17th August 2019

Volume #5

Special Interest Articles:

• Exchange Traded Fund

Sections:

Macroeconomic Indicators
Corporate Earnings
Market Overview
News of The Week
Know Your Finance
Company in Focus

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MACROECONOMIC INDICATORS
United Kingdom
Unemployment Rate
Current: 3.9%
Previous: 3.8%
Frequency: Quarterly
The UK unemployment rate edged
up to 3.9 percent in the second
quarter of 2019 from a 44-year low of
3.8 percent in the previous period,
while markets had forecasted the
rate to remain unchanged.
France
Unemployment Rate
Current: 8.5%
Previous: 8.7%
Frequency: Quarterly
The unemployment rate in France
fell to 8.5 percent in the second
quarter of 2019 from 8.7 percent in
the previous period and below
market expectations of 8.7 percent.
That was the lowest jobless rate
since the fourth quarter of 2008. In
metropolitan France only, the
unemployment rate declined to 8.2
percent, as the number of
unemployed decreased by 66,000 to
2.4 million.
India
Inflation Rate
Current: 3.15%
Previous: 3.18%
Frequency: Monthly
India's retail price inflation rate
stood at 3.15 percent year-on-year in
July 2019, little-changed from the
previous month's 3.18 percent and
slightly below market expectations
of 3.20 percent.
United States
Inflation Rate
Current: 1.8%
Previous: 1.6%
Frequency: Monthly
The US annual inflation rate rose to
1.8 percent in July 2019 from a four-
month low of 1.6 percent in the
previous month and above market
consensus of 1.7 percent, boosted by
food prices and a range of other
goods while energy deflation eased.
Source: tradingeconomics.com
Germany
Inflation Rate
Current: 1.7%
Previous: 1.6%
Frequency: Monthly
The inflation rate in Germany was
confirmed at 1.7 percent year-on-
year in July 2019, up from 1.6
percent in the previous month, as
food prices increased faster while
both energy and services inflation
eased.
GDP Growth
Current: 0.4%
Previous: 0.9%
Frequency: Quarterly
The German economy expanded
by a calendar-adjusted 0.4 percent
year-on-year in the second quarter
of 2019, following an upwardly
revised 0.9 percent growth in the
previous three-month period and
beating forecasts of 0.1 percent, a
preliminary estimate showed. On
an unadjusted basis, the economy
stagnated, after a 0.8 percent
advance in the first quarter.
Germany's gross domestic product
contracted by a seasonally-
adjusted 0.1 percent quarter on
quarter in the three months to June
2019, following a 0.4 percent
expansion in the previous period.
Sourav Khushlani
| PGDM – FS | 2019-21
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 CORPORATE EARNINGS – Q1 FY2020
“HCL HCL TECHNOLOGIES
technologies
Noida-based HCL technologies “While our margin in this quarter
reported a reported a quarter-on-quarter was muted in line with our
quarter-on- decline of 13.5% in profits. investment strategy to leverage
future growth opportunities, I am
quarter decline The net profit stood at ₹2230 crore confident that our time-tested
this quarter. operating model will deliver margins
of 13.5% in within our guided range this year,”
profits.” Revenue from operations rose to
₹16,427 crore from ₹13,878 crore last
President and Chief Executive
Officer C Vijayakumar said.
year.

Earning Results BHARAT FORGE LTD IDBI BANK LTD

Summary
Bharat Forge has reported a
decline of 28% year-on-year
(YoY) in its Q1FY20
consolidated net profit.
IDBI bank reported that its first
quarter net loss widened on the
back of higher provisioning and
lower net interest income. The
bank posted a net loss of
₹3800.84 crore for the June
quarter.
Rudra Deolankar
| PGDM – Core | 2019-21
One of India’s largest automotive
component manufacturers with
diversified interests, has reported a
decline of 28% year-on-year (YoY) in
its Q1FY20 consolidated net profit on
the back of declining vehicle demand
and resulting production cuts
implemented by the automakers.
The company has reported
consolidated net profit of ₹171.92
crore in Q1FY20 as against ₹238.75
crore for the same period a year ago.
Source: company website
The company reported that its first
quarter net loss widened on the back
of higher provisioning and lower net
interest income.
The bank posted a net loss of
₹3800.84 crore for the three months
ended 30 June compared to a loss of
₹2409.89 crore in the year-ago
period.
Provisions during the quarter
increased by 20.93% to ₹6332.05
crore as against ₹5235.96 crore in the
year-ago quarter. In the Jan-Mar
quarter, the bank had set aside
₹8532.78 crore in provisions.

Page | 3
US MARKET OVERVIEW

The DJIA closed at 25886.01,
down 1.53% this week, while
the S&P 500 fell 1.03% to close
at 2888.68. The U.S. – China
trade war is still a big driver of
market movements. The Dow
lost 800 points on Wednesday
after the yield on the
benchmark 10-year Treasury
note briefly broke below the 2-
year rate, but ended by almost
100 points higher after its worst
day of the year, due to
Walmart’s strong earnings and
solid retail sales figures. The
FED does not want stocks to fall
because the yield curve inversions
may not point to imminent doom
for U.S stocks but it intends for big
losses to occur once it inverts. The
major change took place in General
Electric stocks on Thursday due to
accounting fraud claimed by
Madoff whistleblower Harry
Markopolos, rebounded on Friday
after CEO called the accusation
“market manipulation” and thus
shares surged by 9.7%.

OIL MARKET OVERVIEW

Brent prices fell more than 1% crude stocks grew by 1.6 million
amid of week extending the barrels this week, compared with
previous session’s 3% drop, expectation for a drop of 2.8 million
pressured by mounting barrels results in rising concerns in
recession concerns and a oil market. OPEC would have to cut
surprise boost in U.S. crude oil supply by another million
inventories. Brent crude is now barrels a day to push prices up.
at $58.64 a barrel, 0.19% higher
than the last week. WTI Crude
ended at $54.94 a barrel, which
is 4.57% higher than the last
week. The reason affecting oil
market is China’s threat to
impose counter-measures in
retaliation for the latest U.S
tariffs on $300 billion of
Chinese goods also weighed on
oil prices. Meanwhile, U.S

“The DJIA closed at 25886.01,

down 1.53% this week”

Page | 4
INDIAN MARKET OVERVIEW Rashmi Sharma
| PGDM – FS | 2019-21

The BSE Sensex closed at 37,350.33
while the NIFTY ended at 11,047.80
which is around 0.62 % and 0.56 %
lower than the previous week
respectively. The economic
slowdown is not looking good for the
automobile and real estate sectors as
demand is still low and layoffs of
around 10 and 5 lakh employees
respectively is possible. Since, these
industries contribute 7 % to
country’s GDP and nearly half to
India’s manufacturing GDP, fall in
sales will adversely affect the entire
economy. Vodafone Idea was the top
gainer of NIFTY, rising 14.56% this
week and Yes Bank was the biggest
loser, declining 8.52%. After Mukesh
Ambani’s announcement of Saudi
Aramco to buy 20% stake in Reliance
Industries oil- to-chemicals business,
additional oil supplies following the
deal will catapult Saudi Arabia to top
India’s oil supplier spot again and
hence the Saudi Aramco continues to
show keen interest in accessing
Indian market, which has the
strongest long-term growth
prospects.
Source: Bloomberg Quint, CNBC

NEWS OF THE WEEK Saurabh Patel

| PGDM – FS | 2019-21
U.S. yield curve inversion highlights recession fears

In U.S.A. bond market two-year behind the curve in cutting rates but investors in short-term
short-term holdings
holdings get
get
Treasury note yield traded above central bank may be also running out paid more
morethan
thanthose
those
in long-term
in long-term
ones,
that of the 10-year note on 14th of the options to stimulate growth in has
ones,historically
has historically
been a reliable
been a indicator
reliable
August for the first time in more economy of
indicator
a comingof recession.
a coming recession.
than a decade. The inversion The 10-year Treasury note's yield fell Factors contributing to to this
thisinversion
inversion
increased recession fears. An 5.7 basis points at 1.619 percent, and are U.S.A and China
China trade
tradewar,
war,Hong-
Hong-
inverted yield curve often serves as the 2-year yield dropped 4.1 basis Kong –China tension,
tension, negative
negativeyield
yieldofof
an early warning of a looming points at 1.628 percent. This is the European Government bond bond and
and NoNo
recession because it suggests that first time since 2007 that the spread deal brexitShaktikanta
Brexit. Das took over as
monetary policy and financial is negative. the governor of the central bank in
conditions are constraining the The inversion of key parts of the December last year. The repo rate that
economy. Fears are also rising that Treasury yield curve, in which stands at 5.40 per cent post the
the central bank may not only be

Reliance Industries Limited 42nd Annual General Meeting 2019

The major announcements made at
RIL AGM 2019 are
a) Reliance Jio's much-awaited fiber-
to-home service will be launched on
September 5, the third anniversary of
telecom giant's launch with a base
plan starting at ₹700 per month and
a speed of 100 MBPS going up to one
GBPS. At a complimentary offering,
Jio will offer a free 4K/HD TV and a
4K set-top box with Jio Forever plan.
b) RIL on Monday announced the
launch of the Set-Top Box that will
enable newer entertainment and
gaming experiences and mixed
reality shopping experience.
c) Reliance Retail has crossed
₹130,000 crore turnover to maintain
its position as India's largest retailer.
d) Reliance Industries will sell 20 per
cent stake in its oil and chemicals
business to Saudi oil giant Aramco
for about $15 billion (approximately
Rs 1.06 lakh crore INR)
and nearly half of its fuel retail business
to BP of UK for Rs 7,000 crore. This step
will help the company’s vision to
become zero net debt company in next
18 months.
e) RIL chairman Mukesh Ambani also
said that company is interested to invest
in newly formed union territories of
Jammu & Kashmir and Ladakh.

Page | 5
Pakistan suspends all diplomatic and trade ties with India
In reaction to India’s decision of
revoking special status of Jammu and
Kashmir and scrapping of Article 370
and Article 35A of Indian
constitution Pakistan suspends all
diplomatic and trade ties with India.
Pakistan expelled Indian high
commissioner Ajay Bisaria and also
announced that Pakistan now will
not send its newly appointed high
commissioner Moin-ul- Haq to India.
Prime minister of Pakistan Imran
khan called an emergency meeting in
Pakistan to discuss Kashmir issue
Tension between China and U.S.A peaks after china devalues
yuan and Hong-Kong protest
In the ongoing trade war between
china and America US president
Donald trump imposes next set of
tariffs over Chinese goods. US
imposes 10% tariffs over $300 billion
USD worth of Chinese goods
starting from September 1st. As a
result of trade war China is no longer
top trading partner of US and has
been replaced by America’s neighbor
Mexico and Canada. This happens
after 15 years that china is no longer
top trading partner of US.
According to commerce department
and in that meeting Pakistan decided
to take following steps:
1. Downgrading diplomatic relations
with India.
2. Suspension of bilateral trade with
India.
3. Review of bilateral arrangements.
4. Matter to be taken to the United
Nations, including the Security
Council and OIC platform.
report of US, the total value of
bilateral goods exchanged between
USA and China fell 14% in first half
of the year to $271.04 billion USD
The Chinese government responded
to this tariff by allowing its currency
Yuan to fell to more than 7 yuan
against the USD- the lowest level of
yuan in decade. US government then
formally labelled china a currency
manipulator and approached IMF to
put sanction against china for unfair
trade practice.
5. Independence Day this 14 August to
be observed in solidarity with brave
Kashmiris and their just struggle for
their right of self- determination.
6. 15th August will be observed as Black
Day.
Another flash point between USA
and China relation are over a matter
of Hong-Kong protest
The protests in Hong-Kong were
triggered by a controversial bill
introduced by China that would
have allowed extradition of Hong-
Kong citizen to mainland china
where the communist party controls
the court and Hong-Kong citizen
fears unequal treatment in the
Chinese court and see it as a tool to
curb their freedom of speech. USA
warns china of military enforcement.
Page | 6
KNOW YOUR FINANCE
Exchange Traded Fund (ETF)

Exchange Traded Fund (ETF) is a pool or a basket of securities (eg. stocks) that tracks an underlying index such as a
stock index or a bond index. An ETF can contain investments such as stocks, commodities like gold and securities such
as bonds. It trades on exchanges just like shares and can be easily bought or sold anytime during market hours just like
any other stock on the exchange unlike mutual funds which trade once a day after the market closes. The value of ETF
changes as per the changes in the underlying index.

ETFs can be broadly classified into the following categories:

1. Index ETFs that are benchmarked to the index such as Nifty or the Sensex.

2. Commodity ETFs which are index to the market price of the commodity (eg. Gold ETF which are indexed to the
market price of gold)

3. Bonds ETFs that are indexed to the value of bonds.

4. Sectorial or Industry ETFs which are benchmarked to the index of a particular sector or industry (eg. Bank Nifty
ETF based on Bank Nifty Index)

5. International ETF which invests in funds abroad based on the foreign index.

6. Currency ETFs that invest in foreign currencies benchmarked to the value of the currency.

How does an ETF work?

The ETF is sponsored by an AMC which invites institutions to subscribe to the ETF by buying shares reflecting the
index (eg. Nifty 50 Index if it is a Nifty 50 ETF). The entire corpus is created in the same proportion as the value of the
stocks in the index which is then converted into small units and sold to retail investors. These units are then traded in
the stock exchanges.

EXAMPLES
The Bharat -22 ETF was launched by GOI on 14th November, 2017. It tracks performance of the Bharat 22 Index, which
comprises of 19 public sector units and 3 privately owned companies. The largest ETF in the world is SPDR S&P 500
ETF. It tracks the Standard & Poor's 500 Index, which comprises 500 large and mid-cap U.S. stocks.

Benefits of investing in ETFs:

1. Risk management through diversification – ETFs invests in wide range of stocks and industries. It helps in spreading
risk over a number of securities and minimize stock specific risk.

2. Transparency – The investor can know the performance of ETF by tracking the index.

3. Lower expense ratio - In investment funds, the cost is called the expense ratio and is expressed as a percentage. It’s
the share of your assets that the fund takes each year from your account as compensation for managing your funds.
ETFs have a much lower expense ratio as compared to mutual funds since the ETFs are managed passively.

The Indian ETFs are still in the emerging stage. It will slowly replicate the assets that are offered globally and Gold
ETFs are expected to take the lead in India.

Source: Investopedia
Joel Johnson | PGDM - Core | 2019-21

Page | 7
COMPANY IN FOCUS
Avenue Supermarts LTD.
(DMART)
Avenue Supermarts, incorporated in 2002, was founded by Mr. Radhakishan Damani. The company owns and operates
the largest supermarket chain of India, by the name of DMart stores and it is headquartered in Mumbai. The brands D
Mart, D Mart Minimax, D Mart Premia, D Homes Dutch Harbour etc. are brands owned by ASL.

DMart is a one-stop supermarket chain that aims to offer customers a wide range of basic home and personal products
under one roof at the lowest prices. As of today, DMart has a well-established presence in 184 locations across 10 states
in India. In the 15 years of its existence, D-Mart has turned a profit each year. For the year ended March 31’ 2019, total
revenue stood at Rs. 20,004 crores, up by 33% YOY and their net profit stood at Rs 902.46 crores, up by 11.92% YOY.

DMart had a spectacular debut on BSE in March 2017 when its shares got listed at a 102.14 percent premium. The
company is currently valued at Rs. 92,909 crore, more than the combined market capitalisation of its three biggest
rivals, Future Retail, Trent and Aditya Birla Fashion.

The stunning success of DMart is credited entirely to Damani. Below are the strategies that lead DMart to roaring
success:
1.The company never leases property for its stores but buys it, saving from a big rental outgo.

2.Damani started small and did not focus on rapid expansion of DMart, rather he focussed on making his business
profitable first, and then expanding it.

3.Damani used to pay his suppliers and vendors within days instead of weeks which was the industry norm. They
provided the goods at a cheaper rate to him in lieu of early payment. He passed on the cost benefits to his customers,
which ensured heavy discounts and hence, consistent footfall.

4.DMart adopted a slow pace which gave a better focus on profitability. That's why ASL has not shut a single store
since it started and generates higher per store revenues than the stores of Ambani or Biyani.

Source: Company website

Swikar Gupta | PGDM - FS | 2019-21

Page | 8
 K.J. Somaiya Institute
of Management Editor, Finstreet Journal

Studies and Research Rohan Thombare | PGDM – FS

rohan.thombare@somaiya.edu
Vidyanagar, Vidyavihar (E).
Mumbai - 400077. Editor-in-chief, Finstreet
Ph.no. +91-22- 6728 3000 / 6728 3050 Mohak Shah | MMS - Finance

mohak.ks@somaiya.edu

Disclaimer: The information presented in this report is provided to you for education purposes only and is not
to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or
other financial instruments.

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