-19 led to either delays

in shipments or cancellation of orders.

Trade data is likely to remain weak in May, albeit better than April, amid loosening of lockdown restrictions in some

states during the month. That said, trade deficit is expected to come off meaningfully in FY21 as weak domestic demand

vulnerability to massive foreign capital outflows, if any.

▪ Exports declined by a huge 60% YoY in April : After registering a 35% YoY drop

in March when lockdown was effective for only

by a sharp 60.3% YoY in April the worse in the last two decades. The decline has

been broad-based and particularly pronounced in labour-intensive sectors such as

gems & jewellery (-98.7% YoY) and readymade textiles (91% YoY) as

manufacturing completely stopped in the lockdown period. Other major items such

as engineering goods and electronics also recorded a 75% and 65% drop

respectively, while agriculture exports fared somewhat better, thanks to

Government efforts in identifying farm products for exports amid trade restrictions

against Chinese goods as well as providing necessary policy support. In absolute

terms, the export bill in April was the lowest in more than 13 years.

▪ 59 In-line with exports, imports also fell by a

huge 58.6% YoY in April the steepest decline in decades now. In absolute terms,

the import bill in April was the lowest in over 11 years. Oil imports declined by 59%

YoY, partly reflecting a sharp drop in crude oil prices, leading to oil trade deficit

contracting to four-year lows. Non-oil imports also fell by an equivalent 58.5% YoY

led by almost 100% decline in gold imports during the month. Excluding gold and

oil, imports fell by 52.2% YoY in April.

▪ contracting to four-year lows: Sharp contraction in

exports as well as imports resulted in trade deficit declining to US$6.8bn in April

the lowest in the last 47 months, and much lower than the average monthly rate of

US$13.2bn in FY20. While oil deficit has contracted to four-year lows of US$3.4bn,

non-oil trade deficit has actually widened to three-month high of US$3.3bn.

▪ Current account balance to move into surplus in FY21: While we expect a current

account deficit of 1% of GDP in FY20 vs. 2.1% in FY19, we are mostly likely to see

a current account surplus in FY21 amid a signficant deterioration in domestic

demand and plunge in crude oil price, notwitstanding a weak global demand

environment that is likely to put pressure on exports. Lower remittances from

Middle East countries, however, is a concern. While forex reserves fell by US$6bn

on a MoM basis in March the highest monthly fall in the last 17 months, the

accretion improved significantly in April and May, rising by US$11.5bn in FY21 thus

Exports as well as imports

fell by nearly 60% YoY in

April reflecting the

severity of the impact of

lockdown on Indian

economy.

Trade deficit contracted to

near four-year low in April.

FY20 CAD expected at 1%;

FY21 is likely to see

surplus.

Record-high forex reserves

positioning in current weak

global environent


58/133

far (as of May 15th), leading to import cover improving meaningfully. thereby

Figure 69: India monthly trade balance for April 2020

Exports Imports Trade

balance

US$bn %YoY Total

(US$ bn) %YoY

Oil

imports

(US$bn)

%YoY

Non-oil

imports

(US$bn)

%YoY

Gold

Import

(US$bn)

%YoY US$bn

Apr-20 10.4 -60.3 17.1 -58.6 4.7 -59.0 12.5 -58.5 0.0 -99.9 -6.8

Mar-20 21.4 -34.6 31.2 -28.7 10.0 -15.0 21.1 -33.8 1.2 -62.6 -9.8

Apr-19 26.1 0.5 41.4 3.6 11.4 8.7 30.0 1.8 4.0 54.0 -15.3

FY20 314.0 -4.9 473.0 -8.0 130.2 -7.6 342.8 -8.1 28.2 -14.2 -159.0

Source: Ministry of Commerce, CMIE Economic Outlook, NSE

Figure 70: India monthly trade balance



59/133

Figure 71: Non-oil non-gold imports trend

Significant disruptions in global supply chains and

deterioration in domestic demand has led to a sharp fall

in non-oil non-gold imports by 52% in April 2020 the

steepest pace of declines in several decades.

Figure 72: Oil Imports Trend

Oil imports have also fallen at a steep 59% YoY in April

resulting in oil trade deficit falling to four-year low levels.

Source: Ministry of Commerce, CMIE Economic Outlook, NSE

Figure 73: Oil imports are expected to remain weak amid low crude oil prices


(60)

(40)

(20)

0

20

40

0

5

10

15

20

25

30

35

Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20

%US$bn Non-oil non-gold imports have nosedived

Non-oil non-gold imports % YoY (R)

(70)

(20)

30

80

0

3

6

9

12

15

18

Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20

%US$bn Oil imports trend

Oil Imports % YoY (R)


60/133

Figure 74: Global trade projected to fall sharply in 2020

According to World Trade Organisation, global merchandise trade is expected to fall by 13% YoY in 2020 in the optimistic

scenario and by 32% or more if the pandemic is not brought under control and policy response is not effective enough.

Source: Refinitiv Datasream, NSE.

Figure 75: Forex reserves are back to all-time high levels in May, leading to a significant improvement in import

cover

On the positive side, a sustained built up of forex reserves over the years, has resulted in a significant improvement in

import cover, further supported by moderation in domestic demand. After falling to eight mont

import cover has improved sharply to ~13

Source: CMIE Economic Outlook, NSE. Import cover is calculated as the ratio of forex reserves at the end of the period to average monthly imports over the last 12

months.

6

7

8

9

10

11

12

13

14

200

250

300

350

400

450

500

Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20

# of monthsUS$ bn) Forex reserves and import cover (months)

FX reserves (US$bn) Import cover ratio (months, RHS)


61/133

FY20 fisc overshoots RE by 80bps to 4.6%; revenue receipts in April fall sharply

to 4.6% the highest in last seven years. This was led by a huge shortfall in revenue receipts (Rs1.8trn or 0.9% of GDP).

Direct tax collections fell by 7.8% in FY20, marking the first contraction in the last four decades, indirect tax collections

grew by a modest 1.8% YoY. GST collections fell below Rs1trn mark in March for the first time in five months, reflecting

the impact of lockdown. Disinvestment receipts fell short of the revised estimate by 23% in FY20 or Rs150bn as weak

market conditions in Feb-March made it difficult for the Government to offload shares. Government, however, largely

stuck to the expenditure target, barring a small cut in capital spending.

collections fell by 45% YoY in April, largely led by a huge drop in income tax, GST and custom collections during the

month, partly offset by higher corporate tax receipts. Net tax collections, however, fell by 71% YoY in April as 69% of

the gross taxes collected during the month was transferred to states. Revenue expenditure grew at a robust 24% YoY,

reflecting higher spending by the Centre on rural development, healthcare, agriculture and MGNREGS. Capital

expenditure, however, fell by 7.5% YoY. Overall, fiscal deficit in April already touched 35% of the FY21 budget estimates

s well as non-tax collections expected to get severely hit in the wake of an ensuing recession

this fiscal and weak market sentiments, the Government is likely to significantly overshoot the budgeted target of 3.5%.

orrowing plan for the year by Rs4.2trn to Rs12trn may at best meet the revenue

shortfall, thereby providing a limited space for a meaningful fiscal stimulus. A detailed analysis on this would follow in

the next edition of Market Pulse.

• FY20 fisc overshot RE by 80bps to 4.6%...:

FY20 came in 22% higher than the revised estimate at Rs9.4trn, overshooting the

target by 80bps to 4.6% the highest in last seven years. This was largely led by a

huge shortfall in revenue collections, amounting to Rs1.8trn of 0.8% of GDP. Nearly

60% of this was financed by market borrowings and 26% by securities against

small savings. External financial also went by 136% as compared to revised

estimates.

• Gross tax revenues in FY20 fell by

3.4% YoY vs. the targeted growth of 4% in the revised estimates, translating into a

shortfall of Rs1.5trn. Net tax revenues, however, registered a modest growth of

2.9% led by a 14.5% YoY decline in transfer to states. Direct tax collections

declined by 7.8%, marking the first contraction in the last four decades, thanks to

lacklustre corporate tax receipts (-16.1% YoY). Income tax collections grew at a

modest 4%, much lower than the revised growth estimate of 18.5%. Growth in

indirect tax collections, however, was a tad better at +1.8%, thanks to a pick-up in

GST collections over last few months, barring March.

• Non-tax revenue and capital receipts fell 11.5% short of RE: While non-tax

revenues registered a strong 38% growth in FY20, thanks to one-time surplus

transfer by the RBI in August 2019, it was Rs138bn or 6.9% short of the revised

estimate. Disinvestment receipts declined by 47% to Rs503bn in FY20 the lowest

in last three years vs. the RE estimate of Rs650bn.

•

fell by 72% YoY in April: After remaining north of Rs1trn over the previous four

months, GST collections fell by 8.4% YoY/7.4% MoM in March to Rs 976bn. This

translates into gross GST collections of Rs 12.2trn in FY20, up by a modest 3.8%

YoY. The drop reflects the impact of a slowdown in economic activity and shutdown

of non-essential segments towards March-end. The decline in GST collections

Gross fiscal deficit overshot

the revised target of 3.5%

by 80bps.

Short-fall in revenue

receipts in FY20 amounted

to Rs1.8trn of 0.8% of GDP.

GST collections fell below

the Rs1trn mark for the

first time in four months;

declined by 70% YoY.


62/133

worsened in April amid a nation-wide lockdown, deterioration in domestic demand

and waiver of interest, late fees or penalties for SMEs for delays in GST filings. While

share of GST collections came in at a muted Rs167bn in April 2020, down 70% YoY.

• Revenue expenditure growth maintained in FY20; capex cut marginally: Despite

pressures on the revenue front in the wake of COVID-19 outbeak, the Government

did not resort to a

intention to focus more on containing the social and economic damage caused by

COVID-10 than fiscal consolidation. While revenue expenditure grew by 17%, in-

line with the revised growth target, capital expenditure was cut marginally,

registering a 9.7% growth in FY20 vs. the revised estimate of +13.4%.

• April data gives a glimpse of build up of fiscal pressures in FY21: The impact of

an exten

month of April. Gross tax collections fell by 45% YoY in April, largely led by a huge

drop in income tax, GST and custom collections during the month, partly offset by

higher corporate tax receipts. Net tax collections, however, fell by 71% YoY in April

as 69% of the gross taxes collected during the month was transferred to states.

Revenue expenditure grew at a robust 24% YoY, reflecting higher spending by the

Centre on rural development, healthcare, agriculture and MGNREGS. Capital

expenditure, however, fell by 7.5% YoY. Overall, fiscal deficit in April already

• A massive fiscal slippage in FY21 in the making: A 7-day lockdown in the month

of March led to a miss of 80bps on the fisc in FY20. With the lockdown getting

extended to almost two months in the current fiscal, albeit with some relaxations

in the latter part of this period in the Green and Orange districts, strain on the

-tax

collections are expected to get severely hit in the wake of an ensuing recession this

fiscal and weak market sentiments, barring some relief from the hike in excise

duties on petrol and diesel. Clearly, the Government is likely to overshoot the

borrowing plan for the year by Rs4.2trn to Rs12trn may at best meet the revenue

shortfall, thereby providing a limited space for a meaningful fiscal stimulus.

With states playing a major role in containing the virus but with a sharp drop in

resources, state finances are also likely to come under a severe strain. The Centre

has already allowed the states to borrow up to 5% of GDP in the current fiscal, albeit

with some conditions. Prima facie, the combined fiscal deficit (centre + states) may

well rise to double-digits in FY21, with total gross market borrowings jumping to

Rs20bn+.

• With a huge supply of Government

paper, centre and states combined, expected to hit the market in the coming

months, we do not rule out direct deficit monetisation of fiscal deficit by the RBI.

As widely feared, this is unlikely to be inflationary in nature in the wake of a massive

demand destruction caused by the virus outbreak.

Gross tax collections in

April declined by 45% YoY.

Spending on rural

development, healthcare,

agri and MGNREGS picked

up.

Combined fiscal deficit

(Centre + States) may well

shoot up to double-digits in

FY21.


63/133

Figure 76


Figure 77

Source: CMIE Economic Outlook, CGA, NSE

Figure 78: A quick glance at FY20 and FY21BE fiscal balances

FY20 FY21

Rs bn RE (Rs bn) %YoY Actual (Rs bn) %YoY BE (Rs bn) % YoY over

FY20RE

% YoY over

FY20A

Net tax revenues 15,046 14.2 13,559 2.9 16,359 8.7 20.7

Non-tax revenues 3,455 46.6 3,262 38.3 3,850 11.4 18.0

Non-debt cap rec. 816 -27.6 686 -39.1 2,250 175.7 227.8

Total receipts 19,317 16.0 17,507 5.1 22,459 16.3 28.3

Revenue Exp 23,496 17.0 23,496 17.0 26,301 11.9 11.9

Capital Exp 3,489 13.4 3,367 9.7 4,121 18.1 22.4

Total expenditure 26,986 16.6 26,864 16.0 30,422 12.7 13.2

Fiscal deficit 7,668 18.1 9,356 44.1 7,963 3.8 -14.9

% GDP 3.8 4.6 3.5

Source: CMIE Economic Outlook, CGA, Budget documents, NSE

6.6

4.9

5.9

4.9 4.5

4.1 3.9

3.5 3.5 3.4 3.3 3.8

4.6

3.5

-

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3.0

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7.0

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20BE FY20RE FY20A FY21BE

Fiscal deficit trend (% of GDP)


64/133

Figure 79: Direct Tax Collection Trends

Figure 80: Indirect Tax Collection Trends

Source: CMIE Economic Outlook, CGA, NSE

Figure 81: Gross tax collection trends

Figure 82: Monthly trend of GST Collections

Source: CMIE Economic Outlook, CGA, PIB, NSE

Figure 83: Revenue and capital expenditure trend

Figure 84: Expenditure Mix

Source: CMIE Economic Outlook, CGA, PIB, NSE

-10

-5

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%Rsbn Indirect tax collections trend

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Rsbn %Gross tax collections trend

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10.1

6.74.5

5.84.5

-3.0-5.3

6.0

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-5.0

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Rs bn Monthly trend of GST collections

FY20 Required monthly target % YoY

Required monthly run-rate: Rs 1.03trn

10.4 11.5 12.4 13.7 14.7 15.4 16.918.8 20.1

23.51.61.6

1.71.9

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Mil

lio

ns

Rs trn Share of revenue and capital expenditure in total

expenditure

Capital exp

Rev exp

% YoY growth in rev exp

% YoY growth in capital exp

86.9 87.8 88.2 88.0 88.2 85.9 85.5 87.7 86.7 87.5

13.1 12.2 11.8 12.1 11.8 14.1 14.5 12.3 13.3 12.5

0

20

40

60

80

100


% Share of revenue and capital expenditure in total

expenditure trend

Revenue expenditure Capital expenditure


65/133

Figure 85

Items (Rs bn) FY20RE FY20A FY21BE

Rs bn % YoY Rs bn % of RE % YoY Rs bn % YoY* Rs bm % YoY

Net tax revenues 15,046 14.2 13,559 90.1 2.9 16,359 8.7 214 (70.1)

Gross tax revenues 21,828 4.1 20,099 92.9 (3.4) 24,230 12.0 676 (44.3)

Of which:

Direct Tax 11,575 2.9 10,372 89.6 (7.8) 13,060 12.8 465 (10.8)

Corporation tax 6,105 -8.0 5,569 91.2 (16.1) 6,810 11.5 195 57.7

Income tax 5,470 18.5 4,803 87.8 4.0 6,250 14.3 270 (32.1)

Indirect Tax 10,059 5.3 9,727 96.7 1.8 11,170 11.0 211 (69.5)

Goods and service tax 6,123 5.3 6,014 98.2 2.9 6,905 12.8 167 (69.8)

Custom Duties 1,250 6.1 1,092 87.3 (7.3) 1,380 10.4 39 (70.0)

Excise Duties 2,480 6.9 2,396 96.6 3.7 2,670 7.7 1 NM

Others 194 13.0 164 84.7 8.0 205 5.8 5 (19.5)

States Share (6,560) -13.8 (6,507) 99.2 (15) (7,842) 19.5 (460) (7.1)

Transferred to NCCD (28) 55.0 (33) 119.0 84.4 (29) 5.0 (1) NM

Non-Tax Revenue 3,455 46.6 3,262 94.4 38.3 3,850 11.4 58 (75.2)

Dividends and profits 1,999 76.2 1,861 93.1 64.1 1,554 (22.3) 0 (94.9)

Other non-tax revenues 1,456 19.1 1,401 96.2 14.5 2,296 57.7 58 (75.2)

Central govt. revenue receipts 18,501 19.1 16,821 90.9 8.3 20,209 9.2 272 (71.4)

Non-Debt Capital Receipts 816 (27.6) 686 84.1 (39.1) 2,250 175.7 4 (86.5)

Recovery of Loans 166 (6.9) 183 110.3 2.0 150 (9.9) 4 4.3

Misc. Receipts (inc. divestment) 650 (23.6) 503 77.4 (46.9) 2,100 223.1 0 (100.0)

Total Receipts 19,317 16.0 17,507 90.6 5.1 22,459 16.3 275 (71.8)

Revenue Expenditure 23,496 17.0 23,496 100.0 17.0 26,301 11.9 2,788 24.4

Interest Payments 6,251 7.3 6,110 97.7 4.9 7,082 13.3 267 36.5

Major subsidies 2,273 15.5 2,232 98.2 13.3 2,278 0.2 441 (36.1)

Food 1,087 7.3 1,087 100.0 6.7 1,156 6.3 192 (59.0)

Fertilizer 800 13.3 811 101.4 14.9 713 (10.9) 206 21.5

Petroleum 386 55.3 334 86.6 36.0 409 6.1 42 (17.9)

Other revenue expenditure 14,973 21.9 15,154 101.2 23.4 16,941 13.1 2,080 53.4

Capital Expenditure 3,489 13.4 3,367 96.5 9.7 4,121 18.1 283 (7.5)

Total Expenditure 26,986 16.6 26,864 99.5 16.0 30,422 12.7 3,071 20.6

Fiscal Deficit 7,668 18.1 9,356 122.0 44.1 7,963 3.8 2,795 78.0

Fiscal Deficit/GDP 3.8 4.6 3.5 1.4

Source: CMIE Economic Outlook, CGA, Budget Documents, NSE. * The YoY growth figures are on FY20RE.


66/133

Q4FY20 GDP growth at a 11-year low of 3.1%; FY20 at 4.2%, revising FY21E to -6.0%

-year low of 3.1%, illustrating the nature of the national

lockdown, even as it was ahead of market expectations (NSEe: +1%). Growth was dragged down by lower consumption

as well as investment demand. Government spending remained the only saviour for yet another quarter despite strained

fiscal balances. Moreover, the share of discrepencies in Q4FY20 was a tad higher than the average March quarter share

over the last nine years, but contributed 82% to the GDP growth. Adjusting for Government consumption and

discrepancies, GDP in Q4FY20 contracted by 0.8%. While the nationwide lockdown owing to COVID-19 outbreak is

partly to be blamed for the sharp drop in growth last quarter, signficant downward revisi

(9MFY20 GDP growth downgraded by 60bps) points to a pervasive slowdown in the economy even before the

Coronavirus outbreak forced the nation into a lock-down. GDP growth in FY20 at 4.2% is now the lowest in last 11 years.

By economic activity, GVA growth in Q4FY20/FY20 came in at 3.0%/3.9%, supported by Agriculture, while growth in

Industry and Services sectors fell to the lowest in the series.

Amidst an extended lock-down for more than two months now and counting and expectations of a gradual easing of

restrictions at best given rising number of COVID-19 cases, the impact on Indian economy is expected to be much more

severe than envisaged earlier, particularly in the wake of limited fiscal spend. An anticipated recovery period has now

extended substantially as consumption behaviour is expected to change drastically even post the lockdown amid job

uncertainty, leading to higher savings. The severity of macroeconomic shock caused by the lockdown is reflected in a

sharper-than-expected drop in several high frequency indicators such as merchandise trade performance,

manufacturing PMI, auto sales, fuel consumption, amongst others. We therefore downgrade our FY21 GDP growth

estimate to -6.0% vs. +0.8% earlier, led by a meaningful contraction in consumption as well as investment activity.

Nominal GDP would see a contraction in FY21 for the first time in the last six decades, thereby having severe implications

for the fiscal math. Risks to our growth estimates, however, continue to remain on the downside.

• Q4FY20/FY20 GDP growth fall to 11-year lows: Fourth quarter GDP growth fell

to a 11-year low of 3.1%, even as it was higher than market expectations (NSEe:

1%). While investments continued to remain a drag, with COVID-10-imposed

restrictions further adding to the woes, consumption growth also moderated

significantly to over five-year lows. This, along with downward revisions to previous

-year low of 4.2%. The Gross

Value Added (GVA) growth in Q4FY20/FY20 also declined to a decadal low of

3.0%/3.9%, largely led by contraction in industrial sector growth for yet another

quarter and signficant moderation in Services sector growth, even as Agri sector

growth surprised positively. Nominal GDP growth fell to 48-year low of 7.2% in

FY20, thereby having significant implications for the fiscal math.

• Government spending the only saviour: The Q4FY20 GDP growth was severely

dragged down by lacklustre investment, with GFCF (Gross Fixed Capital Formation)

contracting by 6.5% in Q4FY20 the steepest decline in last 11 years, marking the

third consecutive quarter of an YoY contraction. The impact of muted demand

environment, weak business confidence, low capacity utilisation and tight financial

conditions prevalent before got accentuated with the COVID-19 outbreak and

attendant containment measures. Private consumption, however, grew at a modest

2.7% YoY in Q4FY20 the lowest in five years. Government spending remained the

only saviour for yet another quarter despite strained fiscal balances, contributing

~40% to GDP growth in Q4FY20 but with a much lower share of 10%. Notably, the

share of discrepencies in Q4FY20 was a tad higher than the average March quarter

share over the last nine years, but contributed 82% to the GDP growth during the

quarter. Excluding Government consumption and discrepancies, GDP growth in

Q4FY20 worked out to be -0.8% YoY.

GDP growth in Q4/FY20 fell

to a 11-year low of

3.1%/4.2%.

Government spending has

been the only saviour;

excluding Government

spending and

discrepancies, GDP

contracted by 0.8% YoY in

Q4FY20.


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• Sector-wise, Agri/Government services come to the rescue: Among the sectors,

Agriculture and Government services emerged as the only silver linings. Agriculture

sector grew at a two-year high of 5.9%, and is expected to fare relatively much

better in FY21, supported by a normal monsoon and elevated reservoir levels.

Industrial sector contracted by 0.6% YoY in Q4FY20 the second and the steepest

fall in the last eight years (new series), led by manufacturing and construction,

reflecting the weakened consumption and investment demand post the lockdown

announcement. Services growth also moderated significantly to 4.4% led by trade,

hotels & transport and financial & business services, even as Government services

growth remained robust at 10.1% for third quarter in a row. Excluding Agri/

Government Services, GVA growth would work out to be much lower 1.1%/2.8% in

Q4FY20/FY20.

• Direction/magnitude of quarterly revisions disturbing: While revisions to earlier

data have been routine with National Accounts data, particularly in the new series

(Base year 2011-12), what surprises and bothers this time is the direction and

magnitude of the revisions. While growth numbers were revised higher in February,

the revisions for the same quarters has been on the lower side this time.

Nevertheless, the revised data points to a significant, pervasive slowdown in the

economy even before the Coronavirus outbreak forced the nation into a lock-down

of 60 days and counting. A lower growth trajectory than anticipated earlier has

implications on the impact of the lockdown (worse than expected), and on the

extent of recovery (should take longer than expected, but with a sharper base

effect-led initial recovery in FY22).

• FY21 GDP growth estimate revised lower to -6.0%: Amidst an extended lock-

down for more than two months now and counting and expectations of a gradual

easing of restrictions at best given rising number of COVID-19 cases, the impact on

Indian economy is expected to be much more severe than envisaged earlier,

particularly in the wake of limited fiscal spend. An anticipated recovery period has

now extended substantially as consumption behaviour is expected to change

drastically even post the lockdown amid job uncertainty, leading to higher savings.

The severity of macroeconomic shock caused by the lockdown is reflected in a

sharper-than-expected drop in several high frequency indicators such as

merchandise trade performance, manufacturing PMI, auto sales, fuel consumption,

amongst others. We therefore downgrade our FY21 GDP growth estimate to -6.0%

vs. +0.8% earlier, led by a meaningful contraction in consumption as well as

investment activity. Nominal GDP would see a contraction in FY21 for the first time

in the last six decades, thereby having severe implications for the fiscal math. Risks

to our growth estimates, however, continue to remain on the downside.

Excluding Government

services/Agri, GVA growth

in Q4/FY20 came in at a

much lower 1.1%/2.8%.

We have revised our GDP

growth forecast from 0.8%

(estimated in April; read

details here) to -6.0%,

thanks to an extended

lockdown and sharper-

than-expected drop in high

frequency indicators.

https://static.nseindia.com/s3fs-public/inline-files/India%20Macro%20and%20Market%20Outlook_April%202020_0.pdf


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Figure 86: India quarterly GDP growth falls to a 11-year low (%)

GDP growth at 3.1% in Q4FY20 is the weakest in last 11 years. Adjusted for seasonal effects, the 4QMA growth is

firmly trending lower to 4.2% now.


Figure 87: Quarterly growth trend (2011-12=100) (%YoY) Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20

Gross Domestic Product (GDP) 7.1 6.2 5.6 5.7 5.2 4.4 4.1 3.1

Private Consumption (PFCE) 6.7 8.8 7.0 6.2 5.5 6.4 6.6 2.7

Government Consumption (GFCE) 8.5 10.8 7.0 14.4 6.2 14.2 13.4 13.6

Gross Capital Formation (GCF) 10.8 11.4 11.5 5.0 5.3 -2.9 -4.3 -5.8

Gross Fixed Capital Formation (GFCF) 12.9 11.5 11.4 4.4 4.6 -3.9 -5.2 -6.5

Net trade -10.8 65.6 -18.7 -58.5 -4.1 -46.0 -57.5 14.9

Exports 9.5 12.5 15.8 11.6 3.2 -2.2 -6.1 -8.5

Imports 5.9 18.7 10.0 0.8 2.1 -9.4 -12.4 -7.0

Gross Value Added (GVA) 6.9 6.1 5.6 5.6 4.8 4.3 3.5 3.0

Agriculture 3.8 2.5 2.0 1.6 3.0 3.5 3.6 5.9

Industry 7.5 4.8 5.0 2.6 4.2 0.5 -0.3 -0.6

Mining and Quarrying -7.3 -7.0 -4.4 -4.8 4.7 -1.1 2.2 5.2

Manufacturing 10.7 5.6 5.2 2.1 3.0 -0.6 -0.8 -1.4

Electricity 7.9 9.9 9.5 5.5 8.8 3.9 -0.7 4.5

Construction 6.4 5.2 6.6 6.0 5.2 2.6 0.0 -2.2

Services 7.4 7.4 7.4 8.7 5.5 6.5 5.7 4.4

Trade, Hotels, Transport, Storage, Comm. 8.5 7.8 7.8 6.9 3.5 4.1 4.3 2.6

Fin. Svcs, Real Estate & Business Svcs. 6.0 6.5 6.5 8.7 6.0 6.0 3.3 2.4

Community, Social & Personal Svcs. 8.8 8.9 8.1 11.6 7.7 10.9 10.9 10.1

Source: CSO, NSE


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Figure 88: Annual real GDP growth trend (% YoY) FY16 FY17 FY18 FY19 FY20 FY21E

Gross Domestic Product (GDP) 8.0 8.3 7.0 6.1 4.2 -6.0

Private Consumption (PFCE) 7.9 8.1 7.0 7.2 5.3 -6.0

Government Consumption (GFCE) 7.5 6.1 11.8 10.1 11.8 13.1

Gross Capital Formation (GCF) 4.7 3.7 10.0 9.5 -2.0 -12.1

Gross Fixed Capital Formation (GFCF) 6.5 8.5 7.2 9.8 -2.8 -13.7

Net trade of goods & services -9.1 -5.7 257.7 -11.8 -29.2 -11.6

Exports of goods & services -5.6 5.0 4.6 12.3 -3.6 -14.9

Imports of goods & services -5.9 4.4 17.4 8.6 -6.8 -14.5

Gross Value Added (GVA) 8.0 8.0 6.6 6.0 3.9 -6.0

Agriculture 0.6 6.8 5.9 2.4 4.0 2.8

Industry 9.6 7.7 6.3 4.9 0.9 -13.5

Mining and Quarrying 10.1 9.8 4.9 -5.8 3.1 0.1

Manufacturing 13.1 7.9 6.6 5.7 0.0 -15.2

Electricity 4.7 10.0 11.2 8.2 4.1 -4.9

Construction 3.6 5.9 5.0 6.1 1.3 -17.2

Services 9.4 8.5 6.9 7.7 5.5 -4.2

Trade, Hotels, Transport, Storage, Comm. 10.2 7.7 7.6 7.7 3.6 -16.3

Fin. Svcs, Real Estate & Business Svcs. 10.7 8.6 4.7 6.8 4.6 -4.4

Community, Social & Personal Svcs. 6.1 9.3 9.9 9.4 10.0 12.9

Source: CSO, NSE

Figure 89: Share in GDP (%) FY16 FY17 FY18 FY19 FY20

Gross Domestic Product (GDP) 100.0 100.0 100.0 100.0 100.0

Private Consumption (PFCE) 56.1 56.1 56.0 56.6 57.2

Government Consumption (GFCE) 10.0 9.8 10.2 10.6 11.3

Gross Capital Formation (GCF) 34.5 33.0 33.9 35.0 32.9

Gross Fixed Capital Formation (GFCF) 30.7 30.8 30.8 31.9 29.8

Net trade of goods & services -1.2 -1.1 -3.6 -3.0 -2.0

Exports of goods & services 20.8 20.2 19.7 20.9 19.3

Imports of goods & services 22.1 21.3 23.4 23.9 21.4

Discrepancies 0.7 2.3 3.5 0.9 0.6

Gross Value Added (GVA) 100.0 100.0 100.0 100.0 100.0

Agriculture 15.4 15.2 15.1 14.6 14.6

Industry 31.6 31.5 31.4 31.1 30.2

Mining and Quarrying 3.0 3.1 3.0 2.7 2.7

Manufacturing 18.1 18.1 18.1 18.1 17.4

Electricity 2.1 2.2 2.3 2.3 2.3

Construction 8.2 8.1 8.0 8.0 7.8

Services 53.0 53.3 53.4 54.3 55.2

Trade, Hotels, Transport, Storage, Comm. 19.0 18.9 19.1 19.4 19.4

Fin. Svcs, Real Estate & Business Svcs. 21.9 22.0 21.6 21.8 21.9

Community, Social & Personal Svcs. 12.2 12.3 12.7 13.1 13.9

Source: CSO, NSE


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Data revisions and implications: Revisions to national income data have been routine

with national accounts data, particularly in the new series (Base year 2011-12). In fact,

the last significant revision dated January 7th, 2020 had revisions going back every year

to FY17 as better data became available. These ranged from updated production and

prices of crops, ASI (Annual Survey of Industries) results, to updated information on local

bodies and autonomous institutions. Most such revisions are not substantial in nature.

Quarterly revisions: The interesting difference this time around is with the direction

and magnitude of the revisions. Consider the tables below on quarterly figures of GDP and

GVA at both 2011-12 and current prices. Growth in Q1 and Q2FY20 reflected the severe

slowdown in the economy, with Q1 growth dropping to 5.0%, followed by 4.5% in Q2. One

may recall the slowdown also being reflected across various other indicators, like bank

credit, capital raising, corporate earnings and flow of funds to the commercial sector.

The revisions on February 28th showed a slightly different picture, with growth being

revised upwards for Q1 and Q2 of FY20 (by 60bps), but maintaining the trend of a gradual

slowdown, with 3QFY20 growth estimated at 4.7%. What we see now with the Q4FY20

data release is a further revision to FY20 quarters, downwards this time, to

levels even lower in general than the first estimates available in Nov . While Q1

is revised upwards marginally, there are meaningful downgrades for both Q2 and Q3 (-

70bps and 60bps), followed by a 3.1% growth estimate for 4Q. Growth for FY20 is thus

expected to be 4.2%, down 80bps from the earlier estimate of 5.0%, and 190 bps down

6.1% (Which was also reduced from 6.3% earlier).

The revisions are relatively marginally smaller for the more easily estimated nominal data,

but the change in direction between the November, February and May data is evident, as

shown below. In nominal terms, FY20 growth has been revised lower from 7.7% to 7.2%.

Implications: The revised data points to a significant, pervasive slowdown in the

economy even before the COVID-19 outbreak forced the nation into a lock-down of 60

days and counting. A lower growth trajectory than anticipated earlier has implications

on the impact of the lockdown (worse than expected), and the recovery ahead (should

take longer than expected, but with a sharper base effect-led initial recovery in FY22).

Figure 90: Revision in Quarterly Gross Domestic Product Estimates for FY20 (%YoY, 2011-12=100)

Quarter of FY20 Q1 Q2 Q3 Q4

November 30th, 2019 5.0 4.5

Feb 28th, 2019 5.6 5.1 4.7

May 29th, 2019 5.2 4.4 4.1 3.1

Source: CSO, NSE

Figure 91: Revision in Quarterly Gross Value Added Estimates for FY20 (%YoY, 2011-12=100)


November 30th, 2019 4.9 4.3

Feb 28th, 2019 5.4 4.8 4.5

May 29th, 2019 4.8 4.3 3.5 3.0

Source: CSO, NSE

Figure 92: Revision in Quarterly Growth Domestic Product Estimates for FY20 (%YoY, Current Prices)


November 30th, 2019 8.0 6.1

Feb 28th, 2019 8.3 6.4 7.7

May 29th, 2019 8.1 5.9 7.4 7.5

Source: CSO, NSE

Figure 93: Revision in Quarterly Gross Value Added Estimates for FY20 (%YoY, Current Prices)


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November 30th, 2019 7.9 6.3

Feb 28th, 2019 8.6 6.6 7.8

May 29th, 2019 8.0 6.2 7.0 6.8

Source: CSO, NSE

Figure 94: Gross value added (GVA) across sectors:

Across sectors, Agriculture and Government services emerged as the only silver linings. Agriculture sector grew at a

two-year high of 5.9% in Q4FY20. Industrial sector contracted by 0.6% YoY in Q4FY20 the second and the steepest

fall in the last eight years (new series), led by manufacturing and construction, reflecting the weakened consumption

and investment demand post the lockdown announcement. Services growth also moderated significantly to 4.4% led

by trade, hotels & transport and financial & business services, even as Government services growth remained robust at

10.1% for third quarter in a row.



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Figure 95: India GVA sector share of growth (%)


Figure 96: GDP sector quarterly growth (%YoY)

Consumption the mainstay of Indian economy witnessed a significant moderation in the March quarter. has seen

some improvement in the December quarter. While growth in private consumption fell to five-year low of 2.7% in

Q4FY20, Government consumption growth remained robust for yet another quarter at 13.6%. Investments (Gross Fixed

Capital Formation) grew at a 11-year low of -6.5% in Q4FY20, marking the 3rd consecutive quarter of an YoY contraction.



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Figure 97: GDP sector quarterly contribution (%GDP)


Figure 98: India GDP sector share of growth (%)



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Figure 99: Nominal vs. real GDP and GVA growth

Gap between real and nominal GDP growth widened further in Q4FY20, thanks to a spike in inflation over the last few

months.


FY21 GDP growth estimate revised lower to -6.0%: Amidst an extended lock-down for

more than two months now and counting and expectations of a gradual easing of

restrictions at best given rising number of COVID-19 cases, the impact on Indian economy

is expected to be much more severe than envisaged earlier, particularly in the wake of

limited fiscal spend. An anticipated recovery period has now extended substantially as

consumption behaviour is expected to change drastically even post the lockdown amid

job uncertainty, leading to higher savings. The severity of macroeconomic shock caused

by the lockdown is reflected in a sharper-than-expected drop in several high frequency

indicators such as merchandise trade performance, manufacturing PMI, auto sales, fuel

consumption, amongst others. We therefore downgrade our FY21 GDP growth estimate

to -6.0% vs. +0.8% earlier, led by a meaningful contraction in consumption as well as

investment activity. Nominal GDP would see a contraction in FY21 for the first time in the

last six decades, thereby having severe implications for the fiscal math. Risks to our

growth estimates, however, continue to remain on the downside.


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Figure 100: Annual GDP growth trend: FY21 GDP growth estimate revised downwards from 0.8% to -6%

Source: CSO, CMIE Economic Outlook, NSE

7.9 8.1 7.7

3.1

7.98.5

5.2 5.56.4

7.48.0 8.3

7.06.1

4.2

-6.0 (8.0)

(6.0)

(4.0)

(2.0)

-

2.0

4.0

6.0

8.0

10.0

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E

% Annual GDP growth trend


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Insights

Invited article: Earning trust through long-term integrated thinking

Trust is very fragile. It takes special attention to detail to build and even more to protect

In August 2019, we have witnessed a tectonic shift in the understanding of key business 6

companies as part of The Business Roundtable declared that the purpose of a

stakeholders.

Obviously, such a change did not happen overnight and examples of such a shift range

the company for the long term over a decade ago; Former Chairman of Royal Dutch/Shell,

Sir Mark Moody-Stuart who was instrumental in bringing anti-corruption among the ten

Emeritus of the Global Reporting Initiative (GRI) and International Integrated Reporting

Council (IIRC), Mervyn E. King who promotes integrated thinking to ensure that

companies report not only their financials but material impacts on positive and negative

purpose and contributions to society to bring long term value appreciation.

There is a strong link between a focus on long-term value creation and building trust.

Unfortunately, when it comes to financial services sector trust has been fleeting. Financial

service professionals have often struggled to earn the trust of their stakeholders.

According to a survey in the CFAI 2020 Trust Report, doctors, for example, are trusted

three times as much when compared to financial advisers - who rate on a par with

mechanics, but worse than lawyers.

Figure 101: CFAI 2020 Trust Report Survey

Source: CFA Institute

6 First formulated in 1970 by Milton Friedman at his New York Times article.


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TRUST IS THE ESSENCE OF GOOD GOVERNANCE

earn the trust of its stakeholders. Transparency in relationships is the key to earning that

trust. Success requires effective utilization of resources entrusted to an institution. Being

fair and accountable to all the stakeholders whose resources are entrusted to the

institution is the key to sustainability of access to those resources. The communication

and behavior of each institution influences not only how its own resources are utilized,

but also those of its stakeholders. Therefore, consistency of the policies of an institution

is key to ensure that right expectations are formed throughout the value chain, thereby

making the whole value chain stronger. Risk is the kin of profit. Value creation requires

measured risk taking. Therefore, taking initiative and responsibility, which naturally

involves risk taking is a key element of value creation. Sustainability of success requires

continuous improvement and innovation. This in turn requires learning and the

participation and involvement of all in the organization. Hence, creation of a climate,

which emphasizes good governance principles and deployment of a good corporate

governance culture is the key for sustainability 7.

Good governance is key for the financial industry not only for its own institutions, but also

for where the industry deploys the funds it manages. Generally, governance regulations

are tightened after major financial failures, when trust plummets.

WHY IS TRUST SHORT-LIVED IN SPITE OF BEING CORE TO FINANCE?

We all know that funds are aplenty. In that case why do investments rarely end up in

places where they could really make a difference and instead often gravitate towards old

tested solutions? Did asset management industry forget to focus on what is really

days is being defined by comparing itself to benchmarks, why do we then pay a lot of fees

to asset managers when all what they do is to crunch data?

Individuals often fail to invest and dis-intermediate money because they believe the

financial system is not delivering on promises or changing fast enough to meet new

expectations. Challenge in the intermediation mechanism is that there is plenty of money

in the world, but it is being managed sub-optimally. For example, funds gravitate towards

old tried and tested solutions, even when they are not satisfying new expectations or

generating returns commensurate to requirements. In spite of growing pools of capital,

the status quo remains the same.

Additionally, throughout history, economic crises have been associated with market

failures. From a public point of view, the people who benefitted from an economic crisis

were the financials professionals who initiated them, they were also the ones, who took

advantage of the crisis and became the recipients of public funds in terms of government

bailouts. Consequently, people link crises to the failure of financial professionals in taking

appropriate actions, the most recent being the 2008/2009 global financial meltdown,

after which trust in banks eroded significantly.

Finance is often based around asymmetric relationships where one party possesses

significantly more information than the other for example an investment advisor and his

7 CRAFTED principles for governance, as explained in Y. Argüden, “Boardroom Secrets: Corporate Governance for Quality of Life”, Palgrave MacMillan (2009)


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interests before your own as you have a duty of care towards your clients. In such

circumstances, trust is always essential, as in doctor-patient or attorney-client

relationships. The problem is that sometimes financial advisors or intermediaries may

. Trust is absolutely core to finance.

SUSTAINABILITY IS BECOMING A HIGH PRIORTY FOR INVESTORS

As financial professionals struggle with trust issues, there are new emerging

developments happening. These days, various stakeholders in the society are also raising

their concerns about the fact that the world we live in is running out of resources,

externalities are becoming unmanageable and thus, causing detrimental climate change.

Countries, governments, global exchanges, regulators, corporations are responding to

those pressures by balancing local needs with global pulls.

Accordingly, there is also increasing responsibility of investors for stewardship of

sustainable action. Asset managers these days are expected to exercise higher oversight

on ESG matters as more of them sign up to investment practices laid down by the UN to

reach Sustainable Development Goals (SDGs) in the future. Adequate oversight on ESG

could help managers improve on the trust deficit brought about by information

asymmetry implicit in financial market intermediation.

For some asset managers, ESG is not a new burden in first place. Responsible asset

managers have been integrating ESG concepts into their core process for years. The

process of trying to figure out if the governance of the corporation is working properly or

how a corporation is treating its customers and suppliers has been a common part of

investment due diligence. The E, S, G acronyms are now giving visibility to parts of the

processes that have been part of similar concepts being used for a long time.

CHALLENGED BY AN INABILITY TO DEFINE A CLEAR SOCIAL PURPOSE

For trust to exist it needs to be encouraged and cultivated with a clear social purpose.

However, unlike for asset owners, it is very difficult for asset managers to commit to a

single statement of purpose. Asset managers have a fiduciary duty to their investors and

a mandate to abide by. For example, in the United States it is written in law that asset

law to ensure ESG integration into investment decisions. Then, there are different legal

approaches to fiduciary duty in other regions. For example, in France there is Article 173,

which makes ESG integration a requirement by law. Similar laws also apply in the UK, as

well as in the rest of the European Union. Therefore, an ability to define a social purpose

to start with may depend on where you sit. And many a times there may be difficulties in

how to incorporate externalities into the investment decisions.

The good news is that this is improving. Even in the United States, one of the most litigious

places from the fiduciary duty perspective, impetus to consider ESG in investment

decisions is increasing. According to the Conference Board8, recently the notion of

fiduciary duty is expanding to include sustainability issues. Increasingly the pursuit of

sustainable business initiatives is viewed as consistent with corporate governance

8 The Conference Board, “Sustainability in the Boardroom,” DN-008, June 2010


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standards. In particular, judicial action9, recent stakeholder constituency statutes10, and

statutory exculpatory provisions under corporate law11 have laid the groundwork for

boards to consider non-shareholder interests and concerns in making investment

decisions12. According to Mr. David Atkin, CEO of CBUS, a large pension fund in

Australia fiduciary duty in Australia is also shifting. Mr. Atkin says that these days it is less

requiring investors to demonstrate how they take account of climate considerations and

social issues. Additionally, he explains tha

account of these issues or sufficiently demonstrate the assessment of ESG, are exposing

process for assessing risk and for recognizing the outcomes our investments can have on

EARNING TRUST WHILE DEPENDING ON INCONSISTENT DATA

Consistency in behavior, in actions, or in delivering continuous results is a sign of good

leadership and fostering trust. However, one of the major difficulties asset managers are

admitting is the unreliability and inconsistency of data, which they rely on for delivering

results.

There are non-profit and independent standards organizations, such as GRI, SASB, TCFD,

which are aiding this process and offering guidance both to asset managers as well

corporations with the goal to improve the quality of data; as well as voluntary initiatives

such as UN Global Compact and International Integrated Reporting Council that provide

principles rather than standards.

Sustainability Governance Scorecard, an impact research conducted by Argüden

Governance Academy, aims to improve transparency of meaningful disclosure. It

encourages peer learning by promoting best practice examples selected from

sustainability reports by Global Sustainability Leaders from seven countries across 10

sectors. 13 The study also shows that corporations who voluntarily adopt UN Global

Compact principles and Integrated Reporting tend to have better ESG reporting

performance.

9 See, for examples of cases where the legal courts underscored the importance of assessing the impact on key stakeholder relations of a Business decision made in the context of hostile takeovers a shareholder instituted derivative actions: Unocal Corp. Mesa Petroleum Co., 493 A. 2d 946, 955 (Del. 1985), discussing how boards should consider the impact on constituencies other than shareholder when analyzing the reasonableness of defensive measures; and Paramount Communications, Inc. v. Time Inc., 571 A. 2d 1140, 1153 (Del. 1989) 10 For example, 15 Pa. Cons. Stat. §1715. In general, see Kathleen Hale, “Corporate Law and Stakeholders: Moving beyond Stakeholder Statutes,” Arizona Law Review, Vol. 45, 2003, p. 829 11 Delaware Code Annotated, Title 8, Section 102(b) (7), permitting the use of clauses in the certificate of incorporation (therefore approved by shareholders) to insulate corporate directors from monetary liability for any action arising from a breach of their duty of care. Exculpatory clauses provide more freedom and leniency to directors in their decision-making capacity and encourage them to take strategic risk. 12 Pursuit of Social Investments,” The Conference Board, Director Notes No. DN-002, January 2010. 13 https://sgscorecard.argudenacademy.org/

https://sgscorecard.argudenacademy.org/


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Figure 102: Percentage of sustainability leaders by initiative

The main problem here is that despite emerging standards, the corporations across the

globe are still largely reporting ESG data on a discretionary basis. This causes many data

discrepancies. For example, one corporation may report sustainability data only for the

home country, while another corporation may cover all regions it is operating in. Or one

corporation may have its non-financial data partially/fully audited, while the other

corporation may not have any assurance at all14.

Even though it is correct that data is crucial for asset managers, its absence should not

become an excuse for inactivity. If we have data, then in theory machines could be doing

the job of asset managers. Surely, the role of asset managers is to boldly go where the

data is poor and to exercise judgment on the likely future direction of finance. Maybe the

financial services industry is being too conservative and unwilling to innovate. This could

be another reason why trust in active asset management skills has been so low. Then the

question comes up: why should clients pay asset managers a lot of fees if all what asset

managers primarily do is to crunch data?

In order to resolve the issues related to data inconsistency, asset managers could

propose that data should be more focused on outcome rather than on just comparability.

Maybe asset managers could use UN SDGs as the common goalpost and try to quantify

the impact on SDGs. Maybe asset managers need to go beyond past mistakes. Over the

last generation asset management became an industry defining performance based on a

comparing itself to benchmarks, rather than focusing on outcomes for the society.

Ironically, the incompleteness of ESG data could now provide a great reason to focus on

what is really important which is the ultimate outcome, rather than comparability to

predefined bogeys.

TRUSTWORTHINESS MAY DEPEND ON WHERE YOU SIT

An in

operations are physically located. ESG looks very different depending upon where you

Brazil may depend on rainforests whereas South Africa may depend on coal mining and

may be more incentivized compared to others when it comes to ESG integration. Their

14 https://sgscorecard.argudenacademy.org/

https://sgscorecard.argudenacademy.org/


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governments, exchanges or regulatory agencies may be responding more decisively to

threats from climate change or externalities.

1. Switzerland, Hong Kong and Singapore that have historically functioned as

financial hubs may have an inherent incentive to take leadership and push for ESG

integration as they may wish to be first movers in an increasingly ESG driven

environment. EU members such as Germany and France operating under the

influence of the European Finance Commission as well as places like Mainland

China in Asia are locations where climate action is something that is being pushed

by governments and regulators to ensure delivery on international commitments.

In the process, they may be creating a foundation for ESG integration.

2. Areas where ESG integration is taken seriously, such as in the UK, Northern

Europe, and South Africa, there is a sophisticated audience for sustainability. The

bottom up demand from society is simply higher in these regions, which

incentivize regulatory agencies to take action faster. Mandatory regulation also

seems to experience fewer backlashes from corporations in jurisdictions where

the cultural sensitivities are higher.

3. Then there are countries like Japan, Brazil, Turkey, Thailand and India that either

have large government pension funds or influential exchanges that have pushed

for ESG integration through issuing indices and increasing flow of funds into the

GPIF (Government Pension Investment Fund), the evolution of ISE Corporate

Sustainability Index by B3 (Bolsa do Brasil), the creation of BIST Sustainability

Index created by Borsa Istanbul15 and the formation of Nifty100 ESG Index by

National Stock Exchange of India (NSE). The Thai Government Pension Fund

(GPF) has also been spearheading sustainable investing among Thai asset

managers. GPF contributed by initiating a collaborative engagement among Thai

asset management firms to promote good governance and ESG practices among

corporates. It is naïve to think that ESG can be promoted by private action alone.

It needs support from asset owners, global exchanges and regulatory agencies

acting in tandem to give it momentum. Therefore, global exchanges are creating

enablers for asset managers through indices and other initiatives to evaluate ESG

fund returns and create awareness about the sustainability performance of most

liquid companies on their exchanges. Additionally, global exchanges actively

promote sustainable investing among investment practitioners and various

events designed by exchanges to encourage engagement and collaboration

is a difference between asset managers and asset owners. Intermediaries do not

have full agency power. However, asset owners and regulatory agencies have the

power to move the asset managers towards better ESG integration.

4. Lastly, there are global regions where inaction by regulatory agencies has not

investors in countries such as United States, Canada, and Australia became global

15 One of the five founders of the Sustainable Stock Exchanges Initiative at Rio +20


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leaders forcing corporations to make more disclosures. Stakeholder relations

seem to be in front and center for ESG integration in these countries. As data is

not easily accessible in standard formats, engagement with corporations is key.

Therefore, many initiatives are being taken by asset managers themselves to

establish proper communication with corporations and improve the quality of

data.

LOOKING INTO THE FUTURE

There are several ways asset managers can act which can ensure that going forward they

earn trust from clients who are increasingly concerned about sustainability issues. ESG

may provide an opportunity for differentiation and also help build stronger relationships

with the clients and stakeholders. The line of trust asset managers failed to build for years

could reverse course now in a new world that is changing rapidly in many ways, given the

devastation caused by the impact of Covid 19. Maybe now it is a perfect time for asset

managers to make a difference by ensuring that funds are flowing to places where they

will help find a solution to dire challenges faced by humanity, whether that be climate

change or one produced by the pandemic. Trust in financial services could develop faster

if the industry changed fast enough and funds went to areas which many conscious

investors would consider as responsible, meeting the needs of a sustainable future.

Long-term holistic thinking will assist asset managers in identifying sustainable value and

in avoiding value traps. Paying attention to ESG is not only good for risk management, but

also a lead indicator for future value creation.

In the future, we need to see more evidence that ESG considerations are becoming part

of the values and beliefs by ALL asset managers. While some asset managers immediately

became torchbearers as the new ESG principles were introduced, it has been somewhat

disappointing to find out that others still do not fundamentally believe in ESG. Some asset

managers to this date do not have deep seated views about sustainability enshrined in

their own mission and vision statements. ESG faces a challenge of getting stuck in a tug

of war between believers and non-believers as it is pushed as a concept one that needs

to be embraced instead of a concept whose outcome is directly measurable in terms of

its impact. This needs to change.

In conclusion, trust cannot exist without creation of value, and value creation without

trust is unsustainable.16 Asset managers need to adapt to a rapidly changing world with

long-term integrated thinking or need to face a long-term decline in their prospects going

forward.

16 https://trust.cfainstitute.org/wp-content/uploads/2020/05/CFAI_TrustReport2020_FINAL.pdf

https://trust.cfainstitute.org/wp-content/uploads/2020/05/CFAI_TrustReport2020_FINAL.pdf


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The impact of COVID-19 on the agricultural economy of India and the way ahead17

The unprecedented Coronavirus pandemic may lead to a global recession in FY21, with the Indian economy seeing its

worst year since 1979-80 on the back of a 60-day lockdown. In this gloom and doom9, there is a ray of hope from

Agriculture of hope. As per the RBI, the summer sowing of rice, pulses and oilseeds in the country is on track, with record

procurement from the winter crop.

In this context the NSE had organised a webinar on "The impact of COVID-19 on the agricultural economy of India and

the way ahead" on May 27th, with an eminent panel consisting of Prof. Ashok Gulati, the Infosys Chair Professor for

Agriculture at ICRIER, Dharmakirti Joshi, the Chief Economist at CRISIL and Simon Wiebusch, the Chief Operating

Officer for the Crop Science Division of Bayer in India, Bangladesh and Sri Lanka. We summarize key takeaways from the

discussion here. We also provide the YouTube link to the webinar.

to the combined effects of a 60-day lock-down, supply chain disruptions and the ripple impact on several sectors.

Further, at least some portion of the loss in national income is anticipated to be of a relatively permanent nature, i.e.,

unlikely to revive over the next several years, especially given the weak state of the economy prior to the crisis. Mr. Joshi

believes Agriculture is the exception here across sectors, with growth estimated at 2.5% for FY21.

Structural reforms like amendment of the Essential

Commodities Act, formulating a central law for agriculture marketing and legal framework on contract farming along

with improved agri-infrastructure will facilitate farmers to realise better price from the market in the long-term. The key,

however, is effective implementation of these proposals, according to Prof. Gulati. Mr. Wiebusch believes apart from all

the disruption, most notably from the significant migration of labour across the country, the current crisis also presents

an opportunity to revive not just the agriculture sector, but overall employment in the country. A case in point here is

enabling enterpreneurship in the skilled labour travelling across the country to their homeland to engage in agriculture.

Technology evolution and derivatives market of agri-commodities may help to bring even higher efficiency in the sector.

Prof. Gulati believes the current crisis offers an opportunity for a policy measure (cf. Affordable Housing for all)

signific

▪ Indian economy may shrink by 5% in FY21 amid the coronavirus

pandemic:

pandemic, 60-day long nationwide lockdown, unavailability of medical

care of the disease and its prolonged and ripple impact on several

sectors in the domestic market as well as globally. The economy will

suffer the most during the first quarter with 21% decline mainly due to

the lockdown imposed by the government, and actual recovery may

start over the second half of the FY.

▪ Permanent loss of GDP is inevitable: GDP may not revive to its pre-

Covid trend in the next three fiscal years despite of several fiscal and

monetary policy measures. Under the current circumstances, India

may record a 10% permanent loss in its real GDP from the decadal-

trend level.

▪ Low immunity to fight the virus: Indian economy was slowing down

the recent slowdown amid Covid-19 is quite low as compared to its

situation during the GFC in 2008 when the country was growing at

around 8%.

17 Please click here to watch the full webinar.

Exclusive link to the webinar held on May

27th The Impact of COVID-19 on

the agricultural economy of India and the

way ahead

Welcome Address: Ravi Varanasi, Chief

Business Development Officer, NSE

Moderator: Dr. Tirthankar Patnaik, Chief

Economist, NSE

Key speakers:

1. Mr. DK Joshi, Chief Economist, CRISIL

2. Prof. Ashok Gulati, Infosys Chair

Professor of Agriculture, ICRIER

3. Mr. Simon Wiebusch, Chief Operating

Officer, Bayer Crop Science

https://www.youtube.com/watch?v=8VsFH389IGM

https://ind01.safelinks.protection.outlook.com/?url=http%3A%2F%2Femmnse.empressmail.com%2Fgtrack%3Fclientid%3D16134%26ul%3DX1FdDwQfVkhDVFJcAURcUV1zXRADSFtbH1tfTh4%3D%26ml%3DU1ZRRAIfVwIEAE8%3D%26sl%3DJB8nRGcwGmd%2BYk9XCVtYR10dVg4WFF1HQl9QWw4WUwsLH1Q%3D%26pp%3D0%26&data=02%7C01%7Ctpatnaik%40nse.co.in%7Cc64dd437caa74fe8056708d8051d010b%7Cfb8ed65431954846ac37491dc8a2349e%7C0%7C0%7C637264969426680872&sdata=WMH4WE7s%2B1hBpT6qwLPlYVz9uiqfUmEJOXN0Q02M4R0%3D&reserved=0




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▪ High impact on construction: Construction sector is the most vulnerable mainly

due to the reverse migration and lack of demand during the recession. This may

raise total number of unemployment in the country by an alarming rate as the sector

employs as many number of people as the manufacturing sector even with a much

lower GDP share.

▪ Limited impact from the government relief package: Panellists expressed

reservation on the government fiscal relief package given the tight fiscal condition.

Most of the incremental borrowing this year would barely be sufficient to meet the

shortfall in projected revenue. Other than provisioning free ration and food, cash

transfer to a subset of deprived population, moratorium on existing loans and

provisioning additional loans to MSMEs, the relief package emphasised mostly on

structural reforms which will have limited impact in the short-term. Besides, the

government did not provide direct relief to the vulnerable sectors including hotel,

restaurants, aviation, construction, automobile, etc. This would delay their recovery

process and may have ripple impact on unemployment and accumulate NPAs in the

financial system.

▪ Liquidity infusion may not be sufficient while credit market remains tight:

Similar to other countries, liquidity support remains to be the major policy action in

India taken by the government as well as the RBI. However, it would not be

effective in India as the credit market remains tight and a significant part of the

economy remains to be outside the scope of organised financial system.

▪ Agriculture is the lone exception in the economy which is projected to grow by

2.5% in FY21 given the summer sowing of rice, pulses and oilseeds in the country

is on track, with record procurement from the winter crop particularly in Madhya

Pradesh, Haryana and Punjab. Punjab government has taken several proactive

measures like creating new procurement centres other than mandis to ensure

social distancing and timely procurement of rabi crops.

▪ Though agri-

products were under essential commodities, the supply chains of all commodities

were disrupted heavily due to the nationwide lockdown. Besides, cold storage

facilities were unavailable, mandis were not functioning properly, lack of transport

services and shortage of labour amid reverse migration and fear of getting

infections during the period added additional problem in the system that had

adversely affected perishable goods. This may perhaps lead to change in cropping

patterns in the coming year as farmers are de-risking and moving to government

procured crops, while production of perishables may reduce that may lead to higher

vegetable prices.

▪

Panellists have assured that there is no need to be concerned about the food

inflation over the next few months. The recent rise in food prices are temporary in

nature, mainly contributed by supply chain disruptions. Given the current buffer

stock maintained by the government, food prices will ease down post the lockdown

period.

▪ Stimulus package may have long-term positives on agriculture: The Finance

Minister announced three structural reforms in agriculture under the relief package.

First, the Essential Commodities Act will be amended to liberalise select agri-

products including cereals, pulses, edible oils, oilseeds, onions and potato, while


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restrictions will be imposed only in extreme situations like, war, pandemic, etc.

Second, Government will formulate a central law to bring agriculture marketing

reforms to provide marketing flexibility to farmers which is currently restricted to

APMCs. Third, Centre will also formulate a legal framework on contract farming

focusing risk mitigation, and price and quality assurance for farmers. These

measures will facilitate farmers to realise better price from market.

▪ Success of legal contract farming depends on the implementation process:

Implementation of legal contract farming may be difficult in India given the

fragmentation of the market. Allowing Farmers Producers Organisations (FPOs)

and consolidation of supply providers may help to accelerate the process of

contract farming. Besides, FPOs should get proper training in using derivatives and

require adequate capital at reasonable interest rates to make it successful.

▪ Complementary agri-infrastructure is essential: Several agri-infrastructures like

adequate cold storage, better communication, and uniform systems across states

are essential to get fruitful impact of these measures on agriculture.

▪ Technology evolution and derivatives market may help to bring higher

efficiency in agriculture: The agri-market needs to be technologically upgraded

through better infrastructure in the supply chain process, integrating agri-market

across states and developing derivatives market for agri-commodities. Even if

the futures market to de-risk the farming activities throughout the year.

▪ Locust attacks may not have much impact on agriculture: Given the rabi crop is

already harvested and Kharif sowing has not yet started, locust attacks may not

have much impact on agriculture, barring horticulture. However, early control

measures taken by the farmers may help to minimise its impact on the horticulture

crops as well.

▪ Need for an export policy: While it is important to emphasise on revival of

consumption demand internally, experts agreed to have a trade policy for agri-

commodities where agri-market should be open for trade in excess of the minimum

requirement of buffer stock decided by the government.

▪ India may take longer

time to recover and its vulnerability can be much higher than other countries given

its high density of population, weak health infrastructure, and limited fiscal space.

The reverse migration of unskilled labor force in less developed states may raise

additional problems to the current system. This may increase wage rate in relatively

developed states due to shortage of labour, while eastern part of the country may

face additional burden of surplus labour that may result a sharp decline in wage

rates, particularly in the agri-sector which already has a surplus labour force.

▪ Provisioning productive employment to migrants: Though MGNREGA is crucial to

generate additional employment, panellists emphasised to provide productive

employment to migrant labourers in the eastern belt of the country through front-

loading of PM Aaawas yojana, investing on roads, agri-infrastructure, water

management, food processing industries. Water and power consumption needs to

be rationalised. Solar power should be made a third crop for the farmers and buy-

back should be in place. These policy actions along with better infrastructure,

technological evolution and agri-reform would help in doubling farm incomes in a

year.


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Did restrictions on short-selling decline risks in the equity market?

short- -Perez (April 2020)18 to revisit the debate on whether short-selling bans

actually help to improve market confidence by reducing downward price movement and market volatility. The paper

compares arguments in favour of short-selling bans with arguments against them. The literature almost unanimously

argues against the measure as it leads to lower liquidity, increase price inefficiency and distort price discovery. Besides,

restriction on short-selling has negative spillover impact on other markets, including options market.

Many regulators across countries have however imposed restrictions on short-selling activities to reduce market

volatility and downward price movement particularly during (after) certain extreme economic situations, like the Global

Financial Crisis in 2008. In recent times, SEBI has imposed short-selling restrictions on index derivatives market from

March 23rd to minimize the COVID-19-related adverse impact on the securities market. Following the restriction, overall

volatility in the Indian securities market declined significantly. Nevertheless, it would be difficult to argue that the

decline in volatility was solely due to the restriction as volatility indices had declined in other major countries as well.

Besides, overall liquidity declined quite significantly in index derivatives over the last week of March, while trading

activities increased steadily in the Cash market. Despite of all these measures, FPIs remain net sellers over the period

amid continuous rise in Covid-19 cases globally as well as in India and impending global recession in 2020 due to

lockdown measures taken across countries.

Short-selling generally refers to selling a security that is not owned by the trader

at the time of trading. In other words, the trader borrows a security to sell upfront

before owning it with an expectation that price of the security will fall

subsequently when the trader will buy it to deliver to the lender. Hence, the short-

selling mechanism consists of (i) borrowing a security (ii) to sell it to another

trader, and (iii) purchasing the security in some time later at a lower price, (iv) to

deliver the lender and (v) earning the difference between sale price and buy price

with the interest cost to borrow the security initially.

Regulators often impose bans on short-selling activities with an aim to reduce

volatility in the market and to restrain the downward price movement. However,

there are two contradictory theories that explain how short-selling bans affect

the security price. On one side, restriction on short-selling along with investors

having different opinions about stock price movement, stocks are generally

overvalued as bearish investors are not allowed to sell and their valuation does

not have much impact on stock price. Hence, removal of short-selling bans may

help to correct the market valuation and the stock price may fall subsequently.

On the other side, short-selling bans would not lead to underpricing or overpricing

as rational agents have already incorporated short-selling constraints in their

decisions. In other words, allowing short-selling would not have much impact on

the stock price movements.

Though the actual impact of short-selling on stock price movements is debatable,

several studies have shown findings in favour of allowing short-selling to improve

market quality as short-sellers contribute positively to price discovery and

enhance price efficiency. Besides, stock prices converge towards their

fundamental values at a faster pace when short-selling is allowed in the market.

Post the COVID-19 outbreak when market uncertainty rose to a new high, it

would be valuable to understand how short-selling effects market during a time

18https://www.world-exchanges.org/our-work/articles/wfe-research-what-does-academic-research-say-about-short-selling-bans

https://www.world-exchanges.org/our-work/articles/wfe-research-what-does-academic-research-say-about-short-selling-bans


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of increased uncertainty. There are few studies that show short-selling may rise

the downward price movement during a time of sharp price decline, while others

found no evidence that short-selling causes a faster price decline. At the same

time, bans on short-selling reduce trade volumes and lead to higher bid-ask

spread due to low liquidity. Another study on the Mainland Chinese market has

shown how lifting bans on short-selling enhanced price efficiency and reduced

market volatility.

Restriction on short-selling may also have spillover impact on other markets like

options. In US stock market, it was found that short-selling bans during the GFC

had spiked up buying put options to reduce the downside risks. This had negative

impact on options market itself with higher spread of option contracts of banned

stocks. In UK, short-selling bans increased trading volume in OTC market where

short-selling bans were not present. In summary, short-selling bans had several

distortive effects on the existing market mechanism.

Despite sufficient evidence in favor of allowing short-selling in the stock market,

periods of high volatility have often seen it restricted across markets, an

illustrative example being the recent COVID-19 outbreak.19 Among other policy

measures, the regulator restricted short-selling of index derivatives from March

23rd, 2020. Under this measure, short positions in index derivatives (short,

futures,

(MFs/FPIs/TMs/Clients) holding of stocks.

Data reveals that overall volatility in the Indian securities market has declined

significantly post March 23rd, but it would be difficult to argue that the decline in

volatility was solely due to the restriction as volatility indices declined in other

major countries as well. Besides, overall liquidity declined quite significantly in

index derivatives segment over the last week of March as the restriction was

imposed only in the index derivatives market, while turnover increased steadily

in the Cash market at NSE. Nevertheless, FIIs remain net sellers over the period

amid the continuous rise in Covid-19 case globally as well as in India.

19https://www.sebi.gov.in/media/press-releases/mar-2020/regulatory-measures-taken-by-sebi-in-view-of-ongoing-market-volatility_46389.html

https://www.sebi.gov.in/media/press-releases/mar-2020/regulatory-measures-taken-by-sebi-in-view-of-ongoing-market-volatility_46389.html

https://www.sebi.gov.in/media/press-releases/mar-2020/regulatory-measures-taken-by-sebi-in-view-of-ongoing-market-volatility_46389.html


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Figure 103: Movement in volatility indices across markets

Though market volatility declined gradually in the Indian securities market post SEBI restriction on short-selling, other

countries followed similar trend during this period. Hence, it became difficult to argue the declining trend was solely due

to the short-selling restrictions in India.


Figure 104: Turnover vs. number of trades in 2020 thus far

Short-selling restriction did not have much impact on liquidity in the Cash market at NSE, barring few days over the last

week of March.

Source: NSE.

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Turnover (Rsbn) No of Trades (mn) - RHS


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Figure 105: Short-selling restriction may have reduced liquidity in the Index derivatives segment particularly

over the last week of March 2020 Index Futures - Turnover (Rsbn) Index Options Premium turnover (Rsbn)

Source: NSE.

Figure 106: Movement in MSCI India vs. key developed markets in 2020 thus far

Amid significant rise in Covid-19 case globally and rise in uncertainty over the global economy, it became difficult to

distinguish the impact of short-selling restriction in India.


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Figure 107: FPIs remain net sellers in most of the days post March 23rd in both equity and debt segments


Figure 108: Post the short-selling restriction, DIIs net investment flattened in the equity segment



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Market performance across asset classes

Figure 109: Performance across equity indices, fixed income, currency and commodities

Indicator Name Apr-20 1M ago 3M ago 12M ago 1M (%) 3M (%) 6M (%) 12M (%) YTD (%)

Equity Indices

NIFTY 50 9,860 8,598 11,962 11,748 14.7 -17.6 -17.0 -16.1 -19.0

NIFTY 500 8,013 6,997 9,861 9,664 14.5 -18.8 -17.3 -17.1 -18.8

MSCI INDIA 1,147 995 1,358 1,352 15.3 -15.6 -15.0 -15.2 -16.3

India Volatility Index (%) 34 64 17 22 -47.2 95.7 108.8 55.7 191.3

MSCI WORLD 2,053 1,853 2,342 2,179 10.8 -12.4 -8.1 -5.8 -13.0

S&P 500 COMPOSITE 2,912 2,585 3,226 2,946 12.7 -9.7 -4.1 -1.1 -9.9

DOW JONES INDUSTRIALS 24,346 21,917 28,256 26,593 11.1 -13.8 -10.0 -8.5 -14.7

HANG SENG 24,644 23,603 26,313 29,699 4.4 -6.3 -8.4 -17.0 -12.6

FTSE 100 5,901 5,672 7,286 7,418 4.0 -19.0 -18.6 -20.5 -21.8

NIKKEI 225 20,194 18,917 23,205 22,259 6.8 -13.0 -11.9 -9.3 -14.6

Fixed Income

India 10YR Govt Yield (%) 6.11 6.14 6.6 7.4 -3bps -49bps -53bps -130bps -44bps



India 3M T-Bill Yield (%) 3.69 4.32 5.23 6.56 -63bps -154bps -146bps -287bps -146bps

US 10YR Govt Yield (%) 0.63 0.70 1.52 2.51 -7bps -89bps -107bps -188bps -129bps

Germany 10YR Govt Yield (%) -0.59 -0.46 -0.44 0.01 -13bps -14bps -19bps -60bps -40bps

China 10YR Govt Yield (%) 2.51 2.66 3.05 3.42 -15bps -54bps -77bps -91bps -66bps

Japan 10YR Govt Yield (%) -0.04 0.02 -0.06 -0.04 -6bps 3bps 10bps 1bps -2bps

Currency

USD/INR 75.1 75.7 71.4 69.6 -0.7 5.2 5.9 8.0 5.2

EUR/USD 1.1 1.1 1.1 1.1 -0.2 -1.2 -1.8 -2.3 -2.4

GBP/USD 1.3 1.2 1.3 1.3 1.7 -4.3 -2.5 -3.2 -4.8

USD/YEN 106.9 108.0 108.4 111.4 -0.9 -1.3 -1.1 -4.0 -1.6

USD/CHF 1.0 1.0 1.0 1.0 0.2 -0.1 2.2 5.6 0.3

USD/CNY 7.1 7.1 6.9 6.7 -0.6 1.8 0.2 4.7 1.2

Commodities

Brent Crude Oil (US$/bbl) 25.5 22.6 58.2 72.9 12.9 -56.2 -57.6 -65.0 -61.5

LME Aluminium (US$/MT) 1,459 1,493 1,706 1,783 -2.2 -14.5 -16.8 -18.2 -18.1

LME Copper (US$/MT) 5,160 4,939 5,551 6,427 4.5 -7.0 -10.6 -19.7 -16.1

LME Lead (US$/MT) 1,610 1,734 1,898 1,905 -7.1 -15.2 -25.8 -15.5 -15.9

LME Nickel (US$/MT) 12,124 11,435 12,772 12,132 6.0 -5.1 -27.3 -0.1 -13.1

LME Tin (US$/MT) 15,274 14,667 16,425 19,741 4.1 -7.0 -7.4 -22.6 -11.1

LME Zinc (US$/MT) 1,934 1,895 2,212 2,960 2.1 -12.6 -23.4 -34.7 -15.1

SHC Iron Ore Spot (US$/MT) 84 84 97 97 -0.6 -13.5 0.6 -13.5 -9.2

Gold Spot Price (US$/troy ounce) 1,705 1,612 1,587 1,283 5.8 7.4 12.9 32.9 12.1

Silver Spot Price (US$/troy ounce) 15 14 18 15 7.5 -16.7 -17.0 0.7 -15.7

Platinum Spot Price (US$/ounce) 767 727 959 889 5.5 -20.0 -18.1 -13.7 -21.0

Palladium Spot Price (US$/ounce) 1,986 2,307 2,295 1,366 -13.9 -13.5 10.7 45.4 3.4

Source: RefinitivDatastream, Bloomberg, NSE


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Figure 110: Performance across NSE sector indices Indicator Name Apr-20 1M ago 3M ago 12M ago 1M (%) 3M (%) 6M (%) 12M (%) YTD (%)

Auto 5,901 4,731 8,087 8,351 24.7 -27.0 -30.2 -29.3 -28.5

Bank 21,535 19,144 30,834 29,765 12.5 -30.2 -28.4 -27.7 -33.0

FMCG 28,669 27,319 30,775 30,337 4.9 -6.8 -11.3 -5.5 -4.8

IT 14,108 12,764 16,144 16,705 10.5 -12.6 -9.3 -15.6 -9.9

Media 1,160 1,040 1,835 2,409 11.5 -36.8 -35.1 -51.9 -35.7

Metals 1,860 1,586 2,569 3,089 17.3 -27.6 -25.6 -39.8 -33.6

Pharma 9,327 7,177 8,139 9,403 30.0 14.6 18.4 -0.8 16.0

Real Estate 187 176 331 258 6.7 -43.4 -30.4 -27.5 -37.3

Source: RefinitivDatastream, NSE

Figure 111: NIFTY sector performance over the last month (rebased to 0)



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Figure 112: India 10Y G-sec yield long-term trend

Figure 113: India 10Y G-sec yield last one-year trend


Figure 114: India sovereign yield curve

The India sovereign yield curve has steepened over the last couple of months, with the drop in yields seen only up to

three-year maturity papers, thanks to a steep 155bps cut in reverse repo rate which has effectively become the policy

rate in surplus liquidity conditions. A slew of liquidity easing measures taken by the RBI, including the LTROs and TLTROs

(Targeted Long-term Repo Operations) and a huge surplus systemic liquidity, have brought the shorter-end of the yield

curve lower. The longer-end, however, has remained steady a reflection of strengthened growth concerns, massive FPI

outflows and a huge demand-supply mismatch amid heavy supply of G-secs. With the combined fiscal deficit expected

to significantly overshoot budget estimates in FY21, supply of central as well as state papers is expected to be huge this

year, thereby putting continued pressure on the long-end of the curve.

Source: Refinitiv Datastream, NSE.

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%India 10-year benchmark g-sec yield-long-term trend

5.8

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%India 10-year benchmark g-sec yield movement over

last 12 months

7.1

5.1

3.1

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6.4

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3M 6M 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 11Y 12Y 13Y 14Y 15Y 19Y 24Y 30Y

% India sovereign yield curve

31-Dec-19 28-Feb-20 27-May-20


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Figure 115: Sovereign yield curve across G20 countries as of April 30th, 2020

Dec 2019 3m 6m 1y 2y 3y 4y 5y 6y 7y 8y 9y 10y 30y

US 0.11 0.11 0.17 0.19 0.24 0.35 0.52 0.63 1.27

Japan (0.15) (0.17) (0.19) (0.18) (0.18) (0.17) (0.16) (0.17) (0.16) (0.13) (0.07) (0.04) 0.43

Germany (0.55) (0.55) (0.55) (0.76) (0.79) (0.71) (0.76) (0.76) (0.73) (0.66) (0.64) (0.59) (0.17)

France (0.51) (0.47) (0.48) (0.61) (0.59) (0.54) (0.44) (0.36) (0.29) (0.23) (0.15) (0.11) 0.63

UK 0.08 0.17 0.08 0.01 0.05 0.07 0.09 0.07 0.11 0.12 0.19 0.23 0.57

Italy 0.02 0.11 0.26 0.53 0.60 0.87 1.09 1.31 1.42 1.54 1.68 1.78 2.62

Canada 0.26 0.30 0.34 0.31 0.29 0.36 0.39 0.39 0.55 1.13

EU (0.55) (0.55) (0.55) (0.76) (0.79) (0.71) (0.76) (0.76) (0.73) (0.66) (0.64) (0.59) (0.17)

Argentina 25.84 52.25 38.22 34.32

Australia 0.22 0.23 0.27 0.33 0.43 0.53 0.63 0.76 0.84 0.91 1.65

Brazil 3.10 2.89 3.12 4.11 5.43 6.32 7.13 7.54

China 1.14 1.33 1.42 1.74 2.29 2.51 3.33

India 3.64 3.67 3.93 4.47 4.73 5.10 5.15 5.76 6.15 6.30 6.35 6.11 6.65

Indonesia 3.38 3.53 5.70 6.88 7.29 7.89 8.12

South Korea 1.49

Mexico 5.76 5.49 5.28 5.46 5.55 6.28 6.67 7.80

Russia 5.32 5.25 5.12 5.33 5.41 5.75 5.90 6.11

South Africa 3.10 5.54 8.42 10.27 11.81

Turkey 7.34 7.22 8.48 8.87 8.57 11.10 12.19


Figure 116: Sovereign yield curve across G20 countries as of April 30th, 2018

Dec 2017 3m 6m 1y 2y 3y 4y 5y 6y 7y 8y 9y 10y 30y

US 1.81 2.01 2.24 2.48 2.62 2.80 2.92 2.96 3.13

Japan (0.12) (0.13) (0.14) (0.13) (0.12) (0.10) (0.10) (0.06) (0.03) (0.00) 0.03 0.06 0.75

Germany (0.68) (0.66) (0.65) (0.57) (0.42) (0.25) (0.05) 0.07 0.20 0.32 0.44 0.57 1.23

France (0.57) (0.56) (0.55) (0.47) (0.32) (0.11) 0.02 0.21 0.37 0.52 0.66 0.79 1.63

UK 0.51 0.63 0.71 0.80 0.85 1.01 1.14 1.20 1.26 1.37 1.48 1.45 1.85

Italy (0.48) (0.41) (0.39) (0.18) (0.02) 0.29 0.61 0.89 1.23 1.35 1.62 1.74 2.83

Canada 1.20 1.33 1.63 1.90 2.00 2.09 2.13 2.26 2.32 2.41

EU (0.68) (0.66) (0.65) (0.57) (0.42) (0.25) (0.05) 0.07 0.20 0.32 0.44 0.57 1.23

Argentina 28.06 19.01

Australia 1.98 2.10 2.24 2.31 2.49 2.60 2.69 2.75 2.81 2.83 3.40

Brazil 6.20 6.15 6.29 7.16 8.26 8.90 9.36 9.61

China 3.04 3.27 2.97 3.19 3.61 3.66 4.12

India 6.20 6.39 6.79 7.33 7.57 7.74 7.78 7.89 7.83 7.88 7.87 7.77 8.02

Indonesia 4.90 5.05 6.07 6.30 6.64 7.03 7.62

South Korea 1.90 2.14 2.20 2.38 2.47 2.70 2.70

Mexico 7.64 7.63 7.66 7.25 7.38 7.36 7.46 7.66

Russia 7.06 7.05 6.41 6.63 6.84 6.86 7.10 7.27

South Africa 6.35 7.10 7.64 8.19 9.05

Turkey 12.95 13.11 13.90 13.70 13.00 12.24



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Figure 117: Corporate spreads remain elevated at the shorter-end

Corporate bond spreads shot up in March and April amid tight liquidity conditions in the wake of surge in FPI outflows

and redemption pressures in domestic mutual funds, as well as a sharp drop in trading activity. However, a slew or

measures taken by the RBI over the last one month has helped ease liquidity in the system. The TLTROs have led to an

increase in demand for higher-tenor and better-rated corporate bonds by banks thereby reducing the term and liquidity

premia, even as spreads at the shorter-end have remained elevated as demand remains weak due to reinvestment risk.


Figure 118

Source: Bloomberg, NSE

0

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bpsSpreads between AAA-rated corporate bonds and similar maturity G-secs

1-year AAA 5-year AAA 10-year AAA

-9000

-7000

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Rs bnNet lending under RBI's Liquidity adjustment facility

Outstanding amount under repo operations

Outstanding amount under reverse repo operations

Net lending under LAF

Figure less than zero indicates

surplus liquidity in the system

Figure greater than zero

indicates deficit liquidity in

the system

Surplus liquidity in the banking

system has increased sharply,

averaging at Rs 4.9trn during Mar

27-May 28


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Market Statistics: Primary market

Funds mobilisation in the primary market Funds mobilisation declined sharply amid nationwide lockdown: Amid continuous

decline in total fund mobilisation through the NSE platform. Over the month of April, total

fund raised through the securities market recorded 35% to reach Rs534bn from

In the primary market, debt remains to be the preferred instrument as compared to

equities. Out of total resource mobilisation, firms raised Rs524bn through debt, which

accounts for almost 98% of total fund raised over the month, and remaining Rs9.9bn were

mobilised through equities. Over the month, 30 firms raised Rs394bn through private

placement which is 22% lower than Rs503bn in the previous month. Still, private

placement remains to be the most preferred channel in the primary market with almost

74% share in the primary market. Besides, government raised Rs130bn through issuance

of G-Sec.

allotment compared to Rs203bn over the previous month. Besides, one firm issued IPOs

to raise Rs83m over the month which is significantly lower than the previous month. This

month no one has raised fund through rights issue, QIP and NCDs.

Figure 119: Fund mobilised through NSE platform Particulars Apr-20 Mar-20

No. of

Issues

Amount Raised

(Rsm)

Amount

Raised

(USDm)

No. of

Issues

Amount Raised

(Rsm)

Amount

Raised

(USDm)

Equity

IPOs 1 83 1 1 103,408 1,388.02

Rights Issue - - - 3 3,734 50.12

Preferential Allotment 7 9,870 130 15 203,420 2,730.47

Debt

Public issue of NCDs - - - 1 3,226 43.31

Public issue of Gsec 3 130,000 1,706

Private Placement 30 394,391 5,176 52 503,276 6,755.38

Total 534,343 7,013 817,064 10,967

Note: In case of debt issuances, the above table reports no. of ISINs instead of issues.

Source: NSE.


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New listings in the month Risk of lower valuation may have discouraged firms to get listed: This month has seen

only one new listing in the market due to the ongoing nationwide lockdown, unavoidable

global slowdown post the outbreaks of Covid-19, rise in uncertainty, and therefore, risk

of getting lower valuation in the market.

Over the month of April, only one firm Laxmi Goldorna House Limited was listed in the

SME platform with a market size of Rs313m while Mittal Life Style Limited got migrated

from the SME platform towards the mainboard with a mere 0.6% listing gain on the listing

day.

Figure 120: Companies listed on NSE in April 20 Listing

Date Security Name Listing Gain

%

Market Cap

(Rsm)

Gross Turnover

(Rsm)

Listing

16- Apr-20 Laxmi Goldorna House Limited 0.0 313 26 SME IPO

29-Apr-20 Mittal Life Style Limited 0.6 1227 2 Migrated from SME to NSE Main Board

Source: NSE.


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Market Statistics: Secondary market

Institutional flows across market segments The overall trend of net FII inflows differs significantly over the last five (fiscal) years

across different segments. FIIs net inflows were positive in the Equity segment

throughout FY17, except a sharp fall during the third quarter particularly after the

demonetisation. This sudden policy announcement had affected the debt market as well

the fiscal year.

In contrast, there was a significant jump in net inflows in FY18 with US$19bn net

investment in the debt segment, while net inflows remained muted in equities amid the

slowdown in the Indian economy and rise in uncertainty in the global market. This has

also contributed negatively to the FII net inflows throughout FY19 in both equity and debt.

FIIs were net seller till February, before improving partially over the month of March.

The positive trend continued over the first quarter of FY20 with a positive outlook of

Indian economic growth, which trembled a bit during May over the uncertainty in the

General Election in India, but recovered sharply after getting a clear mandate in favour of

the Modi Government. However, the situation reversed completely after the

announcement of additional income tax on FPIs net income in the Union Budget FY20.

The slowdown continued till September, even through government withdrew the budget-

related tax proposals on FPIs registered as trusts. Afterwards, FIIs net inflows recovered

slowly in the equity segment and increased exponentially since October due to the

competitive edge of Indian market over its peers, whereas it remained quite low in the

debt segment.

The trend, however, has changed completely since February as the Covid-19 outbreak

has became pandemic. This has added concerns over the impending global slowdown and

increasing the probability of default by many large companies, particularly related to

Aviation industry, Tourism and many other non-essential commodities. Besides, the

revival of financial system in India seems unlikely after the s

of the largest private bank Yes Bank. FIIs net inflows started declining sharply since

current fiscal year with a sharp rise in capital outflows from both equity and debt

segments.


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Figure 121: Overall net inflows of FIIs in India


*FII/FPI trading activity on NSE, BSE and MSEI.

For domestic institutional investors (DIIs), the overall trends of net investments remain

largely positive over the last five (fiscal) years, including FY21. Though trends were quite

similar during the 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

return to power. Unlike FIIs, net inflows remained elevated

and increased further during July-

and continue to fall till January partly due to a significant drop in economic growth in the

last few quarters. Unlike FIIs, domestic institutional investors increased their net

month of March as well.

the equity segment mainly due to the uncertainty in the market amid exponential rise in

total number of infected cases and fatalities from the novel-coronavirus over the month.


100/133

Figure 122: Overall net inflows of DIIs in India


**DII flows are for India as a whole in equity only.

FIIs remain net seller in the Cash market: invested through NSE

slowdown in the economy and the fear over the sudden outbreak of Novel-coronavirus

which first detected near Wuhan in the Hubei province of China earlier this year and

spread in more than 180 countries so far. FIIs net outflow increased sharply to Rs656bn

in March as market uncertainty rose to a new high with rising number of Covid-19 positive

cases and number of fatalities over the month. This has partially declined over the month

of April even as Covid-19 cases continuous to rise exponentially in India, perhaps due to

multiple policy actions taken by the government bodies, RBI and the SEBI. Over the

contrary, DIIs turned net sellers in April with Rs13bn net sales, significantly down from

Rs531bn over the previous month.

FIIs net investment fell sharply in the derivatives segments as well: In case of the

ictions imposed by the regulator on margin trading

and short-selling. Over the month, DIIs turned net sellers from Rs107bn net investment

in March to Rs17bn net outflows over this month.

Similar trend was observed in the Currency segment as well, where FIIs net investment

turned negative from Rs5bn in March to net outflows of Rs5bn over the month. In case of

Interest rate derivatives, DIIs net investment has somewhat muted, while FIIs turned net

sellers in April with Rs2bn net outflows over the month.


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Figure 123: Foreign and domestic institutional flows (Rsbn) Month Apr-20 Mar-20 Apr-19 Previous FY CYTD

Buy Sell Net Buy Sell Net Buy Sell Net Buy Sell Net Buy Sell Net

Cash Market DII 724 738 (13) 1526 995 531 595 683 (88) 9,777 8,653 1124 3,942 3,256 686

FII 1,194 1,243 (48) 1458 2,114 (656) 992 865 128 13,166 14,155 (989) 4,727 5,654 (926)

Futures & Options

DII 590 608 (17) 840 733 107 750 812 (62) 10,242 10,445 (204) 3,332 3,253 79

FII 35,638 35,520 118 48,760 48,415 345 43,593 43,376 217 664,429 661,886 2543 216,296 215,526 770

Currency Derivatives

DII 78 82 (5) 184 179 5 143 135 9 1,016 1,000 16 348 358 (10)

FII 757 737 20 1,519 1,374 145 716 633 83 9,144 8,247 897 3,801 3,387 414

Interest Rate Derivatives

DII 4 4 (0) 13 13 (0) 15 15 1 174 178 (4) 40 39 1

FII 0 2 (2) 3 2 1 2 3 (0) 47 40 6 10 9 1

Source: NSE*DII Domestic Institutional Investors, FII Foreign Institutional Investors

Segment-wise total turnover over the month of April

amid fewer trading days and rise in uncertainty in the market. In Cash market, total

turnover contracted by 10% rise over the month to reach Rs9trn in April vs. Rs10trn over

the previous month due to having less trading days over the month and sharp fall in

institutional investment in the market.

Similar trends were observed in derivatives segments as well. Total turnover nearly

halved for the Currency futures to reach Rs3.

previous month. Equity options recorded a sharp fall in total premium turnover (-37%),

followed by equity futures turnover that dropped by 26% among all major segments.

Other segments have also registered sharp fall over the month.

Figure 124: Total turnover in different segments (Rsbn) during

Segment Jan-20 Feb-20 Mar-20 Apr-20

Cash Market 8,054 7,969 10,065 9,059

Equity futures 19,471 18,487 20,974 15,497

Index futures 5,433 5,393 9,214 5,947

Stock futures 14,038 13,094 11,760 9,550

Equity options 1,200 1,156 2,268 1,419

Index options 991 941 1,985 1,209

Stock options 209 214 283 210

Currency derivatives 3,882 3,982 7,243 3,733

Currency futures 3,871 3,973 7,220 3,722

Currency options 11 9 23 11

Interest rate derivatives 254 279 298 94

Interest rate futures 254 279 298 94

Interest rate options 0.03 0.10 0.17 0.02

Commodity futures 1.1 1.6 0.9 0.6 Source: NSE ions contracts

Average daily turnover Cash market is further concentrated to large firms and investors are moving towards

less risky assets: On average, daily turnover rose only in the Cash market while all other

segments recorded a sharp fall over the month. Daily average turnover in Cash market

increased by 5% to reach Rs503bn in April (vs. Rs479bn over the previous month) partly

due to increase in uncertainty in the market after the sudden outbreak of COVID-19

globally, and exponential rise in total number of infected cases in India.

Further, we can see investors are moving to more stable assets like gold bonds, and as a

result there was a rise in total turnover of Sovereign Gold Bonds over the month while


102/133

average daily turnover fell by 2.3% for Exchange Traded Funds (ETFs), 55% for InvITs

and 55% for Mutual funds over the month as investors are turning towards less risky

investment options. Further total turnover has concentrated towards large stocks. This,

in turn, has reduced average turnover in the SME segment by 52%.

In the Cash market, SUNPHARMA, HINDUNILVR and RELIANCE recorded a sharp increase

in total turnover over the month that has partly increased average daily turnover in the

segment.

Figure 125: Average daily turnover in Cash market (Rsmn)

Product Apr-20 Mar-20 % Change

Current

FYTD

Previous

FYTD % Change Previous FY CYTD

Cash Market 503,279 479,264 5.0 503,279 336,981 49.3 364,399 428,621

Exchange Traded Funds 3,024 3,095 (2.3) 3,024 2,480 21.9 2,069 2,403

SME Emerge 17 36 (52.1) 17 89 (80.5) 53 39

Sovereign Gold Bonds 28 21 37.6 28 4 630.6 10 18

InvITs 38 86 (55.4) 38 32 18.8 51 62

Mutual Funds (Close Ended) 1 1 (54.0) 1 1 (52.5) 1 1 Source: NSE.

In case of Stock derivatives, daily stock futures turnover declined by 5.3% over the month,

whereas stock options premium turnover fell by 13.2% amid net outflows of institutional

investors and additional restrictions imposed on margin trading and short-selling

activities. Banking sector was adversely affected over the month largely due to rise in the

probability of defaults over the month amid exponential rise in Covid-19 cases and

nationwide lockdown in the country. In this banking sector, turnover fell sharply for SBI

bank, ICICI Bank, HDFC Bank in both Equity futures and options segment.

The index derivatives segment also registered a sharp drop in average daily turnover over

the month, where daily turnover of Nifty fell by 33% and Bank Nifty by 9.3% in the futures

segment. In case of Options premium turnover, Nifty options premium dropped by 40%

over the month followed by Bank Nifty by 9.5%.

Figure 126: Average daily turnover in Equity derivatives (Rsmn)

Product Apr-20 Mar-20 % Change

Current

FYTD

Previous


Single stock derivatives

Stock futures 530,538 559,977 (5.3) 530,538 610,067 (13.0) 602,216 590,746

Stock options premium 11,681 13,458 (13.2) 11,681 8,134 43.6 9,245 11,175

Index futures

BankNifty 134,636 148,422 (9.3) 134,636 90,708 48.4 113,155 126,079

Nifty 195,728 290,301 (32.6) 195,728 122,784 59.4 157,060 190,788

NiftyIT 34 59 (43.0) 34 308 (89.1) 121 56

Index options

BankNifty 31,559 34,879 (9.5) 31,559 16,980 85.9 22,493 29,252

Nifty 35,601 59,666 (40.3) 35,601 12,638 181.7 21,090 33,265

NiftyIT 0 0 NA 0 0 (100.0) 0 0 Source: NSE.*premium turnover for options.


103/133

USDINR remains the major currency pair traded in India, followed by GBPINR and

EURINR. Amongst them, average daily futures turnover of USDINR rose sharply by 75%

and EURINR i

In Currency options, USDINR contributed about 100% of total turnover over the month.

Its daily premium turnover has more than doubled to Rs1.1bn over the month amid

increase in uncertainty in the currency market and a sharp depreciation of Rupee over the

months.

In the Interest rate derivatives segment, 645GS2029 is the most traded instrument in

both futures and options segments with Rs14.4bn and Rs8.7mn average daily turnover

respectively over the month.

Figure 127: Average daily turnover in Currency derivatives (Rsmn)

Product Apr-20 Mar-20 % Change Current

FYTD

Previous


Currency futures

EURINR 7,029 12,104 (41.9) 7,029 5,599 25.6 7,000 8,433

EURUSD 76 508 (85.0) 76 499 (84.7) 472 298

GBPINR 13,916 21,709 (35.9) 13,916 12,203 14.0 15,368 19,771

GBPUSD 130 881 (85.2) 130 485 (73.1) 514 491

JPYINR 3,099 5,848 (47.0) 3,099 1,955 58.5 3,109 3,835

USDINR 194,693 319,956 (39.2) 194,693 179,967 8.2 171,331 208,016

USDJPY 1 6 (76.5) 1 6 (76.3) 9 6

Currency options

EURINR 0.00 0.49 (100.0) 0.00 0.04 (99.5) 0.06 0.15

EURUSD 0.00 0.00 NA 0.00 0.00 NA 0.00 0.00

GBPINR 0.00 0.77 (100.0) 0.00 0.13 (100.0) 0.25 0.50

GBPUSD 0.00 0.03 (100.0) 0.00 0.00 NA 0.01 0.03

JPYINR 0.00 0.00 (100.0) 0.00 0.00 (100.0) 0.02 0.01

USDINR 624.56 1,137.38 (45.1) 624.56 589.31 6.0 548.49 682.36

USDJPY 0.00 0.00 NA 0.00 0.00 NA 0.00 0.00

Source: NSE. *premium turnover for options

Figure 128: Average daily turnover in Interest rate futures (Rsmn)

Product Apr-20 Mar-20 % Change Current

FYTD

Previous


645GS2029 5,428 14,404 (62.3) 5,428 0 NA 8,617 10,612

726GS2029 57 366 (84.4) 57 764 (92.6) 7,903 1,163

757GS2033 57 127 (54.9) 57 0 NA 44 51

Source: NSE. *Data for only those contracts which were traded in the month of March have been reported in the above table.


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Turnover of top traded symbols during the month

Figure 129: Top 10 symbols based on total turnover of Cash market (Rsmn)

Symbol Mar-20 Feb-20 %Change

RELIANCE 618,897 492,418 25.7

BAJFINANCE 371,451 311,882 19.1

HDFCBANK 363,126 449,531 (19.2)

AXISBANK 316,659 285,806 10.8

ICICIBANK 297,946 383,231 (22.3)

HINDUNILVR 248,325 139,144 78.5

HDFC 238,551 315,287 (24.3)

INDUSINDBK 238,171 271,911 (12.4)

SBIN 211,299 428,770 (50.7)

SUNPHARMA 174,456 87,844 98.6

Source: NSE

Figure 130: Top 10 symbols based on total turnover of Stock futures (Rsmn)

Symbol Apr-20 Mar-20 %Change

RELIANCE 798,870 609,034 31.2

ICICIBANK 412,154 588,474 (30.0)

BAJFINANCE 377,247 428,904 (12.0)

HDFCBANK 372,734 528,917 (29.5)

SBIN 342,850 810,274 (57.7)

AXISBANK 335,889 373,328 (10.0)

HINDUNILVR 311,185 215,478 44.4

HDFC 273,608 346,863 (21.1)

KOTAKBANK 227,485 267,626 (15.0)

BHARTIARTL 227,385 272,859 (16.7)

Source: NSE

Figure 131: Top 10 symbols based on total turnover of Stock options (Rsmn)

Symbol Apr-20 Mar-20 %Change

RELIANCE 33,811 24,273 39.3

SBIN 12,556 40,166 (68.7)

ICICIBANK 11,804 15,763 (25.1)

BAJFINANCE 11,518 8,971 28.4

AXISBANK 9,845 9,339 5.4

SUNPHARMA 7,961 4,200 89.5

HDFCBANK 6,865 9,018 (23.9)

INDUSINDBK 6,855 11,518 (40.5)

AUROPHARMA 5,649 2,137 164.3

HINDUNILVR 5,282 2,488 112.2

Source: NSE


105/133

and Equity derivatives market, as shown in the following chart. Monthly turnover in equity

fore coming

down sharply in the following month to reach at Rs16.9trn amid the rise in uncertainty in

the market, impending global recession in FY21 due to lockdown in several countries and

significantly fall in FII inflows. In case of the Cash market, monthly turnover has increased

The overall trend of currency derivatives is quite different, where monthly turnover was

quite high in 2013 due to increase in macroeconomic uncertainty during the Taper

Tantrum. It declined significantly in the following year as government had to put stricter

restrictions on FII limits to minimise currency rate fluctuation. Thereafter, it remained

stable till 2017 and was hovering around Rs2trn on average. It has again started

increasing in 2018 as the Indian government increased the threshold limit of foreign

investment in currency segment, and then, its total turnover remained elevated in 2019

as well toward an average monthly turnover of Rs3.6trn. However, this segment has also

recorded a sharp fall in monthly turnover over the month of April.

Figure 132

Source: NSE.

Note: Total turnover for derivatives includes gross traded value of futures and total premium turnover of options.


106/133

Average daily turnover grew significantly: Despite of the unprecedented coronavirus

decent growth in all major segments on YoY basis. In the Cash market, daily turnover

increased by 41.5% in April, slightly lower than the previous month, but significantly

other segments both equity and currency derivatives recorded 3% growth in their average

daily turnover partly due to the additional restrictions imposed by SEBI on marginal

trading and short-selling activities particularly in the equity derivatives segment.

The overall decline in daily turnover across segments in April has somewhat coincided

with the decline in global economy in 2020 amid the Covid-19 outbreak.

Figure 133: Impact of global slowdown on overall turnover growth across segments

Source: RefinitivDatastream, NSE.

o.

Despite of continuous decline in economic growth projections over the last several

months amid 60-

significantly across all segments over the previous three months. The trend has reversed

in April across all segments as number of Covid-19 cases continues to increase

exponentially, and many leading rating companies have revised their GDP growth forecast

to -5% while IIP growth declined to as low as -16.7%.


107/133

Figure 134: Growth rates of Cash turnover and economic slowdown in India (IIP and GVA growth)


Both CPI and WPI inflation rates started declining in India: Amid low consumption

and export demand, coupled with lower crude oil prices, inflation rates declined over

March-April 2020 in both wholesale and retail markets in India. Inflation trajectory is

expected to ease further with the RBI expecting it to fall to sub-4% in the second half

of the fiscal.

margin, which may have negative impact on total trading volume as well.


108/133

Figure 135:


Exchange rate and crude oil price are on opposite trajectory: Decline in crude oil price

did not have significant impact on India given a limited impact on domestic fuel price and

low domestic demand due to 60-day lockdown. In contrast, INR continues to depreciate

given a sudden rise in FPI net outflows, which may have led to a significant rise in daily

turnover of currency derivatives. But its growth rate declined to 3.3% in April amid decline

in growth projections globally as well as in India.


109/133

Figure 136: oil price and exchange rate


Net investments turned negative for both FIIs and DIIs:

significantly in April as both the FIIs and DIIs become net sellers over the month in contrast

to the previous month. DIIs net investment was quite high in March that led to a significant


110/133

Figure 137:

Source: RefinitivDatastream, NSE.


111/133

Client category-wise participation in total turnover

different client categories over the last six (fiscal) years. In FY21, proprietary traders

continues to contribute 23% to total turnover in the cash market, followed by FIIs (14%),

including individual investors, HUFs,

trusts, NRIs, etc. traded around 51% over the period, marginally higher than the

previous fiscal. In contrast, share of FIIs, DIIs and Corporates declined 1-2 percentage

points over the previous fiscal.

Figure 138: Share of client participation across market segments of NSE in the last five (fiscal) years (%)**

10 12 11 6 5 4

9 10 1010 10 8

23 2116

15 1514

21 1718

22 2323

37 41 45 46 47 51

0%

20%

40%

60%

80%

100%

120%

FY16 FY17 FY18 FY19 FY20 FY21

Cash Market

Corporates DII FII PRO Others

11 8 8 11 9 90 0 0 0 0 0

12 14 1214 19 17

4942 42 38 33

32

2836 37 37 38 42

0%

20%

40%

60%

80%

100%

120%


Equity Derivatives

Corporates DII FII PRO Others

14 14 14 13 13 9

1 1 1 2 21

14 16 14 17 1820

39 40 4141 41 45

31 29 30 26 27 25

0%

20%

40%

60%

80%

100%

120%


Index Futures

Corporates DII FII Others PRO

10 7 7 11 9 90 0 0

0 0 010 12 10

13 19 17

2535 37

3838 42

5546 45

39 33 33

0%

20%

40%

60%

80%

100%

120%


Index Options



112/133

Source: NSE

**DII: Domestic Institutional Investors, FII: Foreign Institutional Investors, PRO: Proprietary Traders, Others: includes individual investors, HUFs, trusts, NRIs, etc.

16 13 15 13 10 9

3 3 4 5 6 6

17 21 18 24 28 33

34 37 38 33 32 31

30 26 25 25 23 21

0%

20%

40%

60%

80%

100%

120%


Stock Futures


9 9 10 10 8 70 0 0 0 0 0

15 17 17 1510

6

38 37 3735

3945

39 37 36 40 42 42

0%

20%

40%

60%

80%

100%

120%


Stock Options


19 1812 10 10 9

1 43

15 16 18

16 1417

12 10 8

49 49 52 47 4337

15 15 15 16 2027

0%

20%

40%

60%

80%

100%

120%


Currency Futures

Corporates FII BanksDII ex-banks PRO ex-banks Others

7 8 7 12 9 51 2 3

2 9

22 2 22

6

2

78 75 74 64 52

60

12 13 1420 24

31

0%

20%

40%

60%

80%

100%

120%


Currency Options

Corporates FII BanksDII ex-banks PRO ex-banks Others

14 13 10 11 9 7

1 33

9 9 11

10 8 108 6 5

60 62 63 5552

47

14 14 15 18 24 29

0%

20%

40%

60%

80%

100%

120%


Currency Derivatives

Corporates FII Banks

DII ex-banks PRO ex-banks Others

23 2720 24 18

27

02

3 21

116

1819 20

20

231

32

34

4

5140 51 48

52 35

8 9 4 3 5 11

0%

20%

40%

60%

80%

100%

120%


Interest Rate Futures

Corporates FII Banks

DII ex-banks PRO ex-banks Others


113/133

In Equity derivatives, there is a significant change in composition of total turnover across

terms of total turnover from 31% in Fy16 to 25% in FY21, followed by corporate whose

share declined from 14% to 9% over the same period. This overall fall in their shares has

45% of total turnover in FY21 (vs.39% in FY16) whereas FIIs share rose from 14% to 20%

over the same period. However, the share of DIIs remains marginal during this period,

which can be attributed to the regulatory restrictions on derivative activity.

In case of Stock futures, Proprietary traders, Corporates and Others lost their share in the

market, which was mainly compensated by FIIs. In FY21, Others traded 31% of total

contracts in stock futures while proprietary traders and FIIs contributed 22% and 33% of

total turnover. Remaining 9% traded by corporate and merely 6% transactions were done

by DIIs in the segment.

DIIs share in the Options segment remains negligible throughout the period due to

regulatory restrictions on derivative activity. Over the period, share of proprietary traders

declined in Index options from 55% in FY16 to merely 33% in FY21 which was partially

offset by Others whose share rose from 25% to 42% over the period. Among other share

17% over the period.

k options from 15% in FY16 to 6% in FY21 which

was taken over by proprietary traders and Others. Out of total contracts traded in Index

options, more than 42% were traded by proprietary traders and 45% by Others.

DIIs¬ excluding banks do not have much presence in the currency segment as well due

to regulatory obligations. Among other categories, the share of proprietary traders

excluding banks in the segment has declined over the period. Still they capture highest

share in both futures and options. While Others have been able to increase their share in

these segments during this period, and FIIs capture a significant share in Currency futures

since FY19. The distributional pattern is more or less similar for Interest rate futures

where proprietary traders excluding banks contributed 35% of total turnover. Here,

banks capture 23% of total turnover followed by corporates with 27% market share in

FY21.

Figure 139: Share of client participation in Cash market of NSE (%)** Client

category Apr-20 Mar-20 Change

Current

FYTD

Previous

FYTD Change Previous FY CYTD

Cash market

Corporates 4.1 7.3 (3.2) 4.1 4.8 (0.7) 5.3 5.4

DII 8.1 12.5 (4.4) 8.1 10.0 (1.8) 10.2 10.3

FII 13.6 17.7 (4.2) 13.6 14.5 (0.9) 15.2 14.8

PRO 22.9 23.8 (1.0) 22.9 22.7 0.2 22.7 22.7

Others 51.3 38.6 12.7 51.3 48.0 3.3 46.5 46.9

Source: NSE. **DII Domestic Institutional Investors, FII Foreign Institutional Investors, PRO Proprietary Traders, Others includes individual investors, HUFs, trusts,

NRIs, etc.


114/133

Figure 140: Share of client participation in Equity derivatives of NSE (%)** Client


Current

FYTD

Previous


Index Futures

Corporates 9.0 12.3 (3.3) 9.0 14.2 (5.1) 12.5 11.3

DII 0.7 0.9 (0.2) 0.7 2.7 (2.0) 1.8 1.2

FII 19.7 20.3 (0.6) 19.7 19.1 0.6 18.2 19.3

PRO 25.1 27.5 (2.5) 25.1 25.1 (0.1) 26.6 26.1

Others 45.5 38.9 6.6 45.5 38.9 6.6 40.9 42.1

Stock Futures

Corporates 9.0 9.2 (0.2) 9.0 11.5 (2.5) 10.5 9.2

DII 5.7 5.6 0.1 5.7 5.6 0.1 5.9 5.9

FII 32.5 34.5 (2.0) 32.5 26.0 6.5 28.0 30.3

PRO 21.5 21.6 (0.2) 21.5 25.3 (3.8) 23.2 22.0

Others 31.2 29.1 2.1 31.2 31.6 (0.4) 32.3 32.6

Index Options

Corporates 8.6 6.8 1.7 8.6 10.2 (1.7) 9.1 8.7

DII 0.0 0.0 (0.0) 0.0 0.0 (0.0) 0.0 0.0

FII 16.7 19.2 (2.4) 16.7 19.2 (2.5) 19.2 18.0

PRO 32.8 32.8 0.0 32.8 33.1 (0.3) 33.4 33.4

Others 41.9 41.2 0.7 41.9 37.4 4.5 38.3 39.9

Stock Options

Corporates 6.9 8.0 (1.1) 6.9 10.3 (3.3) 8.3 6.9

DII 0.0 0.0 (0.0) 0.0 0.0 0.0 0.0 0.0

FII 5.8 8.4 (2.6) 5.8 13.0 (7.1) 10.5 8.2

PRO 42.4 43.6 (1.2) 42.4 39.2 3.2 42.2 43.6

Others 44.8 40.0 4.8 44.8 37.6 7.2 39.0 41.3

Equity Derivatives

Corporates 8.5 7.2 1.4 8.5 10.4 (1.8) 9.2 8.7

DII 0.3 0.3 (0.0) 0.3 0.3 (0.1) 0.3 0.3

FII 17.2 19.6 (2.4) 17.2 19.3 (2.1) 19.2 18.2

PRO 32.4 32.4 (0.0) 32.4 32.9 (0.5) 33.2 33.1

Others 41.6 40.5 1.1 41.6 37.1 4.5 38.1 39.7 Source: NSE. **DII Domestic Institutional Investors, FII Foreign Institutional Investors, PRO Proprietary Traders, Others includes individual investors, HUFs, trusts,

NRIs, etc.


115/133

Figure 141: Share of client participation in Currency derivatives of NSE (%)** Client


Current

FYTD

Previous

FYTD Change

Previous

FY CYTD

Currency Futures

Corporates 9.4 10.5 (1.0) 9.4 9.3 0.1 10.1 10.6

FII 18.1 16.9 1.1 18.1 16.7 1.4 15.6 16.1

Banks 8.1 10.7 (2.5) 8.1 11.0 (2.9) 10.4 9.1

DII ex-banks 0.1 0.1 0.0 0.1 0.2 (0.1) 0.2 0.1

PRO ex-banks 36.8 42.1 (5.3) 36.8 44.3 (7.5) 43.3 41.3

Others 27.5 19.8 7.7 27.5 18.5 8.9 20.4 22.7

Currency Options

Corporates 5.0 5.1 (0.1) 5.0 10.8 (5.8) 8.1 5.2

FII 2.3 4.4 (2.1) 2.3 2.1 0.3 2.5 3.3

Banks 1.9 1.6 0.3 1.9 1.6 0.3 1.9 1.9

DII ex-banks 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

PRO ex-banks 59.6 61.5 (1.9) 59.6 61.6 (2.0) 60.4 61.2

Others 31.1 27.4 3.8 31.1 24.0 7.1 27.1 28.3

Currency Derivates

Corporates 7.4 8.2 (0.9) 7.4 10.0 (2.7) 9.1 8.0

FII 10.7 11.8 (1.0) 10.7 9.5 1.3 9.0 10.1

Banks 5.2 6.9 (1.7) 5.2 6.4 (1.1) 6.2 5.7

DII ex-banks 0.1 0.1 0.0 0.1 0.1 (0.0) 0.1 0.1

PRO ex-banks 47.4 50.1 (2.7) 47.4 52.8 (5.4) 51.9 50.7

Others 29.2 22.9 6.3 29.2 21.2 7.9 23.8 25.4 Source: NSE. **DII Domestic Institutional Investors, FII Foreign Institutional Investors, PRO Proprietary Taders, Others includes individual investors, HUFs, trusts,

NRIs, etc.

Figure 142: Share of client participation in Interest rate futures of NSE (%)** Client


Current

FYTD

Previous


Interest rate futures

Corporates 27.4 20.1 7.2 27.4 21.2 6.1 18.1 19.8

FII 0.9 0.9 (0.0) 0.9 1.0 (0.1) 1.2 1.0

Banks 22.6 17.6 5.0 22.6 21.4 1.2 19.7 19.3

DII ex-banks 3.5 2.8 0.7 3.5 5.8 (2.3) 4.3 2.7

PRO ex-banks 34.7 48.6 (13.9) 34.7 46.2 (11.5) 51.6 50.6

Others 10.9 9.9 0.9 10.9 4.4 6.5 5.1 6.6

Interest rate options

Corporates 44.2 23.7 20.4 44.2 NA NA 25.3 26.3

FII 0.0 0.0 0.0 0.0 NA NA 0.0 0.0

Banks 26.2 0.1 26.1 26.2 NA NA 4.1 4.0

DII ex-banks 0.0 0.0 0.0 0.0 NA NA 0.0 0.0

PRO ex-banks 22.5 62.0 (39.5) 22.5 NA NA 57.7 56.6

Others 7.1 14.1 (7.0) 7.1 NA NA 12.9 13.0

Interest rate derivatives

Corporates 27.9 20.6 7.3 27.9 21.2 6.7 18.3 20.3

FII 0.9 0.8 0.1 0.9 1.0 (0.1) 1.2 0.9

Banks 22.7 15.5 7.2 22.7 21.4 1.3 19.3 18.0

DII ex-banks 3.4 2.5 1.0 3.4 5.8 (2.4) 4.2 2.5

PRO ex-banks 34.3 50.2 (15.9) 34.3 46.2 (11.9) 51.8 51.1

Others 10.8 10.4 0.3 10.8 4.4 6.4 5.3 7.2 Source: NSE. **DII Domestic Institutional Investors, FII Foreign Institutional Investors, PRO Proprietary Traders, Others includes individual investors, HUFs, trusts,

NRIs, etc.


116/133

Region-wise distribution of new investors registered Total registration in

previous month. On average, however, it maintained a slight rise over the last five months

Overall trend is quite different across regions. Northern part of the country recorded a

highest CAGR of 4% over the period, followed by Eastern region with merely 1% CAGR. In

contrast, there is decline in total registration in both Western and Southern parts of the

country with a CAGR of -1% over the period.

As a result, share of total registration changed across regions over the month. Out of 406

followed by western region with 32% registration, while 24% of total investors registered

from south, and remaining 9% from east India. Over the month, registration declined

across all regions, West by 35%, North by 24%, followed by South (14%) and East (13%).

This, in turn has resulted a 25% decline in total registration over the month.

Figure 143: Region-wise distribution of new investors registered

Source: NSE.

Note: East India is Mizoram, Odisha, West Bengal, Assam, Manipur, Arunachal Pradesh, Tripura, Nagaland, Meghalaya, Sikkim, Chattisgarh; West India Is Maharashtra,

Gujarat, Madhya Pradesh, Daman & Diu, Goa, Dadra & Nagar Haveli; North India Is Bihar, Jharkhand, Uttar Pradesh, Uttarakhand, Haryana, Delhi, Punjab, Jammu & Kashmir,

Himachal Pradesh, Chandigarh And Rajasthan; South India Is Telangana, Kerala, Andhra Pradesh, Tamil Nadu, Karnataka, Pondicherry, Lakshadweep And Andaman &

Nicobar.

Data further shows, total registration remains concentrated in few districts. In April,

around 7.6% of all investors are from Delhi region, which is marginally higher than Mumbai

(~6.8%). Among others, 3.2% of all registration over the month happened in Pune,

followed by Bangalore and Surat with 2.7% and 1.3% of total registration respectively.

Besides, a significant number of investors are registered in Hyderabad, Jaipur and Nashik

over the last month.

32

10383

107

325

37

145

96128

406

0

100

200

300

400

500

600

East India North India South India West India Total

'00

0

Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20


117/133

Figure 144: Number of new investors registered in top 10 districts

Source: NSE

Note: Top 10 districts are chosen based on data.

27 28

10 10 8 6 6

3 5

11

31 28

13 11

5 5 5 5 5 4

0

5

10

15

20

25

30

35

40

45

50

'00

0

Dec-19 Jan-20 Feb-20 Mar-20 Apr-20


118/133

Region-wise distribution of individual investor turnover in the cash market

Region-wise distribution of total turnover by retail investors in the Cash market remains

somewhat similar over the last six months, as shown in the following charts. Western

region contributed largest share over the period in terms of turnover and trade volumes

in the Cash market with around 36% of total turnover by retail investors and 39% of total

g other regions, North India contributed around 30% of

retail turnover and 29% of retail volume, followed by the Southern and Eastern India.

Figure 145: Region-wise distribution of individual

Figure 146: Region-wise distribution of individual

Source: NSE.

Further, we have shown the distributional pattern of total turnover and trade volume

across major districts over the last five months. Data reveals that, top 10 cities

contributed ~42% of total retail turnover and ~40% of retail trade volume over the month.

Amongst them, Mumbai and Delhi have contributed around 21.8% of total turnover in

evious month, while Bangalore and

Ahmedabad contributed 4.5% and 3.5% respectively, followed by Pune (3.1%) over the

month.

9 8 9 9 8 8

29 29 29 28 28 30

24 24 24 24 2426

38 39 39 40 39 36

0%

20%

40%

60%

80%

100%


East India North India South India West India

10 9 9 9 8 9

27 27 27 27 28 29

23 21 22 22 2023

41 43 42 42 4439

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


East India North India South India West India


119/133

Figure 147: Top 10 districts based on Cash turnover of individual investors

Source: NSE.

Note: Individual investors include Individual / Proprietorship firms and HUF. Top ten districts are chosen based on Apr data.

Figure 148: Top 10 districts based on individual investors traded

Source: NSE Note: Individual investors include Individual / Proprietorship firms and HUF. Top ten districts are chosen based on data

12.9

9.3

4.4 4.4

3.02.4

1.6 1.9 1.6 1.5

11.6

10.2

4.5

3.53.1

2.5

1.6 1.6 1.5 1.5

0

2

4

6

8

10

12

14

16

% o

f C

ash

tu

rno

ver

of

ind

ivid

ua

l in

vest

ors


12.5

8.0

3.5

5.7

3.3

2.1 1.6 1.9 1.6 1.4

11.8

8.8

3.8 3.8 3.7

1.9 1.8 1.6 1.5 1.3

0

2

4

6

8

10

12

14

% o

f tr

ad

ed

vo

lum

e o

f in

div

idu

al i

nve

sto

rs in

ca

sh

ma

rke

t



120/133

Asset category-wise open interest (average daily volume)

Figure 149: Average daily volume of open interest in Equity derivatives (million contracts) Product Apr-20 Mar-20 % Change Current FYTD Previous FYTD % Change Previous FY CYTD

Equity Derivatives

FUTSTK 2,845 3,608 (21.1) 2,845 4,845 (41.3) 4,294 3,906

OPTSTK 917 1,319 (30.5) 917 1,445 (36.5) 1,490 1,458

Equity Derivatives - Index Futures

BankNifty 1.3 1.3 (6.0) 1.3 2.1 (39.6) 1.7 1.4

Nifty 11.5 17.5 (34.1) 11.5 18.4 (37.3) 17.9 14.7

NiftyIT 0.0 0.0 (48.9) 0.0 0.0 (90.7) 0.0 0.0

Equity Derivatives - Index Options

BANKNIFTY 9.3 10.9 (14.6) 9.3 15.8 (41.4) 14.7 13.6

NIFTY 89.1 109.0 (18.2) 89.1 99.6 (10.6) 104.2 105.1

NIFTYIT - - NA - - NA - - Source: NSE

Figure 150: Average daily volume of open interest in Currency derivatives (no of contracts)

Category Apr-20 Mar-20 % Change Current FYTD Previous FYTD % Change Previous FY CYTD

Futures

EURINR 82,593 116,092 (28.9) 82,593 57,594 43.4 74,622 94,321

EURUSD 1,155 7,227 (84.0) 1,155 38,112 (97.0) 34,538 4,922

GBPINR 47,787 65,495 (27.0) 47,787 48,931 (2.3) 74,553 79,610

GBPUSD 1,060 5,166 (79.5) 1,060 3,353 (68.4) 4,877 3,031

JPYINR 37,312 59,439 (37.2) 37,312 26,505 40.8 49,206 43,563

USDINR 4,654,636 6,719,880 (30.7) 4,654,636 2,476,966 87.9 3,123,879 4,215,912

USDJPY 57 206 (72.2) 57 243 (76.4) 297 206

Options

EURINR 6 3,820 (99.8) 6 1,538 (99.6) 807 1,341

EURUSD 0 0 NA 0 0 NA 0 0

GBPINR 0 6,021 (100.0) 0 1,041 (100.0) 1,770 3,833

GBPUSD 0 15 (100.0) 0 0 NA 3 7

JPYINR 2 91 (98.2) 2 22 (92.7) 170 103

USDINR 2,278,731 3,305,390 (31.1) 2,278,731 2,623,455 (13.1) 2,932,818 3,135,176

Source: NSE

Figure 151: Average daily volume of open interest in Interest rate derivatives II (no of contracts) Category Apr-20 Mar-20 % Change Current FYTD Previous FYTD % Change Previous FY CYTD

Interest rate futures

645GS2029 64,610 98,951 (34.7) 64,610 - NA 67,979 89,957

726GS2029 3,738 10,683 (65.0) 3,738 28,890 (87.1) 89,711 23,116

795GS2032 8,500 8,500 0.0 8,500 25,375 (66.5) 24,646 11,285

757GS2033 8,500 6,375 33.3 8,500 - NA 4,525 6,163

Interest rate options

645GS2029 5,344 35,491 (84.9) 5,344 NA NA 6,093 20003

726GS2029 0 0 NA 0 NA NA 975 1817

Source: NSE


121/133

Internet-based trading In April, average daily turnover of internet-based trading declined significantly across all

segments except the Equity derivatives, as can be seen in the following table. Notably,

average turnover of cash market fell by 61.4% to reach Rs125.6bn daily in A

daily turnover of Equity derivatives rose by 25.5% over the month. Besides, internet based

daily trading fell sharply in both the Currency and interest rate derivatives segments by

18.8% and 31.8% over the month to reach Rs86bn and Rs1.1bn respectively.

Figure 152: Average daily turnover of internet-based trading (Rsm)

Segment Apr-20 Mar-20 % Change

Current

FYTD

Previous


Cash Market 125,639 77,836 61.4 125,639 106,876 17.6 90,639 88,647

Equiity Derivatives 2,892,980 2,305,808 25.5 2,892,980 3,556,066 (18.6) 3,530,890 3,158,916

Index Futures 124,611 118,766 4.9 124,611 67,625 84.3 82,859 94,312

Stock Futures 103,951 86,247 20.5 103,951 146,362 -29.0 121,620 105,328

Index Options 2,581,072 2,034,579 26.9 2,581,072 3,193,693 -19.2 3,213,370 2,870,248

Stock Options 83,346 66,217 25.9 83,346 148,386 (43.8) 113,041 89,029

Currency Derivatives 86,117 106,116 (18.8) 86,117 94,210 (8.6) 83,206 83,431

Currency Futures 42,149 50,753 (17.0) 42,149 36,808 14.5 31,610 36,118

Currency Options 43,968 55,363 (20.6) 43,968 57,402 (23.4) 51,596 47,313

Interest Rate Derivatives 1,149 1,685 (31.8) 1,149 1,517 (24.3) 1,547 1,209

Interest Rate Futures 1,063 1,309 (18.8) 1,063 1,517 (29.9) 1,494 1,031

Interest Rate Options 86 376 (77.2) 86 0 NA 53 179

Source: NSE

Note: Average trading volume is calculated as the average of gross traded value i.e., buy side turnover + sell side turnover; Average gross notional turnover is considered

in case of futures and options contracts.

Record statistics Rise in uncertainty over the outbreak of Covid-19 and its plausible implications on the

economy had raised overall volatility in the market in March. This may have resulted a

sharp increase in total trading across all segments at NSE, particularly in Index derivatives

segment. Index options recorded its highest ever premium turnover on March 19, 2020

-time high of Rs22bn

on March 18, 2020. Though other major segments have recorded a significant growth in

their average turnover, they did not cross their previous record levels.

Cash market recorded its highest turnover of Rs828bn on November 26, 2019 mainly due

to a significant rise in FPI inflows in equity over the month. Index futures recorded their

highest turnover of Rs860bn on September 20th, 2019 after the Finance Minister slashed

the corporate tax rate from 30% to 22%.

Figure 153: Segment-wise record turnover till April 30th, 2020 Segment Turnover (Rsbn) Trading Date

Cash market 828 26-Nov-19

Index futures 860 20-Sep-19

Stock futures 1,954 25-Jan-18

Index options (premium) 146 19-Mar-20

Stock options (premium) 22 18-Mar-20

Source: NSE


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Investment through mutual funds in India The overall trend of total investment through mutual funds in India shows that total

number of mutual fund schemes had declined significantly over the first half of FY20

partly due to significant fall in the number of new schemes.

The recent fall in the number of schemes has resulted an overall decline in the average

exponential rise of COVID-19 cases and total number of fatalities in India. The recent

decline in AAUM has completely wiped out the growth in AAUM over the previous fiscal

year.

Figure 154: Monthly trend of total schemes and average AUM

Source: AMFI. *AAUM-Average Asset under Management.

Data further reveals that total investment has concentrated marginally with fewer

schemes between Apr-

period. The following figure, on the other hand, has shown several ups and downs in net

investments of mutual funds over the last financial year. MFs net inflows jumped up into

the positive territory after a continuous decline over the previous two months to end with

Rs460bn net investment over

market.

0

5

10

15

20

25

30

1,800

1,820

1,840

1,860

1,880

1,900

1,920

1,940

1,960

1,980

AAUM for the month (Rstrn) - RHS No. of Schemes


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Figure 155: Monthly trend of total investment through mutual funds

Source: AMFI.

Monthly trend of total investment remains quite volatile through new MF schemes as well.

Amid unprecedented coronavirus pandemic, rise in market uncertainty and impending

global recession, only five new schemes were launched in April and Rs21bn funds got

mobilised through these new schemes.

Figure 156: Monthly trend of total investment through new schemes

Source: AMFI.

(2,500)

(2,000)

(1,500)

(1,000)

(500)

0

500

1,000

1,500

2,000

0

5,000

10,000

15,000

20,000

25,000

Fund mobilized during the month (Rsbn)

Repurchase/Redemption during the month (Rsbn)

Net Inflow (+ve)/Outflow (-ve) for the month (Rsbn) - RHS

0

50

100

150

200

250

0

5

10

15

20

25

Funds mobilized through new schemes (Rsbn) - RHS No. of new Schemes


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Policy developments India

Policy measures by the SEBI

Apr 13th, 2020 The regulator has extended several timelines related to remat request, transmission request, and

requests for consolidation/split/replacement of share/amalgamation of shares, submission date

of audit reports and compliance reports for equal number of lock down days declared by the

government.

Apr 16th, 2020 SEBI extended the timelines for compliance with regulatory requirements by trading/clearing

members related to reporting of client funding, AI & ML, margin trading risk-based supervision,

audit reports, net worth certificates, penalty for non-collection and maintaining call recordings of

orders and instructions received from clients till May 17, 2020.

Apr 17th, 2020 SEBI has given additional relaxation on a) prior intimation to stock exchanges about meetings of

the board, and b) intimation to stock exchanges regarding loss of share certificate and issue of

duplicate certificates. Further, companies are allowed to use digital signature for any filing and

submission under the LODR.

April 21st, 2020 The regulator has announced one-time relaxation for the validity of SEBI observations for six

months in case they have expired/will expire between March 1 and September 30, 2020. Further,

SEBI has permitted an issuer to increase/decrease its issue size by up to 50% of the estimated

issue size without any fresh draft offer document.

In a separate Circular, the regulator has relaxed certain provision of the SEBI (Issue of capital and

disclosure requirements) Regulation. Under this condition, the eligibility criteria for Fast Track

Rights Issue and the minimum subscription criteria are relaxed significantly. The minimum

threshold requirement for not filing draft letter of offer with SEBI is relaxed from Rs100m to

Rs250m.

April 23rd, 2020 During the lockdown period, SEBI has decided to offer temporary relaxation for the period of

restriction provided in the Buy-back Regulations. Now, companies will be able to raise additional

funds only after six months (instead of one year) from the date of expiry of the Buy-back.

April 23rd, 2020 SEBI has reviewed the provisions under the SEBI (Mutual Funds) Regulations, 1996 and issued a

circular to offer a differential treatment to issuers in case of default, keeping in mind the negative

impacts of nation-wide lockdown and three months moratorium permitted by RBI. According to

this Circular, AMFI appointed valuation agency may not consider a delay in payment of interest/

principal or an extension of maturity by an issuer as default for the purpose of valuation of money

market or debt securities held by mutual funds if the agency finds that the delay was solely due

to the nation-wide lockdown and three months moratorium. This relaxation will be applicable till

the period of moratorium by the RBI.

April 24th, 2020 SEBI has extended timelines for several compliance with regulatory requirements by Depositories

and Depository Participants in view of the current situation arising out of the COVID-19 pandemic

April 27th, 2020 SEBI has extended the implementation date the margin framework for cash and derivatives

segment except commodities derivatives (as per the circular dated February 24th, 2020) from May

1st, 2020 to June 1st, 2020.


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Global

Federal Reserve Board announced temporary change to its supplementary leverage

ratio rule to ease strains in the Treasury market resulting from the coronavirus (FED,

April 1, 2020)20

The Federal Reserve announced temporary change to its supplementary leverage ratio

rule to ease strains in the Treasury market resulting from the coronavirus and increase

banking organizations' ability to provide credit to households and businesses. The change

would exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the

calculation of the rule for holding companies, and will be in effect until March 31, 2021.

SEC proposed to modernize framework for fund valuation practices (SEC, April 21st,

2020)21

SEC has voted to propose a new rule that would establish a framework for fund valuation

practices. The rule is designed to clarify how fund boards can satisfy their valuation

obligations in light of market developments, including an increase in the variety of asset

classes held by funds and an increase in both the volume and type of data used in

valuation determinations. The SEC had last addressed valuation practices in a

comprehensive manner in 1969 and 1970. The markets have evolved considerably since

then, such as many funds now engage third-party pricing services to provide pricing

information, particularly for thinly traded or more complex assets. In addition, significant

regulatory developments have altered how boards, investment advisers, independent

auditors, and other market participants address valuation under the federal securities

laws. The proposal recognizes and reflects these changes, including the important role

The

ion to

determine fair value in good faith for purposes of the Investment Company Act of 1940.

The rule would require a board to assess and manage material risks associated with fair

value determinations; select, apply and test fair value methodologies; oversee and

evaluate any pricing services used; adopt and implement policies and procedures; and

maintain certain records.

20 https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200401a.htm 21 https://www.sec.gov/news/press-release/2020-93

https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200401a.htm

https://www.sec.gov/news/press-release/2020-93


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Comparison of trading activities across major exchanges globally

This edition of the Market Pulse has analysed the trading pattern in the securities market in different segments across

-

A total of 96 exchanges are covered in the analysis; 54 from the EMEA region, 24 from Asia-Pacific and the rest from the

domestic market capitalisation and its trading activity in the cash/spot markets and different derivatives markets

Equity, Index derivatives and Currency segments. Key takeaways of the analysis are:

• 31% YoY to reach US$1.5trn in Mar NSE lost

two positions to end up as 14th globally based on domestic market capitalisation

(DMC) in Mar'20 due to a sharp fall in market cap over the month amid the

unprecedented coronavirus pandemic. Among Indian stock exchanges, BSE held

13th position with similar market cap in Mar NYSE remains the top exchange

globally over the last two years followed by Nasdaq-US and Japan stock exchange.

Among others, Shanghai, Euronext, Hong Kong and Euronext are few more leading

exchanges worldwide. Recently, Saudi Stock Exchange (Tadawul) became one of

the largest exchanges with US$2.0trn DMC as on March 58bn in

Mar valued at US$1.7trn in

amid ongoing global slowdown owing to Covid-19. However, NY

increased by 10% on YoY basis and maintained its 1st position globally.

• In the Cash market, Shanghai Stock Exchange (SSE) and Shenzhen Stock

Exchange (SZSE) maintained top two positions in terms of number of trades,

whereas NSE slipped to fifth position globally in Mar (vs. fourth in the previous

month). NSE slipped below fourth position for the first time in the last two years.

Data also reveals the volatility of total trades has increased significantly across all

exchanges particularly over the last three months. Notably, all large exchanges

have recorded a significant rise in total volume over the last two months due to rise

in uncertainty over the securities market.

• NSE hold sixth position in stock options: Distibution of total trade volume is quite

diverse across exchnages for Stock options vs. Stock futures. In stock options,

Nasdaq-US

CBOE Global where 94mn contracts were treaded over the month. B3 - Brasil Bolsa

Balcão slipped to third position with 85m contracts traded over the month, while

NSE ranked sixth with 12.6m contract trade over the month.

• Korea Stock Exchange topped in the stock futures segment in terms of total

number of contracts traded over the last two years, followed by Borsa Istanbul

Exchange, Moscow Stock Excnange and NSE. NSE retained slipped to fourth

position globally in terms of total number of contracts trades in stock futures over

• NSE retains its top position in equity index options with ~55% of trade share in

: equity index options market declined sharply from 63%

20, still it maintains its top position in the market over the

last two years in terms of total number of contracts traded in the segment. Other

exchanges contributes a minor portion in the market globally over the last two

years, while Korea Stock Exchange and CBOE Global hold second position with


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merely 11% market share each, followed by Deutsche Boerse AG with 10% market

share over the month.

• global position improved to 10th in the Equity index futures segment in

terms of total number of contracts traded: B3 - Brasil Bolsa Balcão retains top

position in the Equity index futures market over the last two years, barring few

months in 2018 in terms of number of contracts traded. Out of total trade volume

in , about 27% are traded in B3 - Brasil Bolsa Balcão (significantly lower than

40% in the previous month) followed by 22% in CME group, 16% in Deutsche

Boerse and 10% in Japan stock exchange, whereas NSE market share increased

~1% over the previous month).

• In case of Currency segment, NSE holds top position in options market: NSE

topped in the Currency options with 67% contracts traded in March; however, the

exchange has lost its top position in Futures to Moscow Stock Exchange since

February. Among other exchanges in India, BSE also contributed significant share

in the global market. It retained second position in Currency options and fourth

position in Currency futures with 21% and 12% market shares respectively.

Figure 157: Market Cap and number of trades in different products of top ranked exchanges ( - )*

0 5,000 10,000 15,000 20,000 25,000 30,000

NSE

BSE

DBAG

SIX

TMX Group

Tadawul

LSE Group

SZSE

Euronext

HKEX

SSE

JPX

Nasdaq - US

NYSE

a. Domestic market capitalization (US$bn)*

Mar'20 Mar'19 Mar'18

100

200

300

400

500

600

700

800

Mar-18 Sep-18 Mar-19 Sep-19 Mar-20

b. Number of trades - Cash market (mn)

SZSE CBOE

Nasdaq - US SSE

NSE KRX


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0

20

40

60

80

100

120

140

160


c. Number of contracts traded - Stock

futures (mn)

KRX BIST MOEX NSE DBAG

0

30

60

90

120


d. Number of contracts traded - Stock options (mn)

Nasdaq - US CBOE Global

B3 - Brasil Bolsa Balcão MIAX

DBAG NSE

0

50

100

150

200

250

300

350

400

450


e. Number of contracts traded - Stock

index futures (mn)

B3 - Brasil Bolsa BalcãoCME GroupDBAGJPXKRXSGXMOEX

0

75

150

225

300

375

450

525


f. Number of contracts traded - Stock index

options (mn)

NSE KRX CBOE Global

DBAG CME Group


129/133

Source: WFE monthly statistics.

Note: *ASX - Australian Securities Exchange, BIST - Borsa Istanbul, BME - Spanish Exchanges, BSE - BSE India Limited, HKEX - Hong Kong Exchanges and Clearing, ISE -

International Securities Exchange, JPX - Japan Exchange Group Inc., JSE - Johannesburg Stock Exchange, KRX - Korea Exchange, LSE London Stock Exchange, MOEX -

Moscow Exchange, NSE - National Stock Exchange of India Ltd., NYSE New York Stock Exchange, SGX - Singapore Exchange, SSE - Shanghai Stock Exchange, SZSE -

Shenzhen Stock Exchange, TMX TMX Group, TSE - Tehran Stock Exchange, TFE - Taiwan Futures Exchange, Tadawul - Saudi Stock Exchange (Tadawul), TASE - Tel-Aviv

Stock Exchange, MIAX - Miami International Securities Exchange, DBAG - Deutsche Boerse AG.

Only WFE member exchanges are included in the analysis.

0

20

40

60

80

100

120


g. Number of contracts traded - Currency

futures (mn)

MOEX NSE

B3 - Brasil Bolsa Balcão BSE

CME Group

0

20

40

60

80

100


h. Number of contracts traded - Currency

options (mn)

NSE BSE JSE MOEX TASE


130/133

Economic calendar for major countries (June 2020)

Date Country Indicator Name Period Reuters Poll Prior

Period Unit

1 Jun 2020 China (Mainland) Caixin Mfg PMI Final May 49.6 49.4 Index (diffusion)

1 Jun 2020 India IHS Markit Mfg PMI May 27.4 Index (diffusion)

1 Jun 2020 Euro Zone Markit Mfg Final PMI May 39.5 39.5 Index (diffusion)

1 Jun 2020 United Kingdom Markit/CIPS Mfg PMI Final May 40.6 Index (diffusion)

1 Jun 2020 United States Markit Mfg PMI Final May 39.8 Index (diffusion)

1 Jun 2020 United States ISM Manufacturing PMI May 42.5 41.5 Index

3 Jun 2020 Euro Zone Unemployment Rate Apr 8.3% 7.4% Percent

4 Jun 2020 Euro Zone ECB Refinancing Rate Jun 0.00% 0.00% Percent

4 Jun 2020 Euro Zone ECB Deposit Rate Jun -0.50% -0.50% Percent

4 Jun 2020 United States International Trade $ Apr -40.5B -44.4B USD

5 Jun 2020 United States Non-Farm Payrolls May -7,450k -20,500k Person

5 Jun 2020 United States Unemployment Rate May 19.8% 14.7% Percent

7 Jun 2020 China (Mainland) Exports YY May 3.5% Percent

7 Jun 2020 China (Mainland) Imports YY May -14.2% Percent

8 Jun 2020 Japan GDP Rev QQ Annualised Q1 -3.4% Percent

10 Jun 2020 China (Mainland) CPI YY May 3.3% Percent

10 Jun 2020 China (Mainland) CPI MM May -0.9% Percent

10 Jun 2020 United States Fed Funds Target Rate 10 Jun 0-0.25 Percent

10 Jun 2020 India Trade Deficit Govt -USD May 6.76B USD

10 Jun 2020 India Imports - USD May 17.12B USD

10 Jun 2020 India Exports - USD May 10.36B USD

12 Jun 2020 United Kingdom GDP Estimate YY Apr -5.7% Percent

12 Jun 2020 Euro Zone Industrial Production YY Apr -12.9% Percent

12 Jun 2020 India Balance Payments $ Q1 21.6B USD

12 Jun 2020 India CPI Inflation YY May 5.91% Percent

12 Jun 2020 India Industrial Output YY Apr -16.7% Percent

15 Jun 2020 China (Mainland) Industrial Output YY May 3.9% Percent

16 Jun 2020 United Kingdom ILO Unemployment Rate Apr 3.9% Percent

17 Jun 2020 Japan Trade Balance Total Yen May -930.4B JPY

17 Jun 2020 United Kingdom CPI MM May -0.2% Percent

18 Jun 2020 United Kingdom BOE Bank Rate Jun 0.10% 0.10% Percent

23 Jun 2020 United Kingdom Flash Manufacturing PMI Jun Index (diffusion)

25 Jun 2020 United States GDP Final Q1 Percent

30 Jun 2020 Japan Unemployment Rate May Percent

30 Jun 2020 United Kingdom GDP YY Q1 -1.6% Percent

30 Jun 2020 India External Debt Q1 563.9B USD

Source: RefinitivDatastream


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Annual Macro Snapshot


National income

GDP (Current) Growth (%) 19.9 14.4 13.8 13.0 11.0 10.5 11.8 11.1 11.0 7.5

GDP (Current) (Rs trn) 76.3 87.4 99.4 112.3 124.7 137.7 153.9 171.0 189.7 203.8

GVA (Constant) Growth (%) 8.0 5.2 5.4 6.1 7.2 8.0 8.0 6.6 6.0 4.9

Agriculture growth (%) 8.8 6.4 1.5 5.6 -0.2 0.6 6.8 5.9 2.4 3.7

Industry growth (%) 7.9 3.6 3.3 3.8 7.0 9.6 7.7 6.3 4.9 1.8

Services growth (%) 7.8 5.9 8.3 7.7 9.8 9.4 8.5 6.9 7.7 7.0

Per Capita GDP (Curr) (Rs) 64,372 71,609 80,518 89,796 98,405 1,07,341 1,18,489 1,30,124 1,42,963 1,52,012

Prices

CPI Inflation (%) 10.1 9.3 5.9 4.9 4.5 3.6 3.4 4.8

CPI Rural (%) 10.7 9.6 6.1 5.5 5.0 3.6 3.0 4.2

CPI Urban (%) 9.5 9.1 5.4 4.1 4.0 3.6 3.9 5.4

WPI Inflation (%) 9.5 8.9 6.9 5.2 1.2 -3.7 1.7 3.0 4.3 1.8

Primary articles (%) 17.9 9.8 11.4 9.9 2.2 -0.4 3.5 1.3 2.8 6.9

Fuel & power (%) 12.3 13.9 7.1 7.1 -6.1 -19.7 -0.2 8.1 11.6 -1.7

Manuf. prods (%) 5.7 7.3 5.3 3.0 2.5 -1.8 1.4 2.8 3.6 0.3

Money, banking & interest rates

Money supply (M3) growth (%) 16.1 13.5 13.6 13.4 10.9 10.1 10.1 9.2 10.5 8.9

Aggregate deposit growth (%) 15.9 13.5 14.2 14.1 10.7 9.3 15.3 6.2 10.0 6.0

Bank credit growth (%) 21.5 17.0 14.1 13.9 9.0 10.9 8.2 10.0 13.3 3.4

Non-food credit growth (%) 21.3 16.8 14.0 14.2 9.3 10.9 9.0 10.2 13.4 3.2

Cash Reserve Ratio (%, eop) 6.0 4.8 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0

Bank Rate (%, eop) 6.00 9.50 8.50 9.00 8.50 7.75 6.75 6.25 6.50 4.65

Public Finance

GOI rev. receipts growth (%) 37.6 -4.7 17.0 15.4 8.5 8.5 15.0 4.4 8.2 19.1

Tax receipts growth (%) 27.0 12.1 16.5 9.9 9.3 16.9 17.9 11.8 8.4 4.0

GOI Expenditure growth (%) 16.9 8.9 8.1 10.6 6.7 7.6 10.3 8.4 8.1 16.6

Subsidies growth (%) 22.7 25.7 18.0 -1.0 1.4 2.3 -11.1 -4.4 -0.7 18.2

Interest expense growth (%) 9.8 16.7 14.7 19.5 7.5 9.7 8.8 10.0 10.2 7.3

External transactions

Exports growth (%) 40.7 21.9 -1.8 4.9 -1.5 -15.5 5.1 10.1 8.8 -4.9

POL exports growth (%) 47.8 34.9 8.7 4.3 -10.7 -46.1 3.4 18.8 24.5

Non-POL exports (%) 39.3 19.3 -4.2 5.1 0.8 -8.6 5.4 9.0 6.6

Imports growth (%) 28.5 32.4 0.2 -8.4 -0.3 -15.0 1.0 21.2 10.5 -9.3

POL exports growth (%) 21.9 46.4 5.7 0.7 -16.4 -40.1 5.3 25.0 29.9

Non-POL exports growth (%) 31.3 26.8 -2.3 -13.0 9.1 -3.8 -0.2 20.1 4.5

Net FDI (US$bn) 11.3 21.9 19.8 21.6 31.3 36.0 35.6 30.3 30.7 38.7

Net FII (US$bn) 30.3 17.2 26.9 4.8 42.2 -4.1 7.6 22.1 -0.6 -2.7

Trade Balance DGCI&S (US$bn) -118.6 -183.4 -190.1 -134.0 -137.5 -118.2 -108.5 -162.1 -184.1 -152.6

Current Acc. Balance (US$bn) -78.2 -87.8 -32.4 -26.7 -22.1 -15.2 -48.7 -57.2

Forex Reserves (US$bn) 304.8 294.4 292.6 303.7 341.4 355.6 370.0 424.4 411.9 475.6

Exchange rate (USDINR) 45.57 47.95 54.45 60.50 61.15 65.46 67.09 64.45 69.89 70.88



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Economic Policy & Research

Tirthankar Patnaik, PhD [email protected] +91-22-26598149

Prerna Singhvi, CFA [email protected] +91-22-26598316

Runu Bhakta, PhD [email protected] +91-22-26598163

Ashiana Salian [email protected] +91-22-26598163

We gratefully acknowledge the valuable contribution of Sayonee Baliarsingh, Rhythm Ahuja, Pravalika Rangisetti and

Akash Sherry to this report.

Marketing

Rajesh Jaiswal [email protected] +91-22-26598380

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