NSE Market Pulse

January 2021
Volume 3, Issue 1
Market Pulse
A monthly review of Indian economy and markets
Market Pulse
January 2021 | Vol. 3, Issue 1
Indian
A Monthly Review
Economy and
Markets
Volume 3, Issue 1
This monthly publication is a review of
major developments in the economy and
financial markets during the month.
Online: www.nseindia.com
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Market Pulse
Market Pulse
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Market Pulse
Table of Contents
Executive Summary ........................................................................................................................ 1
Stories of the month ....................................................................................................................... 3
Who owns India Inc.? — Retail up, FIIs up, DIIs down ................................................................................... 3
Looking back at 2020: A year full of challenges ............................................................................................29
COVID-19 Update: India sees a positive start to the year but global scare on the rise ...............................73
Charts of the month ...................................................................................................................... 91
Gauging economic recovery 2.0: Recovery gathers steam during the festive season .................................91
New Product: Derivatives on Nifty Financial Services Index ............................................................ 97
Macro economy ...........................................................................................................................107
Retail inflation eases in November ............................................................................................................. 107
Industry recovery strengthens further........................................................................................................ 113
Trade deficit widens to fiscal-year high on weaker exports ....................................................................... 118
2Q BoP at record high led by current account surplus and robust capital flows ....................................... 122
Cumulative fiscal deficit reaches 135% of BE ............................................................................................ 129
FY21AE GDP: CSO factors in a decent recovery in H2 with FY21 GDP est. at -7.7% ................................ 135
RBI Monetary Policy: Status quo on rates; Inflation/growth forecasts revised upwards ......................... 140
Insights ......................................................................................................................................150
Invited Article: Tackling global inequality in a world impacted by COVID and climate change: Lessons
from Peterloo and Black Lives Matter ......................................................................................................... 150
RBI Working Paper: Measuring Trend Inflation in India............................................................................. 154
Market Performance ....................................................................................................................156
Market Round-up ......................................................................................................................................... 156
Market performance across asset classes.................................................................................................. 161
Institutional flows across market segments in India ................................................................................. 168
Fund mobilisation through NSE ....................................................................................................170
Market Statistics: Primary market............................................................................................................... 170
New listings in the month ............................................................................................................................ 171
Trend of NSE’s turnover across different segments ........................................................................172
Impact of macro indicators on NSE’s turnover ........................................................................................... 172
Institutional investments through NSE platform ........................................................................................ 176
Total turnover in CM and derivatives market .............................................................................................. 178
Average daily turnover in CM and derivatives market ................................................................................ 179
Market Pulse
Turnover of top traded symbols over the month ........................................................................................ 181

Client category-wise participation in total turnover ................................................................................... 183
Asset category-wise open interest (average daily volume) ....................................................................... 195
Internet-based trading ................................................................................................................................ 196
Spatial distribution of trading activities ........................................................................................198
Region-wise distribution of new investors registered ................................................................................ 198
Region-wise distribution of individual investor turnover in the cash market ............................................ 200
Investment through mutual funds in India ....................................................................................202
Policy developments....................................................................................................................204
Economic calendar for major countries (January 2021) ..................................................................208
Annual Macro Snapshot ...............................................................................................................209
Market Pulse
Executive Summary
2021: Annus horriblis to annus mirabilis?
December 2020 capped the year 2020 on a relatively positive note, with markets posting another good month, and
economic markers continuing to beat expectations. On the pandemic front, cases worldwide raged higher, particularly
in Europe and the US, but the advent of multiple vaccines gave cause for cheer. Daily cases in India followed the
downtrend of the previous couple of months, with the Government finally announcing the vaccine program earlier this
month. The economic recovery remained fledgling but continues to beat expectations, with growth estimates now
stabilizing at 7.5-8.5% for FY21. The next step of the recovery would depend on the economy opening up further.
Vaccines are finally here, and a massive immunization plan is on, across several countries. India has reason to be proud,
being ahead of most developing countries in terms of preparation. One must remain careful, though, with new variants
of the Coronavirus being discovered (UK/S. Africa version, and now Japan). Starting from China in late December 2019,
worldwide Coronavirus cases have now reached crossed 90m, and with more than 1.9m dead and counting. Despite
unprecedented efforts, daily cases remain at 600,000 and loss of life at ~8000, ~50% of which is in the US, the most
affected country. The pandemic has remained somewhat better controlled in India, with the daily tally at staying below
20,000 and the death tally at ~220 now. While vaccines have provided some hope and comfort, there remain enough
roadblocks in immunization programs. The effectiveness of these vaccines and how they are distributed remains a risk
for both the economic recovery and the markets, now at life-time high levels.
Global markets saw an encore after a strong November, riding on a vaccine roll-out, renewed expectations of a faster
cyclical recovery and increasing trade activity, and on continued liquidity support from central banks. Additional
stimulus packages from the US and Japan, enhanced monetary support from the ECB, and a provisional agreement
between the UK and the EU served to lower post-Brexit uncertainty to a considerable degree, although details remain
to be ironed out. Notwithstanding these developments, global COVID-19 cases continued to rise in the US and Europe,
lately with the new, more infectious variant. Markets rallied more in the EM complex, driven by strengthened risk-on
sentiments. While the MSCI World Index went up by 4.2% in December following a strong 12.7% return in the previous
month, MSCI Emerging Market Index generated a return of 7.2% (+9.2% in November). For the year, the MSCI EM Index
return was only a tad higher at 15.8% (+52.2% during Apr-Dec 2020) vs. 14.1% generated by MSCI World Index
(+45.2% during Apr-Dec 2020).
Indian equity markets outperformed the broader EM pack in the month of December, with the Nifty 50 and Nifty 500
Index rising by a strong 7.8% and 7.5%, following a bumper November (11.4% and 11.9% respectively). Signs of
continued improvement in economic activity—reflected in several high frequency indicators, continued decline in daily
COVID cases and strong foreign capital inflows led the rally, and for the year, the Indian markets performed in-line with
the broader EM pack, with the Nifty 50 and Nifty 500 rising by 14.9% and 16.8% respectively.
Global fixed income markets saw a marginal increase in bond yields, particularly at the long-end, again led by vaccine
roll-outs, leading to flight of capital to riskier asset classes including equities and commodities. The short-end, however,
remained benign amid expectations of sustenance of an easy monetary policy, thereby leading to further steepening of
the yield curve. Back home, expectations of a gradual normalisation of liquidity stance led to short-term rates rising
marginally last month, even as long-end remained broadly steady. Commodities also rallied sharply, in-line with other
risky asset classes, attributed to a weak dollar and vaccine optimism.
Our stories of the month once again explore two major topics. We begin with a panoramic round-up of the impact of the
Coronavirus pandemic and its impact on macro aggregates in India and the World across asset classes. While 2020 was
a year with full of difficulties, the unprecedented Coronavirus outbreak has been the most challenging one. With more
than 90m infected across 220 countries, and ~1.9m people losing their lives, the pandemic has had impact quite unlike
any in recent memory. Even as the vast majority of the global population has survived, lives and livelihoods have been
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compromised in permanent ways, in terms of social distancing norms, adopting work-from-home culture and
postponement of usual social and economic activities. Our analysis shows that economic and market conditions reacted
harshly to the lockdown measures but also surprised positively with the pace of recovery.
Our second story month is an in-depth analysis of the COVID-19 spread across India. We have noted the continued
global spread of the virus above, and the relative respite visible in India, where cases have been on a steady downward
trajectory despite a post-Diwali surge in November. Daily cases dropped to an average of ~27k in December from ~40k
in the previous month and have been hovering at sub-20k levels for over a week now, making it an encouraging start to
the new year. As of January 6th, India had ~10.4mn confirmed cases, with ~150k deaths and ~225k active patients.
Emergency authorization has been granted to two vaccines, viz., Covishield and Covaxin, and the immunization program
is slated to begin on January 16th.
On the macro front, headline inflation finally moderated to 6.9% in November vs. a six-year-high of 7.6% in the previous
month, thanks to cheaper vegetables, cereals, and other, protein-based foods. This marks the eighth consecutive month
and 11 in the last 12 months when headline inflation has been higher than the RBI MPC’s 4+-/2% band. In any year, the
reaction function of the MPC would have been towards a tighter policy, but this is not quite any year. In December, the
MPC maintained status quo on rates, even as it raised both growth and inflation forecasts. Amidst questions on the
MPC’s perspective, and on the need to probably adjust the target band itself higher, we feature an RBI paper in our
Insights section this month, that argues for the need to maintain it. Inflation targets need to be set with trend inflation
to which the monthly print tends to converge.
Industrial production marked the second consecutive month of expansion, up 3.6% YoY, while the trade deficit widened
to US$9.9bn—the highest this fiscal—dragged down by weak exports (-8.7% YoY. The overall Balance of Payments (BoP)
remained in surplus for the third quarter in a row at US$19.4bn or 2.4% of GDP in 2QFY21, while the gross fiscal deficit
rose to 135% of the BE over Apr-Nov. Advance estimates of FY21 GDP growth were pegged in at -7.7% (NSE Estimate
at -8%). These estimates would be used for FY22 Union Budget estimates on February 1st.
Our invited article from the Arguden Academy explores the linkages between environmental issues like climate change
and systemic social concerns, and the need for inclusive growth in societies. Skewed distributions of income pose
hurdles for consumption, and therefore for sustainable development in the long run.
Of all the years in recent memory, 2020 would surely rank up there as the ‘annus horribilis’, the year humanity would
like to forget. Unfortunately, viruses and other organisms of their ilk do not work by the Gregorian calendar. The
pandemic remains between us and is likely to remain so for many more months. Its impact on the global economy
makes similar events in the past seem trivial in nature. During the worst parts of the lockdown imposed across countries,
however, we saw some remarkable changes too. To name just a few, the development cycle of COVID-19 vaccines
worldwide has been the fastest in history, digitization and technology in general as themes have never been so powerful,
and the awareness about the dangers posed by climate change has never been higher. These forces have probably
compressed years of change into months, and the world would never be the same again. With the recovery seen in the
economy across multiple sectors, 2021 could turn out an annus mirabilis instead. The key of course, would be to sustain
it.
We bring out the first edition of the Market Pulse in 2021 on these rays of hope, and hope you find it useful. As usual,
we are eager to hear your comments and suggestions. Here’s wishing a happy, healthy and prosperous new year.
Dr. Tirthankar Patnaik

Chief Economist
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Stories of the month

Who owns India Inc.? — Retail up, FIIs up, DIIs down
In this edition of our quarterly report “India Inc. Ownership Tracker” 1, we extend our analysis of ownership trends and
patterns in NSE-listed companies to include the data available for the quarter ending September 2020. We note: 1) A
sustained contraction in Govt. ownership to fresh all-time lows, reflecting continuous efforts to expand public ownership
and relative underperformance of PSUs in the current market rally; 2) Further rise in private promoter ownership for the
third quarter in a row to over 15-year highs, led by Indian promoters even as foreign promoters offloaded some of the
stake; 3) A modest increase in FII2 (foreign institutional investors) stake following a drop in the previous two quarters,
aided by an ample global liquidity; 4) A marginal drop in DMF (domestic mutual funds) share for the second consecutive
quarter, partly attributed to continued moderation in SIP inflows and higher redemptions; 5) Further increase in direct
retail ownership, thanks to strengthened retail participation amidst a huge market rally; 6) FIIs maintained their out-
sized bet on Financials3, increased their overweight4 (OW) position on Energy and retained a cautious stance on India’s
consumption as well as investment story despite emerging green shoots; 7) DMFs’ portfolio stance contrasted with FIIs
with a negative stance on smaller financial companies, an incrementally more cautious view on Energy and an OW
position on Industrials and Healthcare; and 8) While FIIs have largely maintained a status quo (in terms of number of
stocks with >5% share and exposure to top 10% companies), strong inflows of funds into DMFs over the last few years,
barring a drop in FY21 thus far, have led to a curious combination of both rising concentration and a widening spread.
• Private promoter share rose further; Government ownership fell to Who owns India Inc.? NSE-listed in Sep’20
fresh all-time lows: Private Indian promoters saw their ownership
Retail, Others, 6.5 Pvt.
rising for the third quarter in a row to near-15-year high level of 9.0 promoters,
35.4%/34.8% in NSE-listed/Nifty 500 companies in the September Banks, FIs & 45.4
Insurance, 5.2
quarter. This marked the steepest sequential increase in private
Indian promoter stake in last seven years, with 216/1664 NSE-listed
FIIs, 20.6
stocks (where shareholding is available for June and September
quarters) witnessed an increase. Foreign promoters, however, saw a DMFs, Govt.,
7.7 5.6
drop in ownership for yet another quarter, leading to 81bps and 83bps
QoQ increase in private promoter stake in the NSE-listed/Nifty 500
FII ownership in NSE-listed companies
universe to 45.4%/44.8%. The increase in private promoter share
% FII share in NSE-listed universe
was much higher in the Nifty 50 Index. Government ownership FII share ex-Financials
25
(promoter and non-promoter), however, declined further to hit fresh 20
all-time lows of 5.6% in the NSE-listed universe. While a part of this 15
reflects the Government’s efforts to expand public partnership in the 10
ownership of public sector companies and augment revenues from 5
alternative sources, it is also a result of a sharp underperformance of 0
Sep-02
Mar-04
Sep-05
Sep-08
Sep-11
Sep-14
Sep-17
Sep-20
Mar-01
Mar-07
Mar-10
Mar-13
Mar-16
Mar-19
Government-owned companies in the current market rally.

• FIIs ownership picked up amidst an influx of foreign capital flows:
Source: CMIE Prowess, NSE.
Following a steep drop in the previous two quarters, FII ownership in
the September quarter rose by 23bps, 44bps and 42bps QoQ to 26%,
21.4% and 20.6% in the Nifty 50, Nifty 500 and the overall NSE-listed
universe respectively. This is reflected in strong foreign portfolio
inflows into Indian equities during the quarter (US$6.3bn), supported
by an ultra-loose monetary policy. Excluding Financials where FIIs
1
The “India Inc. Ownership Tracker” report examines ownership trends and patterns in Indian companies listed on the NSE since 2001.
2
FII ownership includes ownership through depository receipts held by custodians.
3
Sector weights and comparisons here are based on the respective indices as benchmarks.
4
Overweight (OW), neutral (N) or underweight (UW) stance of FIIs and DMFs on any sector is with respect to the sector’s weight 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
+/- 100bps of the sector’s weight in the Index.
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continued to reduce their stake for the third quarter in a row, FII DMF ownership in NSE-listed companies
ownership in the listed universe rose to near-three-year highs. Rs bn %
SIP inflows
300 DMF share in NSE floating stock 18
The sector positioning of FIIs remained broadly steady in the
September quarter. The perennial out-sized bet on Financials was 200 13
maintained but with a reduced absolute portfolio allocation, partly 100 8

explained by the sector’s underperformance with respect to the
0 3
broader market. Additionally, FIIs turned incrementally bullish on
Dec-17
Dec-16
Dec-18
Dec-19
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Mar-17
Mar-18
Mar-19
Mar-20
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Energy, and maintained their cautious view on India’s consumption
as well as investment story with a sustained UW position on
FII and DMF portfolio OW/UW in Nifty 500 vs.
Consumer Staples and Discretionary, Materials and Industrials.
the index (Sep 2020)
• DMF ownership dropped for the second quarter in a row, bps
227
reflecting continued moderation in SIP inflows and higher Energy -269
-221
redemptions. DMFs’ stake in the Nifty 500/overall NSE-listed Cons. Staples -184
Financials 655
universe fell by 10bps/12bps QoQ to 7.9%/7.7%. DMF ownership in -165
IT 50
Nifty 50, however, fell by a higher 29bps QoQ, partly attributed to -135 FIIs
Realty 24
relative underperformance of large-cap stocks as compared to mid- -9 DMFs
Cons. Disc. -119
and-small-caps. The share of Banks, Financial Institutions and 92
Comm Svcs. 22
Insurance companies fell to two-decadal lows. 16
99
Utilities 106
DMFs’ sector positioning has remained a complete contrast to FIIs. Materials -301 126
In the September quarter, DMFs turned incrementally positive on Healthcare -139
167
Financials, strengthened their cautious view on Energy and sharply Industrials -215
173
reduced their UW position on IT—a result of an increase in allocation -500 0 500 1000
as well as a strong rally seen in IT stocks during the quarter. Among
other sectors, DMFs maintained a negative stance on Consumer New investor account addtions
Staples, albeit incrementally less so, and were OW on Healthcare, mn
Industrials, Materials and Utilities. DMFs’ OW position on 10
CDSL NSDL
Industrials, however, has come off meaningfully over the last 8
several years. 6
4
• Direct retail ownership inched up further: Direct retail ownership
2
in NSE-listed companies inched up further by 37bps QoQ to a 10-
0
quarter high of 9.0%—the highest QoQ increase in the last 18
2020TD*
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
quarters. In the Nifty500 universe, direct retail share is currently
hovering at a 12-year high of 8.6%. Strong market rally over the last
few quarters has boosted sentiments of retail investors—also
Ownership concentration trend in top 10%
reflected in a sharp rise in new investor accounts added this year companies (rebased on March 31st, 2001)
and a surge in retail share in the cash market turnover. Notably, the FIIs
increase in retail share in the Nifty 50 Index has been much lower, 120
DMFs
Banks, FIs & insurance companies
indicating higher interest in the small-cap stocks during this rally.
100
• Evolving institutional ownership and concentration: Combining the
theme of ownership patterns with concentration trends leads to 80
some interesting takeaways. The number of stocks in the FII portfolio
has remained unchanged over the last decade, with inflows of 60
Sep-02
Sep-05
Sep-08
Sep-11
Mar-13
Sep-14
Sep-17
Sep-20
Mar-01
Mar-04
Mar-07
Mar-10
Mar-16
Mar-19
US$145bn since 2010 merely leading to a larger share in existing

stocks. FIIs have at least 5% ownership in 70% of the NIFTY 500.
Source: CMIE Prowess, AMFI, SEBI, NSE.
DMFs have a more interesting story. Large inflows over the past few
years have led to a curious combination: A wider share (5%+
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ownership in 294 stocks now, vs 137 in 2014) and higher

concentration (~86% of value in top 10% of stocks).
Ownership patterns—September 2020
Ownership pattern of the NSE-listed universe (September 2020)
Private promoter ownership rose to near-15-year highs: Total promoter ownership in
the NSE-listed universe fell by 18bps QoQ to 50.7% in the September quarter, as a sharp September quarter saw a
further increase in private
increase in the stake of private Indian promoters was more than offset by a drop in
Indian promoter ownership
holding of foreign promoters and government. Private Indian promoter ownership picked
in the NSE-listed universe,
up by 125bps QoQ—the steepest sequential increase in last seven years—to near-15-year while Govt. ownership
high of 35.4%. This marked the third consecutive quarter of increase, translating into a declined further to hit fresh
jump of ~320bps in private promoter stake in the NSE-listed space in the first nine all-time lows.
months of 2020, with 216/1664 companies (where shareholding data is available for
June as well as September quarter) witnessing an increase. Foreign promoters, however,
reduced their ownership by 44ps QoQ to 10%, marking the second consecutive quarter
of drop.
Government ownership hit fresh all-time lows: Government ownership (promoter and
Government ownership
non-promoter) in the NSE-listed space has been coming off since 2010, in-line with its declined further to hit fresh
efforts to garner higher revenues through the disinvestment route. The Government’s all-time lows.
share in the NSE-listed universe fell by ~100bps QoQ to hit fresh all-time lows of 5.7% in
the September. This is partly also attributed to a massive underperformance of PSU
stocks in the current market rally. For instance, Nifty PSE Index (comprising of 20
Government-owned stocks) fell by 13.3%% in 2020 vs. Nifty 50 return of 14.9%.
FII ownership inched up after declining over the previous two quarters: Amongst
institutional investors, FII share inched up by 42bps QoQ to 20.6% in Q2FY21 following FII ownership inched up in
a drop in the previous two quarters. This is reflected in strong foreign portfolio inflows the September quarter to
into Indian equity markets during this period (US$6.3bn), supported by an ample global 20.6% following a drop in
the previous two quarters.
liquidity. Excluding Financials where FIIs continued to reduce their stake for the third
quarter in a row, FII ownership in the listed universe increased by a much higher 78bps
QoQ to 15-quarter high of 13.3% in the September quarter.
DMF ownership dropped for the second quarter in a row: A modest decline seen in the
DMF ownership declined
DMF ownership in the previous quarter continued in the September quarter as well, with
for the second quarter in
the DMFs’ stake in the NSE-listed companies falling by 12bps QoQ to a five-quarter low row, falling by 12bps QoQ
of 7.7%. This is reflected in the continued moderation in SIP (Systematic Investment to 7.7%.
Plans) inflows into mutual funds, averaging at ~Rs79bn/month during Apr-Nov’20 vs. a
monthly average of Rs83bn in FY20. That said, the DMF share is just 24bps shy of the all-
time high of 7.9% (in the quarter ending March 2020). The share of Banks, Financial
Institutions and Insurance companies in the NSE-listed space also fell by 33bps QoQ to
5.2% in the September quarter—the lowest share in the last two decades.
Retail investors’ holding went up further in the September quarter: Individual retail
investors’ holding inched up by 37bps QoQ to a 10-quarter high of 9.0%—the highest Retail holding witnessed
sequential increase in the last 18 quarters. This marked the third successive quarter of the highest sequential
an increase in retail ownership in Indian equities. A sharp market crash in the March increase in the last 18
quarters, rising to a 10-
quarter, coupled with lockdown restrictions, lured retail investors into trading in equity
quarterr high of 9.0%.
markets, with a strong market rally over the last two quarters significantly strengthening
their sentiments. Of the 1664 listed companies (where data is available for June and
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September quarter), 1268 saw an increase in stake held by retail investors. This
increased buying is also reflected in a sharp rise in new investor accounts added in 2020
and increase in retail share in the cash market turnover.
Figure 1: NSE-listed universe: Ownership pattern by total market cap (%)

June 2020 September 2020
Non-promoter Other non-institutional Non-promoter Retail, 9.0 Other non-institutional
Retail, 8.7
corporate, 3.2 non-promoters, 2.7 corporate, 2.8 non-promoters, 2.6
Other institutional Other institutional

non-promoters, 0.8 Private Indian non-promoters, 1.2 Private Indian
promoters, promoters,
Banks, FIs &
Banks, FIs & 34.1 35.4
Insurance, 5.2
Insurance, 5.5
FIIs, 20.6
FIIs, 20.2
Govt., 5.6
Govt., 6.7
DMFs, 7.7 Foreign promoters,
DMFs, 7.8 Foreign promoters,
10.0
10.4
Source: CMIE Prowess, NSE. *FII ownership includes ownership through depository receipts held by custodians.
Figure 2: NSE-listed universe: Ownership trend across key stakeholders by total market cap over last three years
Private Indian Foreign Domestic Banks, FIs Non-promoter
% Govt. FIIs * Retail
promoters promoters MFs & Insurance corporate
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 33.3 6.9 11.1 7.9 5.5 20.8 3.3 8.4
Jun-20 34.1 6.7 10.4 7.8 5.5 20.2 3.2 8.7
Sep-20 35.4 5.6 10.0 7.7 5.2 20.6 2.8 9.0
QoQ change 125bps -102bps -44bps -12bps -33bps 42bps -40bps 37bps
Source: CMIE Prowess, NSE. *FII ownership includes ownership through depository receipts held by custodians
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Figure 3: NSE-listed universe: Ownership pattern by free float market cap (%)
Non-promoter
Other non-institutional Govt., 0.8 Non-promoter
non-promoters, 5.5 Govt., 0.7
Other non-institutional
DMFs, 15.8 non-promoters, 5.3
DMFs, 15.5
Retail, 17.6
Retail, 18.3
Non-promoter
corporate, 6.4 Non-promoter
corporate, 5.6
Other institutional
non-promoters, 1.7 Other institutional
FIIs, 41.0 non-promoters, 2.4
Banks, FIs &
Insurance, 11.2 Banks, FIs & FIIs, 41.7
Insurance, 10.5
Figure 4: NSE-listed universe: Ownership trend across key stakeholders by floating stock over last three years
Banks, FIs & Non-promoter
% Domestic MFs FIIs* Retail
Insurance corporate
Dec-17 11.9 11.6 40.2 11.0 18.7
Mar-18 12.2 11.3 40.4 11.3 18.2
Jun-18 12.8 11.4 41.2 10.4 17.5
Sep-18 13.0 11.7 41.1 10.3 17.3
Dec-18 13.9 11.6 40.7 10.0 17.4
Mar-19 14.2 10.9 41.5 9.8 17.0
Jun-19 14.5 10.9 42.2 9.4 16.7
Sep-19 15.4 11.0 43.4 7.2 16.9
Dec-19 15.5 10.8 44.2 6.9 16.7
Mar-20 16.1 11.2 42.4 6.7 17.2
Jun-20 15.8 11.2 41.0 6.4 17.6
Sep-20 15.5 10.5 41.7 5.6 18.3
QoQ change -29bps -70bps 71bps -83bps 68bps
Source: CMIE Prowess, NSE *FII ownership includes ownership through depository receipts held by custodians
Figure 5: NSE-listed universe: Long-term ownership trend across key stakeholders by total market cap
% Ownership trend of listed companies across key stakeholders by total market cap
Promoters DMFs FIIs Banks, FIs & Insurance Non-promoter corporate Retail
60
50
40
30
20
10
0
Sep-01
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Mar-09
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Source: CMIE Prowess, NSE *FII ownership includes ownership through depository receipts held by custodians.
7/212
Market Pulse
Figure 6: NSE-listed universe: Long-term ownership trend across key stakeholders by free float market cap
% Ownership trend of listed companies across key non-promoter stakeholders by floating stock
DMFs FIIs Banks, FIs & Insurance Non-promoter corporate Retail

50
45
40
35
30
25
20
15
10
5
0
Mar-01
Sep-01
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Mar-16
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-17
Mar-18
Mar-19
Mar-20
SIP inflows declining amid rising market uncertainty: SIPs—a preferred route for retail
investors to invest in equity markets until early last year—have went slightly out of flavor SIP inflows declined to 31-
since the last few months. Investment in mutual funds through SIPs declined on a month low of Rs730bn in
November, marking the sixth
sequential basis for the eighth consecutive month, hitting a 31-month low of Rs730bn in
consecutive month of a -
November vs. an average monthly run-rate of ~Rs830bn in FY20. This is probably a
sub-Rs800bn figure.
consequence of heightened market uncertainty particularly in the wake of a sharp surge
over the last few months as well as a partial shift in retail investments from the SIP route
to direct trading as reflected in a significant jump in retail ownership this fiscal year.
That said, the moderation in SIP inflows has been fairly benign considering the
unprecedented economic slowdown and consequent pay cuts and job losses, potentially
signaling that mature long-term retail investors still consider SIP as the feasible route to
increase exposure to Indian equities as it helps them reduce market timing risk. These
sticky SIP flows have helped mutual funds significantly increase their ownership in Indian
equities over the last few years.
Figure 7: Monthly SIP inflows into mutual funds Figure 8: Quarterly SIP inflows vs DMF ownership
Rs bn Rs bn Quarterly SIP flows vs. DMF ownership %
Monthly SIP inflows into mutual funds
100 300 SIP inflows 17.0
90 DMF share in NSE floating stock
250 15.0
80
70 13.0
200
60 11.0
50 150
9.0
40
100
30 7.0
20 50 5.0
10
0 0 3.0
Sep-16
Mar-17
Sep-17
Mar-18
Sep-18
Mar-19
Sep-19
Mar-20
Sep-20
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Dec-16
Dec-17
Dec-18
Dec-19
May-16
Mar-17
May-17
May-18
May-19
May-20
Jul-16
Jul-17
Jul-19
Jul-20
Mar-16
Sep-16
Sep-17
Jul-18
Mar-18
Sep-18
Mar-19
Sep-19
Mar-20
Sep-20
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
Jan-17
Jan-18
Jan-19
Jan-20
Source: AMFI, NSE
8/212
Market Pulse
FII resumed buying from May onwards: After witnessing record-high FII outflows on a
September quarter saw
quarterly basis of US$7bn in the March quarter amid fears of a worst global recession strong FII buying into Indian
since the Great Depression, FIIs resumed buying into Indian equities from May onwards, equities supported by
supported by aggressive policy response by the global central banks through rate cuts surplus global liquidity.
and injection of ample global liquidity. This has translated into total FII inflows of
US$29.5bn in Indian equities during the first three quarters of FY21. In fact, net FII
inflows of US$20bn in the December quarter was the highest ever flows India has ever
seen into Indian equities in any quarter. This was aided by strengthened global risk-on
environment in the wake of favorable phase-3 trials and consequent regulatory
authorization of some vaccines as well as continued fiscal and monetary policy support.
Figure 9: Net FII inflows and FII shareholding in the NSE-listed floating stock
US$ mn %
Net FII inflows and FII shareholding
25000 Net FII inflows FII ownership in NSE listed floating stock (R) 50.0
45.0
20000
40.0
15000 35.0
30.0
10000
25.0
5000
20.0
0 15.0
10.0
-5000
5.0
-10000 0.0
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Source: Refinitiv Datastream, CMIE Prowess, NSE * FII ownership includes ownership through depository receipts held by custodians.
Figure 10: Annual net FII inflows trend

US$ bn
Annual net FII inflows into Indian equities
50 44.9
40
30.1
30 26.2
22.6 21.7 22.4
17.9 19.3 18.5
20 16.4
12.5
7.4 8.1 8.2
10
3.8 4.3 3.3 4.3 4.0
0
0.1
-10 6.3
13.2
-20
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Refinitiv Datastream.
9/212
Market Pulse
Direct trading by retail investors continues to pick up: A sharp market crash in the
March quarter, coupled with lockdown restrictions, lured retail investors into trading in
equity markets, with a strong market rebound thereafter further strengthening their
sentiments. This is reflected in an increase in retail ownership in the NSE-listed universe
in the first nine months of 2020. This increased buying is also reflected in a sharp rise in
new investor accounts added in 2020 and increase in retail share in the cash market
turnover. New investor account additions through CDSL as well as NSDL during Jan-Oct
2020 stood at 8.3mn—the highest in last 10 years—representing nearly 17% of the
outstanding active investor accounts. Moreover, the share of individual retail investors in
NSE’s cash market turnover shot up from 39% in FY20 to 465 in the first eight months of
this fiscal year (Apr-Nov 2020).
Figure 11:Quarterly trend of number of active investor Figure 12: Annual trend of new investor account
accounts with depositories additions with depositories
mn mn
Number of investor accounts New investor account additions
50.0 9
NSDL CDSL CDSL NSDL
8
40.0
7
6
30.0
5
20.0 4
3
10.0 2
1
0.0
0
Sep-11
Sep-14
Sep-17
Sep-20
Mar-10
Mar-13
Mar-16
Mar-19
Jun-09
Jun-12
Jun-15
Jun-18
Dec-10
Dec-13
Dec-16
Dec-19
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
TD*
Source: SEBI Bulletin, NSE.
Figure 13: Client category-wise share in NSE’s cash market turnover

Others PRO Individuals investors FII DII Corporates
100% 4 5 6 7 8 7
90%
21 17 18
80% 22 23 24
70%
60% 33 36
39
50% 39 39
46
40%
30% 23 21
16
15 15
20%
10 10 11
9
10% 10 10
12 7
10 11 6
0% 5 5
FY16 FY17 FY18 FY19 FY20 FY21
Source: NSE. Note: DII: Domestic Institutional Investors, FII: Foreign Institutional Investors, Prop traders: Proprietary Traders, Individual investors: individual domestic
investors, NRIs, sole proprietorship firms and HUFs, Others: Partnership Firms/LLP, Trust / Society, AIF, Depository Receipts, PMS clients, Statutory Bodies, FDI, OCB,
FNs, QFIs, VC Funds, NBFC, etc. FY21 considers data till November’20
10/212
Market Pulse
Ownership pattern of the Nifty 50 universe (September 2020)
Private promoter stake inched up for the third quarter in a row; Govt. stake continued
Private Indian promoter
to decline: Overall private promoter ownership in the Nifty 50 Index increased for the
ownership in the Nifty 50
third quarter in a row by 169bps QoQ to over 15-year high of 39.8% in the September universe rose to over 15-year
quarter, translating into a total increase of 5.1pp during the first three quarters of 2020. high of 32.1% in the
This was largely due to a sharp 278bps QoQ increase in private Indian promoter September quarter, even as
ownership to 32.1% in the Nifty 50 Index—the steepest sequential rise in the last seven foreign promoter and
years, but with just 2/50 companies witnessing an increase. Foreign promoters on the government ownership
other hand reduced their ownership in the Nifty 50 universe by 109bps QoQ on top of a declined sharply.
93bps drop in the previous quarter to 7.7%. Government ownership declined for yet
another quarter to hit fresh all-time low of 4.7% (-91bps QoQ), partly attributed to
underperformance of Government-owned companies with respect to the broader market.
FII ownership inched up in the Nifty 50 universe but DMFs’ saw a modest drop: In-
FII share in Nifty 50
line with the listed universe, FII ownership inched up in the Nifty 50 universe by 23bps
companies inched up by
QoQ to 26% in the September quarter, even as the drop on YTD basis (Jan-Sep’20)
23bps QoQ to 26% in the
remain huge at 235bps. Excluding Financials, where FII ownership dropped for the third September quarter, while that
quarter in a row, FIIs’ stake in the Nifty 50 universe went up by 46bps QoQ to a three- of DMFs fell by 29bps QoQ to
year high of 15.4%. DMF ownership on the other hand declined by 29bps QoQ to a five- 8.2%.
quarter low of 8.15% after remaining broadly stable over the previous three quarters.
The drop is much higher than that seen in the broader listed universe, partly reflecting
relative underperformance of large-cap stocks as compared to mid-and-small-caps. The
ownership of Banks, Financial Institutions and Insurance also fell by 50bps QoQ—the
steepest drop in last three years—to hit fresh two-decadal lows of 6.7% in the quarter
ending September 2020.
Retail ownership in the Nifty 50 index at 12-year high: Individual retail investors’
holding in the Nifty 50 Index inched up by 18bps QoQ, albeit at a slower pace as
compared to the listed universe and is now hovering at 12-year high of 8% as of
September-end. This translates into a total increase of 32bps in retail ownership in the
Nifty 50 Index during Jan-Sep 2020 vs. 66bps increase in the overall NSE-listed universe
during the same period, indicating higher retail buying in smaller companies. Nearly 80%
of the Nifty 50 companies saw an increase in stake held by retail investors.
Figure 14: Nifty 50: Ownership pattern by total market cap (%)
Non-promoter Retail, 7.8 Other non-institutional Non-promoter Other non-institutional
corporate, 2.9 non-promoters, 3.2 corporate, 2.3 Retail, 8.0 non-promoters, 3.0

Private Indian
non-promoters, 1.0 non-promoters, 1.4 Private Indian
promoters, 29.3
Banks, FIs & promoters, 32.1
Banks, FIs & Insurance, 6.7
Insurance, 7.2
Govt., 5.6 FIIs, 26.0 Govt., 4.7

FIIs, 25.8
Foreign
Foreign… promoters, 7.7
DMFs, 8.1
DMFs, 8.4
11/212
Market Pulse
Figure 15: Nifty 50: Ownership trend across key stakeholders by total market cap over the last three years
% Govt FIIs * Retail
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 28.0 6.4 9.8 8.4 7.1 26.4 3.1 7.7
Jun-20 29.3 5.6 8.8 8.4 7.2 25.8 2.9 7.8
Sep-20 32.1 4.7 7.7 8.1 6.7 26.0 2.3 8.0
Figure 16: Nifty 50: Ownership pattern by free float market cap (%)
Non-promoter Other non-institutional
Other non-institutional
Govt., 0.3 non-promoters, 5.3
non-promoters, 5.6
DMFs, 14.9 DMFs, 14.6

Retail, 13.8 Retail, 14.3
Non-promoter
Non-promoter corporate, 4.0
corporate, 5.1
Other institutional
Other institutional non- non-promoters, 2.6
promoters, 1.7
Banks, FIs &
Banks, FIs & Insurance, 12.1
Insurance, 12.8 FIIs, 45.7 FIIs, 46.8
Figure 17: Nifty 50: Ownership trend across key stakeholders by free float market cap over last the three years
% Domestic MFs FIIs* Public
Insurance corporate
Dec-17 10.9 14.3 47.9 8.6 12.4
Mar-18 11.1 13.9 47.8 8.9 12.1
Jun-18 11.5 13.5 47.4 9.1 12.8
Sep-18 11.7 13.7 46.4 9.1 12.8
Dec-18 12.7 13.4 46.2 8.8 13.0
Mar-19 13.0 13.0 46.7 8.3 12.9
Jun-19 13.3 12.8 47.3 7.8 13.0
Sep-19 14.3 12.8 48.0 6.0 13.4
Dec-19 14.4 12.5 48.9 5.7 13.2
Mar-20 15.0 12.7 47.0 5.6 13.8
Jun-20 14.9 12.8 45.7 5.1 13.8
Sep-20 14.6 12.1 46.8 4.0 14.3
12/212
Market Pulse
Figure 18: Nifty 50: Long-term ownership trend across key stakeholders by total market cap
% Ownership trend of Nifty 50 universe key stakeholders by total market cap
Promoters DMFs FIIs
Banks, FIs & Insurance Non-promoter corporate Retail
60
50
40
30
20
10
0
Sep-01
Sep-02
Mar-03
Sep-03
Sep-04
Sep-05
Mar-06
Sep-06
Sep-07
Sep-08
Mar-09
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Mar-01
Mar-02
Mar-04
Mar-05
Mar-07
Mar-08
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Figure 19: Nifty 50: Long-term ownership trend across key stakeholders by free float market cap
% Ownership trend of Nifty 50 universe across key non-promoter stakeholders by floating stock

60
50
40
30
20
10
0
Sep-01
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Mar-18
Sep-18
Mar-19
Sep-19
Mar-20
Sep-20
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Ownership pattern of the Nifty 500 universe (September 2020)

Private promoter stake inched up in-line with the listed universe; Govt. stake
Private Indian promoter
declined further to fresh all-time lows: In line with the listed universe and the Nifty 50 ownership in the Nifty 50
Index, private Indian promoter ownership in the Nifty 500 universe increased for the third universe rose to near 15-year
quarter in a row, rising by 130bps QoQ—the steepest sequential increase in last seven high of 34.8% in the
years—to near 15-year high of 34.8% in the September quarter. Nearly 64 out of 500 September quarter, even as
companies saw an increase in the private Indian promoter stake during the quarter. foreign promoter and
Foreign promoters, however, declined their share in the Nifty 500 universe by 47bps QoQ government ownership
on top of a 66bps drop in the previous quarter to 10%. Consequently, private promoter declined further.
stake rose by 83bps QoQ to 44.8% in the September quarter—the highest in last 15 years.
13/212
Market Pulse
Institutional ownership in Nifty 500 inched up led by FIIs: In terms of institutional

FII share in Nifty 500 rose by
ownership, DMFs’ aggregate share in Nifty 500 companies fell by a modest 10bps QoQ to
44bps QoQ in the September
7.9%—nearly 17bps shy of the 20-year peak level. Banks, Financial Institutions and quarter, while that of DMFs
Insurance companies also trimmed their ownership in the Nifty 500 companies by 24bps fell by a modest 10bps to
QoQ to hit fresh two-decadal lows of 5.3%. Selling by domestic institutions, however, was 7.9%.
more than made up by FIIs whose share in the Nifty 500 companies inched up by 44bps
QoQ to 21.4% and is now mere 180bps shy of the peak share in December 2014.
Excluding Financials, the increase in FII ownership in the Nifty 500 Index was much
higher at 82bps QoQ to 14-quarter high of 13.9%, reflecting massive underperformance
of the sector with respect to the broader market.
Retail ownership inched up further: Retail investors ownership in Nifty 500 companies
rose by 31bps QoQ to over 12-year high of 8.6% as of September-end, translating into a
total increase of 58bps during the first three quarters of 2020. The sequential increase in
Q3 2020 was higher than that witnessed in the Nifty 50 Index but a tad lower than the
overall listed universe, indicating higher retail interest in the small-cap stocks.
Figure 20: Nifty 500: Ownership pattern by total market cap (%)
Retail, 8.6 Other non-
Non-promoter Retail, 8.3 Other non-institutional Non-promoter institutional non-
corporate, 2.9 non-promoters, 2.7 corporate, 2.5 promoters, 2.6
non-promoters, 0.9 Private Indian non-promoters, 1.2
promoters, 33.5 Banks, FIs & Private Indian
Banks, FIs & Insurance, 5.3 promoters, 34.8
Insurance, 5.6
FIIs, 21.4
FIIs, 21.0
Govt., 5.7
Govt., 6.7
DMFs, 7.9 Foreign

DMFs, 8.0 Foreign promoters, 10.0
promoters, 10.5
Figure 21: Nifty 500: Ownership trend across key stakeholders by total market cap over last the three years
% Govt FIIs * Retail
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 11.1 8.1 5.5 21.6 3.1 8.1
Jun-20 33.5 6.7 10.5 8.0 5.6 21.0 2.9 8.3
Sep-20 34.8 5.7 10.0 7.9 5.3 21.4 2.5 8.6
14/212
Market Pulse
Figure 22: Nifty 500: Ownership pattern by free float market cap (%)
Non-promoter
Other non-institutional Non-promoter
Govt., 0.8 Other non-institutional
non-promoters, 5.4 Govt., 0.7
non-promoters, 5.2
DMFs, 16.2 DMFs, 15.9

Retail, 16.6 Retail, 17.2
Non-promoter
Non-promoter corporate, 4.9
corporate, 5.9
non-promoters, 1.7 non-promoters, 2.4
FIIs, 42.2 Banks, FIs &

Banks, FIs & Insurance, 10.6 FIIs, 43.0
Insurance, 11.2
Figure 23: Nifty 500: Ownership trend across key stakeholders by free float market cap over the last three years
% Domestic MFs FIIs Retail
Insurance corporate
Dec-17 12.3 12.2 43.0 9.8 16.4
Mar-18 12.6 11.8 43.1 9.9 16.1
Jun-18 12.9 11.7 42.7 9.9 16.1
Sep-18 13.1 12.0 42.4 9.9 16.0
Dec-18 14.0 11.9 41.9 9.6 16.2
Mar-19 14.3 11.2 42.6 9.5 15.8
Jun-19 14.6 11.1 43.3 9.1 15.6
Sep-19 15.5 11.3 44.4 6.8 15.9
Dec-19 15.6 11.0 45.2 6.6 15.8
Mar-20 16.4 11.1 43.5 6.2 16.4
Jun-20 16.2 11.2 42.2 5.9 16.6
Sep-20 15.9 10.6 43.0 4.9 17.2
Figure 24: Nifty 500: Long-term ownership trend across key stakeholders by total market cap
% Ownership trend of Nifty 500 universe key stakeholders by total market cap
Promoters DMFs FIIs
70 Banks, FIs & Insurance Non-promoter corporate Retail
60
50
40
30
20
10
0
Sep-…
Sep-…
Sep-…
Sep-…
Sep-…
Sep-…
Sep-…
Sep-…
Sep-…
Sep-…
Sep-…
Sep-…
Sep-…
Sep-…
Sep-…
Sep-…
Sep-…
Sep-…
Sep-…
Sep-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
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Mar-…
Mar-…
15/212
Market Pulse
Figure 25: Nifty 500: Long-term ownership trend across key stakeholders by free float market cap
% Ownership trend of Nifty 500 universe key stakeholders by floating stock
50
45
40
35
30
25
20
15
10
5
0
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Mar-…
Sep-01
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Sector-wise ownership pattern and allocation to key stakeholders

Sector-wise ownership of the Nifty 50 universe (September 2020): In the quarter
Utilities remained the leading
ending September 2020, Communication Services within the Nifty 50 universe had the
sector in terms of DMF
highest promoter ownership at 55.9% (+230bps QoQ), followed by Information
ownership for the second
Technology at 55.5% (-114bps QoQ), Utilities at 51.3% and Energy at 50.6% (-57bps consecutive quarter.
QoQ). Utilities and Energy remained the top sectors in terms of Government ownership at
FIIs remained the biggest
52.9% (-6bps QoQ) and 9.9% (-367bps QoQ) respectively, even as both the sectors have
non-promoter owners of
seen a significant drop in Government’s over the years. Financials within the Nifty 50
Utilities remained the leading sector in terms of DMF ownership for the second universe, despite a drop in
share over the last three
consecutive quarter even as the DMF ownership fell by 78bps QoQ in the sector to reach
quarters.
14.1% in the September quarter. Healthcare sector inched ranked second with DMF
share rising by 122bps QoQ to 12.9%, followed by Communication Services at 12.7%
(+144bps QoQ), Industrials at 12.0% (-54bps QoQ) and Financials at 11.2% (-77bps
QoQ), Notably, DMF ownership in Communication Services has nearly tripled in the last
three years.
FIIs have remained the biggest non-promoter owners of Financials at 42.5% (-130bps
QoQ) despite a drop in share over the last three quarters. This is followed by Consumer
Discretionary at 24.8% (+37bps QoQ), Energy at 24.0% (162bps QoQ), Information
Technology at 20.8% (+54bps QoQ and Communication Services at 20.5% (-414bps
QoQ). Unlike DMFs, FIIs’ ownership share in Communication Services has been declining
over the last few years. In terms of overall foreign ownership (including foreign
promoters), Consumer Staples leads with a 60.9% (+28bps QoQ) foreign share, followed
by Consumer Discretionary at 45.9% (-55bps) and Financials at 43.4% (-58bps QoQ).
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Market Pulse
Figure 26: Nifty 50: Sector-wise ownership pattern across key stakeholders (September 2020)
% Sector-wise ownership of the Nifty 50 universe
Private Indian promoters Govt. Foreign promoters
DMFs FIIs* Banks, FIs & Insurance
Non-promoter corporate Retail Others**
2.0 1.8
100 3.5
1.9 4.5 4.0 3.7 6.3 5.8 3.9 2.7
1.9
5.2 7.8 8.5 14.0 5.2 9.1
90 8.5 12.3 10.0
1.9 1.7
9.3 0.4
0.6 6.1
6.4 5.3 5.0
8.0 3.8
80 20.5 7.4 4.4 15.5 6.7
18.1
9.7 20.8
70 24.0 0.8
24.7 19.4 17.6
12.7 16.4
60 13.9 42.5 6.1 14.1
5.6 2.0 7.5
50 7.2 5.7 12.9 0.7
17.7 9.9
18.4
3.9
40
21.1
11.2
30 12.0
53.6 52.9
47.1 4.3 49.4
5.5
20 38.2 40.9 40.1 6.2
0.3
10 19.7 21.9
16.3
0 -
Comm Svcs. Cons. Disc. Cons. Staples Energy Financials Healthcare Industrials IT Materials Utilities
Source: CMIE Prowess, NSE
* FII ownership includes ownership through depository receipts held by custodians **Others include other institutional and non-institutional non-promoter investors
Figure 27: Sector allocation of the Nifty 50 universe for key stakeholders (September 2020)
Private Banks, FIs Non-
% Foreign Domestic
Indian Govt FIIs* & promoter Retail
promoters MFs
promoters Insurance corporate
Communication Services 3.5 0.0 6.7 4.5 2.3 2.3 2.5 0.7
Consumer Discretionary 3.8 7.2 16.8 5.4 5.8 7.4 1.7 6.6
Consumer Staples 0.0 0.0 64.0 7.3 5.6 15.2 34.7 16.2
Energy 25.8 42.9 0.0 13.9 18.7 19.4 16.9 19.8
Financials 17.1 23.1 3.1 34.4 40.9 19.6 18.6 26.8
Health Care 4.9 0.0 2.0 6.2 2.9 2.5 6.7 4.6
Industrials 1.1 0.2 1.8 3.2 1.5 5.3 0.8 4.3
Information Technology 34.3 0.2 5.2 15.4 16.4 18.6 4.0 13.4
Materials 9.5 0.1 0.6 5.6 4.2 6.2 13.7 7.0
Utilities 0.0 26.3 0.0 4.0 1.6 3.5 0.3 0.8
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
DMFs increased their exposure to IT and Healthcare in the September quarter: Amidst
DMFs turned
increased
incrementally
their
high macro and market uncertainty, DMFs increased their exposure to sectors that have more
exposure
cautious
to IT,on
Healthcare
Financials in
emerged largely unscathed from the COVID-19 pandemic. In the September quarter, and
the September
Industrialsquarter
in the June
at the
DMFs significantly strengthened their OW position on Healthcare and Communication quarter,
expense trimming
of reduced their
exposure
OW
Services within the Nifty 50 Index, with their exposure to both relative to the Index rising position
to Energyon both.
and Materials
to the highest level in last 20 years. They also turned incrementally less cautious on relative to the Index.
Information Technology and Consumer Staples during the quarter and increased their OW
position on Financials. This came at the expense of reduced allocation to Energy,
Materials and Utilities. While DMFs strengthened their already big negative position on
Energy, they turned mild UW on Materials and trimmed their OW position on Utilities.
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Market Pulse
Figure 28: DMF sector allocation of the Nifty 50 universe Figure 29: DMF sector-wise OW/UW in Nifty 50 relative
(September 2020 vs. June 2020) to sector weight in the index (September 2020)
% DMF sector allocation of the Nifty 50 universe bps DMF sector-wise OW/UW in Nifty 50
34.4
Financials -137
35.2 Energy
-297
15.4
IT -223
11.7 Cons. Staples
-169
13.9 Jun-20
Energy -249
13.6 IT
-145
Sep-20
7.3
Cons. Staples Cons. Disc. -126
8.6
-143
6.2
Healthcare Materials 33
4.0 Sep-20 -55
5.6
Materials Jun-20 Industrials 49
6.9 42
5.4 83
Cons. Disc. Financials
5.2 110
4.5 259
Comm Svcs. Utilities
6.0 198
4.0 96
Utilities Healthcare
5.1 213
3.2 216
Industrials Comm Svcs.
3.8 246
0 10 20 30 40 -400 -300 -200 -100 0 100 200 300

Source: CMIE Prowess, NSE.
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Market Pulse
Figure 30: DMF vs Nifty 50—Sector-wise OW/UW trend (bps)

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
2,000 Materials Real Estate Utilities
1,500
1,000
500
-500
-1,000
-1,500
-2,000
Mar-01
Sep-02
Mar-04
Sep-05
Mar-07
Sep-08
Mar-10
Sep-11
Mar-13
Sep-14
Mar-16
Sep-17
Mar-19
Sep-20
Jun-03
Jun-06
Jun-09
Jun-12
Jun-15
Jun-18
Dec-01
Dec-04
Dec-07
Dec-10
Dec-13
Dec-16
Dec-19
FIIs trimmed exposure to Financials but retained an outsized bet; turned

FIIs maintained their
incrementally bullish on Energy: Unlike DMFs, FIIs trimmed their exposure to Financials
perennial OW position on
for the second quarter in a row even as they retained their perennially out-sized bet on Financials and turned
the sector. Also contrary to DMFs, FIIs turned incrementally more bullish on Energy and incrementally more bullish on
strengthened their OW position, with their relative positioning to the sector being the Energy in the September
highest in last 20 years. FIIs maintained their negative stance on Consumer Staples, quarter.
Materials, Industrial and Healthcare and remained neutral on Communication Services,
Information Technology, Consumer Discretionary and Utilities.
Figure 31: FII sector allocation of the Nifty 50 universe Figure 32: FII sector-wise OW/UW in Nifty 50 relative to
(September 2020 vs. June 2020) sector weight in the index (September 2020)
% FII sector allocation of the Nfity 50 universe bps FII sector-wise OW/UW in Nifty 50
Financials 40.9 Cons. Staples -382

-341
42.2
18.7 Materials -172
Energy 16.3 -204
Jun-20
16.4 Industrials -140
IT 14.0 -124
Sep-20
5.8 Healthcare -93
Cons. Disc. 5.4 -112
5.6 Cons. Disc. -105
Cons. Staples 7.0 -99
Sep-20
4.2 Utilities -53
Materials 4.8 -42
Jun-20
2.9 IT -15
Healthcare 2.1 -40
2.3 Comm Svcs. 44
Comm Svcs. 4.3 21
1.6 Energy 134
Utilities 2.0 180
1.5 Financials 781
Industrials 1.9 761
0 10 20 30 40 50 -500 -250 0 250 500 750 1000

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Market Pulse
Figure 33: FII vs Nifty 50—Sector-wise OW/UW trend (bps)

bps Sector-wise OW/UW trend for FIIs vs. Nifty 50 Index
2,000
Materials Real Estate Utilities
1,500
1,000
500
-500
-1,000
-1,500
Sep-02
Sep-05
Sep-08
Sep-11
Sep-14
Sep-17
Sep-20
Mar-01
Mar-04
Mar-07
Mar-10
Mar-13
Mar-16
Mar-19
Jun-03
Jun-06
Jun-09
Jun-12
Jun-15
Jun-18
Dec-01
Dec-04
Dec-07
Dec-10
Dec-13
Dec-16
Dec-19
Sector-wise ownership of the Nifty 500 universe (September 2020): As of September

Sector-wise, Communication
2020, Real Estate sector had the highest promoter shareholding at 65.7% (-142bps
Services beat Industrials to
QoQ), followed by Utilities at 60.2% (+266bps QoQ), Materials at 56.6% (-15bps QoQ)
become the sector with the
and Information Technology at 56.3% (-126bps QoQ). Utilities had the highest highest DMF ownership in the
Government ownership at 26.3% (-443bps QoQ), followed by Energy at 9.8% (-337bps September quarter.
QpQ) respectively, even as both have seen a significant drop over the last few years.
FIIs are the biggest non-
Industrials and Financials stood second and third with Government share at 9.2% (- promoter owners of
162bps QoQ) and 9.1% (-113bps QoQ) respectively in the September quarter. Financials in the Nifty 500
universe as well, followed by
In terms of DMF ownership, Communication Services beat Industrials to become the Energy and Communication
sector with the highest DMF ownership of 10.6% in the September quarter. DMF Services.
ownership in Industrials within the Nifty 500 Index fell by 30bps QoQ to a six-quarter low
of 10% as of September-end. DMF ownership in Financials inched up by a modest 15bps
QoQ to 9.8% following a sharp drop in the previous quarter, while that in Information
Technology rose by 61bps QoQ to more than 19-year high of 6.3%. DMFs also raised their
share in Real Estate within the Nifty 500 Index to a 57-quarter high of 4.5% (+68bps QoQ)
in the September quarter.
FIIs remained the biggest non-promoter owners of Financials at 34.6% (-101bps QoQ),
followed by Energy at 23.8% (+157bps QoQ) and Communication Services at 23.0% (-
32bps QoQ). Except for Communication Services and Consumer Staples, all sectors
within the Nifty 500 universe witnessed a sequential increase in FII ownership in the
September quarter. In terms of overall foreign ownership (including foreign promoters),
Consumer Staples leads with a 46.9% (-100bps QoQ) foreign share, followed by
Communication Services at 39.3% (-115bps QoQ) and Financials at 37.3% (+106bps
QoQ).
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Market Pulse
Figure 34: Nifty 500: Sector-wise ownership pattern across key stakeholders (September 2020)
% Sector-wise ownership of the NSE 500 universe
Private Indian promoters Govt. Foreign promoters
DMFs FIIs* Banks, FIs & Insurance
Non-promoter corporate Retail Others**
100 2.0 3.1 3.5 3.6 3.5 0.9 1.5
3.9 4.2 5.2 5.4 4.0
4.7 5.9
7.9 8.7 1.6 1.7
90 3.1 9.7 11.0 10.8 5.7 9.7
3.8 10.7 0.6 5.8
1.9 2.2
2.7 2.5 5.6 3.5
5.2 6.2 4.6 2.3
80 5.6 3.1 4.7 21.2
6.7 7.1 17.2
23.0
16.6 19.9 12.2
70 18.1 23.8
14.4 13.2 4.5
34.6 1.4 8.2
8.0
60 6.3 6.1
10.6 5.6 9.5 10.0
8.6 5.8 5.1 9.5
50 0.3 0.6
11.3 4.9
16.3 9.8
18.2 15.4 26.3
40 9.8
32.5
2.7
2.6 9.2 64.3
30 9.1
50.8
41.9 44.2
20 36.4
40.9
30.7 29.1
24.7 26.9
10 21.1
0
Comm Svcs. Cons. Disc. Cons. Staples Energy Financials Healthcare Industrials IT Materials Reality Utilities
Source: CMIE Prowess, NSE * FII ownership includes ownership through depository receipts held by custodians
**Others include other institutional and non-institutional non-promoter investors
Figure 35: Sector allocation of the Nifty 500 universe for key stakeholders (September 2020)
Private Banks, FIs Non-
% Foreign Domestic
Indian Govt FIIs* & promoter Retail
promoters MFs
promoters Insurance corporate
Communication Services 3.0 0.0 4.6 3.8 3.0 2.0 3.5 1.6
Consumer Discretionary 7.7 4.0 15.8 9.4 7.3 9.2 9.5 9.8
Consumer Staples 6.9 0.7 36.7 8.0 7.6 14.4 23.7 14.5
Energy 15.5 22.9 0.3 9.7 14.6 15.4 10.1 12.2
Financials 15.5 35.2 5.9 27.1 35.3 18.8 19.5 22.3
Health Care 8.8 0.1 8.2 8.7 5.6 4.2 7.3 9.2
Industrials 4.6 9.7 9.2 7.6 3.7 8.0 5.6 7.5
Information Technology 21.0 1.5 7.3 11.5 13.4 15.2 3.7 9.6
Materials 12.5 8.4 9.3 9.9 5.6 8.7 13.8 11.1
Real Estate 1.4 0.0 0.1 0.4 0.8 0.0 0.5 0.5
Utilities 3.1 17.5 2.3 3.9 3.0 4.1 2.7 1.8
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
DMFs remained cautious on smaller financial companies and turned incrementally

DMFs remained cautious on
more negative on Energy: DMFs’ remained relatively negative on smaller financial smaller banks and NBFCs
companies as reflected from their UW position on the sector within the Nifty 500 Index and Consumer Staples, albeit
for the third quarter in row as compared to an OW position within the Nifty 50 Index. That incrementally less so, and
said, the extent of UW stance came off marginally in the September quarter. strengthened their UW stance
on Energy. The OW position
Similar to the trend seen in the Nifty 50 Index, DMFs turned incrementally more negative
on Industrials was retained
on Energy, and strengthened their UW stance by broadly retaining their allocation to the despite a cut in allocation
sector as compared to a ~120bps QoQ increase in the sector’s weight in the Index. DMFs
also reduced their UW stance on Information Technology—a consequence of an increase
in allocation as well as a strong rally seen in IT stocks during the quarter. Among other
sectors, DMFs maintained a negative stance on Consumer Staples, albeit incrementally
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Market Pulse
less so, and were OW on Healthcare, Industrials, Materials and Utilities. DMFs’ OW
position on Industrials, however, has come off meaningfully over the last several years.
Notably, unlike FIIs, DMFs’ portfolio is far more aligned to the Index, with no outsized
positive or negative bets on any sector.
Figure 36: DMF sector allocation of the Nifty 500 Figure 37: DMF sector-wise OW/UW in Nifty 500 relative
universe (September 2020 vs. June 2020) to sector weight in the index (September 2020)
% DMF sector allocation of the Nfity 500 universe bps DMF sector-wise OW/UW in Nifty 500
Energy -269 -153
Financials 27.1
28.6
IT 11.5 Cons. Staples -236 -184
8.7
9.9 Financials -192 Jun-20
Materials 9.7 -165
9.7 IT -216 Sep-20
Energy 9.6 -135
9.4 Realty -17
Cons. Disc. 9.1 -9
Healthcare 8.7 Sep-20 Cons. Disc. 101
7.8 92
Cons. Staples 8.0 Jun-20 Comm Svcs. 111
8.9 99
Industrials 7.6 Utilities 155
7.8 106
Utilities 3.9 Materials 115
4.7 126
Comm Svcs. 3.8 150
4.6 Healthcare 167
Realty 0.4 183
0.4 Industrials 173
0 5 10 15 20 25 30 -300 -200 -100 0 100 200 300

Figure 38: DMF vs Nifty 500—Sector-wise OW/UW trend (bps)

bps Sector-wise OW/UW trend for DMFs vs. Nifty 500 Index
1,000
500
-500
-1,000
-1,500
Sep-05
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Mar-05
Mar-06
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
FIIs’ sector stance contrasted DMFs’ with a huge OW stance on Financials and Energy
in the Nifty 500 Index: The relative sector positioning of FIIs in the Nifty 500 Index has
remained broadly stable in the September quarter, and is in complete contrast to DMFs’.
The out-sized bet of FIIs on Financials was maintained for yet another quarter but with a
22/212
Market Pulse
sequentially lower exposure at 35.3% (-257bps QoQ)—the lowest in last 15 quarters, a

part of which is attributed to a 120bps QoQ dip in the sector’s weight in the index.
Financials aside, FIIs turned incrementally quite bullish on Energy and strengthened their
OW position on the sector in the quarter ending September 2020. Contrary to DMFs, FIIs
have perennially remained negative on the investment theme in the economy, FIIs are largely playing the
maintaining their UW stance on Industrials and Materials since 2006. FIIs have also India story through
Financials and Energy with
maintained their cautious view on India’s consumption story and are UW on Consumer
the two accounting for ~50%
Staples as well as Consumer Discretionary, albeit incrementally less so, reflecting
of their exposure to Nifty 500
uncertain demand environment and possibly valuation discomfort. Amongst other vs. their combined weight of
sectors, FIIs maintained a negative stance on Healthcare and a neutral position on 41% in the Index
Utilities, Communication Services, Information Technology and Real Estate.
Figure 39: FII sector allocation of the Nifty 500 universe Figure 40: FII sector-wise OW/UW in Nifty 500 relative
(June 2020 vs. March 2020) to sector weight in the index (June 2020)
% FII sector allocation of the Nfity 500 universe bps FII sector-wise OW/UW in Nifty 500
35.3 Materials -292
Financials 37.9 -301
14.6 Cons. Staples -246
Energy 12.9 -221
13.4 Industrials -218
IT 11.3 -215
7.6 Healthcare -124 Jun-20
Cons. Staples 8.8 -139
7.3 Cons. Disc. -131
Cons. Disc. 6.8 -119 Sep-20
5.6 Utilities -12
Healthcare 5.1 Sep-20 16
5.6 Comm Svcs. 50
Materials 5.7 Jun-20 22
3.7 Realty 24
Industrials 3.8 24
3.0 IT 37
Comm Svcs. 4.0 50
3.0 Energy 169
Utilities 3.1 227
0.8 Financials 743
Realty 0.8 655
0 10 20 30 40 -400 -200 0 200 400 600 800

Figure 41: FII vs Nifty 500—Sector-wise OW/UW trend (bps)

bps Sector-wise OW/UW trend for FIIs vs. Nifty 500 Index
1,500
1,000
500
-500
-1,000
Sep-05
Mar-06
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Mar-05
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
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Market Pulse
Institutional ownership concentration analysis
Institutional ownership gets incrementally more concentrated to larger companies:

FIIs’ portfolio, with nearly
The charts below depict how institutional money is concentrated in the larger companies 74% of investments made
within the listed universe. FII ownership (including ownership through depository towards Nifty 50 companies,
receipts) inched up across the board in the September quarter, translating into a net is far more concentrated as
buying (increase in exposure) of ~Rs1trn in the Nifty 50 as well as the overall NSE-listed compared to DMFs’ who have
floating stock. DMFs, on the other hand, marginally reduced their ownership in equity a relatively much lower (63%)
markets in the September quarter, with net selling (decrease in exposure) by DMFs in the share of their portfolio
allocated to Nifty 50.
September quarter estimated at ~Rs300bn and ~Rs450bn in the Nifty 50 and overall
listed universe respectively. Banks, FIs and insurance companies were much bigger
sellers of Indian equity markets in the September quarter, with net selling by them in the
NSE-listed universe being equivalent to net buying by FIIs despite owing just 25% of what
FIIs own. That said, FIIs’ portfolio, with nearly 74% of investments made towards Nifty
50 companies (~59% of the NSE-listed universe), remains far more concentrated as
compared to DMFs’ who have a relatively much lower (63%) share of their portfolio
allocated to Nifty 50.
Figure 42:Institutional ownership of total market cap across indices and stock universe (Sep 2020 vs. June 2020)
% Institutional ownership of total market across universes
Nifty 50 Top 10% listed cos by market cap Nifty 500 All listed All listed ex Nifty 500
30
25.8 26.0
25 22.0 22.5
21.020.2 21.420.6
20
15
10 8.4 7.8 8.0 7.8 8.1 7.7 7.9 7.7

7.2 6.7
6.0 5.6 5.5 5.5 5.7 5.3 5.2
4.2 4.8
5 3.0 3.0 3.0
0
FII DMFs Banks, FIs & FII DMFs Banks, FIs &
June 2020 Insurance September 2020 Insurance
Figure 43:Institutional ownership of floating stock across indices and stock universe (Sep 2020 vs. June 2020)
% 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
50 45.7 46.8
43.9 44.7
42.241.0 43.041.7
40
30
20 14.915.716.215.8 13.9 14.615.415.915.5

12.812.0
10.8 11.211.212.2 12.111.310.6
10.5
10 7.6 7.4 7.5
0
FII DMFs Banks, FIs & FII DMFs Banks, FIs &
June 2020 Insurance September 2020 Insurance
24/212
Market Pulse
Ownership concentration in terms of no. of companies with holding greater than 5%:
Combining the theme of evolving institutional ownership patterns with concentration
trends in the market brings out some interesting takeaways. We consider the FII portfolio FIIs’ investment
in India since 2001, not in terms of its value, but in terms of the number of stocks. Notice concentration in terms of not
of companies with at least
how overall number of stocks in the portfolio has hovered around 1200 for the past 11
5% ownership has remained
years. During this period (2010-), FIIs have poured in US$145bn+ on a net basis into the
broadly steady over the last
Indian equity markets. In the absence of new companies, the deployment of this capital six years, while that of DMFs
has led to a gradual rise in their ownership of the incumbent portfolio. Illustratively, FIIs have more than doubled
today have at least 5% ownership in ~70% of the Nifty 500 Universe (by no of companies), during this period.
even as the share has fallen slightly over the last couple of years.
In contrast with foreign investors, domestic mutual funds have led an amplified version
of this behaviour, particularly since June 2014. Notice how the number of Nifty 500
companies with at least 5% DMF ownership has almost doubled from 137 in June 2014
to ~300 now. This is a direct consequence of the increased inflows into DMFs, particularly
through the SIP route, the last few years. While the FIIs have broadly held their position,
other institutional players have ceded space to DMFs.
Figure 44: Number of listed cos with FII holding >5% Figure 45: Number of Nifty500 cos with FII holding >5%
# FII-held cos. % # %
# of Nifty 500 cos with FII share>5%
# of listed cos with FII share>5%
1,400 48% 438 % of Nifty 500 cos (R) 100%
% of NSE listed cos (R)
1,200 43% 388 90%
38% 338 80%

1,000
70%
33% 288
800 60%
28% 238
600 50%
23% 188
40%
400
18% 138 30%
200 13% 88 20%
0 8% 38 10%
Sep-02
Sep-05
Sep-08
Sep-11
Sep-14
Sep-17
Sep-20
Sep-02
Sep-05
Sep-08
Sep-11
Sep-14
Sep-17
Sep-20
Mar-01
Mar-04
Mar-07
Mar-10
Mar-13
Mar-16
Mar-19
Mar-01
Mar-04
Mar-07
Mar-10
Mar-13
Mar-16
Mar-19
Jun-03
Jun-06
Jun-09
Jun-12
Jun-15
Jun-18
Jun-03
Jun-06
Jun-09
Jun-12
Jun-15
Jun-18
Dec-01
Dec-04
Dec-07
Dec-10
Dec-13
Dec-16
Dec-19
Dec-01
Dec-04
Dec-07
Dec-10
Dec-13
Dec-16
Dec-19
Figure 46: Number of listed cos with DMF holding >5% Figure 47: Number of Nifty500 cos with DMF holding >5%
# DMF-held cos % # %
# of Nifty 500 cos with DMF share>5%
# of listed cos with DMF share>5% % of Nifty 500 cos (R)
1,300 35% 350 65%
% of NSE listed cos (R)
1,100 30% 300 55%

294
900 25% 250 45%
700 20% 200 35%
500 15% 150 25%

137
300 10% 100 15%
100 5% 50 5%
Mar-01
Sep-02
Sep-05
Sep-08
Sep-11
Mar-13
Sep-14
Sep-17
Sep-20
Mar-04
Mar-07
Mar-10
Mar-16
Mar-19
Jun-03
Jun-06
Jun-09
Jun-12
Jun-15
Jun-18
Dec-01
Dec-04
Dec-07
Dec-10
Dec-13
Dec-16
Dec-19
Mar-01
Sep-02
Sep-05
Sep-08
Mar-10
Sep-11
Sep-14
Sep-17
Sep-20
Mar-04
Mar-07
Mar-13
Mar-16
Mar-19
Jun-03
Jun-06
Jun-09
Jun-12
Jun-15
Jun-18
Dec-01
Dec-04
Dec-07
Dec-10
Dec-13
Dec-16
Dec-19
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Market Pulse
Figure 48: Number of listed companies with Banks, FIs Figure 49: Number of Nifty500 companies with Banks,
& Insurance holding >5% FIs & Insurance holding >5%
# BFI-held cos % # %
# of Nifty 500 cos with Banks, Fis & Insurance share>5%
# of listed cos with BFI share>5%
1,700 45% % of Nifty 500 cos (R)
% of NSE listed cos (R) 260 55%
1,500 40% 240
50%
1,300 35% 220
45%
1,100 30% 200
180 40%
900 25%
160 35%
700 20%
140
500 15% 30%
120
300 10% 25%
100
100 5% 80 20%
Sep-02
Sep-05
Sep-08
Sep-11
Sep-14
Sep-17
Sep-20
Sep-02
Sep-05
Sep-08
Sep-11
Sep-14
Sep-17
Sep-20
Mar-01
Mar-04
Mar-07
Mar-10
Mar-13
Mar-16
Mar-19
Mar-01
Mar-04
Mar-07
Mar-10
Mar-13
Mar-16
Mar-19
Jun-03
Jun-06
Jun-09
Jun-12
Jun-15
Jun-18
Jun-06
Jun-09
Jun-12
Jun-15
Jun-18
Dec-01
Dec-04
Dec-07
Dec-10
Dec-13
Dec-16
Dec-19
Dec-01
Jun-03
Dec-04
Dec-07
Dec-10
Dec-13
Dec-16
Dec-19
Source: CMIE Prowess, NSE. BFI = Banks, Financial Institutions and Insurance Companies.
Concentration of Institutional money in the top 10%:

So, if FIIs are content to maintain the stock count in their portfolio, what has been the
While FIIs have tried to
experience with their top holdings? A benchmarking of the concentration levels in maintain the status quo, by
institutional portfolios with the Nifty 500 throws up some more interesting results. We and large, strong inflows of
use the market-cap share of the top 10% of stocks as the metric here. funds into DMFs have led to a
curious combination of both
The ‘foreign’ portfolio was highly concentrated in 2001, with ~98% of the entire holdings rising concentration and a
in just the top 10% of stocks. That has since changed with increased understanding of widening spread.
the markets, dropping to 85% in 2006, and then gradually rising, to reach 93.5% in
September 2020. Just to clarify here: The rise in concentration in the last two years or so
is merely a market feature—notice the commensurate (actually more acute) rise in the
benchmark Nifty 500 portfolio during this time.
It is the Domestic Mutual Funds (DMFs) that have actually seen a relatively more
concentrated portfolio in the last two years. The top 10% of stocks by market cap now
occupy ~86% of their total portfolio, vs. 75% in December 2019.
What one can gather from both the views (The top 10% of the portfolio and the number
of stocks with at least 5% ownership) is that while FIIs have tried to maintain the status
quo, by and large, strong inflows of funds into DMFs, barring a drop seen in FY21 thus far,
have led to a curious combination of both rising concentration and a widening spread.
DMFs do explore a larger set of stocks, but they are also largely content to pile on their
existing holdings.
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Figure 50:Trend of FII portfolio allocation to top 10% Figure 51:Trend of DMF portfolio allocation to top 10%
companies by total market cap companies by total market cap
% FII portfolio allocation to top 10% cos pp % DMF portfolio allocation to top 10% cos pp
Share of top 10% cos in listed universe Share of top 10% cos in listed universe
12 100 5
99 Gap (R)
11 96 Gap (R)
95 10 92 0
9 88
91
8 84 -5
87 7 80
6 76 -10
83 5 72
4 68 -15
79
3 64
75 2 60 -20
Sep-02
Sep-05
Sep-08
Sep-11
Sep-14
Sep-17
Sep-20
Mar-01
Mar-04
Mar-07
Mar-10
Mar-13
Mar-16
Mar-19
Jun-03
Jun-06
Jun-09
Jun-15
Jun-18
Jun-12
Dec-01
Dec-04
Dec-07
Dec-10
Dec-13
Dec-16
Dec-19
Sep-02
Sep-05
Sep-08
Sep-11
Sep-14
Sep-17
Sep-20
Mar-01
Mar-04
Mar-07
Mar-10
Mar-13
Mar-16
Mar-19
Jun-03
Jun-06
Jun-09
Jun-12
Jun-15
Jun-18
Dec-01
Dec-04
Dec-07
Dec-10
Dec-13
Dec-16
Dec-19
Figure 52: Trend of Banks, FIs & Insurance companies’ Figure 53: Trend of institutional investment share in top
portfolio allocation to top 10% cos by total market cap 10% companies by total market cap
% BFI portfolio allocation to top 10% cos pp % Inst. Inv portfolio allocation to top 10% cos pp
Share of top 10% cos in listed universe 13 Share of top 10% cos in listed universe 8
98 Gap (R) 98 Gap (R)
11
7
94 9 94
90 7 90 6
86 5 86
5
3
82 82
1 4
78 78
-1
3
74 -3 74
70 -5 70 2
Sep-02
Sep-05
Sep-08
Sep-11
Sep-14
Sep-17
Sep-20
Mar-01
Mar-04
Mar-07
Mar-10
Mar-13
Mar-16
Mar-19
Jun-03
Jun-06
Jun-09
Jun-12
Jun-15
Jun-18
Dec-01
Dec-04
Dec-07
Dec-10
Dec-13
Dec-16
Dec-19
Mar-01
Sep-02
Mar-04
Sep-05
Mar-07
Sep-08
Mar-10
Sep-11
Mar-13
Sep-14
Mar-16
Sep-17
Mar-19
Sep-20
Jun-03
Jun-06
Jun-09
Jun-12
Jun-15
Jun-18
Dec-01
Dec-04
Dec-07
Dec-10
Dec-13
Dec-16
Dec-19
Source: CMIE Prowess, NSE. BFI = Banks, Financial Institutions and Insurance Companies
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Market Pulse
Figure 54: Share of investments made by institutional investor categories towards top 10% companies
% Share of investments made towards top 10% companies by market cap
100.0
FIIs DMFs Banks, FIs & insurance companies
95.0
90.0
85.0
80.0
75.0
70.0
65.0
60.0
Mar-16
Mar-01
Sep-02
Mar-04
Sep-05
Mar-07
Sep-08
Mar-10
Sep-11
Mar-13
Sep-14
Sep-17
Mar-19
Sep-20
Jun-03
Jun-06
Jun-09
Jun-12
Jun-18
Jun-15
Dec-01
Dec-04
Dec-07
Dec-10
Dec-13
Dec-16
Dec-19
Figure 55: Relative ownership concentration trend of institutional investors in top 10% companies by market cap
Relative ownership concentration trend to top 10% cos (rebased to 100 on March 31, 2001)
120
FIIs DMFs Banks, FIs & insurance companies
110
100
90
80
70
60
Sep-02
Sep-05
Sep-08
Sep-11
Sep-14
Sep-17
Sep-20
Mar-01
Mar-04
Mar-07
Mar-10
Mar-13
Mar-16
Mar-19
Jun-03
Jun-06
Jun-09
Jun-12
Jun-15
Jun-18
Dec-01
Dec-04
Dec-07
Dec-10
Dec-13
Dec-16
Dec-19
Source: CMIE Prowess, NSE. Concentration here is calculated as the share of investments made towards top 10% companies by market cap.
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Looking back at 2020: A year full of challenges

The year gone by was full of challenges, with the unprecedented Coronavirus outbreak being the most difficult of all.
With more than 86m infected across 220 countries, and ~1.9m people losing their lives, the pandemic has had impact
quite unlike any in recent memory. Even as the vast majority of the global population has survived, lives and livelihoods
have been compromised in permanent ways, in terms of social distancing norms, adopting work-from-home culture and
postponement of usual social and economic activities. Governments in many countries have had to resort to stringent
measures including full/partial lockdowns towards containing the virus and undertake fiscal expansion to mitigate its
adversary impact on the economy. In this report, we take a panoramic view of the impact of the Coronavirus pandemic
and its impact on macro aggregates in India and the World across asset classes. Our analysis shows that economic and
market conditions reacted harshly to the lockdown measures but also surprised positively with the pace of recovery.
Global GDP fell sharply in Q2 2020 along with a sharp rise in unemployment rate and decline in global trade volume.
Even as there are several green shoots in the following quarters, thanks to gradual unlocking process, decline in active
Coronavirus cases in many countries along with fiscal and monetary policy actions, global economic activity is projected
to decline by 4.4% in 2020 (IMF, October 2020). The pandemic caused havoc on both entrepreneurs and employees
with a spike in unemployment, rise in gig-economy, accumulation of bad loans and shut down of businesses. Except a
few Asian countries like China and Taiwan, the health crisis hampered developed and emerging economies alike due to
a sharp fall in consumption demand, low investment demand and a free fall in export. Several economists have
predicted to have a K-shaped recovery as there is a fear of rising poverty level and increasing inequality across the globe
(Poverty and Shared Prosperity Report, 2020).5
The overall impact has, however, been quite different across sectors. While IT, Consumer staples and Pharma
performed outstandingly well amid sudden surge in demand, Consumer Discretionary, Energy, Industrials, Materials,
Real estate, Hospitality and Travel industries were worse hit during the pandemic amid stringent lockdown measures,
social distancing norms and sharp decline in demand. Low credit growth and surplus liquidity in the system even after
taking several monetary measures reveal a stalled investment cycle in the economy.
The pandemic has adversely impacted several commodities like crude oil, aluminium, lead, copper and nickel. Notably,
WTI crude oil price fell by almost 161% to a minimum of -US$36.7/bbl as on April 20th, while other hard commodities
recorded a significant fall in their respective prices over the Q2-2020 before rising again over the next two quarters
along with revamp in economic activities. Gold, on the other hand, increased to a record level of US$2,053/t as on
August 6th (vs. US$1,521/t as on January 1st, 2020) as investors considered it to be a safe-haven investment option.
Barring a few market wide circuit breakers in Mar’20, the equity market has performed exceptionally well reaching to a
new high across several countries. This section, in this regard, has attempted to give a detailed perspective of all major
developments in the year of 2020. We have started with an analysis on the Covid-19 pandemic across major countries
thus far, and how it has affected their economic activities. We have also attempted to understand market performance
over the year across asset classes and listed down major policy initiatives taken by the Government of India and the
RBI so far. Major takeaways of the analysis are as follows:
• Unlike India, US and many European countries continued to suffer with

multiple waves: Total number of active Coronavirus cases continued to rise in US,
UK, France and Spain as they have seen multiple waves thus far post the unlock
process started, largely led by loosening precautions during the festive seasons.
Moreover, there is a rising concern over a new strain of the virus found in UK, which
has already started to spread in other countries including India. While hospitals in
Central and Eastern Europe have been hit hardest in the second and third wave,
5
https://www.worldbank.org/en/publication/poverty-and-shared-prosperity
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the UK government has taken fresh lockdown measures in the country even as they
have already started the vaccination process. On the positive side, total number of
active cases continued to fall in India since mid-September as total number of
recoveries remained higher than per day new infections. Till now, more than 10m
people are infected in the country, while more than 149 thousand people lost their
lives, implying to a death rate of ~1.0%, which is significantly lower than the global
average.
• IMF projected Global GDP to fall by 4.4% in 2020, followed by a V-shape
recovery in 2021: The IMF, in its recent World Economic Outlook, expects the
global economy to contract by 4.4% in 2020, much lower than the Global Financial
Crisis and worst since the Great Depression in 1930s. This recent fall in economic
activity was largely led by partial/complete lockdown in several countries since the
outbreak of the pandemic, leading to a significant disruption in global supply chains
and industrial activity across all major economies barring China. Recent high
frequency data has, however, shown early signs of recovery across countries. For
instance, the manufacturing PMI increased to a record level in several countries,
while retail sales recorded a strong comeback, thanks to pent-up demand post the
unlock process started, successful trial of multiple vaccines and emergency
approval of few vaccines in few developed countries. Global economy, as a result,
is expected to grow by 5.2% in 2021, according to the IMF estimates (WEO,
Oct’20).
• V-shape economic recovery in India as well: Following ~24% contraction in Q2-
2020, India’s GDP growth revised up to -7.5%—a higher than expected (Bloomberg
consensus: -8.2%) recovery—amid a strong recovery in investments and exports,
partly compensating a contraction in public spending and private consumption.
Given recent recovery is domestic demand and high frequency indicators as
unlocking process spurs activity and employment coupled with continuous decline
in active cases and considerable optimism on emergency approval of vaccines,
India’s real GDP is estimated to contract by 8.0% in FY21—a significant upward
revision from our previous estimate of -10.5%—followed by a 9.5% growth in FY22.
However, it remains to be seen if the demand recovery sustains in 2021,
particularly in the wake of decline in household incomes. Additionally, the second
wave of infections in the US/Europe and recent lockdown measures in UK may
hamper India’s exports to these countries.
• Inflation is on downward trajectory in major economies, barring few: Inflation
rates rose temporarily during the first quarter of the year across all major
economies due to supply side disruption amid lockdown measures and social
distancing norms post the outbreak. The trend has reversed in the second quarter
across several countries as supply-side disruption eased globally. India, however,
remained to be an outlier and inflation rate continued to be high throughout the
year even as the unlock process started.
• Major policy responses to cope-up with the pandemic: The RBI and the
government have taken a slew of measures, in line with other countries like US,
China, to cope-up with the sudden outbreak of the Covid-19 and its adverse impact
on the economic outcomes. Other than the containment measures since Mar’20,
government has announced four major fiscal packages and the RBI announced
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several policy rate cuts and liquidity enhancement measures to reverse the sharp
drop in consumption activities and total investment.
• Prompt policy measures helped the equity market to rebound faster in 2020:
The equity market started the year with a positive note, thanks to the favourable
news related to the US-China trade war, before the unprecedented coronavirus
outbreak hit the global economy. The situation worsened suddenly over the month
of February as Covid-19 cases continued to rise exponentially outside China, and
subsequently, Europe and US became the epicentre of the pandemic with
thousands of cases and several deaths by end of the month. Equity prices fell until
early April, wiping out returns of ~5 years. However, the overall impact of Covid-19
on equity prices was considerably lower than the overall decline during the Global
Financial Crisis as several countries have taken prompt measures, including (a)
partial/complete lockdown of non-essential economic activities, (b) strict
containment measures to restrict overall spread of the virus, (c) aggressive
monetary and fiscal policy actions. These measures have helped the market to
rebound at a faster rate and partially offset the overall decline globally.
• Developed and emerging economies were affected alike: The MSCI-US recorded
~30% decline in March from its recent peak before recovering fully by September
and ended the year with a 16% rise. Similar trend was observed in other developed
economies as well, barring UK as uncertainty remained quite high with rising
Coronavirus cases after finding a new variant with a much higher R-number (which
is the average number of people an infected person infects). Among other major
economies, China was least affected due to Covid-19 as it could successfully
contain the outbreak in its provinces with strict containment actions and providing
adequate health facilities in a short span of time.
• In India, the overall impact of Covit-19 on equity prices was broadbased in
nature: Both Nifty 50 and the Nifty 500 Index reached their lowest levels in March
since 2016, ended the month 23.3% and 24.3% lower respectively, followed by a
recovery in line with the global markets. Active policy interventions by the RBI as
well as the government supported investor sentiments. While the RBI responded
through a steep cut in policy repo/reverse repo rates and a slew of liquidity easing
measures, the Government also announced several relief packages including cash
transfers, free rationing, prodicuction linked incentives and credit gurantee
programs. These prompt policy actions helped the stock market to recover fully in
India to end its benchmark index Nifty50 at 13,981 with 15% YoY growth as of
January 31st, 2020.
• Market performance across asset classes: In 2020, the cryptocurrency Bitcoin
outperformed all other asset classes globally with 303.9% return on YoY basis,
while NASDAQ Composite ranked second with 49% return largely led by a strong
performance of technology firms in US—Amazon, Microsoft, Apple and Tesla.
Among other best performers, Gold performed extremely well throughout the year
as a safe-haven option for investors, while several other equity market indices
recovered fully from their initial decline and recorded more than 15% return across
several markets. European market has, however, performed poorly and recorded
negative returns over the year, while crude oil performed worst with more than
20% fall in its price over the year due to strict lockdown measures, sharp fall in
global demand and limited reserve capacity across countries.
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Status of the Coronavirus pandemic
Total number of active cases continued to rise globally due to a sharp increase in total
number of infections in US, UK and many other European countries. As of Dec 31st, the
virus has spread to 220 countries, affected more than 86m people worldwide, taken more
than 1.9m lives thus far. Even though many countries have taken several stringent
measures including full/partial lockdown, aggressive testing, contract tracing since the
beginning of the year, global death rate rose above 7% in Apr’20 before coming down
slowly over the next months as recovery rates improved in many countries to reach at
~2% by end of the year.
US and many European countries continued to suffer with multiple waves: Number of
active cases continued to rise in US, UK, France and Spain as they have recorded multiple
waves thus far post the unlock process started, largely led by loosening precautionary
measures during the festive seasons. In December, the UK government found a new
strain of the virus which has spread at a faster rate with a much higher R-number.
Hospitals in Central and Eastern Europe have been hit hardest in the second wave, even
as few countries have started the vaccination process with emergency approval.
On the positive side, total number of active cases continued to fall in India since mid-
September. In contrast to the global scenario, India’s total number of active cases
continued to decline since mid-September as its recovery rate has been significantly
higher than the number of new cases. Till now, more than 10m people are infected while
more than 144 thousand people lost their lives, implying to a death rate of ~1%, which is
significantly lower than the global average. However, we cannot completely dismiss the
chance of a second wave in near future.
Figure 56: COVID-19 status - Worldwide Figure 57: COVID-19 status in India
Source: Refinitiv Datastream, Source: Refinitiv Datastream,
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Figure 58: COVID-19 active cases across countries:

In US, total number of active cases continues to rise at an alarming rate, while several European countries are suffering
with second/third waves as a new variant of the Coronavirus is spreading by 70% faster than the original one.
Source: Refinitiv Datastream,
Figure 59: Daily Coronavirus cases across countries:

While number of daily cases continues to fall in India, US, Russia, Brazil and many European countries have encountered
multiple waves thus far.
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Figure 60: Case fatality rates across countries:

There is a significant improvement in case fatality rates across countries. Notably, India’s case fatality rates remain
significantly lower than many other developed countries.
Total Coronavirus cases are highly concentrated in a few states in India: India’s 1.3bn
people across 28 states and eight union territories have had significantly different
exposure to the Coronavirus, with some states like Maharashtra bearing the brunt of the
cases early on, followed by others like Andhra Pradesh, Karnataka, Tamil Nadu, Kerala,
and Delhi.
Some states recorded a second wave post festive season: Since September end, few
Indian states have seen a sharp rise in new infections in the wake of the festive season.
This second wave of infections has been especially severe in some states like
Maharashtra, Kerala, Delhi, West Bengal, and Rajasthan before declining again over the
last two months. That divergence has been a feature all through, underlined in recent
months by aggressive testing by some states that have managed to control the spread
meaningfully, while others have continued to lag in testing and control. Mortality levels
are now well below 2% in all major states except Maharashtra and Punjab, and recovery
rates reaches over 95% by end of the year—a significant improvement from the 60-70%
levels see in the Jul-Aug period. Consequently, active cases have fallen sharply across all
states.
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Figure 61: Total active cases in India across states Figure 62: Case fatality rates in India across states
Figure 63: New Coronavirus cases in India across states
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Economic recession: Worst since 1930s
IMF projected Global GDP to fall by 4.4% in 2020…: The IMF, in its recent World
Economic Outlook, expects the global economy to contract by 4.4% in 2020, much worse
than the Global Financial Crisis and worst since the Great Depression in 1930s. This was
largely led by partial/complete lockdown in several countries since Feb’20, leading to a
significant disruption in global supply chains and industrial activity across all major
economies, except China as it could contain the virus within first half of the year.
…followed by a V-shape recovery in 2021: Recent data shows early signs of recovery
across countries. Manufacturing PMI rose well above 50 across several major economies.
For instance, the manufacturing PMI increased to a record level of 64 in Brazil, followed
by Germany, Taiwan, US and India. Besides, retail sales recorded a strong comeback,
thanks to pent-up demand post the unlock process started, successful trial of multiple
vaccines and emergency approval of few vaccines in few developed countries. Global
economy, as a result, may grow by 5.2% in 2021, according to the IMF estimates (WEO,
Oct’20).
Figure 64: Cross country GDP growth: IMF
Source: Refinitiv Datastream, IMF.
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Figure 65: Global manufacturing PMI pointing to fast economic recovery in several economies since Q3-2020.

Note: AU-Australia, AT-Austria, BR-Brazil, CA-Canada, CN-China, CO-Colombia, CZ-Czech Republic, DK-Denmark, EG-Egypt, FR-France, DE-Germany, GR-Greece, IN-
India, ID-Indonesia, IE-Ireland, IT-Italy, JP-Japan, MY-Malaysia, MX- Mexico, MN-Myanmar, NL-Netherland, PH-Philippines, PL-Poland, RU-Russia, KR-South Korea, ES-
Spain, CH-Switzerland, TW-Taiwan, TH-Thailand, VN-Vietnam, GB-United Kingdom, US- United States.
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US and UK recorded a partial recovery in their GDP growth: Post a sharp contraction in
Q2 2020, economic growth registered partial recovery in both US and UK as unlock
process started. Their retail sales increased sharply in Q3 and Q4 to reach well above the
pre-Covid levels due to pent-up demand, expansionary fiscal and monetary policy
initiatives and loosening lockdown measures. Consumer sentiment, however, remained
stagnated as uncertainty persists over the Coronavirus situations with multiple waves till
now and total active cases continues to rise in these countries. In December, the virus is
muted to a new variant which can spread at a much faster rate than the original one. This
has caused a partial/full lockdown in UK and expected to spread in other adjoining
countries as well.
Figure 66: Economic growth in US recorded a partial Figure 67: Similar trends were observed in UK as
recovery in Q3-2020, while consumers’ sentiment well, largely led by the resurgence of Covid-19
remained stagnated due to continuous rise in active cases.
Coronavirus cases.
Figure 68: US unemployment rate and inflation (%) Figure 69: US jobless claims (‘000 persons)
Source: Refinitiv Datastream, NSE

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China successfully contained the virus as well as its economic recession: China’s GDP
growth dropped down to -6.8% in Q1-2020, followed by a sharp recovery in Q2 and Q3
with 3.2% and 4.9% economic growth respectively as the country could contain the virus
within first half of the year and started economic activity across all sectors. Economic
growth reached closed to its pre-Covid level, and retail sales of passenger cars recovered
fully, thanks to pent-up demand, rise in export demand and fiscal measures. In contrast
to other major economies, China is expected to record an economic growth of 1.9% in
2020, which will further increase to 8.2% in 2021 with a further improvement in global
demand.
Figure 70: China’s GDP growth, on the other hand, recovered almost fully in Q3-2020 post a sharp recession in Q1.
Consumer confidence has also improved as China could successfully control Covid-19 spread in the country.
V-Shape recovery in global trade volume as well: Post a sharp decline in Q2, global
trade shows signs of recovery from the Covid-19 outbreak. However, the recovery
process may be short lived due to the recurrence of the Coronavirus cases. According to
the World Tarde Organisation, the volume of world merchandise trade may fall by 9.2%
in 2020, followed by a 7.2% rise in 2021.6 These estimates are, however, subject to a
high degree of uncertainty related to the evolution of the pandemic and government
responses to it. Overall, total trade volume performed better than expected due to surge
in demand as lockdown measures eased across countries and governments had
undertaken several expansionary measures thus far.
6
https://www.wto.org/english/news_e/pres20_e/pr862_e.htm
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Figure 71: Global trade is projected to decline by 9.2% in 2020, followed by 7.2% growth in 2021, according to the
WTO.
Source: Refinitiv Datastream, WTO.
Inflation is on downward trajectory for several economies except India and Russia:
Inflation rates rose temporarily during the first quarter of the year across several major
economies due to supply side disruption post the outbreak of the pandemic amid
lockdown measures and social distancing norms. The trend reversed in the second
quarter as supply-side disruption eased and demand fell globally. India, however,
remained to be an outlier and inflation rate continued to rise even after the unlock
process started. This was largely led by food inflation as the supply-side bottleneck
continued.
Figure 72: Inflation rates in major economies Figure 73: Inflation rates in BRICS countries
Source: Refinitiv Datastream. Source: Refinitiv Datastream.
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Commodity prices moved in tandem with global demand: Barring precious metals like
gold, commodity prices fell sharply over the first two quarters in 2020 amid sudden
outbreak of the Covid-19 and fall in global demand due to several stringent measures
taken by the governments. The generic brent crude oil fell to more than two-decade lows
of US$16/bbl in the wake of a sharp fall in global demand, even as supply continues to
remain huge despite the production cut by OPEC and Russia. In fact, the May futures for
US West Texas International (WTI) crude fell into the negative territory for the first time
in history to –US$38/bbl in the overnight trade, ahead of the expiry on May 21st, as COVID-
induced demand destruction left the world with surplus oil and not enough storage
capacity. The situation has, however, improved since May end and elevated towards
US$50/bbl by the end of the year as OPEC+ have cut down total production and global
demand revived.
Gold price recorded a sharp rise over the first two quarters in 2020: Gold price
increased to a record level in August 6th as investors considered it to be a safe-haven for
investment given rise in uncertainty throughout the year. Overall, gold price rose by 25%
to reach at US$1898/t by end of 2020 as compared to US$1521 in 2019.
Figure 16: Generic Brent crude vs. US WTI crude Figure 17: Hard commodities falling except Gold
Source: Refinitiv Datasream, NSE. Source: Refinitiv Datasream, NSE.
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Indian economy in 2020: The first recession in 40 years
India saw the worst contraction on record in Q2-2020…: Indian economic activity
contracted by ~24% in Q2-2020 due to a prolonged lockdown measure taken by the
government to contain the Covid-19 spread across the country. This decline was largely
led by a sharp fall in private consumption and investment demand, partly offset by
government expenditure and a trade surplus. By economic activity, Gross Value Added
(GVA) contracted by 22.8% YoY, primarily led by a sharp fall in manufacturing,
construction and trade, hotels & transport, while agriculture recorded a decent growth
over the period.
…followed by a strong recovery in Q3-2020: India’s GDP growth revised up to -7.5%—

a higher than expected (Bloomberg consensus: -8.2%) recovery—amid a strong recovery
in investments and exports, partly compensating a contraction in public spending and
private consumption. By economic activity, GVA contracted by 7.0% YoY on the back of a
less-than-expected contraction in the Industrial sector—reflected in robust growth in
corporate profits in Q2.
High frequency indicators point to a strong recovery: The high frequency indicators
including PMI, auto sales, GST collection show a sharp recovery since Q3-2020, thanks
to pent-up demand, continuous fall in Coronavirus cases and loosening nationwide
restrictions. However, the economic growth over the following quarters remains highly
uncertain depending on how the demand recovery sustains beyond the festive season,
particularly in the wake of decline in household incomes, surge in COVID-19 cases in
European countries from a mutant coronavirus.
Figure 74: India’s economy recovered partially in Q3, Figure 75: Total E-way bills and GST collection point
thanks to pent-up demand, continuous fall in to a fast and strong recovery, particularly over Q4-
Coronavirus cases and loosening nationwide 2020.
restrictions.
mn mn
Total E-way bills
70 2
Goods and Services Tax (GST) - RHS
1.8
60
1.6
50 1.4
1.2
40
1
30
0.8
20 0.6
0.4
10
0.2
0 0
Apr-18 Oct-18 Apr-19 Oct-19 Apr-20 Oct-20
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Figure 76: Expenditure side contribution to India’s GDP Growth
Figure 77: Gross value added in India by economic activities
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Figure 78: Google Mobility Report in India

Retail and recreation Grocery and pharmacy Parks
Transit stations Workplaces Residential
60
40
20
-20
-40
-60
-80
-100
Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20
Source: Google LLC "Google COVID-19 Community Mobility Reports". https://www.google.com/covid19/mobility/ Accessed: January 5th, 2021.
India’s GDP may decline by 8% in FY21,…: Given initial contraction in economic activity,
recent recovery is domestic demand and high frequency indicators along with continuous
decline in active cases and considerable optimism on emergency approval for multiple
vaccines, we revised the FY21 GDP growth estimates upward to 8.0%—a significant
upward revision from our previous estimate of -10.5%. However, it remains to be seen if
the demand recovery sustains in 2021, particularly in the wake of decline in household
incomes. Additionally, the second wave of infections in the US/Europe and recent
lockdown measures in UK may hamper India’s exports to these countries.
Figure 79: Annual GDP growth in India (%YoY)

12.0
10.0
8.0
6.0
4.0
2.0
0.0
FY52 FY56 FY60 FY64 FY68 FY72 FY76 FY80 FY84 FY88 FY92 FY96 FY00 FY04 FY08 FY12 FY16 FY20
-2.0
-4.0
-6.0 India’s GDP may contract by 8.0%

-8.0 in FY21
-10.0
Source: CMIE Economic Outlook, RBI Monetary Policy Statement, 2020-21 (Dec 04, 2020).
Retail inflation remained elevated throughout the year: In 2020, the headline inflation
has mostly remained above the upper bound of the RBI’s target range (6%) due to a
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broad-based rise in food inflation, continuous fall in policy rates and supply side
disruptions due to the nationwide lockdown since Mar’20. The retail inflation continued
to be high over the latter half of the year even as agriculture recorded a decent growth,
unlock process started and supply-side bottlenecks somewhat declined.
Inflation is expected to soften in the coming months supported by a) recent measures
taken by the Government to arrest rising food prices, including easing import duties and
curbing exports, b) a good Kharif harvest, c) reduced supply-side disruptions, and d)
favourable base effect. That said, it is likely to remain at the higher end of the RBI’s 2-6%
target range.
Figure 80: CPI inflation vs. policy rates
Figure 81: Category-wise contribution to India’s CPI inflation
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India’s trade volume fell sharply in 2020: Post a decline in 2019, India’s trade volume
deteriorated further in 2020 amid strict lockdown and social distancing norms that has
deteriorated overall demand globally. Notably, the pace of contraction rose to 46% and
44% in May’20 YoY for imports and exports respectively, before coming down over the
second half of the year. The initial contraction in exports was primarily led by a huge
contraction in exports of petroleum products, gems & jewellery, ready-made textiles and
electronic goods, while later export contraction declined due to rise in strong growth in
exports of petroleum products, engineering goods and readymade textiles. Import
growth, on the other hand, was largely driven by consumption demand and crude oil
prices.
Barring Jun’20, trade balance continued to be negative throughout the year: Trade
balance continued to improve over the first half of the year and turned into a surplus of
US$793mn in June 2020 as imports fell at a higher rate than exports due to a free fall in
domestic demand. Afterwards, trade balance turned negative and trade deficits
continued to rise over the following months as shown in the chart below. Overall, there is
a significant decline in total trade deficits thus far in 2020 as compared to the same period
in the previous year.
Figure 82: Trade deficits rose further even as import fell faster than export
Decline in trade deficits led to a record surplus in current account: India’s current
account continued to enjoy surplus for three consecutive quarters since Q4 2020.
Notably, current account surplus widened meaningfully to record-high levels of
US$19.2bn or 3.8% of GDP in Q1FY21, followed by a moderation to US$15.5bn in
Q2FY21, thanks to an overall decline in trade deficits and steady net invisible receipts.
Even as trade deficit is expected to widen in the second half of the fiscal thanks to weak
global growth outlook and continued normalisation of domestic economy, the full year
figure is expected to remain reasonably lower than last year. Our estimates point to near-
40% drop in trade deficit in FY21, thereby translating into a current account surplus of
1.1% of GDP in FY21 the first in 17 years. This, coupled with strong foreign capital inflows,
should
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result in a record-high BoP surplus in FY21. In FY22, we expect current account to slip
into deficit again, with our estimate pegged at 0.7% of GDP, even as expectations of
sustenance of foreign investments is likely to keep BoP in a comfortable surplus position
for the third year in a row.7
Figure 83: India’s quarterly CAD over the last decade:
Figure 84: Cumulative net inflows of FIIs in India
7
https://static.nseindia.com//s3fs-public/inline-files/India_Q2FY21_BoP_Review_20201231.pdf
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INR became much more volatile in 2020: After a stable currency market in 2019,
currencies turned much more volatile over 2020 amid the rise in uncertainty due to the
pandemic and its adversary impact on health, economic, and social outcomes. Brazilian
and Russian currencies depreciated the most over the year with a 28% and 20% fall by
end of the year, while INR depreciated by ~3% in 2020 due to strict lockdown, sharp
decline economic activities, and large number of Coronavirus infections and fatalities. In
contrast, Euro, GBP and CNY recovered fully from their initial depreciation due to a spike
in uncertainty; and recorded over 5% appreciation over the period thanks to several
expansionary policies taken by the government.
Figure 85: Currency performance in major economies Figure 86: Movement in BRICS countries
Major policy responses to cope-up with the pandemic
The RBI and the government have taken a slew of measures thus far to cope-up with the
sudden outbreak of the Covid-19 and its adverse impact on economic outcomes. Other
than the containment measures since Mar’20, government has announced four major
fiscal packages and the RBI announced several policy rate cuts and liquidity
enhancement measures to reverse the the sharp drop in consumption activities and total
investment.
Government undertaken several containment measures: Initially the Government
issued several travel advisories, advising Indians from refraining to travel to select
countries where the outbreak has been severe, making self-quarantine cumpulsory for
all incoming international travellers and finally cancelling all scheduled international
passenger flights w.e.f. March 22nd. 8 Besides travel related restrictions, the Government
also imposed several restrictions on mass gathering and made it stringent over time,
closed educational and recreational establishments to enforce social distancing and
finally imposed a 21-day nation-wide lockdown on March 25th, which was later extended
till May 31st. The unlock process started thereafter on phased manner with several
restrictive measures in different containment zones, and the Centre has given the States
8
https://static.nseindia.com//s3fs-public/inline-files/India%20Macro%20and%20Market%20Outlook_April%202020_0.pdf
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to customise the containment measure based on current situation and new

developments. Overall, educational institutes remained shut thus far, entertainment
centres were permitted to open since October, while the government has again imposed
fresh restrictions on international flights to restrict immigration from European countries
particularly from the UK.
RBI responds through rate cuts and liquidity boost: The RBI has slashed policy repo
rate by 115bps and reverse repo rate by a much higher 155bps in 2020. Besides, it has
announced a slew of measures to boost liquidity, facilitate and incetivise banks and
easing financial stress. Initially, it had a) injected adequate targeted liquidity through
TLTROs (targeted long-term repo operations), enhanced borrowing limit under Marginal
Standing Facility (MSF), special refinance facility for financial institutions (NABARD,
SIDBI, NHB), enhancement in Ways and Means Advances (WMA) limits for the centre and
states, a) facilitating and incentivising bank credit flows through cut in Cash Reserve Ratio
by 100bps, a sharper cut in reverse repo rates, reduction in liquidity coverage ratio, and
regulatory forbearance on NPA classification and resolution timeline for large default
accounts, and c) easing financial stress by making debt servicing easier by allowing banks
to grant three-month moratorium on terms loans and working capital facilitis. 9
With limited headroom available for further policy rate cut given high inflation, the central
bank continued to take several regulatory mesures including a) an additional special
liquidity facility of Rs100bn to National Housing Board (NHB) and NABARD, b) a one-time
restructuring of eligible COVID-19-related stressed corporate and personal loans,
including stressed MSME borrowers that were standard as on March 1st, 2020, c)
increase in loan-to-value ratio for gold loans from 75% to 90%,10 d) enhance liquidity
support by extending On Tap TLTROs (Targeted Long-term Repo Operations) to 26
stressed sectors identified by the Kamath Committee and permitting Regional Rural
Banks (RRBs) to access call/notice money and liquidity windows of the RBI, b) ensure
financial stability by disallowing banks to pay dividends for FY20, formulating guidelines
on dividend distribution by NBFCs, strengthening audit systems of supervised entities,
and imposing security controls on digital payments, c) deepen financial markets by taking
steps to develop interest rate and currency derivatives, and d) boost external trade by
liberalising extant policies pertaining to certain export transactions. Overall, the central
bank has remained proactive in taking prompt measures to mitigate liquidity shock with
ample liquidity boost in the system. 11
Peristent inflation trajectory above the RBI’s target range and nascent signs of economic
recovery had left the RBI with limited room to cut the policy rates. We expect the RBI to
maintain an accommodative stance in the current as well as next financial year and using
all available monetary policy tools at its disposal to ensure a durable revival in economic
growth.
9
https://static.nseindia.com//s3fs-public/inline-files/India%20Macro%20and%20Market%20Outlook_April%202020_0.pdf
10
https://static.nseindia.com//s3fs-public/inline-files/RBI%20Monetary%20Policy%20Review_20200806.pdf
11
https://static.nseindia.com//s3fs-public/inline-files/RBI_Monetary_Policy_Review_20201205.pdf
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Figure 31: Policy rates have been reduced significantly since 2019
Figure 32: Net lending under RBI’s Liquidity Adjustment Facility

Surplus liquidity in the system jumped up magnificently in 2020 due to several liquidity enhancement schemes taken
by the RBI. On average, net lending under LAF widened from an average of Rs0.73trn in 2019 to Rs4.0trn in 2020.
Rs bn
Net lending under RBI's Liquidity adjustment facility
Outstanding amount under repo operations
Outstanding amount under reverse repo operations Figure greater than zero
4000
Net lending under LAF indicates deficit liquidity in
the system
2000
-2000
Figure less than zero

-4000
indicates surplus liquidity in
the system
-6000
Surplus liquidity has

-8000
increased in 2020
-10000
May-18
Jul-18
Mar-18
Sep-18
Sep-20
Nov-18
Oct-19
Nov-20
Jan-18
Jan-19
Feb-20
Jun-19
Jun-20
Apr-19
Aug-19
Dec-19
Apr-20
Source: CMIE Economic Outlook, NSE
Major fiscal responses to revive economic growth: Following the unprecedented

announcement of a nation-wide lockdown for 21 days, the Government announced a Rs
1.7trn (-0.8% of GDP) relief package under the ‘Pradhan Mantri Garib Kalyan Yojana’ on
March 26th to fight against the immediate economic stress from the COVID-19 pandemic
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and preventive lockdown. The relief package was primarily focused towards mitigating
financial stress of farmers, households below poverty line, daily wage earners, health
workers and small and medium-scale industries in the unorganised sectors.
In May, the government announced an economic package totalling Rs20trn in five

tranches in the areas of employment, healthcare, education, ease of doing business,
privatisation of Public sector enterprises and extending support to MSMEs. The fiscal
packages include: (i) provisioning fully guaranteed new MSME loans of a tenure of four
years and a fund-of-funds will be set up with an equity infusion of Rs100bn; 12 (ii)
Extended free food grains distribution to migrant labour, venders and small farmers; (iii)
Relief of Rs65bn for small businesses and street vendors; (iv) Amendments to the
Essential Commodity Act, the APMC Structure, enabling a legal framework for farmers; 13
(v) increased allocation to MGNREGS, Enhanced borrowings for states and relaxation to
the IBC norms.14
In the third major fiscal response to COVID-19 pandemic, the Government announced
additional measures to stimulate consumption as well as investment demand in the
economy, but with several conditions. Consumption related measures included a) cash
payment to Government employees in lieu of Leave Travel Concession (LTC) to be utilised
for purchase of goods attracting >=12% GST, and b) interest-free advance of Rs10,000 to
be spent by March 31st, 2021, recoverable in maximum 10 instalments. On the
investment front, the Government announced a) a Rs120bn special interest-free 50-year
loan to states, to be spent on new/ongoing capital projects and/or payment of dues by
March 31st, 2021, and b) an additional capital expenditure of Rs250bn towards roads,
defence, water supply, urban development and domestically produced capital
equipment. These measures are expected to cost ~Rs467bn to the Centre (0.25% of GDP),
with overall demand boost, including states and PSBs/PSUs, estimated at Rs730bn
(Rs360bn through consumer spending and Rs370bn through capex).15
In the fourth major fiscal response, the Government announced a 12-point stimulus
package totalling Rs2.65trn, named as Atmanirbhar Bharat 3.0. The package entailed
measures including i) subsidy on new employment to EPFO-registered establishments,
and increased outlay to PM Garib Kalyan Rozgar Yojana (PMGKRY); ii) Extension of the
Emergency Credit Line Guarantee Scheme (a 100% Government-guaranteed collateral-
free credit) to healthcare and 26 stressed sectors as eligible beneficiaries, extension of
the production-linked incentive (PLI) scheme to 10 more sectors, and additional
allocation to capital and industrial expenditure; iii) Increased outlay to PM Awaas Yojana-
Urban (PMAY-U), income tax relief for developers and home buyers, relaxation of
performance security and Earnest Money Deposit (EMD) on Government contracts and
Rs60bn equity infusion in NIIF debt platform; iv) A Rs650bn support to ensure adequate
availability of fertilizers in the upcoming crop season; and v) A Rs30bn support to EXIM
Bank for project exports.
12
https://static.nseindia.com//s3fs-public/inline-files/India%20COVID-19%20stimulus%20package_Part%201_20200513.pdf
13
14
15
https://static.nseindia.com//s3fs-public/inline-files/India_Fiscal_Stimulus_3.0_20201013.pdf
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Figure 87: Summary of stimulus measures announced thus far

No. Measures Amount (Rs bn)
1 Pradhan Mantri Garib Kalyan Package (PMGKP) + 1,928
2 Atmanirbhar Bharat Abhiyan 1.0 11,027
3 PMGKP Anna Yojana--extension of five months from Jul to Nov 829
4 Atmanirbhar Bharat Abhiyan 2.0 730
5 Atmanirbhar Bharat Abhiyan 3.0 2,651
6 RBI measures announced till October 31st, 2020 12,712
Total 29,876
Source: Ministry of Finance.
Figure 88: Production-linked Incentive Scheme extended to 10 champion sectors

No. Sector Estimated expenditure on new PLIs (Rsbn)
1 Advance Cell Chemistry Battery 181.0
2 Electronic/Technology Products 50.0
3 Automobiles and Auto Components 570.4
4 Pharmaceutical Drugs 150.0
5 Telecom & Networking Products 122.0
6 Textile Products 106.8
7 Food Products 109.0
8 High Efficiency Solar PV Modules 45.0
9 White Goods (ACs & LED) 62.4
10 Specialty Steel 63.2
Total 1,459.8
Source: Ministry of Finance.
Markets had a roller-coaster ride in 2020
Prompt policy measures helped the equity market to rebound faster in 2020: The
equity market started the year with a positive note as equity prices continued to rise till
the first half of Jan’20, thanks to the favourable news related to the US-China trade war,
before the unprecedented coronavirus outbreak hit the global economy. The situation
worsened suddenly over the month of February as Covid-19 cases continued to rise
exponentially outside China, and over time Europe and US became epicentre of the
pandemic with thousands of cases and several deaths by end of the month.
Equity prices recorded continuous fall till April 1 st and total return from the equity market
was completely wiped out for almost five years. However, the overall impact of Covid-19
on equity prices was considerably lower than the overall decline during the Global
Financial Crisis as several countries have taken prompt measures, including (a)
partial/complete lockdown of non-essential economic activities, (b) strict containment
measures to restrict overall spread of the virus, (c) aggressive monetary and fiscal policy
actions. These measures have helped the market to rebound at a faster rate and partially
offset the overall decline globally.
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Figure 89: MSCI of major economies over major economic events
Both developed and emerging economies were affected alike: The MSCI-US recorded
~30% decline in March from its recent peak before recovering fully by September, and
ended with 16% rise throughout the year. Similar trend was observed in other developed
countries as well barring UK as uncertainty remained quite high with rising Coronavirus
cases after finding a new variant with a much higher R-number (which is the average
number of people an infected person infects).
Among other major economies, China was least affected as it could successfully contain
the outbreak in its provinces with strict containment actions and providing adequate
health facilities in a short span of time. As can be seen in the following figure, MSCI-China
rebound fully to its pre-Covid level by July, while other countries were lagging largely due
to their inability to contain the virus as well as its weak economic conditions. Emerging
economies have also recorded similar impact of Covid-19 outbreak with a sharp fall in
equity prices during February and March, while they rebound either fully or partially by
the end of the year with the help of prompt fiscal and monetary measures.
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Figure 90: Market performance (MSCI) in major Figure 91: Equity market in India vs. major emerging
economies (Rebased to 0 on Jan 1st, 2020) economies (Rebased to 0 on Jan 1st, 2020)
Market volatility jumped up temporarily in Feb’20: The overall impact of Covid-19 is

quite visible in market volatility as well. After a stable market in 2019, market volatility
index quadrupled in Feb’20 as market uncertainty increased due to an exponential rise in
Covid-19 cases and fatalities all over the world. This has again come down significantly
since the end of Mar’20 with several regulatory measures taken across countries but
remains above the long-term average as uncertainty prevails regarding economic
recovery, rise in Covid-19 cases and exorbitant rise in debt to GDP ratio in major
economies.
Figure 92: A sharp jump in market volatility in Mar’20 Figure 93: The overall impact was broadbased in
nature in the Indian equity markets.
In India, the overall impact of Covit-19 on equity prices was broadbased in nature:
Both Nifty 50 and the Nifty 500 Index reached their lowest levels in March since 2016,
ending the month 23.3% and 24.3% lower respectively. The decline was boadbased and
uniform across all market sizes, as the Mid- and Small-cap indices also ended the month
lower by 30.3% and 36.7% respectively. The volatility remained significantly high during
the month, with Nifty VIX Index rising 177%, on top of a 49% and 34% increase in
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January and February respectively. The market, however, recovered towards March-end,
in line with the global markets. Active policy intervention by the RBI as well as the
government bodies also supported investor sentiments. While the RBI responded
through a steep cut in policy repo/reverse repo rates and a slew of liquidity easing
measures, the Government also announced several relief packages including cash
transfers, free rationing, prodicuction linked incentives and credit gurantee programs.
These prompt policy actions helped the stock market to recover fully in India to end its
benchmark index Nifty50 at 13,981 with 15% YoY growth in 2020.
Several sector-wise indices ended the year in the positive territory: Except Bank and
Media, all major sector-wise indices recovered fully from their initial decline in February
and March. While Pharma enjoyed positive returns since April, IT and FMCG sectors
recovered in July as the unlock process started and domestic demand recovered partially.
However, Auto, Real estate and Metal took longer time to recover and closely tallied with
a rise in global demand since November.
Figure 94: Performance of Nifty sectors in 2020 YTD (rebased to 0 on Jan 1st, 2020)
Source: Refinitiv Datastream, NSE.
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Market concentration in terms of total traded value has fallen from its peak of the
1990s…:16 In India, the long-term trend indicated concentration in trading activity,
measured by the Herfindahl-Hirschman Index was at its peak in the 90s but has fallen
significantly since then. This decline in concentration can be largely attributed to: (a) rise
in institutional flows through FPIs and DIIs, (b) gradual rise in retail participation through
Systematic Investment Plan (SIP) route, (c) better regulatory oversight, (d)
implementation of technologies (d) improved transparency in information dissemination
and, (e) pursuit of higher governance standards by trading members and investors. The
Indian equity market has evolved greatly since the establishment of market regulator
Securities and Exchange Board of India (SEBI) and demutualisation of stock exchanges.
…followed by a rise over the second half of 2020: There is a sudden rise in market
concentration over the second half of 2020 as market uncertainty has increased
significantly amid the Coronavirus pandemic. However, the overall rise remained
significantly lower than 1990s. While the gap between the HHI for listed universe and
Nifty 500 universe in marginal, the HHI in the Nifty 50 universe has remained higher than
the overall market implying higher concentration in the top 50 stocks.
Figure 95: Market concentration (HHI) in terms of traded value
2600
2400
Nifty 500 Index
2200
2000 Listed universe
1800 Nifty 50 Index
1600
1400
1200
1000
800
600
400
200
0
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Source: CMIE Prowess, NSE; Note: HHI is calculated in terms of traded value for each stock on the last trading day of the month.
Market concentration (HHI) in terms of market capitalisation jumped up in 2020

above its 1990s peak: Post a significant fall till 2017, there was a gradual rise in market
concentration (HHI) in terms of market capitalisation over the next three years, followed
by a sudden jump since Aug’20. The recent jump in market concentration was led by a
16
https://static.nseindia.com//s3fs-public/inline-files/Market_Pulse_June_2020.pdf
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rise in uncertainty over the Cornavirus situation globally. The increase was much higher
for Nifty 50 index as compared to listed universe and Nifty 500.
Figure 96: Market concentration (HHI) in terms of market capitalisation
950
850 Listed Universe
750 Nifty 500 Index
Nifty 50 Index
650
550
450
350
250
150
50
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Source: CMIE Prowess, NSE; Note: HHI is calculated in terms of market capitalisation for each stock on the last trading day of the month.
Fixed income market gained interest as an alternative to equity market: Fixed income
market gained momentum with a sharp fall in market return from equity segment, rise in
downside market risk, slow recovery of economic activities. Besides, the recent rate cuts
by the Federal Reserve and other central banks along with easy availability of liquidity
due to unconventional monetary measures have led to a sharp fall in G-Sec yield in US
and UK, while the G-Sec yield turned negative in the European Union.
Similar trend was observed in India as well. Steep cuts in policy rates by RBI, liquidity
infusion by both conventional and unconvetional monetary measures, and investors
preference towards fixed-income markets over equity market had led to a sharp fall in
government bond yields in India since 2018 end, in line with all advanced economies. The
fall steepened post Covid-19 crisis when 5-year G-Sec yields have fallen at a faster pace
than 10-year G-Securities as demand for short-term bonds is much higher than the long-
term bonds during the current crisis.
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Figure 97: G-sec yields in advanced economies have Figure 98: …while G-sec yields in India have benefited
fallen amid global risk-off.. from rate cuts and huge liquidity surplus
Corporate bond spreads spiked up in Mar’20 amid sharp fall in equity returns: In the
US credit market, spreads of corporate bonds over US 10-year Treasuries rose at an
alarming rate across ratings since the outbreak of Covid-19, before coming down sharply
after policy rate cuts and unconventional policy measures. Even though spreads came
down to the Covid-19 level for A and BBB rated bonds, it remained significantly high for
AAA rated bonds amid a rise in the probability of defaults due to continuous rise in
coronavirus cases, lack of demand globally and an estimated 4.4% decline in World GDP
over FY20 (IMF, October 2020).
Figure 99: US 10-year corporate bond spreads
Inverted V-shaped recovery in Indian corporate bond market as well: In India,

corporate bond spreads over G-Sec yields rose significantly since March’20 across issuer
categories and credit ratings as default probability rose and financial condition
deteriorated for many corporates due to the strict nationwide lockdown and sharp fall in
global and domestic demand. The rise in corporate bond spread was generally highest for
NBFCs, followed by AAA-rated corporates and PSUs. Besides, the spread was around
50bps higher for AA-rated bonds than AAA-rated corporate bonds over the period. In
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contrast, the spreads remain stable for 10-year corporate bonds due to lack of demand
for such bonds amid a gloomy outlook of Indian economy and a significant rise in supply
of government bonds in the long-end.
The trend has, however, reversed since June’20 across all categories due to massive
liquidity surplus in the economy post a slew of measures taken by the Central Bank. The
LTROs and TLTROs led to a surge in demand for better-rated corporate bonds by banks
thereby reducing credit spreads in-line with the sovereign yield curve.
Figure 100: Spreads for 3-month corporate bonds across segments
bps
Spreads for 3-month corporate bonds across segments
3M Corp (-) 3M G-sec 3M NBFC (-) 3M G-sec 3M PSU (-) 3M G-sec
340
300
260
220
180
140
100
60
20
-20
May-19
May-20
Jul-19
Jul-20
Sep-19
Sep-20
Mar-19
Mar-19
Nov-19
Oct-19
Mar-20
Nov-20
Oct-20
Jan-19
Jan-20
Feb-20
Jun-19
Jun-20
Dec-18
Apr-19
Aug-19
Dec-19
Apr-20
Aug-20
Dec-20
Source: Refinitiv Datastream, Bloomberg, NSE.
Figure 101: Spreads for 1-year corporate bonds across segments

bps
Spreads for 1-year corporate bonds across segments
1Y Corp (-) 1Y G-sec 1Y NBFC (-) 1Y G-sec 1Y PSU (-) 1Y G-sec
340
300
260
220
180
140
100
60
20
-20
Jul-19
Jul-20
May-19
Sep-19
May-20
Sep-20
Mar-19
Mar-19
Nov-19
Nov-20
Oct-19
Mar-20
Oct-20
Jan-19
Jan-20
Feb-20
Jun-19
Jun-20
Dec-18
Apr-19
Aug-19
Dec-19
Apr-20
Aug-20
Dec-20
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bps
320
280
240
200
160
120
80
40
0
-40
May-20
May-19
Jul-19
Mar-19
Mar-19
Sep-19
Jul-20
Sep-20
Oct-19
Mar-20
Nov-19
Oct-20
Nov-20
Jan-19
Jan-20
Jun-19
Feb-20
Jun-20
Dec-18
Apr-19
Aug-19
Dec-19
Apr-20
Aug-20
Dec-20

bps
230
200
170
140
110
80
50
20
-10
May-20
Jul-19
Jul-20
May-19
Mar-19
Mar-19
Sep-19
Sep-20
Oct-19
Mar-20
Nov-19
Oct-20
Nov-20
Jan-19
Jan-20
Jun-19
Feb-20
Jun-20
Aug-19
Aug-20
Dec-18
Apr-19
Dec-19
Apr-20
Dec-20
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bps
180
160
140
120
100
80
60
40
20
May-20
Jul-19
Jul-20
May-19
Sep-19
Sep-20
Mar-19
Mar-19
Oct-19
Mar-20
Oct-20
Nov-19
Nov-20
Jan-19
Jan-20
Jun-19
Feb-20
Jun-20
Aug-19
Aug-20
Dec-18
Apr-19
Dec-19
Apr-20
Dec-20
Figure 105: AAA-rated corporate bond yield curve Figure 106: AA-rated corporate bond yield curve
% %
AAA-rated corporate yield curve AA-rated corporate yield curve
9.0 31-Dec-19 31-Aug-20 20-Oct-20 9.0 31-Dec-19 31-Aug-20 20-Oct-20
8.0 8.0
7.0
7.0
6.0
6.0
5.0
5.0
4.0
4.0
3.0
3M 6M 1Y 2Y 3Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y
3M 6M 1Y 2Y 3Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y
Source: Bloomberg, NSE.
Market performance across asset classes: In 2020, Bitcoin outperformed all other
asset classes globally with 303.9% return on YoY basis, while NASDAQ Composite ranked
second with 49% return partially due to a strong performance of technology firms in US—
Amazon, Microsoft, Apple and Tesla. Among other best performers, Gold performed
extremely well throughout the year as a safe-haven option for investors, while several
other equity market indices recovered fully from their initial decline and recorded more
than 15% return across several markets including Russell 1000, MSCI EM, MSCI World,
S&P500, Nifty 50. European market has, however, performed poorly and recorded
negative returns over the year, while crude oil performed worst with more than 20% fall
in its price over the year due to strict lockdown measures, sharp fall in global demand and
limited reserve capacity across countries.
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Figure 107: Market performance across asset classes: Ranked by %change in each year
Consensus earnings estimates and Earnings Revision

The consensus earnings estimates have been downgraded sharply…: The
unprecedented Covid-19 outbreak, several containment measures taken by the
government and sharp fall in demand from both domestic as well as global market have
downgraded the Consensus earnings estimate (from Refinitiv) for the top 200 covered
companies by market cap by nearly 40% over the year.
…Even as the Earnings Revision Indicator (ERI) recorded a V-shaped recovery: ERI
fell deep into the negative zone to the lowest level since the data is available (2007) as
corporate earnings outlook got adversely impacted due to massive supply and demand
disruptions caused by mass-scale COVID-19-induced lockdowns worldwide. In fact,
except for one or two companies, rest all the Nifty 50 companies witnessed significant
earnings downgrades until May 2020, taking ERI to its lower limit of -1 in mid-May,
implying downgrades across the board. The ERI has since improved to reach a 10-year
high led by upward revisions in Healthcare, FMCG and Information Technology.
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Figure 108: Yearly trend of NIFTY 50 Consensus EPS estimates
Figure 109: Nifty 50 Earnings Revision Indicator (since January 2019)
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Figure 110: Nifty 50 Earnings Revision Indicator (10-year trend)
Actual vs. Future expectation of India’s Equity Market Performances

A sharp fall in India’s equity markets during Q1-2020 led to a signficant valuation de-
rating. The 12-month forward price/earnings (P/E) fell from ~18x, a little over +1 std. dev.
in the beginning of 2020, to closer to -1 std. dev. by April 1st, largely led by downgrade in
earnings estimates. However, equity market rebounds quickly by the end of the year, in-
line with global equity markets, erasing a part of the losses. This has led to a significant
jump in market valuations beyond the long-term average to ~22x far more than +1 std.
dev, in line with global equity markets, aided by massive liqidity boosts from central
banks along with multiple rate cuts and relief packages announced by government
bodies. Further, market valuations based on book value per share have also improved
significantly above +1 std. dev.
The recent trend is somewhat similar to the historical performance, particularly during
the GFC, suggests that equity markets tend to bounce back quickly after a sharp fall and
a huge valuation de-rating. For instance, over the last two times when 12-month forward
P/E fell to below 10x, i.e. post taper-tantrum in 2013 and Global Financial Crisis in 2008,
equity markets generated strong returns over the next two-year period. Over the recent
crisis, however, equity markets took less time to recover to its pre-crisis period, thanks
to prompt and considerable policy responses worldwide from both central banks and
governments. However, in the long-term the future market performance would depend
on the duration of the outbreak, effectiveness of approved vaccines, efficacy of monetary
and fiscal measures taken thus far and evolving macroeconomic fundamentals.
Across sectors, consumer staples, consumer discretionary, energy, materials, financials
and healthcare recovered rapidly post a sharp fall in terms of 12-month forward P/E
during the pandemic-era, thanks to pent-up demand, while valuation of Utilies continues
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to fall thus far, due to lack of demand, continued precausionary measures taken post the
lockdown period and slow economic recovery in the country.
Figure 111: Nifty 50 12-month forward price to earnings per share (P/E)
Figure 112: Nifty 50 12-month trailing price to earnings per share (P/E)
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Figure 113: Nifty 50 P/E bands
Figure 114: Nifty 50 12-month forward price to book value per share (P/B)
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Figure 115: Nifty 50 12-month trailing price to book value per share (P/B)
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Figure 116: Consumer Staples 12-month forward P/E Figure 117: Consumer Staples 12-month forward
P/B
Figure 118: Consumer Discretionary 12M forward P/E Figure 119: Consumer Discretionary 12-M forward P/B
Figure 120: Financials 12-month forward P/E Figure 121: Financials 12-month forward P/B
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Figure 122: Healthcare 12-month forward P/E Figure 123: Healthcare 12-month forward P/B
Figure 124: Energy 12-month forward P/E Figure 125: Energy 12-month forward P/B
Figure 126: IT 12-month forward P/E Figure 127: IT 12-month forward P/B
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Figure 128: Industrials 12-month forward P/E Figure 129: Industrials 12-month forward P/B
Figure 130: Materials 12-month forward P/E Figure 131: Materials 12-month forward P/B
Figure 132: Utilities 12-month forward P/E Figure 133: Utilities 12-month forward P/B
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MSCI India vs. MSCI Emerging markets: After a sharp fall in relative valuation premia
of Indian equity market to MSCI EM post Covid-19 crisis, Indian equity markets
performed quite well and reached +1 std. dev. above the last 13-year average since 2008.
This was on account of a significant rise in 12-month forward P/E in India which is
considerably higher than the broader EM on average. However, the situation has not
improved as impressive in terms of 12-month forward P/B, where relative valuation
premia of Indian equity market remains below the last 13-year average since the GFC
even after a significant recovery in recent months.
Figure 134: MSCI India 12-month forward P/E valuation premium to MSCI EM
Figure 135: MSCI Emerging Market 12-month forward P/E trend
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Figure 136: MSCI India 12-month forward P/B valuation premium to MSCI EM
Figure 137: MSCI Emerging Market 12-month forward P/B trend
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COVID-19 Update: India sees a positive start to the year but global scare on the rise17
COVID-19 cases in India have been on a steady downward trajectory after a surge in November due to the festive season
and easing restrictions on travel. Concerns of the emergence of ‘second wave’ of infections during the festive season
haven’t really materialised to the extent feared, barring a few states including Maharashtra, Kerala and Delhi. Daily cases
dropped to an average of ~27k in December from ~40k in the previous month and are now hovering at sub-20k levels
for over a week now, making it an encouraging start to the new year. As of January 6 th, India had ~10.4mn confirmed
cases, with ~150k deaths and ~225k active patients.
Among the states that saw a surge in cases, while Maharashtra and Delhi have successfully managed to contain the
spread, Kerala has lately started to see a spike in daily cases again. In addition to aggressive testing, many states
resorted to night curfews and restrictions in the last week of December to curb celebrations. At 1.45%, India’s mortality
rate also been consistently improving, and fares much better than the global average of 2.2%, even as there are still
high deviations across states, with Punjab and Maharashtra having mortality rates much higher than the global average.
Kerala, on the other hand, has a mortality rate of mere 0.4% despite accounting for ~29% of the active cases in India.
In marked contrast to India, the spread of the Coronavirus has continued to increase globally, leading to many countries
re-imposing lockdown restrictions to control the spread. For instance, the United Kingdom experienced their highest
daily rise in cases in the first week of January as it entered its strictest lockdown, with the total tally there nearing
~2.9mn (~4.2% of the population). A number of countries have imposed flight restrictions on the UK. With daily cases
still hovering at 200k+ levels, the USA also remains in a weak spot. Apart from the US and UK, countries that have now
add significant numbers are Brazil (~60k), Turkey (~33k), Germany (~26k), Russia (~25k) and South Africa (~20k).
Consequently, India’s current share in the global tally in terms of daily cases as well as deaths at 2.6% and 1.5%
respectively has fallen sharply.
On the positive side, Vaccine roll-outs have begun in various parts of the world raising hopes of an end to this crisis this
year. India has granted emergency authorization to two vaccines—Covishield manufactured by the Serum Institute of
India and Covaxin manufactured by Bharat Biotech International Ltd. Amidst rising scare of the new Coronavirus strain,
effective roll-out of the vaccine would be crucial in further containing the spread in India.
Figure 138: COVID-19 cases in India (as of January 6th, 2021)
Source: covid19india.org.
17
The minor variations in data across tables and charts are due to different data sources.
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Figure 139: COVID-19 daily cases in India (as of January 6th, 2021)
Source: covid19india.org
Figure 140: COVID-19 active cases in India (as of January 6th, 2021)
Active cases have been on a steady dip since mid-September, thanks to falling new infections and strong recoveries.
Source: covid19india.org.
Figure 141: Month-wise COVID-19 progression

Month Daily confirmed (average) Daily recovered (average) Daily deceased (average) Cumulative confirmed (eop)
January 0 0 0 1
February 0 0 0 3
March 53 5 2 1635
April 1100 297 37 34866
May 5000 2671 137 190649
June 13000 8533 400 585795
July 36000 24119 618 1697068
August 64000 56188 932 3687953
September 87000 81087 1089 6310276
October 60000 71595 756 8183317
November 43000 46633 517 9463178
December 27000 32037 366 10286234
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Daily cases in India have steadily declined since end-November and India’s share of the
global coronavirus cases has a major improvement as well. After the surge in cases due
to the festive season in November, cases have been on a downward trajectory despite
Christmas and New Year’s celebrations in the country. The Google Mobility Charts stayed
approximately the same through November and December.
The country’s share in daily confirmed cases worldwide was ~27% as on September 30th,
2020 but has now fallen to low single digits. India’s share of overall confirmed cases has
also fallen from ~18% in September to 11% now. Mortality rates are now down to 1.45%,
lower than the global average of 2.14%, and is actually lower in most states apart from
Maharashtra, Delhi, Punjab and Gujarat. India’s total deaths at 151k now comprise about
7.8% of the global total, and the 300-odd deaths daily are a fraction of the global total of
~10k. Recovery rates have been inching up gradually, currently hovering at 96%.
Figure 142: India’s share of the global cases and deaths
Source; worldometers.info, covid19india.org.
Figure 143: India’s share of the global coronavirus cases (daily and total)
Date World Daily India Daily India Total World Total India Daily Share India Total Share
05-Jan 725671 18088 10374932 85575366 2.50% 12.1%
29-Feb 1,446 0 3 6,612 0.00% 0.0%
31-Mar 75,337 146 1,397 7,79,093 0.20% 0.2%
30-Apr 81,818 1,801 34,863 31,30,737 2.20% 1.1%
31-May 1,05,773 8,782 1,90,609 59,98,835 8.30% 3.2%
30-Jun 1,73,337 18,641 5,85,481 1,02,39,259 10.80% 5.7%
31-Jul 2,89,732 61,242 16,95,988 1,73,56,471 21.10% 9.8%
31-Aug 2,61,172 69,921 36,91,166 2,52,33,053 26.80% 14.6%
30-Sep 3,24,096 86,821 63,12,584 3,36,85,132 26.80% 18.7%
31-Oct 4,73,618 46,963 81,84,082 4,57,11,629 9.90% 17.9%
30-Nov 4,96,892 31,118 94,62,809 6,27,78,734 6.30% 15.1%
30-Dec 7,47,664 21,822 1,02,66,674 8,19,26,995 2.9% 12.5%
Source: worldometers.info, covid19india.org.
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Figure 144: India’s share of the global coronavirus deaths (daily and total)
Date World Daily India Daily India Total World Total India Daily Share India Total Share
05-Jan 15269 264 150114 1846098 1.7% 8.1%
29-Feb 22 0 0 105 0.0% 0.0%
31-Mar 4,722 3 35 40,947 0.1% 0.1%
30-Apr 5,830 75 1,154 2,28,555 1.3% 0.5%
31-May 2,768 223 5,408 3,62,422 8.1% 1.5%
30-Jun 4,907 507 17,400 4,94,899 10.3% 3.5%
31-Jul 6,194 793 36,511 6,61,570 12.8% 5.5%
31-Aug 4,198 819 65,288 8,36,248 19.5% 7.8%
30-Sep 6,399 1,181 98,678 9,99,643 18.5% 9.9%
31-Oct 6,526 470 1,22,111 11,79,890 7.2% 10.3%
30-Nov 8,564 482 1,37,621 14,50,169 5.6% 9.5%
30-Dec 14,976 299 1,48,738 17,83,126 2.0% 8.3%
Source: worldometers.info, covid19india.org.
India’s 1.3bn people across 28 states and eight union territories have had significantly
different exposure to the Coronavirus, with some states like Maharashtra bearing the
brunt of the cases early on, followed by others like Andhra Pradesh, Karnataka, Tamil
Nadu, Kerala, and Delhi. In this analysis, we try to examine the COVID-19 spread across
a continent-sized populace.
COVID-spread across states in terms of confirmed cases tells only part of the story. The
maturing of the pandemic–if one might call it that–saw a rapid rise in the number of
recoveries as well, particularly in states with early spreads like Maharashtra and Kerala.
After two months, some of these states have seen cases increase again in the wake of the
festive season, a second wave. States that saw second waves included Maharashtra and
Delhi but have since been on a steady downward trajectory.
Mortality levels are now at sub-1.5%, and recovery rates hover at ~96%, a significant
improvement from the 60-70% levels see in the Jul-Aug period. Consequently, active
cases have fallen sharply. Across States, thanks to the difference in testing intensity,
ranking of states differs meaningfully across confirmed and active cases.
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Figure 145: COVID-19 Cases Panel in India across States as of January 6th, 2021
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Figure 146: COVID-19 Confirmed cases across major states, as of January 6th, 2021
States have also differed meaningfully in terms of the proportion of patients that have
already recovered from the disease. India’s overall recovery rate has improved
substantially and has crossed 94% now (end-November), but an interesting picture
emerges from state-wise data. We saw a gradual, stable and upward convergence in data
emerge over August-September, and then a gradual dip, barring a slight increase during
the festive season. Maharashtra, Delhi, Gujarat and Goa were some of the several states
that imposed night curfews and restrictions in the last week of 2020 to curb New Year’s
celebrations in fear of another surge in cases. Kerala was considered a success story for
their handling of the pandemic. However, they experienced a surge in cases after the
festival of Onam and have been struggling to contain the virus since then. They currently
have the highest number of active cases out of all the states in the country.
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Figure 147: COVID-19 Active cases across major states, as of January 6th, 2021
Figure 148: COVID-19 Recovered cases across major states, as of January 6th, 2021
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Figure 149: COVID-19 recovery rate across major states, as of January 6th, 2021
Even as the overall mortality in India remains meaningfully below global levels there are
sharp divergences across states, not easily explained. Maharashtra does have the highest
number of deaths among states, but its high share of the total confirmed cases in the
country does translates into a disproportionate share of deaths.
Figure 150: COVID-19 Deceased cases across major states, as of January 6th, 2021
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In terms of Case Fatality Rate, Punjab leads with the highest CFR of 3.2%—much higher
than the global average, and nearly double of the nation’s average, followed by
Maharashtra at 2.6% and Sikkim at 2.2%. Punjab’s Health Secretary attributed the high
rate to “secondary infections caused by co-morbid conditions” and have established a
protocol to be followed for patients with comorbidities to bring the death rate down. Top-
affected states that fare much better in terms of CFR include Kerala (0.4%), Assam
(0.5%), Telangana (0.5%), Bihar (0.6%) and Odisha (0.6%).
Figure 151: COVID-19 Case Fatality Rate (CFR) across major states, as of January 6th, 2021
It is becoming increasingly clear that the differentiating factor in containing the spread of
the virus across countries is the extent of testing. While the testing intensity has fallen at
pan-India level, it varies widely across states. Amongst badly affected states, Delhi by far
leads in terms of testing intensity, having covered nearly 45% of the population—a reason
behind the spike in daily confirmed cases in the state in November. Uttar Pradesh and
Bihar also tested nearly 11-15% of their population, while southern states have been
much ahead compared to others, having tested 15-20% of the population. Delhi beat a
surge of cases in November thanks to their intensive testing.
Amongst large states, Madhya Pradesh fares the worst, having tested a mere 6% of the
population as compared to India’s tally of ~14%, followed by Rajasthan (7.1%) and West
Bengal (7.7%).
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Figure 152: Daily COVID-19 tests in India (the trend line denotes 7DMA)
Figure 153: Testing intensity across states as of November 30th, 2020

%
Testing intensity across states
50
45
40
35
30
25
20
15
10
5
0
Goa
Puducherry
Kerala
India
Odisha
Haryana
Gujarat
A&N
Arunachal Pradesh
Bihar
Chhattisgarh
Himachal Pradesh
Karnataka
Telangana
Assam
Chandigarh
Mizoram
Delhi
J&K
Tamil Nadu
Andhra Pradesh
Uttarakhand
Tripura
Rajasthan
Nagaland
Uttar Pradesh
Sikkim
Madhya Pradesh
Punjab
Jharkhand
Maharashtra
West Bengal
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Figure 154: COVID-19 Test Positivity Rate (TPR) across major states, as of January 6th, 2021
Infection spread across states
We have highlighted the divergence in the rate of infection across states over the past
three months. In order to understand the growth trends, we consider growth in terms of
the number of days it would take to double the cases. The so-called doubling-rate (2x)
rate is a widely used metric for measuring rapid growth.
All states have in general shown a gradual increase in the number of days to double their
current confirmed cases. India’s 2x rate is now 397, with Kerala being the only exception
with a doubling rate of a much lower 126 days. We see a similar trend in the number of
fatalities as well with a 2x rate of 393 days, but these metrics tend to stabilise only with
volume. Kerala and West Bengal have a doubling rate of 102 and 291 days respectively,
which is worrying.
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Figure 155: COVID-19 Doubling Rate: Confirmed cases across major states, as of January 6th, 2021
Figure 156: COVID-19 Doubling Rate: Deceased cases across major states, as of December 1st, 2020
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District-level trends
The last three months have also seen an emerging trend of the virus spreading rapidly in
urban areas. While higher population density would point to the obvious nature of the
phenomenon, what we try and highlight here is another feature, that regardless of density
and size, the rate of growth of infection is peaking out in most major cities/metro areas.
Figure 157: COVID-19 confirmed cases across districts, Figure 158: COVID-19 active cases across districts,
ranked by confirmed cases as of January 6th, 2021 ranked by confirmed Cases as of January 6th, 2021
Source: covid19india.org Source: covid19india.org
Cases have steadily declined in most urban areas across the country. A pattern of surges
in cities triggering spikes in neighbouring districts emerged early on, as seen in Gurgaon,
Faridabad and Thane. However, with most cities well past their peak, cases in other
districts are also on a downward trajectory. Active cases continue to drop across the
country, not just in overall figures, but also in terms of spread. The number of cities with
1000+ cases is 36 now and large cities with more than 10,000 cases have dropped to
only 2. Mumbai has the highest number of deceased cases, closely followed by Delhi.
While the decline in overall cases is extremely encouraging, we must be wary of another
surge. Densely populated areas should continue to be on high alert as districts continue
to open up gradually due to the inability to follow social distancing in such closed spaces.
Figure 159: Dispersion of COVID-19 active cases and deaths across districts
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Figure 160: COVID-19 cases across districts, ranked by Active Cases as of January 6th, 2021
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Figure 161: COVID-19 Test Positivity Rate across districts, ranked by Active Cases as of January 6th, 2021
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Figure 162: COVID-19 Case Fatality Rate (CFR) across districts, ranked by Active Cases as of January 6th, 2021
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Figure 163: COVID-19 Active cases trend across districts ranked by Active Cases as of January 6th, 2021
Figure 164: COVID-19 Doubling rate across districts ranked by Active Cases as of January 6th, 2021
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COVID-19 cases in other affected countries
Europe saw a surge in COVID cases in November and a number of countries introduced
fresh lockdowns and restriction. The UK has seen a new high of daily cases in the first
week of January 2021 and has recently announced their strictest lockdown ever, which
will be in force till the second week of February at least. Other European countries have
introduced flight restrictions in light of the new virus strain. The USA is also still struggling
to contain the spread of the virus which worsened after their presidential elections in
November.
A number of countries have granted emergency authorization to vaccines and have begun
the roll-out to frontline workers and the elderly. India gave emergency authorization to
the Serum Institute manufactured Covishield and Bharat Biotech’s Covaxin on January 1
and 2 respectively. While the government is expected to kick off the first phase of
Covishield vaccinations in the last week of January, approval given to Covishield has
raised eyebrows due to the unavailability of the third phase clinical trial data.
Figure 165: Summary of prominent vaccine candidates for India

Name Manufacturer Development Clinical trials
Oxford University and AstraZeneca
Covishield Serum Institute of India Phase 3 completed
Plc.
Bharat Biotech, ICMR and the

Covaxin Bharat Biotech International Ltd. Undergoing Phase 3 trials
National Institute of Virology
Russian Direct Investment Fund in

partnership with local Undergoing trials in India in partnership
Sputnik V Gamaleya Institute of Russia
manufacturers, distributed in India with Dr. Reddy's Laboratories Ltd.
by Dr. Reddy's Laboratories Ltd.
Source: Media reports.
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Charts of the month

Gauging economic recovery 2.0: Recovery gathers steam during the festive season
Economic recovery that started at a gradual pace beginning August 2020 (refer to the ‘Chart of the month’ section in
the October edition of Market Pulse) gathered steam during the festive months of October-December 2020. While a
part of this has been led by normalisation of business activities, improvement in consumption demand, thanks to the
festive season and some absorption of pent-up demand, has also supported the recovery. After our first attempt at
gauging economic recovery in October, we again try to analyse the pace of recovery during the festive months by looking
at an exhaustive list of high-frequency indicators related to consumption, investment, trade and financial markets.
Nearly ~65% of the 72 indicators we have looked at are closer or ahead of the pre-COVID levels, vs. 50% in October,
reflecting a pick-up in the pace of recovery, even as the extent differs across sectors. Rural demand has remained
strong, thanks to an above-normal monsoon, bumper kharif harvest and considerable policy support. Urban
consumption demand that had been a laggard until September has also picked up meaningfully during the festive
season—reflected in strong car sales figures, higher imports and robust growth in retail credit. Business activity has
been reviving, and so have sentiments, in line with easing of lockdown restrictions, even as weak credit growth points
to a delayed investment cycle recovery, notwithstanding a significant easing of financial conditions.
High-frequency indicators point to a fairly broad-based pick-up in economic activity from the steep contraction seen in
the initial months of lockdown. Google mobility indicators are improving, but remain below pre-COVID levels, indicating
still high stringency of government responses. Government Response Stringency Index for India is still very high at 69%,
partly explaining the slower pace of India’s economic recovery vs. other key emerging markets. Additionally, a sustained
increase in global caseloads poses threat to India’s recovery, notwithstanding risks of COVID resurgence in India. And
finally, it remains to be seen if the recovery sustains beyond the festive season—something that’s at risk given the
deterioration in labour conditions last month. On the positive side, initiation of vaccine rollouts is a positive
development, even as achieving a widespread coverage is going to be a daunting task for a country like India. We
maintain our GDP growth estimate of -8% for FY21, with FY22 growth expected at 9.5%, supported by a favourable
base.
• Strong rural consumption demand: Rural demand has remained fairly strong,
thanks to an above-normal monsoon, record-high kharif production, strong rabi
season prospects and strengthened policy support in the form of higher
procurement (paddy procurement for kharif marketing season 2020-21 rising
~24% YoY as on Dec 30th, 2020) and robust Govt. spending (including farmer
welfare, rural development, rural employment and fertilizers). This is reflected in
two-wheeler, tractor and fertilizer sales which are already significantly ahead of
pre-COVID levels, even as November saw some moderation. Agri exports have also
done quite well, growing at ~21% during July-Nov 2020. On the negative side, rural
unemployment rate, as estimated by CMIE, shot up meaningfully in December.
Additionally, rural sentiments, as per the CMIE Consumer Pyramid Survey, remain
much below pre-COVID levels, but a tad better than urban sentiments. This poses
risk to the sustenance of rural consumption demand over the coming months.
• Urban demand also picks up during the festive season: Urban consumption
demand, that got worsened due to stringent lockdown restrictions, job losses and
decline in disposable incomes, saw some improvement during the festive season.
This is reflected in a strong double-digit growth in passenger car sales during
August and September even as the growth has come off meaningfully over the last
two months, recovery in non-oil non-gold imports and consumer durables
production, a modest growth in petrol consumption and rising property
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registrations. That said, a meaningful deterioration in urban unemployment rate

may derail the underlying recovery in urban demand.
• Business activity picked up further: Business and trade activity has been
gradually coming back on track, in-line with the easing of lockdown restrictions.
While industrial production is slowly approaching pre-COVID levels, activity has
more-or-less normalised—reflected in a strong growth in rail freight traffic, daily E-
way bills, GST collections and increase in new order inflows. Google mobility trends
to workplaces also point to a significant normalisation in business activity, even as
it still remains below pre-COVID levels, reflecting higher social distancing
requirements. Sentiments have also improved meaningfully, with the RBI’s
Business Expectations Index (BEI) reverting to the expansion zone for the quarter-
ahead period (Q3FY21) as well as Manufacturing PMI remaining well above 50,
indicating expectations of an improvement in demand conditions.
• …but weak credit growth pointing to a delayed investment cycle recovery: Even
as normalisation of business activity has largely happened, investment cycle
recovery is expected to take longer, as reflected in weak industrial credit growth.
Overall new project announcements in value terms fell by ~89% YoY in the quarter
ending December 2020 to the second lowest level in last 15 years. A sharp drop in
interest rates this year, while helping businesses to survive through this economic
downturn, has not really helped revive the capex cycle, given an uncertain
economic environment.
• Financial conditions remain conducive: A slew of measures taken by the RBI,
including rate cuts, liquidity injection and easier credit flow to certain sectors, has
significantly eased financial conditions. Interest rates across money, bank and
credit markets have fallen sharply, thereby significantly reducing cost of funds.
Easier domestic and global liquidity has also provided a strong boost to market
sentiments. Debt issuances in the first three quarters of this fiscal have risen by
44% YoY in value terms. Primary issuances through the equity route have also
remained broadly steady. This, along with a surge in new investor accounts and
trading volumes, reflects strengthened market sentiments.
• Rising global cases and high stringency of government responses to COVID-19
may hurt the recovery process: High-frequency indicators point to a fairly broad-
based pick-up in economic activity from the steep contraction seen in the initial
months of lockdown. Google mobility indicators are improving, but remain below
pre-COVID levels, indicating still high stringency of government responses.
Government Response Stringency Index for India is still very high at 69%—only
slightly lower than 71% for the US and UK, but much higher than other badly
affected countries including Russia, Brazil and South Africa. This partly explains
the slower pace of India’s economic recovery as compared to other key emerging
markets. Additionally, a sustained increase in global caseloads poses threat to
India’s recovery, notwithstanding risks of COVID resurgence. And finally, it remains
to be seen if the recovery sustains beyond the festive season—something that’s at
risk given the deterioration in labour conditions in the month of December. On the
positive side, initiation of vaccine rollouts is a positive development, even as
achieving a widespread coverage is going to be a daunting task for a country like
India. We maintain our GDP growth estimate of -8% for FY21, with FY22 growth
expected at 9.5%, supported by a favourable base.
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Market Pulse
Figure 166: Movement in high-frequency macro/market indicators compared to pre-COVID levels (February 2020)
(February 2020 = 100, unless specified otherwise)
Feb Mar Apr Mar Jun Jul Aug Sep Oct Nov Dec
Indicators
2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020
Consumption demand
Rural
2-wheeler sales 100.0 67.5 2.9 23.4 75.3 91.0 113.0 135.7 150.9 120.0
3-wheeler sales 100.0 63.9 8.7 23.9 43.1 39.0 64.7 73.2 82.2 72.7
Tractor sales 100.0 54.2 19.2 99.9 151.9 108.8 111.8 178.9 190.8 137.9
Fertilizer sales 100.0 103.6 83.6 115.2 136.4 152.8 144.5 146.0 143.9 143.6
MGNREGA daily work demand (HH) 100.0 87.4 59.4 160.0 198.3 137.0 104.2 108.0 104.4 100.8 113.6
MGNREGA daily work provided (HH) 100.0 79.9 58.5 168.9 205.6 140.8 102.6 105.7 101.7 97.2 91.6
Average rural wage rates 100.0 100.0 100.0 103.3 104.6 104.9 103.7 102.7
Rural unemployment 100.0 115.0 311.9 287.6 129.3 88.7 104.2 80.1 94.7 85.0 124.7
Urban
Passenger car sales 100.0 53.2 0.0 9.3 35.5 65.8 79.8 104.9 116.9 95.9
Domestic air passenger traffic 100.0 62.2 0.0 2.5 16.0 16.8 23.2 32.4 42.9 52.0
Non-oil, non-gold & silver imports 100.0 81.5 50.0 76.5 63.3 83.6 84.5 97.6 101.0 97.7
Gold & silver imports 100.0 53.7 4.3 16.6 30.2 76.8 151.6 24.7 101.0 122.8
Broadband subscriber base 100.0 100.9 99.3 100.4 102.5 103.6 101.0 106.6 107.9
Petrol consumption 100.0 85.9 38.7 70.5 90.9 90.0 94.8 97.6
Google mobility (retail & recreation)* -2.0 -75.0 -84.0 -73.0 -55.0 -54.0 -45.0 -39.0 -34.0 -27.0 -18.0
Naukri Jobspeak Index 100.0 80.9 39.4 37.7 50.0 52.3 58.5 72.7 100.0 71.5
Urban unemployment 100.0 108.8 288.4 267.5 135.0 108.3 113.6 97.7 100.0 81.7 102.2
EPFO net payroll additions 100.0 56.1 -17.6 -14.0 25.6 60.7 78.3 101.0 113.0
Perceptions
Rural Consumer Sentiment Index 100.0 91.6 46.0 41.5 42.2 42.2 48.2 46.8 52.7 51.8 52.7
Rural Consumer Expectations Index 100.0 91.5 47.7 43.2 43.2 44.9 50.3 50.3 54.5 54.0 54.8
Urban Consumer Sentiments Index 100.0 92.5 38.5 35.4 38.6 38.6 36.7 38.8 44.9 44.2 46.0
Urban Consumer Expectations Index 100.0 92.8 39.6 37.2 41.4 40.4 38.8 40.6 48.1 46.3 47.9
Investment
Industrial Production
IIP 100.0 87.3 40.2 67.2 80.4 87.9 87.1 92.0 95.8
IIP: Manufacturing 100.0 83.2 31.4 62.9 79.8 88.3 88.2 93.7 97.4
IIP: Capital Goods 100.0 74.5 7.2 36.3 65.5 72.8 77.6 92.6 93.8
IIP: Const. & Infra. Goods 100.0 81.1 14.0 61.0 79.2 88.7 88.7 90.2 96.6
IIP: Consumer Durables Goods 100.0 70.9 4.7 33.8 66.7 84.7 94.0 108.0 113.6
Eight-core sector production 100.0 100.0 60.6 80.4 86.8 91.4 89.3 89.9 94.2 94.0
Steel production 100.0 87.1 17.6 63.0 80.0 92.8 98.6 94.9 101.7 96.9
Steel consumption 100.0 86.1 13.9 61.1 81.1 97.5 101.7 104.4 117.3 111.3 116.8
Coal production 100.0 122.6 60.6 63.9 61.0 58.6 57.4 61.8 71.5 80.4
Cement production 100.0 80.8 14.0 73.0 85.7 78.9 67.9 78.8 87.9 82.3
Electricity production 100.0 95.6 81.8 98.0 101.7 108.3 105.9 108.3 105.6 93.1
Commercial Vehicle sales* 100.0 75.3 21.5 90.9
Activity
Diesel consumption 100.0 79.0 45.4 76.7 87.9 76.8 67.7 76.7 97.7 98.3
Rail freight traffic 100.0 96.8 61.4 77.5 87.9 89.4 88.9 96.1 101.7 103.4 111.1
Domestic air cargo 100.0 72.2 6.9 18.1 52.6 64.7 71.3 89.6 104.0 95.1
International air cargo 100.0 82.5 24.8 46.9 66.3 76.2 79.6 89.0 92.0 88.2
Port cargo 100.0 106.8 82.9 79.3 85.7 89.9 90.2 93.5 98.3 103.9
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Feb Mar Apr Mar Jun Jul Aug Sep Oct Nov Dec
Indicators
2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020
Daily E-way bills 100.0 66.5 14.6 41.7 73.4 79.1 80.9 97.1 105.0 97.6 105.0
GST collections 100.0 92.6 30.6 58.9 86.3 83.0 82.0 90.6 99.8 99.6 109.3
New orders (machinery) 100.0 166.9 1279 693. 5.5 75.7 472.2 184.9 55.2 554.8 1605
New orders (Industrial & Infra Const.) 100.0 74.7 2.4 161.4 96.1 346.8 524.2 344.2 135.1 952.5 296.7
Daily property sale registrations (MH) 100.0 73.7 0.7 26.3 72.8 67.2 71.1 107.2 113.4 123.3 221.3
Google mobility (workplaces)* 8.0 -68.0 -61.0 -16.0 -35.0 -34.0 -31.0 -27.0 -17.0 -34.0 -18.0
Perceptions
Business Assessment Index 100.0 109.9 54.1 94.1
Business Expectations Index 100.0 103.6 91.5 102.4
Manufacturing PMI 100.0 95.0 50.3 56.5 86.6 84.4 95.4 104.2 108.1 103.3 103.5
Services PMI 100.0 85.7 9.4 21.9 58.6 59.5 72.7 86.6 94.1 93.4 91.0
External
Merchandise imports 100.0 83.0 45.1 60.3 56.2 76.7 81.8 80.5 88.7 88.1 112.4
Oil imports 100.0 93.2 43.1 33.2 46.1 60.7 59.8 54.0 55.7 58.1 89.1
Merchandise exports 100.0 77.5 36.6 69.3 79.4 85.6 82.3 99.5 90.1 84.8 96.9
Agri exports 100.0 90.0 61.5 86.5 93.7 105.8 93.6 108.3 108.7 103.3
Services imports 100.0 100.4 84.0 89.8 90.0 90.8 86.7 91.6 86.1
Services exports 100.0 102.5 92.8 94.6 95.9 96.1 92.8 97.5 93.6
USDINR (eop) 100.0 104.4 104.0 104.8 104.6 103.6 102.0 102.2 102.5 102.2 101.2
Financial markets
Cost of credit
WALR on new loans 100.0 98.9 97.9 97.3 96.1 95.9 95.5 94.9 94.2 93.4
WALR on O/S loans 100.0 95.2 92.0 92.8 90.4 92.1 90.2 89.5 90.5 89.8
1-year T-bill 100.0 91.6 75.1 69.1 71.3 69.9 71.4 70.8 66.3 63.6 71.8
10-year G-sec yield 100.0 96.3 95.9 94.4 92.4 91.6 95.4 94.4 92.3 92.8 92.5
5-year AAA-rated corp bond yield 100.0 103.3 100.5 93.8 90.7 83.5 88.4 88.3 82.8 81.7 81.0
Access to capital
Equity issuances 100.0 150.4 0.1 53.6 379.6 126.9 326.1 84.6 37.0 56.8 122.3
Debt issuances 100.0 100.5 95.4 95.0 91.3 62.8 69.6 104.6 77.7 61.0 78.0
Agri credit (O/S) 100.0 100.2 99.6 99.2 99.7 101.1 101.0 103.3 105.4 106.4
Industry credit (O/S) 100.0 104.0 103.3 102.5 103.0 101.0 99.5 99.4 98.1 98.6
Services credit (O/S) 100.0 106.6 105.8 104.5 103.9 104.7 104.8 105.9 105.9 105.6
Consumer durable loans (O/S) 100.0 143.2 137.2 134.0 136.2 140.5 139.4 102.6 105.9 106.8
Credit card outstanding (O/S) 100.0 97.4 87.4 83.7 88.0 91.4 94.5 95.2 99.3 103.0
Vehicle loans (O/S) 100.0 99.8 98.1 97.0 97.0 98.4 99.4 100.1 101.3 103.5
Housing loans (O/S) 100.0 100.8 100.1 100.0 100.5 101.4 101.5 102.3 103.3 104.1
Digital retail payments 100.0 109.6 59.8 73.7 94.0 97.8 96.9 107.2 115.0
Participation
Investor accounts (NSDL + CDSL) 100.0 101.8 103.5 105.1 107.6 110.3 112.9 116.1 118.7
SIP inflows 100.0 101.5 98.4 95.4 93.0 92.0 91.5 91.5 91.6 85.8
Market cap of listed companies 100.0 77.3 87.5 86.0 94.9 100.5 104.7 105.2 107.1 118.7 128.1
Trading volumes on NSE 100.0 120.3 126.3 132.2 154.1 147.2 153.3 139.6 131.4 167.8 156.8
Share of wallet
MF average net AUM 100.0 87.4 83.2 85.9 92.2 96.4 98.2 98.1 100.2 105.5
Aggregate deposits (O/S) 100.0 101.8 103.0 104.6 104.4 106.3 106.4 107.0 108.2
Source: CMIE Economic Outlook, RBI, SEBI, AMFI, Refinitiv Datastream, Bloomberg, MGNREGA website, IGR, Google COVID-19 Community Mobility Reports.
Note: Data has been extracted on January 7th, 2021. * Mobility change from the baseline day. A baseline day represents a normal value for that day of the week and is the
median value from the 5-week period from Jan 3rd to Feb 6th, 2020, translating into seven baseline values for seven days of the week.
Worst (significantly below pre-COVID level) -------------------------------- ----------------------------→ Best (at par or ahead of pre-COVID level)
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Market Pulse
Figure 167: Growth/change in high-frequency macro/market indicators in 2020 thus far

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Indicators Change
‘20 ‘20 ‘20 ‘20 ‘20 ‘20 ‘20 ‘20 ‘20 ‘20 ‘20 ‘20
Consumption demand
Rural
2-wheeler sales % YoY -10.8 -14.8 -35.9 -97.6 -81.4 -37.9 -19.6 0.2 11.3 18.1 12.7
3-wheeler sales % YoY 6.0 -21.3 -53.4 -92.1 -78.0 -60.6 -66.0 -48.3 -45.0 -38.5 -41.2
Tractor sales % YoY 3.3 19.6 -50.2 -80.1 0.5 20.2 35.9 64.8 26.7 9.0 48.3
Fertilizer sales % YoY 28.7 29.8 -1.6 53.4 38.6 23.2 25.7 6.6 -0.6 16.5 3.0
MGNREGA work demand (HH) % YoY -11.1 2.1 3.5 -35.6 53.0 78.6 76.5 69.3 73.8 91.6 52.4 58.5
MGNREGA work provided (HH) % YoY -13.2 2.4 -0.3 -33.3 59.7 84.5 86.5 65.3 68.1 85.7 50.4 29.3
Average rural wage rates % YoY 3.8 4.2 4.0 3.9 6.8 7.9 7.6 6.4 5.0
Rural unemployment bps YoY 2 53 372 2157 2351 234 -57 23 -18 -133 -33 320
Urban
Passenger car sales % YoY -8.1 -8.8 -53.3 -100.0 -89.9 -58.0 -12.0 14.1 28.9 9.7 -2.8
Domestic air passenger traffic % YoY 1.5 9.8 -32.9 -99.9 -97.4 -83.5 -82.6 -75.8 -65.1 -56.8 -50.2
Non-oil, non-gold/silver imports % YoY -4.4 1.0 -29.6 -53.7 -34.8 -41.6 -27.5 -23.4 -11.4 -4.6 -1.3
Gold & silver imports % YoY -32.3 -10.7 -61.0 -97.5 -92.1 -76.0 -15.3 127.9 -57.3 29.6 -0.1
Broadband subscriber base % YoY 24.7 23.8 22.0 18.2 17.6 17.4 16.8 16.4 16.1 14.1
Petrol consumption % YoY 3.5 11.3 -16.4 -60.4 -35.3 -13.5 -10.4 -7.5 3.3 4.5 5.1
Google mobility (recreation) ** -2.0 -75.0 -84.0 -73.0 -55.0 -54.0 -45.0 -39.0 -34.0 -27.0 -18.0
Naukri Jobspeak Index % YoY 5.8 0.0 -17.8 -61.6 -61.2 -44.4 -47.3 -34.7 -23.0 -17.0 -28.0
Urban unemployment bps YoY 131 125 219 2296 1697 414 129 12 -118 -132 -204 -20
EPFO net payroll additions % YoY 20.2 29.7 -29.7 -136.0 -146.2 -57.8 -10.1 46.9 120.1 238.4
Perceptions
Rural Cons. Sentiment Index % YoY 5.5 2.5 -10.0 -54.3 -60.0 -58.5 -58.3 -52.2 -56.1 -48.1 -48.7 -49.4
Rural Cons. Expectations Index % YoY 4.9 0.6 -11.5 -53.1 -59.1 -57.8 -56.1 -50.8 -53.5 -46.4 -47.2 -47.7
Urban Cons. Sentiments Index % YoY 2.2 0.2 -8.1 -61.4 -65.0 -62.2 -61.4 -62.8 -61.0 -55.3 -55.6 -53.6
Urban Cons. Expectations Index % YoY 1.7 -0.5 -8.9 -60.7 -63.4 -59.9 -60.3 -61.0 -59.6 -52.3 -53.9 -52.3
Investment
Industrial Production
IIP % YoY 2.2 5.2 -18.7 -57.3 -33.4 -16.6 -10.5 -7.4 0.5 3.6
IIP: Manufacturing % YoY 1.8 3.8 -22.8 -66.6 -37.8 -17.0 -11.4 -7.9 -0.2 3.5
IIP: Capital Goods % YoY -4.4 -9.6 -38.8 -92.7 -65.9 -37.4 -22.8 -14.8 -1.3 3.3
IIP: Const. & Infra. Goods % YoY -0.3 2.8 -24.3 -85.0 -39.0 -18.3 -8.2 -1.6 2.5 7.8
IIP: Consumer Durables Goods % YoY -3.7 -6.2 -36.8 -95.7 -70.3 -34.8 -23.7 -9.6 3.4 17.6
Eight-core sector production % YoY 2.2 6.4 -8.5 -37.9 -21.4 -12.4 -7.6 -6.8 -0.2 -0.9 -2.6
Steel production % YoY 1.6 2.9 -22.0 -82.8 -40.4 -23.2 -6.5 0.5 2.8 4.0 -4.4
Steel consumption % YoY 4.1 -6.5 -29.2 -85.8 -45.9 -26.1 -11.0 -13.4 -3.2 4.1 12.2 5.7
Coal production % YoY 8.0 11.2 4.0 -15.4 -14.1 -15.5 -5.7 3.6 21.2 11.7 2.9
Cement production % YoY 5.1 7.8 -25.1 -85.2 -21.4 -6.8 -13.4 -14.6 -3.5 3.1 -7.2
Electricity production % YoY 3.3 11.5 -8.2 -22.9 -14.8 -10.0 -2.5 -1.8 4.9 11.2 2.2
Commercial Vehicle sales % YoY -48.3 -84.8 -20.1
Activity
Diesel consumption % YoY -1.6 6.3 -24.1 -55.6 -29.5 -15.5 -19.6 -20.8 -6.0 7.5 -6.9
Rail freight traffic % YoY 2.8 6.5 -13.9 -35.3 -21.3 -7.7 -4.6 3.9 15.5 15.4 9.0 8.7
Domestic air cargo % YoY 0.8 1.7 -32.6 -92.8 -82.9 -48.0 -41.4 -36.0 -19.9 -15.7 -9.8
International air cargo % YoY -2.9 -3.1 -31.7 -77.0 -58.2 -35.7 -30.1 -24.9 -13.6 -12.4 -15.0
Port cargo % YoY 2.2 4.6 -5.3 -21.1 -23.3 -14.6 -13.2 -10.4 -1.9 -1.3 4.1
E-way bills % YoY 11.6 10.3 -26.0 -83.6 -53.0 17.7 -7.3 -3.5 9.6 21.4 8.1 15.9
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Market Pulse
Jan Feb Mar Apr Mar Jun Jul Aug Sep Oct Nov Dec
Indicators Change
‘20 ‘20 ‘20 ‘20 ‘20 ‘20 ‘20 ‘20 ‘20 ‘20 ‘20 ‘20
GST collections % YoY 8.1 8.3 -8.4 -71.6 -38.2 -9.0 -14.4 -12.0 3.9 10.2 1.4 11.6
New orders (Machinery) % YoY 57.1 -82.2 -86.3 26251 4245.5 -99.5 -94.9 -81.0 -93.8 -94.1 186.9 304.5
New orders (Ind. & Infra/Const.) % YoY -56.4 -60.4 -81.0 -97.8 234.7 -27.5 177.9 340.2 2.4 -4.8 175.2 31.9
Sale property registrations (MH) % YoY 21.7 -5.7 -33.3 -99.2 -75.7 -28.9 -30.6 -14.9 49.2 63.9 37.2 132.6
Google mobility (workplaces) ** 8.0 -68.0 -61.0 -16.0 -35.0 -34.0 -31.0 -27.0 -17.0 -34.0 -18.0
Perceptions
Business Assessment Index % YoY -4.7 -49.0 4.0
Business Expectations Index % YoY -4.1 -11.8 9.0
Manufacturing PMI +/- 50 5.3 4.5 1.8 -22.6 -19.2 -2.8 -4.0 2.0 6.8 8.9 6.3 6.4
Services PMI +/- 50 5.5 7.5 -0.7 -44.6 -37.4 -16.3 -15.8 -8.2 -0.2 4.1 3.7 2.3
External
Merchandise imports % YoY -0.7 3.6 -28.0 -59.7 -51.0 -48.0 -28.1 -22.2 -19.1 -11.5 -13.3 7.6
Oil imports % YoY 15.6 14.5 -14.7 -59.8 -71.6 -55.7 -32.9 -41.4 -35.9 -38.3 -43.4 -10.4
Merchandise exports % YoY -2.1 3.3 -34.3 -61.0 -35.6 -12.0 -9.4 -12.1 6.0 -4.8 -8.7 -0.8
Agri exports % YoY -6.2 1.0 -28.7 -32.9 -7.9 11.7 15.3 14.1 31.5 34.0 12.4
Services imports % YoY 8.8 12.8 -2.2 -18.4 -20.4 -15.3 -21.7 -20.1 -8.7 -12.3
Services exports % YoY 7.0 6.9 1.2 -8.9 -10.2 -8.4 -10.8 -9.9 -1.4 -6.3
USDINR (eop) % YoY 0.7 1.4 9.0 7.5 8.4 9.6 8.6 2.6 4.4 4.5 2.9 2.5
Financial markets
Cost of credit
WALR on new loans bps YTD 1 -3 -14 -24 -30 -41 -43 -48 -54 -61 -69
WALR on O/S loans bps YTD 8 -3 -51 -83 -75 -99 -82 -101 -108 -98 -104
1-year T-bill bps YTD -23 -59 -138 -293 -349 -329 -342 -327 -333 -376 -401 -324
10-year G-sec yield bps YTD 7 -28 -63 -68 -83 -102 -109 -73 -82 -103 -98 -101
5Y AAA-rated corp. bond yield bps YTD -2 -51 -20 -47 -110 -140 -208 -162 -162 -214 -225 -231
Access to capital
Equity issuances % YoY 65.2 -53.6 -48.3 -99.9 -83.4 484.5 816.9 550.9 -25.8 -50.7 -82.5 -25.7
Debt issuances % YoY -4.2 93.1 -40.6 151.4 26.9 54.7 68.0 11.2 49.6 48.8 2.1 36.9
Agri credit (O/S) % YoY 6.5 5.8 4.2 3.9 3.5 2.4 5.4 4.9 5.9 7.4 8.5
Industry credit (O/S) % YoY 2.5 0.7 0.7 1.7 1.7 2.2 0.8 0.5 0.0 -1.7 -0.7
Services credit (O/S) % YoY 8.9 6.9 7.4 11.2 11.2 10.7 10.1 8.6 9.1 9.5 8.8
Consumer durable loans (O/S) % YoY 41.3 43.4 47.6 43.7 43.5 53.3 62.3 65.1 22.3 23.8 26.2
Credit card outstanding (O/S) % YoY 31.6 33.0 22.5 4.8 -0.8 2.8 7.9 7.4 6.3 4.9 8.0
Vehicle loans (O/S) % YoY 9.8 10.3 9.1 8.6 6.3 7.1 8.1 8.4 8.8 8.4 10.0
Housing loans (O/S) % YoY 17.5 17.1 15.4 13.9 12.9 12.5 12.3 11.1 8.5 8.2 8.5
Participation
Investor accounts (NSDL + CDSL) % YoY 12.3 12.8 13.8 14.8 15.7 17.4 19.4 21.0 18.6 20.2
SIP inflows % YoY 5.8 5.2 7.3 1.7 -0.7 -2.5 -5.9 -5.3 -5.7 -5.4 -11.7
Market cap of NSE listed cos % YTD 0.6 -5.7 -27.1 -17.5 -18.9 -10.5 -5.2 -1.3 -0.8 1.0 11.9 20.8
Daily trading volumes on NSE % YoY 20.9 24.6 30.6 49.4 47.0 95.7 89.2 81.3 48.7 39.0 60.3 92.4
Share of wallet
MF average net AUM % YoY -6.9 -4.5 1.0 5.7 8.4 8.3 8.4 10.7
Aggregate deposits (O/S) % YoY 11.1 10.2 7.9 9.9 10.5 9.6 12.1 10.9 10.5 11.1
Source: CMIE Economic Outlook, RBI, SEBI, AMFI, Refinitiv Datastream, Bloomberg, MGNREGA website, IGR, Google COVID-19 Community Mobility Report.
Note: Data has been extracted on October 21st, 2020. ** Mobility change from the baseline day. A baseline day represents a normal value for that day of the week and is
the median value from the 5-week period Jan 3rd Feb 6th, 2020, translating into seven baseline values for seven days of the week.
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Market Pulse
New Product: Derivatives on Nifty Financial Services Index

The National Stock Exchange of India (NSE) launched derivatives trading on the Nifty Financial Services Index in the
Futures and Options Segment of the Exchange from January 11th, 2021. This would become the third index derivatives
product being offered by the Exchange, the first two being on the Nifty 50 Index and the Nifty Bank Index. The Nifty
Financial Services Index—comprising of 20 companies including banks, NBFCs, insurance companies and other
financial institutions—has generated an annualized return of 14.6% over the last five years.
National Stock Exchange of India (NSE), the world’s No 1 derivatives exchange in the year
2019 based on contracts traded, has received approval from Securities Exchange Board
of India (SEBI) launched derivatives on the Nifty Financial Services Index in the Futures
& Options Segment of the exchange (contract symbol “FINNIFTY”) on January 11, 2021.
Currently, NSE offers index derivatives on only two equity indices – Nifty 50 Index and
the Nifty Bank Index.
The financial services sector assumes significance as the sector accounts for 33.15% of
the in the Nifty 500 index. The Nifty Financial Services Index comprises of 20 stocks and
is designed to reflect the behavior and performance of the Indian financial market which
includes banks, financial institutions, housing finance, insurance companies and other
financial services companies.
The first day witnessed volumes of 1.4 lakh contracts being traded worth Rs. 511 crores.
311 trading members across the country participated in the index derivatives. The near
week futures contract last traded price was at a premium of 37 basis points to the closing
Nifty Financial Services index value while the near monthly futures contract last traded
price was at a premium of 49 basis points to the Nifty Financial Services closing index
value.
A recent investment data of Foreign Portfolio Investors (FPIs) indicate that nearly 35%
of the equity assets under custody of FPIs are invested in Financial Services sector.
Further, many of the asset management companies have mutual fund schemes on the
financial sector theme.
The Nifty Financial Services index has a 94% correlation and a Beta value of 1.2 with the
Nifty 50 Index. It has a correlation of 98% with Nifty Bank index. The Nifty Financial
Services index has delivered annualized returns of 14.59% in last 5 years.
Exchange offers futures and options in 7 serial weekly excluding the monthly expiry and
3 serial monthly contracts. This is the first time Exchange will make available weekly
futures for the stock index derivatives. The derivatives are cash settled with expiry day
being the last Thursday of the expiry month for the monthly contracts and Thursday of
the expiring week for weekly expiry contracts. The option contracts are European styled
Call Option (CE) and Put Option (PE) with strike scheme of 30-1-30 and strike interval of
100.
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Market Pulse
About the Nifty Financial Services Index

The Nifty Financial Services Index tracks the performance of Indian financial
services companies including banks, housing finance, insurance, NBFCs, other
financial services companies etc. The index comprises a maximum of 20 stocks and a
stock’s weight is based on its free float market capitalization.
Introduction
Financial services firms are crucial to the success of the Insurance companies facilitate pooling of risks so
economy in the long run. The financial services individuals and firms can focus on their core business,
landscape in India is constantly changing and evolving. knowing they are financially protected against
Banks have historically played a critical role in the unforeseen circumstances. Asset Management
financial system, channeling surplus funds from savers Companies facilitate savings and investment and help
to borrowers, and continue to do so. However, in recent investors achieve their financial goals.
years other subsectors of the financial services
including Insurance, Housing Finance, NBFCs, Asset
Management Companies etc. have gained increased
prominence. Similar to Banks, Housing Finance
companies and NBFCs support credit creation and
growth across the economy.
Highlights
The index has a base date of January 01, 2004, with a base value of 1000
The index tracks the performance of Indian financial services companies including Banks, Housing
Finance, Insurance, NBFCs, other financial services companies etc.
The companies should form part of Nifty 500 at the time of review to be eligible for inclusion in the index
The index comprises a maximum of 20 stocks
The weight of each stock is based on its free float market capitalization
The index is reconstituted semi-annually
A buffer based on free float market capitalization is applied to reduce turnover
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The Nifty Financial Services Index offers diversified exposure to Banks, Housing
Finance, Insurance, NBFCs and other financial companies
The Nifty Financial Services Index offers broad and diversified exposure to the Financial Services sector. The
subsectors and constituents of the Nifty Financial Services Index are shown below.
Figure 168: Constituents of the Nifty Financial Services Index as at December 29 th, 2020
Nifty Financial Services Index
Other
Insurance Financial Housing
Banks NBFC Financial
Institution Finance
HDFC Asset
HDFC Bank Bajaj Finserv Bajaj Finance PFC HDFC Ltd.
Management
Kotak
Bajaj Piramal
Mahindra REC
HDFC Life Holdings Enterprise
Bank
Cholamandalam
ICICI Bank Investment and
SBI Life
Finance
ICICI Shriram
SBI Lombard Transport
General Finance
ICICI Mahindra &

Axis Bank Prudential Life Mahindra
Insurance Financial
Source: NSE Indices
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As seen in the figure below, Banks account for 63.1% Institutions categories cumulatively account for 2.4%
of weight of the Nifty Financial Services Index, followed of the weight of the Nifty Financial Services Index.
by Housing Finance Companies at 18.5%. NBFCs and These categories include Asset Management
Insurance Companies have 8.1% and 8.0% weight Companies and Public Sector Undertaking (PSU)
respectively. Other Financial Services and Financial lending institutions.
Figure 169: Distribution of Nifty Financial Services Index weights by subsector
1.3 1.1
8.0
8.1
18.5
63.1
Banks Housing Finance NBFCs Insurance Other Financial Services Financial Institutions
Source: NSE Indices. Data as of December 29, 2020.
Investors can obtain greater exposure to various subsectors of the Financial Services
sector through the Nifty Financial Services Index compared to Nifty Bank Index and
broad market
The Nifty Financial Services Index allows investors to get diversified exposure to financial services sector as
compared to Nifty Bank Index and more focused exposure as compared to broad market indices. The figure below
shows the weights of various subsectors of financial services in the Nifty Financial Services Index versus their
weights in the Nifty Bank Index and in the broader Nifty 50 Index and Nifty 500 Index.
Figure 170: Distribution of Nifty Financial Services Index weights (%) by subsector compared to Nifty 50 Index,
Nifty 500 Index and Nifty Bank Index
Sector Nifty Financial Services Nifty 50 Nifty 500 Nifty Bank
Banks 63.1 26.5 20.3 100.0
Housing Finance 18.5 7.5 5.6 0.0
NBFCs 8.1 2.3 3.0 0.0
Insurance 8.0 2.5 2.5 0.0
Other Financial Services 1.3 0.0 1.4 0.0
Financial Institutions 1.1 0.0 0.3 0.0
Total Financial Services exposure 100.0 38.7 33.2 100.0
Source: NSE Indices. Data as of December 29 th, 2020. Other Financial Services includes rating agencies, capital markets, investment companies, stock broking
and allied services.
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Banks account for 63.1% weight of the Nifty Financial Index gives investors more targeted and larger
Services Index compared to 26.5% in the Nifty 50 exposure to these subsectors of the Financial Services
Index, 20.3% in the Nifty 500 Index and 100.0% in the sector than broad market indices. Likewise, Nifty
Nifty Bank Index, as of December 29, 2020. Similarly, Financial Services Index provides more diversified
the weight of Insurance companies in the Nifty exposure to various subsectors of financial services
Financial Services Index is 8.0% compared to 2.5% in sector as compared to exposure to only banking sector
the Nifty 50 Index and Nifty 500 Index and 0.0% in the in case of Nifty Bank Index
Nifty Bank Index. Thus, the Nifty Financial Services
The weights of sectors like Insurance and NBFC sub-sector have increased in Nifty
Financial Services Index through time
The Figure below shows how the weights of various The weight of the NBFCs has increased from 5.9% as
subsectors have changed through time in the Nifty of December 31, 2016 to 8.1% as of December 29,
Financial Services Index. As of December 31 st, 2016, 2020. Through the same period, the weight of Banks
the weight of insurance companies in the Nifty has decreased marginally from 67% as of end CY 2016
Financial Services Index was 1.9%. Since then, more to 63.1% as of December 29, 2020. Housing Finance
insurance companies have been listed on the companies’ weight has reduced from 23% as of end CY
exchanges and the weight of the sector has steadily 2016 to 18.5% as of December 29th, 2020.
increased to 8.0% as of December 29th, 2020.
Figure 171: Distribution of Nifty Financial Services Index by subsector over the last five calendar years
Banks Housing Finance NBFCs Insurance Other Financial Services Financial Institution Stockbroking & Allied
2.1
2016 67.0 23.0 5.9

1.9
1.7
2017 67.3 21.0 7.7
2.3
1.1
2018 64.8 21.3 7.3 4.2
1.3
0.3
2019 63.9 19.2 7.5 7.8

1.2
1.1
2020* 63.1 18.5 8.1 8.0
1.3
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0
Source: NSE Indices. *Data as of December 29 th, 2020. For other years, data is as of December 31 st for the respective year
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Figure 172: Nifty Financial Services Index, Nifty 50 Index, Nifty Bank Index and Nifty 500 Index performance
Movement in Indices (rebased to 100 on January 1st, 2012)
500
Nifty Financial Services Nifty 50 Nifty Bank Nifty 500
450
400
350
300
250
200
150
100
50
0
Source: NSE Indices. Data as of December 29 th, 2020
Figure 173: Nifty Financial Services Index, Nifty 50 Index, Nifty Bank and Nifty 500 Index performance table
CAGR returns Annualised volatility Return-risk ratio
Nifty Nifty Nifty
Nifty Nifty Nifty Nifty Nifty Nifty Nifty Nifty Nifty
Period Financial Financial Financial
50 Bank 500 50 Bank 500 50 Bank 500
Services Services Services
Since Inception 18.7% 13.9% 16.9% 13.9% 29.3% 22.9% 30.5% 22.2% 0.64 0.61 0.56 0.63
15 Years 16.9% 12.6% 14.9% 12.1% 29.3% 22.9% 30.2% 22.1% 0.58 0.55 0.49 0.55
10 Years 13.3% 9.9% 11.1% 10.0% 23.6% 17.5% 24.9% 17.0% 0.57 0.56 0.45 0.59
7 Years 19.0% 13.4% 16.3% 14.2% 22.8% 17.2% 24.0% 17.0% 0.83 0.78 0.68 0.84
5 Years 17.3% 13.3% 13.7% 12.6% 23.7% 18.2% 24.8% 17.7% 0.73 0.73 0.55 0.71
3 Years 13.6% 11.2% 7.3% 7.8% 27.8% 21.1% 28.9% 20.3% 0.49 0.53 0.25 0.38
1 Year 4.1% 15.7% -2.6% 17.4% 41.2% 31.3% 43.1% 29.5% 0.10 0.50 -0.06 0.59
6 Months 43.5% 36.0% 46.6% 36.1% 24.0% 15.5% 27.5% 15.0% 1.81 2.32 1.69 2.40
3 Months 42.3% 24.2% 46.0% 23.0% 24.2% 14.4% 27.1% 13.8% 1.75 1.67 1.70 1.67
Source: NSE Indices. Data as of December 29 th, 2020. Inception date: Jan 01, 2004. Returns based on TRI values
The Nifty Financial Services Index has outperformed Index has had annualized volatility of 29.3%
both the Nifty 50 Index and Nifty Bank since inception compared to 22.9% for the Nifty 50 Index and 30.5%
(Jan 01, 2004), with 18.7% CAGR return against for the Nifty Bank Index. Similarly, over the last 1 year
13.9% return for the Nifty 50 Index and 16.9% CAGR between December 31, 2019 and December 29, 2020,
return for the Nifty Bank Index. In the last 5 years, over the Nifty Financial Services Index has had annualized
the period of December 31, 2015 to December 29, volatility of 41.2% compared to 31.3% for the Nifty 50
2020, the Nifty Financial Services Index returned Index and 43.1% for the Nifty Bank Index. This higher
17.3% CAGR compared to 13.3% CAGR for the Nifty 50 volatility over the last year was also due to the
Index and 13.7% CAGR for the Nifty Bank Index. pandemic related sell-off in H1 2020, with the
economy-sensitive financial sector being significantly
Being a sector index, the Nifty Financial Services Index
affected by pandemic related disruptions. The Nifty
has been more volatile than the Nifty 50 Index, however
Financial Services Index has outperformed the Nifty
being more diversified than Nifty Bank Index, it has been
Bank Index over various time horizons with lesser
less volatile than the Nifty Bank Index over various time
volatility and better returns and thus exhibited better
horizons. Since inception, the Nifty Financial Services
risk adjusted returns than the Nifty Bank Index.
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Figure 174: Nifty Financial Services Index, Nifty 50 Index, Nifty Bank and Nifty 500 Index betas and correlations
with Nifty Bank Index
Beta relative to Nifty Bank Correlation with Nifty Bank
Nifty Financial Nifty Nifty Financial
Period Nifty 50 Nifty 500 Nifty 50 Nifty Bank Nifty 500
Services Bank Services
Since Inception 0.94 0.66 1.00 0.64 0.98 0.88 1.00 0.88
15 Years 0.95 0.66 1.00 0.64 0.98 0.88 1.00 0.88
10 Years 0.92 0.63 1.00 0.61 0.97 0.89 1.00 0.89
7 Years 0.92 0.64 1.00 0.63 0.97 0.89 1.00 0.88
5 Years 0.93 0.66 1.00 0.64 0.97 0.90 1.00 0.89
3 Years 0.93 0.66 1.00 0.63 0.97 0.91 1.00 0.90
1 Year 0.94 0.67 1.00 0.62 0.98 0.92 1.00 0.91
6 Months 0.84 0.47 1.00 0.44 0.97 0.84 1.00 0.81
3 Months 0.86 0.45 1.00 0.40 0.96 0.84 1.00 0.79
Source: NSE Indices. Data as of December 29, 2020. Inception date: Jan 01, 2004. Returns based on TRI values. Benchmark for beta and correlation calculation is Nifty
Bank Index.
The Nifty Financial Services Index has had beta < 1 Index over several time horizons. For example, the
over various time horizons in relation to the Nifty Bank correlation between the Nifty Financial Services Index
Index. For example, since inception, the Nifty Financial and the Nifty Bank Index has been 0.97 over the seven-
Services Index has had beta of 0.94 in relation to the year period from December 31 st, 2013 to December
Nifty Bank Index. The Nifty Financial Services Index 29th, 2020.
has exhibited strong correlation with the Nifty Bank
The Nifty Financial Services Index has outperformed the Nifty 50 Index and Nifty
Bank Index for most of the calendar years.
The Nifty Financial Services Index has outperformed For example, underperformance of the financial
the Nifty 50 Index in 10 out of the last 17 calendar services index vs the Nifty 50 Index occurred in 2008
years and outperformed the Nifty Bank Index in 11 out (Global Financial Crisis), 2011 (European sovereign
of the last 17 calendar years from 2004 onward. The debt crisis), 2013 (‘Taper Tantrum’ in the US as the
Nifty Financial Services Index has generally Federal Reserve considered slowing its QE program),
underperformed the Nifty 50 Index in years of global 2015 (commodity price crash) and 2020 (COVID
turmoil. pandemic).
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Nifty Financial Services Index has outperformed the Nifty 50 and Nifty Bank Index
on a rolling return basis over long term horizons.
Figure 175: Instances of outperformance of Nifty Financial Services Index vs Nifty 50 Index on a daily rolling
return basis
Instances of underperformance Instances of outperformance vs. Nifty 50
vs. Nifty 50
Excess >= 0% Excess Return Excess Return (2- Excess Return (0-
Period Excess < 0% CAGR Return
CAGR Return (>4% CAGR) 4% CAGR) 2% CAGR)
10 Years 0.0% 100.0% 79.1% 17.7% 3.3%
7 Years 0.0% 100.0% 73.4% 26.3% 0.4%
5 Years 0.7% 99.3% 67.6% 23.8% 7.9%
3 Year 13.3% 86.7% 63.0% 12.3% 11.4%
2 Years 17.8% 82.3% 54.0% 15.3% 12.9%
1 Year 30.8% 69.2% 56.8% 6.7% 5.6%
Source: NSE Indices. Instances of outperformance or underperformance calculated using daily rolling returns. Data as of December 29 th, 2020.
From the table above, based on daily rolling returns, for For the 5-year investment horizon, based on daily
a 5-year investment horizon, the Nifty Financial rolling return analysis, the excess return of the Nifty
Services Index has outperformed the Nifty 50 Index Financial Services Index exceeds 4% per annum over
99.3% of the time. The frequency of outperformance the Nifty 50 Index in 67.6% of the instances, excess
rises to 100% when we consider longer time horizon of return ranged between 2-4% per annum for 23.8% of
7 years and 10 years. Outperformance of the Nifty the instances and excess return was in the range of 0-
Financial Services Index over the Nifty 50 Index is also 2% per annum for 7.9% of the instances, leading to
observed over shorter periods. For example, for 1-year cumulative 99.3% instances of outperformance over
investment horizon, based on daily rolling return the Nifty 50 Index.
analysis, the Index has outperformed the Nifty 50
Index 69.2% of the time.
Figure 176: Average return and standard deviation of daily rolling returns of Nifty Financial Services Index vs
Nifty 50 Index
Average rolling return St. Deviation of rolling return Rolling Return-Risk Ratio
Nifty Financial Nifty Financial Nifty Financial
Period Nifty 50 Nifty 50 Nifty 50
10 Years 16.9% 12.0% 3.9% 3.4% 4.37 3.54
7 Years 16.9% 12.0% 4.1% 3.4% 4.13 3.54
5 Years 17.1% 12.1% 6.4% 5.6% 2.66 2.15
3 Year 18.7% 13.6% 12.3% 10.7% 1.52 1.27
2 Years 19.7% 14.8% 17.7% 15.7% 1.11 0.94
1 Year 23.0% 16.5% 33.0% 24.6% 0.70 0.67
Source: NSE Indices. Averages and standard deviations calculated using daily rolling returns. Data as of December 29 th, 2020.
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From the table above, based on daily rolling returns, for Based on daily rolling returns, for a 7-year investment
a 1-year investment horizon, the Nifty Financial horizon, the Nifty Financial Services Index has returned
Services Index has returned an average of 23% p.a. an average of 16.9% p.a. compared to 12.0% p.a. for
compared to 16.5% p.a. for the Nifty 50 Index. The the Nifty 50 Index. The standard deviation of the time
standard deviation of the time series of 1-year rolling series of 7-year rolling returns, based on daily rolling
returns, based on daily rolling returns, is 33% for the returns, is 4.1% for the Nifty Financial Services Index
Nifty Financial Services Index compared to 24.6% for compared to 3.4% for the Nifty 50 Index. Thus, the
the Nifty 50 Index. Thus, over a 1-year horizon, the rolling return-risk ratio for a 7-year investment horizon
rolling return-risk ratio (average rolling return / std. is 4.13 for the Nifty Financial Services Index vs 3.54 for
dev. of rolling returns for a given horizon) is 0.70 for the the Nifty 50 Index, which demonstrates the Nifty
Nifty Financial Services Index vs 0.67 for Nifty 50. Financial Services Index has provided superior rolling
returns adjusted for volatility over 7-year investment
The Nifty Financial Services Index outperforms the
horizons compared to the Nifty 50 Index.
Nifty 50 Index on rolling return-risk ratio basis across
longer time horizons as well.
Figure 177: Instances of outperformance of Nifty Financial Services Index vs Nifty Bank Index on a daily rolling
return basis
Instances of underperformance Instances of outperformance vs. Nifty Bank
vs. Nifty Bank
Excess >= 0% Excess Return Excess Return (2- Excess Return (0-
Period Excess < 0% CAGR Return
CAGR Return (>4% CAGR) 4% CAGR) 2% CAGR)
10 Years 22.6% 77.4% 0.0% 12.6% 64.8%
7 Years 17.4% 82.6% 0.0% 16.4% 66.2%
5 Years 24.9% 75.1% 3.8% 20.1% 51.2%
3 Year 28.0% 72.0% 19.8% 9.6% 42.6%
2 Years 33.2% 66.8% 24.0% 13.4% 29.4%
1 Year 35.3% 64.7% 30.0% 16.1% 18.6%
Source: NSE Indices. Instances of outperformance or underperformance calculated using daily rolling returns. Data as of December 29 th, 2020.
From the table above, based on daily rolling returns, for For the 5-year investment horizon, based on daily
a 5-year investment horizon, the Nifty Financial rolling return analysis, the excess return of the Nifty
Services Index has outperformed the Nifty Bank Index Financial Services Index exceeds 4% per annum over
75.1% of the time. The frequency of outperformance the Nifty Bank Index in 3.8% of the instances, excess
rises to 82.6% when we consider longer time horizon return ranged between 2-4% per annum for 20.1% of
of 7 years. Outperformance of the Nifty Financial the instances and excess return was in the range of 0-
Services Index over the Nifty Bank Index is also 2% per annum for 51.2% of the instances, leading to
observed over shorter periods as well. For example, for cumulative 75.1% instances of outperformance over
1-year investment horizon, based on daily rolling the Nifty Bank Index.
return analysis, the Index has outperformed the Nifty
50 Index 64.7% of the time.
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Figure 178: Average return and standard deviation of daily rolling returns of Nifty Financial Services Index vs
Nifty Bank Index
Average rolling return St. Deviation of rolling return Rolling Return-Risk Ratio
Nifty Financial Nifty Financial Nifty Financial
Period Nifty Bank Nifty Bank Nifty Bank
10 Years 16.9% 16.0% 3.9% 3.9% 4.37 4.06
7 Years 16.9% 16.0% 4.1% 4.0% 4.13 4.01
5 Years 17.1% 16.1% 6.4% 6.3% 2.66 2.54
3 Year 18.7% 17.2% 12.3% 11.6% 1.52 1.48
2 Years 19.7% 17.8% 17.7% 17.2% 1.11 1.04
1 Year 23.0% 21.0% 33.0% 33.3% 0.70 0.63
Source: NSE Indices. Averages and standard deviations calculated using daily rolling returns. Data as of December 29 th, 2020.
From the table above, based on daily rolling returns, for across longer time horizons as well. Based on daily
a 1-year investment horizon, the Nifty Financial rolling returns, for a 10-year investment horizon, the
Services Index has returned an average of 23% p.a. Nifty Financial Services Index has returned an average
compared to 21% p.a. for the Nifty Bank Index. The of 16.9% p.a. compared to 16.0% p.a. for the Nifty
standard deviation of the time series of 1-year rolling Bank Index. The standard deviation of the time series
returns, based on daily rolling returns, is 33% for the of 10-year rolling returns, based on daily rolling
Nifty Financial Services Index compared to 33.3% for returns, is ~3.9% for both the Nifty Financial Services
the Nifty Banks Index. Thus, over a 1-year horizon, the Index and the Nifty Bank Index. Thus, the rolling
rolling return-risk ratio (average rolling return / std. return-risk ratio for a 7-year investment horizon is 4.37
dev. of rolling returns for a given horizon) is 0.70 for the for the Nifty Financial Services Index vs 4.06 for the
Nifty Financial Services Index vs 0.63 for the Nifty Bank Nifty Bank Index, which demonstrates the Nifty
Index. Financial Services Index has provided superior rolling
returns adjusted for volatility over 10-year investment
The Nifty Financial Services Index outperforms the
horizons compared to the Nifty Bank Index.
Nifty Bank Index on rolling return-risk ratio basis
The Nifty Financial Services Index is expected to serve as a reference index, which can be tracked by passive funds in
the form of Exchange Traded Funds (ETFs), index funds and structured products.
For more information on the Index methodology and factsheet, please visit us at www.nseindia.com.
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Macro economy
Retail inflation eases in November
Headline CPI inflation moderated to 6.9% in November from a six-year high of 7.6% in the previous month, surprising
market expectations on the positive side (Consensus: 7.1%; Source: Refintiv Datastream). This marked the eighth
consecutive month (and 11/12 months) of a 6%+ print—the upper bound of the RBI’s target range. The decrease was
primarily led by a drop in food inflation, particularly vegetables, cereals and protein-based foods. Barring food and fuels,
the core inflation print remained steady at 5.5%. We expect the headline retail inflation to continue to soften in the
coming months aided by falling food prices in the wake of easing supply-side disruptions and arrival of winter vegetables
as well as a favourable base. That said, it is likely to remain at the higher end of the RBI’s 2-6% target range in the
foreseeable future, with upside risks arising from higher commodity prices and increasing domestic demand.
Amidst an uncomfortably high inflation trajectory and an improvement in growth outlook (we expect an expansion in
Q4FY21, with FY21 GDP growth pegged at -8%), rate cuts seem to be off the table for now. Additionally, minutes of the
recent MPC meeting highlighted concerns regarding persistence of short-term interest rates below the policy rate
corridor for quite some time now, potentially signalling discomfort on further lowering policy rates, even as liquidity
support is likely to continue for now.
• Retail inflation fell to a three-month low in November…: CPI inflation continued

Retail inflation declined
to remain uncomfortably high but fell to 6.9% in November from a six-and-a-half from a six-and-a-half year
year high of 7.6% in the previous month. Barring Mar’20’s 5.8%, consumer inflation high of 7.6% in October to
has remained above the MPC’s 4+/-2% band for 11 months now. Headline inflation 6.9% in November.
has averaged 6.9% this fiscal thus far vs. 3.5% over the same period last year. That
said, a favourable base should start supporting the inflation trajectory from
December onwards.
• …led by a moderation in food inflation: Pace of price rise across food products
barring oils & fats came off in November, albeit marginally, led by a combination of Partial abatement of
supply-side bottlenecks
partial abatement of supply-side bottlenecks and a gradual increase in arrival of
and arrival of winter
winter vegetables. Consequently, food inflation fell by ~70bps MoM to a three-
supplies led to a drop in
month low of 8.8% in November, led by vegetables (-645bps MoM to 15.6%),
food inflation in November.
cereals (-120bps MoM to 13-month low of 2.3%), meat & fish (-200bps MoM to
16.7%) and egg (-150bps MoM to 20.3%). Excluding vegetables, headline inflation Core inflation remained
fell by a modest 24bps MoM. This sequential drop was partly offset by a pick-up in steady at elevated levels,
inflation in oils & fats (+270bps MoM to 17.9%) and non-alcoholic beverages reflecting continued
(+170bps to 10.1%). Across the rest of the categories in the inflation basket, normalisation of economic
activity.
easing fuel prices in the previous month translated into a modest drop in fuel &
light, transportation and personal care & effects inflation in November.
• Core inflation remained broadly steady: Declining COVID-19 infections and pick-
up in consumption demand kept core inflation broadly steady at a near two-year
high of 5.5% in November. A modest decline in transportation (-11bps MoM to
11.1%) and personal care & effects (-10bps MoM to 12%) inflation, reflecting a
drop in crude oil prices in the previous month, was almost entirely offset by a pick-
up in inflation in footwear, health and education. Overall, core inflation has
averaged at 5.2% in this fiscal thus far as compared to 4% in the same period last
year. Continued normalisation of economic activity and push from the demand side
may keep core inflation elevated in the near-term.
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• Rate cuts off the table for now: Headline inflation is expected to continue to
Amidst an elevated
soften in the coming months aided by easing food inflation in the wake of easing
inflation trajectory and
supply-side disruptions and arrival of the winter vegetables, with a favourable base
improving growth, further
providing an added support. That said, it is likely to remain at the higher end of the
rate cuts seem unlikely.
RBI’s 2-6% target range. The revival in economic activity, however, has been
better-than-anticipated, aided by a good festive demand and a sharp drop in
COVID-19 cases. That said, it remains to be seen if the recovery in domestic
demand sustains beyond the festive season—the absence of which may weigh on
the industrial recovery. Additonally, resurgence of COVID infections in the US and
Europe and consequent re-imposition of stringent lockdown restrictions is also
likely to negatively impact the domestic manufacturing sector.
Overall, amidst an uncomfortably high inflation trajectory and an improvement in
growth outlook (we expect an expansion in Q4FY21, with FY21 GDP growth pegged
at -8%), rate cuts seem to be off the table for now. Additionally, minutes of the
recent MPC meeting highlighted concerns related to persistence of short-term
interest rates below the policy rate corridor for quite some time now, potentially
signalling discomfort on further lowering policy rates, even as liquidity support is
likely to continue for now.
Figure 179: Consumer price inflation in November 2020 (%YoY)
Weight (%) Nov-20 Oct-20 Nov-19 FY21TD FY20TD
CPI 6.9 7.6 5.5 6.9 3.7
Food & Beverages 45.9 8.8 10.1 8.7 9.0 3.9
Pan, Tobacco & Intoxicants2 2.4 10.4 10.6 3.3 9.6 4.2
Clothing & Footwear 2
6.5 3.3 3.1 1.3 3.1 1.5
Housing 10.1 3.2 3.3 4.5 3.3 4.7
Fuel & Light 6.8 1.9 2.1 (1.9) 2.2 (0.1)
Miscellaneous2 28.3 6.9 6.9 3.7 6.5 4.4
Core CPI inflation 1, 2
44.9 5.5 5.5 3.5 5.2 4.0
Source: CSO, NSE. NA = Not Available.
Note: 1 Headline inflation excluding food & beverages, pan, tobacco & intoxicants and fuel & light.
2
Inflation data for these components for April and May 2020 are based on the imputed index calculated by MOSPI.
Figure 180: Headline CPI inflation trend

%
Headline inflation remains elevated at 6%+ for the eight month in a row
13
CPI Food & Beverages Fuel & Light Core inflation
11
(1)
(3)
Nov-16 May-17 Nov-17 May-18 Nov-18 May-19 Nov-19 May-20 Nov-20
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Figure 181: Real interest rates have remained negative for quite some time now
Figure 182: Recent spike in headline inflation largely led by perishables

%
CPI inflation ex-vegetables Headline CPI inflation
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19 Nov-20
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Figure 183: Category-wise contribution to India consumer price inflation (CPI)
Figure 184: Category-wise contribution to India Food and Beverages inflation (CPI)
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• Wholesale inflation picked up further to ninth-month highs…: Wholesale price

inflation (WPI) inched up further to an eight-month high of 1.6% in November,
contrary to the trend seen in retail inflation this month. This was primarily led by a
a sharp pick-up in manufactured products inflation (with a weight of 64% in the
WPI basket) and non-food primary inflation. Rest other categories saw a decline in
prices at the wholesale level. That said, the increase in wholesale inflation over the
last several months has been much more benign in comparison with headline
inflation, partly reflecting the spike in the latter being primarily supply-led.
Primary articles inflation fell from 4.7% in October to 2.7% in November. This was
primarily led by a drop in food and minerals inflation from 6.4% to 4.0% and from
9.1% to 2.0% in November respectively as well as a sharper drop in crude & natural
gas prices on a YoY basis. This was partly offset by a sharp pick-up in non-food
primary articles inflation to a 52-month high of 8.4% in November. Fuel & power
inflation remained in the negative zone for the ninth month in a row at -9.9% led
by a continued sharp drop in mineral oils (-16% YoY) and a 4.3% YoY drop in
electricity prices. Manufactured products inflation, on the other hand, picked up by
85bps MoM to 23-month high of 3% in November. Wholesale price inflation in this
fiscal thus far has averaged at -0.3% vs. 1.4% in the same period last year.
• Gap between CPI and WPI inflation declines in November: Following an inch-up
in the previous month, the gap between retail and wholesale price inflation fell by
nearly 80bps MoM to nine-month low of 5.4pp in November 2020, even as it
remains much higher than the series average of 3.6pp. The drop last month was
primarily on account of a) a much higher weight of food in the retail basket (45.9%)
as compared to the wholesale basket (15.3%), where prices have moderated last
month, and b) a higher weightage of manufactured goods in the wholesale basket
(64.2%) as compared to the retail basket, where inflation has remained broadly
sticky. That said, a huge gap between wholesale and retail prices is a testament of
persistence of supply-side bottlenecks in the economy, even as there has been
some improvement lately.
Figure 185: Wholesale price inflation for November 2020 (%YoY)

Weight (%) Nov-20 Oct-20 Nov-19 FY21TD FY20TD
WPI 1.6 1.5 0.6 (0.3) 1.4
Primary articles 22.6 2.7 4.7 7.6 1.5 6.4
Food articles 15.3 3.9 6.4 11.2 4.4 8.0
Non-food articles 4.1 8.4 2.9 1.9 (0.9) 4.0
Minerals 0.8 2.0 9.1 (5.8) 2.1 14.6
Crude petroleum & natural gas 2.4 (25.6) (13.0) (7.4) (25.7) (8.0)
Fuel & power 13.2 (9.9) (10.9) (7.3) (12.6) (3.3)
Coal 2.1 - (0.1) 2.5 1.4 1.2
Mineral oils 8.0 (16.0) (17.9) (13.6) (21.5) (6.1)
Electricity 3.1 (4.3) (4.3) 0.6 (4.0) (0.3)
Manufactured products 64.2 3.0 2.1 (0.8) 1.1 0.3
Food group 24.4 4.3 5.8 9.1 4.6 6.1
Source: CSO, CMIE Economic Outlook.
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Figure 186: WPI inflation trend Figure 187: Gap between wholesale and retail inflation
% WPI inflation inches up percentage points
9 Gap between CPI and WPI inflation
12.0
10.0
6
8.0
3
6.0
0 4.0
2.0
(3)
0.0
(6)
-2.0
(9) -4.0
Nov-12
Nov-13
Nov-14
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
May-16
May-17
May-18
May-19
May-20
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
Source: CMIE Economic Outlook.
Figure 188: India wholesale price inflation (WPI)
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Industry recovery strengthens further

Industrial production (IIP) continued to recover and reported a growth of 3.6% YoY in October, albeit off a low base,
marking the second YoY expansion in a row. Normalisation of business activities in-line with easing of lockdown
restrictions and increased festive and pent-up demand has supported the industrial recovery. Sector-wise, the recovery
was led by Manufacturing and Electricity sectors, while the Mining sector fell back into contraction zone (on a YoY basis)
despite a favourable base, reflecting sustained labour availability issues. On a FYTD basis (Apr-Oct’20), contraction in
industrial production stands at 17.5% YoY.
While the industrial recovery over the last couple of months has been encouraging, partly aided by a positive base effect,
it remains to be seen if the recovery in domestic demand sustains beyond the festive season—the absence of which may
weigh on industrial production. Additionally, rising COVID infections in the US and Europe and consequent re-imposition
of stringent lockdown restrictions is also likely to negatively impact the domestic manufacturing sector.
• Industrial production growth improves further in October…: At an eight-month
Industrial production
high of +3.6% YoY, the October IIP growth picked up further from an upwardly
improved further in
revised +0.5% YoY in the previous month, markign the second consecutive month October (+3.5% YoY),
of an YoY expansion. Notwithstanding a favorable base (-6.6% in Oct’19), the albeit off a low base, in-
improvement is a reflection of continued normalisation of economic and business line with continued easing
activities and realisation of festive and pent-up domestic demand. This is also of lockdown restrictions.
reflected in other high-frequency indicators for the month including E-way bills,
Manufacturing PMIs and GST collections, among others. On a FYTD basis (Apr-
Oct’20), industrial production declined by 17.5% YoY vs. a +0.1% growth in the
same period last year.
• …led by a strong rebound in Manufacturing and Electricity: The Manufacturing
and Electricity sectors of the IIP basket witnessed a meaningful improvement in Favourable base aside,
October, partly aided by a low base and improvement in domestic demand ahead normalising business
activity and higher demand
of the festive season. Manufacturing production improved to an eight-month high
ahead of the festive season
of 3.5% in October, but off a low base of -5.7% in the same period last year. came
supported industrial
off meaningfully in September (3.5%), with 14/23 sub-sectors recording an YoY
production growth in
expansion (vs. 10 in the previous month) led by transport equipment, electrical November.
equipment, motor vehicles, trailers and semi-trailers, rubber & plastic products,
fabricated metal products and pharmaceuticals. On the negative side,
discretionary items including textiles, wearing apparel, beverages, paper and
paper products and furniture reported a contraction for yet another month.
Following a modest expansion in the previous month, mining activity returned to
contraction again in October, falling by 1.5% YoY despite a low base (-8.0% in
October 2019), possibly reflecting continued labour availability issues. Electricity
production, however, grew at the highest pace of 11.2% YoY as demand from
industrial and commercial establishments is largely back to pre-COVID levels
thanks to continued easing of restrictions and normalisation of business activities.
• Festive demand supports consumer durables segment: Use-based classification
showed a meaningful improvement in consumption even as recovery in investment Festive demand supported
activity has been relatively muted. After recording an YoY contraction in the consumer durables
previous 22 months, Capital goods production increased by 3.3% YoY in October production, while recovery
vs. a 1.3% YoY drop in the previous month. That said, this growth has come on top in investment activity was
relatively benign.
of a 22.4% contraction in October’19, reflecting at best a modest recovery in
investment activity. Primary Goods recorded a sequentially steeper contraction of
3.3% in October (vs. -1.5% in the previous month) owing to weak mining activity.
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While intermediate goods production grew by 0.8% YoY, infra/construction goods

grew by at a 22-month high of 7.8% YoY in October. Notably, Consumer Durables
posted a strong 17.6% YoY growth—the highest in five years—supported by
festive/pent-up demand and consumption-boosting measures taken by the
Government, while Consumer non-durables production grew by 7.5% YoY.
• Industrial recovery may falter over the coming months: While the industrial
recovery over the last couple of months has been encouraging, partly aided by a
positive base effect, it remains to be seen if the recovery in domestic demand
sustains beyond the festive season—the absence of which may weigh on industrial
production. Additionally, rising COVID infections in the US and Europe and
consequent re-imposition of stringent lockdown restrictions is also likely to
negatively impact the domestic manufacturing sector. We maintain our estimate of
GDP contraction of 8% in FY21, with a favourable base leading to growth bouncing
to 9.5% in FY22.
Figure 189: India industrial production for October 2020 (%YoY)
Weight (%) Sep-20 Aug-20 Oct-19 FY21TD FY20TD
IIP 3.6 0.5 (6.6) (17.5) 0.1
Sector- Mining 14.4 (1.5) 1.4 (8.0) (13.3) (0.4)

based Manufacturing 77.6 3.5 (0.2) (5.7) (19.7) (0.0)
indices Electricity 8.0 11.2 4.9 (12.2) (5.6) 1.6
Primary Goods 34.0 (3.3) (1.5) (6.0) (12.7) 0.2
Capital Goods 8.2 3.3 (1.3) (22.4) (34.4) (12.1)
Intermediate Goods 17.2 0.8 (1.0) 8.7 (19.7) 9.4
Use-based
Infra/Construction Goods 12.3 7.8 2.5 (9.7) (20.8) (2.7)
Goods
Consumer Goods 28.2 11.6 2.8 (10.3) (16.8) (1.1)
Consumer Durables 12.8 17.6 3.4 (18.9) (31.8) (7.2)
Consumer Non-durables 15.3 7.5 2.4 (3.3) (5.9) 3.9
Source: CSO, NSE
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Figure 190: India industrial production (3MMA)
Figure 191: Long-term industrial production trend (12MMA)
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Figure 192: India industrial production use-based goods (3MMA)
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Figure 193: India eight-core sector growth (3MMA)
Figure 194: Manufacturing PMI remained steady in December while Services PMI declined marginally
Manufacturing and Services PMI

70.0 Manufacturing PMI Services PMI
60.0
50.0
40.0
30.0
20.0
10.0
-
May-14
May-15
May-16
May-17
May-18
May-19
May-20
Nov-20
Nov-13
Nov-14
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
Feb-14
Feb-15
Feb-16
Feb-17
Feb-18
Feb-19
Feb-20
Aug-14
Aug-15
Aug-16
Aug-17
Aug-18
Aug-19
Aug-20
Source: CMIE Economic Outlook, NSE.
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Trade deficit widens to fiscal-year high on weaker exports

India’s merchandise trade deficit widened to US$9.9bn in November from US$8.7bn in the previous month, the highest
this fiscal year (Apr-Nov’20) and higher than market expectations (Consensus est.: -US$8.8bn; source: Refinitiv
Datastream). This was primarily led by a 6% MoM contraction in exports while imports remained broadly steady on a
sequential basis. On a YoY basis, exports fell by 8.7% YoY in November, primarily led by a huge drop in exports of
petroleum products and engineering goods, excluding which exports actually grew by 3.4% YoY. Shortage in shipping
containers, higher freight charges and re-imposition of lockdown restrictions in the Western countries have restricted
export activity. Merchandise import bill fell by 13.3% YoY after recovering steadily on a YoY basis since May’20. This
was on the back of a sequentially steeper YoY contraction in oil imports, reflecting weak demand and lower crude oil
prices as compared to the year-ago period. Excluding oil and gold, imports continued to recover, registering a modest
1.7% YoY contraction in November, albeit off a low base, indicating a gradual pick-up in domestic consumption demand.
Contraction in imports is expected to come off further over the coming months, supported by a continued pick-up in
domestic activity. Exports, on the other hand, may weaken due to renewed restrictions globally, with the uncertainty
lingering around the new strain of the Virus adding to the woes. This is likely to widen trade deficit over the coming
months. That said, it is likely to remain lower than the average monthly run-rate of ~US$13bn in FY20. This should
translate into a current account surplus in FY21, supported by steady services exports, with our estimate pegged at
1.1% of GDP.
• Export activity deteriorates further in November: Following a YoY contraction in

October, export activity worsened further in November, falling by 8.7% YoY/5.9% Exports fell by 8.7% YoY
MoM. This is primarily attributed to weakening global demand in the wake of rising and 5.9% MoM in
COVID-19 cases and attendant re-imposition of lockdown restrictions in the US November, weighed down
by weak global demand
and UK as well as shortage in shipping containers. On a sequential basis, India’s
and shortage in containers.
exports to the US and UK—accounting for nearly 22% of India’s exports—fell by 6%
and 18% respectively. The YoY drop in export bill in November was led by a huge
59.7% and 8.6% YoY contraction in exports of petroleum products and engineering
goods respectively—the steepest fall in last six months, with the drop in latter
partly also attributed to an unfavorable base (+7.9% YoY growth in exports of
engineering godos in Nov’19). This was somewhat offset by a strong growth in agri
exports (+12.4% YoY led by rice, spices, oil meals), iron ore (+68.2% YoY) and
pharmaceuticals (+11.1% YoY) and a modest pick-up in exports of electronic
goods (+0.2% YoY/+14.4% MoM). On a cumulative basis, exports fell by 17.6%
YoY in the first eight months of this fiscal year.
• Import growth faltered after improving consistently since May: India’s

China’s share in India’s
merchandise imports fell by 13.3% YoY in November after recovering consistently
export bill this fiscal has
on a YoY basis since May. That said, unlike exports, imports remained broadly risen to three-decadal
steady on a sequential basis. Oil imports declined by a huge 43.4% on a YoY basis— highs.
a consequence of lower crude oil prices as compared to the year-ago period and
weak demand. Gold imports grew by a modest 2.6% on a YoY basis but a strong
21% sequentially, reflecting a festive-led demand and higher prices as compared
to the same period last year. In volume terms, India’s gold imports at ~55kg in
November 2020 was much lower than ~73kg in the same month last year as well
as average monthly imports of ~60kg in FY20. Excluding gold and oil, India’s import
bill continued on the path of a steady recovery and fell by mere 1.7% YoY in
November, indicating a gradual normalisation of domestic demand, supported by
the festive season. This was led by agri products (edible oils, pulses, fruits),
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chemicals including fertilizers, and electronic goods. On a cumulative basis,

imports fell by a much higher 32.6% YoY for the period April-November 2020.
• Trade deficit widened to the highest level in this fiscal: Worsening exports and
Trade deficit widened for
steady imports led to trade deficit widening to an eight-month high of US$9.9bn
the second month in a row
from US$8.6bn in the previous month. Excluding gold and oil, however,
to fiscal-year high of
merchandise trade deficit remained steady on a sequential (MoM) basis. US$9.9bn in November
Notwithstanding a sequential expansion last month, trade deficit on a cumulative 2020.
basis (April-November 2020) is still down by a strong 60.5% YoY, with the monthly
run-rate of US$5.6bn this fiscal year as comapred to US$14.1bn in the same period
last year.
• Current acount surplus estimated at 1.1% of GDP in FY21: Contraction in

An expected current
imports is expected to come off further over the coming months, supported by a
account surplus in FY21,
continued pick-up in domestic activity. Exports, on the other hand, may weaken
coupled with strong foreign
due to renewed restrictions globally, with the uncertainty lingering around the new capital inflows, bodes well
strain of the Virus adding to the woes. This is likely to widen trade deficit over the for the INR.
coming months. That said, it is likely to remain lower than the average monthly run-
rate of ~US$13bn in FY20. This should translate into a current account surplus in
FY21, supported by steady services exports, with our estimate pegged at 1.1% of
GDP. This, along with huge foreign capital inflows, bodes well for the INR (+5.1%
from the April peak until 2020-end).
Figure 195: India monthly trade balance for November 2020

Trade
Exports Imports
balance
Oil Non-oil Gold
Total
US$ bn %YoY %YoY imports %YoY imports %YoY Import %YoY US$ bn
(US$ bn)
(US$ bn) (US$ bn) (US$ bn)
Nov-20 23.5 -8.7 33.4 -13.3 6.3 -43.4 27.1 -1.2 3.0 2.6 -9.9
Oct-20 25.0 -4.8 33.6 -11.5 6.0 -38.3 27.6 -2.2 2.5 35.9 -8.6
Nov-19 25.8 -1.2 38.5 -11.8 11.1 -18.1 27.5 -8.9 2.9 6.6 -12.8
FY21TD 174.1 -17.6 218.9 -32.6 44.3 -48.5 174.6 -26.8 12.3 -40.3 -44.8
Source: Ministry of Commerce, CMIE Economic Outlook.
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Figure 196: India monthly trade balance trend
Figure 197: Non-oil, non-gold imports trend Figure 198: Oil imports trend
US$bn Non-oil non-gold imports recovers further % US$bn Oil imports trend %
35 Oil Imports % YoY (R)

Non-oil non-gold imports % YoY (R) 18 110
30 40
15
25 60
20
12
20
0
9 10
15
(20) 6
10
(40)
(40) 3
5
0 (60) 0 (90)
Nov-15 Nov-16 Nov-17 Nov-18 Nov-19 Nov-20 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19 Nov-20
Source: Ministry of Commerce, CMIE Economic Outlook.
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Figure 199: Oil imports vs. Brent crude oil prices trend
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2Q BoP at record high led by current account surplus and robust capital flows
India’s current account remained in surplus for the third quarter in a row at US$19.2bn or 2.4% of GDP in Q2FY21—a
tad lower than the record-high surplus of US$19.2bn or 3.8% of GDP in the previous quarter. This was on the back of a
24% YoY drop in trade deficit and steady net invisible receipts, even as trade deficit widened on a sequential (QoQ)
basis as the economy gradually opened up following the easing of lockdown restrictions. The capital account balance,
however, improved meaningfully led by record-high FDI (Foreign Direct Investment) and strong foreign portfolio inflows,
with the latter supported by global monetary easing. This, along with a strong current account surplus, resulted in the
Balance of Payments (BoP) surplus rising to record-high levels of US$31.6bn in Q2FY21.
Even as trade deficit is expected to widen in the second half of the fiscal thanks to weak global growth outlook and
continued normalisation of domestic economy, the full year figure is expected to remain reasonably lower than last
year. Our estimates point to near-40% drop in trade deficit in FY21, thereby translating into a current account surplus
of 1.1% of GDP in FY21—the first in 17 years. This, coupled with strong foreign capital inflows, should result in a record-
high BoP surplus in FY21. In FY22, we expect current account to slip into deficit again, with our estimate pegged at
0.7% of GDP, even as expectations of sustenance of foreign investments is likely to keep BoP in a comfortable surplus
position for the third year in a row.
Strong foreign inflows, along with the comfort on current account, bodes well for the INR (+4.9% against the USD from
the April peak level), notwithstanding aggressive RBI intervention. India’s foreign exchange reserves have touched fresh
record highs of US$581bn as on December 18th, implying an accretion of ~US$106bn in FY21 thus far. This, in turn, has
weighed on the INR—it is the worst performer among major Asian currencies in 2020.
• Trade deficit widened in Q2 as economy opened up gradually post lockdown…:
Current account remained
India’s trade deficit widened on a sequential basis from a 15-year low of
in surplus for the third
US$10.8bn in the previous quarter to US$14.8bn in Q2FY21. This was primarily on
quarter in a row at
the back of moderation in YoY contraction in India’s import bill, down 24.4% YoY
US$19.2bn or 2.4% of GDP
in Q2FY21 to US$90.4bn vs. -51.3% YoY in the previous quarter, even as exports in Q2FY21—a tad lower
also improved meaningfully (-5.5% YoY to US$75.6bn vs. 36.7% YoY drop in the than the record-high
previous quarter). While oil imports fell by a strong 37% YoY—attributed to weak surplus of US$19.2bn in in
demand and lower crude oil prices as compared to the year ago period, non-oil the previous quarter.
imports fell by relatively lower 20.3%, reflecting gradual normalisation of
economic activity as lockdown restrictions were gradually lifted. On a YoY basis,
trade deficit was still down 24.4% in Q2FY21.
• …leading to moderation in current account surplus: Net invisible receipts
remained steady on a QoQ basis at ~US$30bn in Q2FY21 but fell by a modest 5.5%
YoY. This was led by a 7.3% QoQ/5.9% YoY growth in services receipts, partly
offset by a 7.8% YoY drop in transfers. Steady invisibles and widened-yet-benign
trade deficit led to current account balance remaining in surplus for the third
quarter in a row at US$15.5bn in Q2FY21 or 2.4% of GDP—a tad lower than the
record-high surplus of US$19.2bn or 3.8% of GDP in the previous quarter.
• Capital account balance improved meaningfully leading to record-high BoP
surplus in Q2: On the capital account, record-high FDI inflows of US$24.6bn in A current account surplus
Q2FY21, thanks to a few large deals including overseas investments in Reliance and strong capital flows
led to BoP surplus
Jio, and strong foreign portfolio inflows (US$7.0bn in Q2—primarily into equities),
widening to record-high
supported by an easy global fiscal and monetary policy regime, led to current
levels in Q2FY21.
account surplus widening sharply from a 27-quarter low of US$1.0bn in Q1 to
US$15.4bn in Q2. This was partly offset by net ECB outflows and moderation in
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NRI deposits. Consquently, BoP surplus in Q2 rose to record-high levels of

US$31.6bn (US$51.4bn in H1FY21, +1.7x YoY).
• Current account surplus expected at 1.1% of GDP in FY21: Weak global growth
outlook amidst a continued surge in COVID-19 infections and consequent re- We estimate a current
imposition of lockdown restrictions are likely to weigh on exports over the coming account surplus of 1.1% of
months. This, coupled with continued normalisation of domestic economy, would GDP in FY21 but expect a
deficit of 0.7% of GDP in
lead to widening of trade deficit in the second half of the fiscal. That said, the full-
FY22.
year’s figure is expected to remain reasonably lower than last year, with our
estimates factoring in a near-40% YoY drop in trade deficit in FY21, thereby Sustenance of foreign
translating into a current account surplus of 1.1% of GDP in FY21—the first in 17 capital inflows should keep
years. This, coupled with strong foreign capital inflows, should result in a record- the BoP in a comfortably
high BoP surplus in FY21. In FY22, we expect current account to slip into deficit surplus position.
again, with our estimate pegged at 0.7% of GDP, even as expectations of
sustenance of foreign investments is likely to keep BoP in a comfortable surplus
position for the third year in a row.
Strong foreign inflows, along with the comfort on current account, bodes well for
the INR (+4.9% against the USD from the April peak level), notwithstanding
aggressive RBI intervention. India’s foreign exchange reserves have touched fresh
record highs of US$581bn as on December 18th, implying an accretion of
~US$106bn in FY21 thus far). This, in turn, has limited the gains on the INR—the
worst performer among major Asian currencies in 2020
Figure 200: Balance of Payments – Quarterly account

US$ bn Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21
Current account -19.1 -17.8 -4.6 -15.0 -7.6 -2.6 0.6 19.2 15.5
CAD/GDP (%) -2.9 -2.7 -0.7 -2.1 -1.1 -0.4 0.1 3.8 2.4
Trade balance -50.0 -49.3 -35.2 -46.8 -39.7 -36.0 -35.0 -10.8 -14.8
Trade balance/GDP (%) -7.5 -7.4 -5.0 -6.6 -5.7 -5.0 -4.8 -2.1 -2.3
Merchandise exports 83.4 83.1 87.4 82.7 80.0 81.2 76.5 52.4 75.6
Merchandise imports 133.4 132.4 122.6 129.5 119.6 117.3 111.6 63.1 90.4
Oil imports 35.3 38.4 32.4 35.4 29.8 31.5 33.8 13.2 18.8
Non-oil imports 98.2 94.0 90.1 94.1 89.8 85.8 77.7 49.9 71.6
Invisibles 31.0 31.5 30.6 31.8 32.1 33.4 35.6 30.0 30.3
Net services 20.3 21.7 21.3 20.1 20.9 21.9 22.0 20.5 21.2
Software earnings 19.3 19.9 19.9 21.0 21.1 21.5 21.1 20.8 22.3
Transfers 19.3 17.4 16.2 18.0 20.0 18.9 18.4 17.0 18.4
Investment income -9.1 -8.3 -7.5 -7.0 -9.6 -8.1 -5.6 -8.2 -10.0
Other invisibles 0.5 0.8 0.6 0.7 0.7 0.7 0.7 0.7 0.7
Capital account 16.6 13.8 19.2 28.6 13.6 23.6 17.4 1.0 15.4
Capital acc./GDP (%) 2.5 2.1 2.7 4.0 1.9 3.3 2.4 0.2 2.4
Foreign investments 7.6 5.2 15.9 18.8 9.8 17.6 -1.8 -0.2 31.6
FDI 7.4 7.3 6.4 14.0 7.3 9.7 12.0 -0.8 24.6
FII 0.2 -2.1 9.4 4.8 2.5 7.8 -13.7 0.6 7.0
Loans 6.9 2.9 10.3 9.6 3.1 3.1 9.9 2.5 -4.2
ECBs 2.2 2.0 7.5 6.1 3.3 3.2 10.3 -1.4 -4.3
Banking capital 0.5 4.9 -8.1 3.4 -1.8 -2.3 -4.6 2.2 -11.2
NRI deposits 3.3 0.1 3.4 2.8 2.3 0.8 2.8 3.0 1.9
Others 1.5 0.7 1.2 -3.2 2.5 5.2 13.8 -3.6 -0.7
Errors & Omissions 0.6 -0.3 -0.4 0.4 -0.9 0.6 0.9 -0.4 0.6
Overall balance (BoP) -1.9 -4.3 14.2 14.0 5.1 21.6 18.8 19.8 31.6
Source: RBI, CMIE Economic Outlook, NSE
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Figure 201: Balance of Payments – Annual account

US$ bn FY16 FY17 FY18 FY19 FY20 FY21E FY22
Current account -22.2 -14.4 -48.7 -57.3 -24.7 28.2 -21.2
CAD/GDP (%) -1.1 -0.6 -1.8 -2.1 -0.9 1.1 -0.7
Trade balance -130.1 -112.4 -160.0 -180.3 -157.5 -92.5 -144.2
Trade balance/GDP (%) -6.2 -4.9 -6.0 -6.6 -5.5 -3.6 -4.8
Merchandise exports 266.4 280.1 309.0 337.2 320.4 276.9 315.7
Merchandise imports 396.4 392.6 469.0 517.5 477.9 369.4 459.9
Oil imports 82.6 86.9 108.7 141.1 130.5 82.5 101.3
Non-oil imports 313.9 305.6 360.3 376.4 347.4 286.9 358.7
Invisibles 107.9 98.0 111.3 123.0 132.8 120.7 123.0
Net services 69.7 68.3 77.6 81.9 84.9 83.6 86.1
Transfers 62.6 56.0 62.4 69.9 75.2 69.4 70.8
Other invisibles -24.4 -26.3 -28.7 -28.9 -27.3 -32.3 -33.9
Capital account 41.1 36.4 91.4 54.4 83.2 75.0 64.0
Capital account/GDP (%) 2.0 1.6 3.4 2.0 2.9 2.9 0.0
Foreign investments 31.9 43.2 52.4 30.1 44.4 68.0 45.0
FDI 36.0 35.6 30.3 30.7 43.0 38.0 35.0
FII -4.1 7.6 22.1 -0.6 1.4 30.0 10.0
Loans -4.6 2.4 16.7 15.9 25.7 10.0 12.0
Banking capital 10.6 -16.6 16.2 7.4 -5.3 -5.0 5.0
NRI deposits 16.1 -12.4 9.7 10.4 8.6 9.0 10.0
Others 3.2 7.5 6.1 1.0 18.4 2.0 2.0
Errors & Omissions -1.1 -0.5 0.9 -0.5 1.0 0.0 0.0
Overall balance (BoP) 17.9 21.6 43.6 -3.3 59.5 103.2 42.8
Source: RBI, CMIE Economic Outlook, NSE
Figure 202: Trade deficit widens in Q2FY21…

US$bn %
Trade balance % of GDP (RHS)
0 0.0
-1.0
-10
-2.0
-20 -3.0
-4.0
-30
-5.0
-40 -6.0
-7.0
-50
-8.0
-60 -9.0
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Mar-18
Sep-18
Sep-19
Sep-20
Mar-14
Mar-15
Mar-16
Mar-17
Mar-19
Mar-20
Jun-14
Jun-15
Jun-17
Jun-18
Jun-19
Jun-20
Dec-13
Dec-14
Dec-15
Jun-16
Dec-16
Dec-17
Dec-18
Dec-19
Source: RBI, CMIE Economic Outlook, NSE.
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Figure 203: …Leading to moderation of current account surplus from record-high levels
US$ bn %
Quarterly current account balance
30 Current account balance % of GDP (RHS) 6.0
20 4.0
10 2.0
0 0.0
-10 -2.0
-20 -4.0
-30 -6.0
-40 -8.0
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-20
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Jun-19
Dec-19
Figure 204: FDI inflows surged to record-high levels in Q2FY21 …
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Figure 205: …with strong foreign portfolio inflows during the quarter…
Figure 206: …translating into a meaningful improvement in capital account surplus
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Figure 207: Current account surplus pegged at 1.1% of GDP in FY21; expect deficit of 0.7% of GDP in FY22
A significant contraction in trade deficit in FY21 is expected to translate into a current account surplus of 1.1% of GDP
in FY21—the first surplus in 17 years, vs. a deficit of 0.9% of GDP in FY20. In FY22, we expect current account to slip
into deficit again, with our estimate pegged at 0.7% of GDP, even as expectations of sustenance of foreign investments
is likely to keep BoP in a comfortable surplus position for the third year in a row.
Figure 208: Forex reserves are all all-time high levels, leading to a sharp rise in import cover
A significant accretion to forex reserves over the years, and particularly this fiscal year (+US$ 69bn in FY21 till date),
has resulted in a significant improvement in import cover, further supported by moderation in domestic demand. After
falling to eight months in 2014, India’s import cover has improved sharply to nearly 19 months now, thereby
significantly reducing India’s external vulnerability.
US$ bn Forex reserves and import cover (months) # of months
600 20
FX reserves (US$bn) Import cover ratio (months, RHS)
550 18
500
16
450
14
400
12
350
10
300
250 8
200 6
Nov-14 May-15 Nov-15 May-16 Nov-16 May-17 Nov-17 May-18 Nov-18 May-19 Nov-19 May-20 Nov-20
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Market Pulse
Figure 209: Aggressive RBI intervention has weighed on the INR this year
Even as strong foreign capital inflows and a comfortable current account bodes well for the INR, aggressive dollar
purchases by the RBI—reflected in record-high FX reserves—have constrained gains on the INR. The INR is the worst
performing currency among major Asian currencies in 2020.
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Market Pulse
Cumulative fiscal deficit reaches 135% of BE

The Centre’s gross fiscal deficit in the first eight months of this fiscal reached Rs10.6trn or 135% of the budget estimate
vs. 114.8% in the same period last year. There has been a significant improvement in Centre’s fiscal balances over the
last couple of months, thanks to a recovery in tax collections, particularly indirect taxes, partly offset by an increase in
spending at an aggregate level. The Centre’s cumulative gross tax revenues are now down 12.6% YoY vs. -16.8% in the
first seven months, led by a meaningful improvement in indirect tax collections. While excise tax collections have
benefited from duty hikes on petrol/diesel, custom duties have also risen in-line with gradual normalisation of business
activities. Importantly, GST collections have risen sharply in-line with unlocking activity, with higher festive/pent-up
demand and better compliance providing an added support. GST collections for the month of November at Rs1.15trn
(collected in December) were the highest since the implementation of GST regime in July 2017. On the negative side,
corporate tax collections have remained weak despite a strong rebound in corporate profitability in Q2, possibly
reflecting continued pain on smaller enterprises. The Centre’s expenditure has also risen in-line with improving revenue
receipts, primarily attributed to higher spending towards rural development, agriculture & farmer welfare, health &
family welfare, food and public distribution, communications and interest payments.
While we maintain our gross fiscal deficit estimate for the Centre at 7.7% of GDP in FY21 vs. the budget estimate of
3.5% assuming a revenue shortfall of Rs5.4trn, higher revenue expenditure of ~Rs.1.4trn and a marginal cut in capital
expenditure, it faces significant upside risks now. This is primarily on the back of a) a faster-than-anticipated recovery,
leading to improvement in revenue receipts, and b) a sharp cut in revenue as well as capital expenditure in several
sectors to provide for higher spending towards rural development, agriculture and healthcare. Consequently, this is
likely to provide some support to the combined fiscal deficit (Centre + states; our current estimate at 12% of GDP), even
as the states’ finances are likely to remain under pressure.
• Centre’s cumulative fiscal deficit rises to 135.1% of the budgeted target: The
Centre’s fiscal balances have improved over the last few months, thanks to a Gross fiscal deficit has
reached 135.1% of the
recovery in tax collections, particularly indirect taxes, even as spending has has
Government’s budgeted
also increased during this period. Overall, cumulative gross deficit during April-
target in Apr-Nov’20.
November 2020 stood at Rs 10.8trn or 135.1% of the budgeted target for FY21,
higher than 114.8% for the same period last year and the highest in last 20 years.
Revenue deficit at 139.9% of the full-year target is also much higher than 128.4%
in the year-ago period.
• Revenue receipts improving: Gross tax revenues during April-November 2020

declined by 12.6% YoY to Rs10.3trn—an improvement from a 16.8% YoY Tax collections are
contraction in the first seven months of the fiscal, thanks to normalisation of gradually improving in-line
economic activity and higher festive-led demand. That said, it still accounts for just with normalisation of
42.3% of the budgeted target. Indirect tax collections (-2% YoY vs. -6.5% in economic activity, further
aided by higher festive
7MFY21) are swiftly reviving, thanks to a meaningful recovery in GST collections
demand.
and strong growth in excise revenues (supported by excise duty hikes on
petrol/diesel). Direct tax collections (-24.4% YoY in Apr-Nov’20), however, remain
lacklustre, largely attributed to lower corporate tax collections, possibly reflecting
continued pain on smaller enterprises. Income tax receipts, on the other hand, are
gradually increasing, in-line with an improvement in job market/incomes. Net tax
collections, however, fell by a tad lower 8.3% YoY—a significant improvement from
15.8% YoY contraction in the seven months, as transfer of tax collections to states
has come off meaningfully. Non-tax revenues during Apr-November 2020 are
running ~47% below the levels seen in the same period last year, primarily owing
to a huge drop in dividends from PSUs as well as RBI. Revenue generation through
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Market Pulse
the disinvestment route at Rs181bn has also been miniscule in this fiscal thus far
as against an aggressive budgeted target of Rs2.1trn for the year.
• GST collections reaches the highest level since its existence: GST collections in
GST collections improved
December (for the month of November) rose by a strong 11.6% YoY/9.7% MoM to meaningfully in December,
Rs1.15trn—the highest level since the implementation of the GST regime in July rising to Rs1.15trn—the
2017. This is due to continued normalisation of economic activity, higher festive/ highest monthly figure
pent-up demand and improved compliance. This is also reflected in other high since GST implementation.
frequency indicators including e-way bills, manufacturing PMI, industrial
production, among others. Cumulative GST collections during the nine months of
this fiscal year are now down by 14.4% YoY, with average monthly run-rate of
~Rs867bn in FY21 thus far—still significantly below the required monthly run-rate
of Rs 1.1trn.
• Government spending rises: Despite strained fiscal balances, the Centre’s
expenditure at an aggregate level improved in November, following a moderation
over the previous few months. This was primarily led by a modest 3.7% growth in
revenue expenditure—attributed to rural development, agriculture & farmer
welfare, health & family welfare, rural development, communications and interest
payments. Capital expenditure also improved sharply, and is now up 4.7% YoY on
a cumulative basis during Apr-Nov’20, led by robust spending on food & public
distribution and road transport & highways as well as higher transfer to state and
union territories. Excluding these three—accounting for ~65% of total capital
expenditure during Apr-Nov’20 vs. ~30% in the year-ago period—capital
expenditure actually declined by 11.5% YoY.
• Our FY21 fiscal deficit estimate of 7.7% faces upside risks: While we maintain
our gross fiscal deficit estimate for the Centre at 7.7% of GDP in FY21 vs. the Our FY21 fiscal deficit
budget estimate of 3.5% assuming a revenue shortfall of Rs5.4trn, higher revenue estimate of 7.7% of GDP
faces upside risks, thanks
expenditure of ~Rs.1.4trn and a marginal cut in capital expenditure, it faces
to a faster-than-
significant upside risks now. This is primarily on the back of a) a faster-than-
anticipated economic
anticipated recovery, leading to improvement in revenue receipts, and b) a sharp
recovery and a potential
cut in revenue as well as capital expenditure in several sectors to provide for higher spending cut.
spending towards rural development, agriculture and healthcare. Consequently,
this is likely to provide some support to the combined fiscal deficit (Centre + states;
our current estimate at 12% of GDP), even as the states’ finances are likely to
remain under pressure.
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Market Pulse
Figure 210: Yearly trend of India’s fiscal balances
Figure 211: Gross fiscal deficit as % of budget targets during April-October over the last 20 years
% Gross fiscal deficit as a % of budget target during Apr-Nov
160.0
132.4 135.1
140.0
120.0 112.0 114.8 114.8

105.3
98.9
100.0 93.9
85.6 87.0 85.8
76.4 80.4
74.7 72.8
80.0 68.0
61.5 61.0 63.8
57.8
60.0 51.5 48.9
40.0
20.0
0.0
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY20 FY21
(BE) (RE) (BE)
Source: CMIE Economic Outlook, CGA, NSE.
Figure 212: Centre’s gross fiscal trend Figure 213: A quick glance at FY21 fiscal balances
Fiscal deficit trend (% of GDP) Apr-Nov
Rs bn FY20A* FY21BE %YoY** % YoY
9.0 2020
7.7
8.0 Net tax revenues 13,559 16,359 8.7 6,884 -8.3
7.0 6.6
5.9 Non-tax revenues 3,262 3,850 11.4 1,243 -46.6
6.0
4.9 4.9 Non-debt cap rec. 686 2,250 175.7 181 -37.5
4.5 4.6
5.0 4.1 3.9
3.5 3.5 3.4 3.3 3.8 3.5 Total receipts 17,507 22,459 16.3 8,309 -17.9
4.0
3.0 Revenue Exp 23,496 26,301 11.9 16,652 3.7
2.0 Capital Exp 3,367 4,121 18.1 2,412 12.8
1.0
Total expenditure 26,864 30,422 12.7 19,064 4.7
-
Fiscal deficit 9,356 7,963 3.8 10,755 33.1
FY13
FY10
FY11
FY12
FY14
FY15
FY16
FY17
FY18
FY19
FY20A
FY21E
FY20BE
FY21BE
FY20RE
% of GDP# 3.8 3.5 4.8

Source: CMIE Economic Outlook, CGA, NSE. BE = Budget Estimates, RE = Revised Estimates, A = Actual. * FY20 actual figures are provisional number released by CGA.
** Growth in FY21 BE figures are based on the revised estimates for FY20. #FY21 figures are based on the GDP figure in budget estimates.
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Figure 214: Direct tax collections trend during Apr-Nov Figure 215: Indirect tax receipts trend during Apr-Nov
Rsbn Direct tax collections trend % Rsbn Indirect tax collections trend %
Indirect tax collections % YoY (R)

6.0 Direct tax collections % YoY (R) 20 7.0 350
15
300
5.0 6.0
10
250
5 5.0
4.0 200
0
4.0 150
3.0 -5
100
-10 3.0
2.0 50
-15 2.0
0
-20
1.0 1.0
-25 -50
0.0 -30 0.0 -100

FY11FY12FY13FY14FY15FY16FY17FY18FY19FY20FY21 FY11FY12FY13FY14FY15FY16FY17FY18FY19FY20FY21
Source: CMIE Economic Outlook, CGA, NSE.
Figure 216: Gross tax collections trend during Apr-Nov Figure 217: GST collections trend
Rsbn Gross tax collections trend % Rs bn Monthly trend of GST collections
Gross tax collections % YoY (R) Monthly GST collections Monthly average
14.0 30 1,400
25 1,200
12.0
20 1,000
10.0
15 800
8.0 10
600
6.0 5
400
0
4.0
200
-5
2.0 0
-10
Aug-17
Aug-18
Aug-19
Aug-20
Dec-17
Apr-18
Dec-18
Apr-19
Dec-19
Apr-20
Dec-20
0.0 -15
FY11FY12FY13FY14FY15FY16FY17FY18FY19FY20FY21
Source: CMIE Economic Outlook, CGA, PIB, NSE.
Figure 218: Revenue and capital exp during Apr-Nov Figure 219: Expenditure mix during Apr-Nov
Rs trn Expenditure break-up % % Share of revenue and capital expenditure in total
expenditure trend
Capital exp Revenue expenditure Capital expenditure
Rev exp 100
25 50 10.7 11.5 11.8 12.3 11.3 13.9 11.1 12.5 11.9 11.7 12.7
% YoY growth in rev exp
Millions
% YoY growth in capital exp 80

20
2.4
2.1 25 60
15 1.9
1.8
1.4 89.3 88.5 88.2 87.7 88.7 86.1 88.9 87.5 88.1 88.3 87.3
1.6 40
10 1.3 1.2 16.7
1.0 16.1 0
0.7 0.9 12.9 14.2
5 11.4 20
9.5 9.8
7.7 9.0
6.2 6.7
0 -25 0
FY11FY12FY13FY14FY15FY16FY17FY18FY19FY20FY21 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Source: CMIE Economic Outlook, CGA, PIB, NSE.
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Market Pulse
Figure 220: A snapshot of government finances for April-Nov 2020

Items (Rs bn) FY20A FY21BE Apr-Nov 2020
% YoY on % YoY on
Rs bn % YoY Rs bn Rs bn % of BE % YoY
FY20RE FY20A
Net tax revenues 13,559 2.9 16,359 8.7 20.7 6,884 42.1 (8.3)
Gross tax revenues 20,099 (3.4) 24,230 12.0 20.6 10,261 42.3 (12.6)
Of which:
Direct Tax 10,372 (7.8) 13,060 12.8 25.9 4,207 32.2 (24.4)
Corporation tax 5,569 (16.1) 6,810 11.5 22.3 1,857 27.3 (35.7)
Income tax 4,803 4.0 6,250 14.3 30.1 2,350 37.6 (12.3)
Indirect Tax 9,727 1.8 11,170 11.0 14.8 6,053 54.2 (2.0)
Goods and service tax 6,014 2.9 6,905 12.8 14.8 3,330 48.2 (16.5)
Custom Duties 1,092 (7.3) 1,380 10.4 26.4 631 45.7 (17.0)
Excise Duties 2,396 3.7 2,670 7.7 11.4 1,963 73.5 47.7
Service tax 60 (12.5) 10 (15.0) (83.1) 11 103.8 99.1
Others 164 8.0 205 5.8 24.9 119 58.0 23.6
States Share (6,507) (15) (7,842) 19.5 20.5 (3,344) 42.6 (20.7)
Transferred to NCCD (33) 84.4 (29) 5.0 (11.7) (32) 109.8 91.7
Non-Tax Revenue 3,262 38.3 3,850 11.4 18.0 1,243 32.3 (46.6)
Dividends and profits 1,861 64.1 1,554 (22.3) (16.5) 706 45.4 (55.4)
Other non-tax revenues 1,401 14.5 2,296 57.7 63.9 537 23.4 (27.7)
Central govt. revenue receipts 16,821 8.3 20,209 9.2 20.1 8,127 40.2 (17.3)
Non-Debt Capital Receipts 686 (39.1) 2,250 175.7 227.8 181 8.1 (37.5)
Recovery of Loans 183 2.0 150 (9.9) (18.3) 120 79.9 9.6
Misc. Receipts (inc. divestment) 503 (46.9) 2,100 223.1 317.5 61.79 2.9 (65.9)
Total Receipts 17,507 5.1 22,459 16.3 28.3 8,309 37.0 (17.9)
Revenue Expenditure 23,496 17.0 26,301 11.9 11.9 16,652 63.3 3.7
Interest Payments 6,110 4.9 7,082 13.3 15.9 3,834 54.1 12.2
Major subsidies 2,232 13.3 2,278 0.2 2.1 2,021 88.7 (14.0)
Food 1,087 6.7 1,156 6.3 6.3 1,163 100.6 (12.0)
Fertilizer 811 14.9 713 (10.9) (12.1) 657 92.2 (10.3)
Petroleum 334 36.0 409 6.1 22.5 201 49.2 (31.9)
Other revenue expenditure 15,154 23.4 16,941 13.1 11.8 10,797 63.7 4.9
Capital Expenditure 3,367 9.7 4,121 18.1 22.4 2,412 58.5 12.8
Total Expenditure 26,864 16.0 30,422 12.7 13.2 19,064 62.7 4.7
Fiscal Deficit 9,356 44.1 7,963 3.8 -14.9 10,755 135.1 33.1
Fiscal Deficit/GDP* 4.6 3.5 4.8
Source: CMIE Economic Outlook, CGA, Budget Documents, NSE. *Based on nominal GDP growth estimate in FY21 Budget estimates.
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Figure 221: Fiscal math: Expect FY21 fiscal deficit at 7.7% of GDP
FY20A* FY21BE FY21E
Items % YoY over % YoY over
Rs bn % YoY Rs bn Rs bn
FY20A FY20A
Net tax revenues 13,559 2.9 16,359 20.7 13,037 (3.8)
Gross tax revenues 20,099 (3.4) 24,230 20.6 19,075 (5.1)
Of which:
Direct Tax 10,372 (7.8) 13,060 25.9 9,320 (10.1)
Corporation tax 5,569 (16.1) 6,810 22.3 4,901 (12.0)
Income tax 4,803 4.0 6,250 30.1 4,419 (8.0)
Indirect Tax 9,727 1.8 11,170 14.8 9,755 0.3
Goods and service tax 6,014 2.9 6,905 14.8 5,052 (16.0)
Custom Duties 1,092 (7.3) 1,380 26.4 764 (30.0)
Excise Duties 2,396 3.7 2,670 11.4 3,714 55.0
Service tax 60 (12.5) 10 (83.1) 54 (10.0)
Others 164 8.0 205 24.9 171 3.9
States Share (6,507) (15) (7,842) 20.5 (6,009) (7.7)
Transferred to NCCD (33) 84.4 (29) (11.7) (29) (11.7)
Non-Tax Revenue 3,262 38.3 3,850 18.0 3,090 (5.3)
Dividends and profits 1,861 64.1 1,554 (16.5) 1,303 (30.0)
Other non-tax revenues 1,401 14.5 2,296 63.9 1,787 27.6
Total revenue receipts 16,821 8.3 20,209 20.1 16,127 (4.1)
Non-Debt Capital Receipts 686 (39.1) 2,250 227.8 950 38.4
Recovery of Loans 183 2.0 150 (18.3) 150 (18.3)
Misc. Receipts (include divestment) 503 (46.9) 2,100 317.5 800 59.0
Total Receipts 17,507 5.1 22,459 28.3 17,076 -2.5
Revenue Expenditure 23,496 17.0 26,301 11.9 27,663 17.7
Interest Payments 6,110 4.9 7,082 15.9 7,082 15.9
Major subsidies 2,232 13.3 2,278 2.1 2,194 (1.7)
Food 1,087 6.7 1,156 6.3 1,156 6.3
Fertilizer 811 14.9 713 (12.1) 771 (5.0)
Petroleum 334 36.0 409 22.5 267 (20.0)
Other revenue expenditure 15,154 23.4 16,941 11.8 18,045 19.1
Capital Expenditure 3,367 9.7 4,121 22.4 3,878 15.2
Total Expenditure 26,864 16.0 30,422 13.2 31,541 17.4
Fiscal Deficit 9,356 44.1 7,963 -14.9 14,465 54.6
GDP (current price) 203,398 7.2 224,894 10.6 187,688 (7.7)
Fiscal Deficit/GDP* 4.6 3.5 7.7
Source: Budget documents, CGG, NSE.
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Market Pulse
FY21AE GDP: CSO factors in a decent recovery in H2 with FY21 GDP est. at -7.7%
The Advance Estimate (AE) of India’s real GDP growth for FY21 has been pegged by the CSO at -7.7% vs. +4.2% in
FY20. This is marginally higher than our estimate of 8% contraction and implies a modest decline of 0.1% in the second
half of FY21—a significant improvement from a 15.7% drop in the first half. A sharp contraction in investment and private
consumption in FY21 is expected to be partly offset by higher government consumption and trade surplus. The recovery
in H2 assumed in the CSO’s estimates is in-line with the faster-than-expected revival seen in several high-frequency
indicators. Nearly 65% of the 70 odd indicators that we have looked at are currently hovering at near or above pre-
COVID levels. Notably, government consumption is expected to grow at a strong 17% in the second half, excluding
which GDP growth estimate for H2FY21 falls to -2.1%. Gross Value Added (GVA) contraction in FY21 is estimated at
7.2%, translating into a modest 0.3% growth in the second half. All sectors, barring Mining and Trade, Hotels &
Transport, are expected to register an YoY expansion in H2FY21.
Faster normalisation of business activities amid gradual lifting of restrictions, higher festive and pent-up demand and
policy support has translated into a faster-than-anticipated economic recovery over the last few months. That said, the
GDP estimates do not entirely capture the stress faced by the informal sector. Additionally, the deterioration in global
growth outlook amid surging COVID-19 infections poses downside risks to India’s growth prospects. Sustenance of
demand improvement beyond the festive season is crucial for a credible economic recovery, particularly in the wake of
limited external support. We therefore remain cautious and retain our GDP growth estimate at -8% for FY21, with a
favourable base leading to an optically strong growth of 9.5% in FY22.
• FY21AE GDP growth pegged at -7.7%: The CSO (Central Statistics Office) has
The CSO estimates India’s
estimated India’s real GDP growth for FY21 at -7.7% vs. 4.2% growth in the
real GDP growth at -7.7%
previous fiscal, marking the first annual contraction in last four decades and the in FY21—the steepest
steepest since independence. This is primarily led by a huge contraction in contraction since
investment and private consumption, partly offset by a decent growth in independence.
government spending and trade surplus. This implies a modest decline of 0.1% in
GDP growth in H2FY21—a significant improvement from a 15.7% drop in the first
half. The nominal GDP for FY21 is expected to shrink by 4.2% to Rs194.8trn—
nearly 13.4% short of the FY21 budget estimate.
• Government consumption to drive growth in the second half: Even as the

recovery is expected to be broad-based in the second half, the biggest growth Implied H2FY21 GDP
driver is likely to be government consumption. Government Final Consumption growth of -0.3% assumes a
strong 17% in Government
Expenditure (GFCE) is expected to growth at a strong 17% YoY in H2FY21 vs. a
consumption.
3.9% contraction the first half. This, however, looks a bit optimistic given weak
revenue receipts for the Centre as well states, notwithstanding some pick-up over
the last couple of months. Private consumption is also expected to improve
meaningfully in the second half—signs of which are already visible in several high-
frequency indicators including auto sales, non-oil non-gold imports, fuel
consumption, amongst others—with growth pegged at -0.6% vs. -18.9% in the first
half. Investment, as measured by Gross Fixed Capital Formation (GFCF), is
expected to fall by 1.5% in the second half vs. a huge 29% drop in H1FY21. While
the CSO has pegged exports growth at -5.8% in H2 (-10.7% in H1)—reflecting weak
external demand, imports are expected to decline by 11.3%, partly attributed to
lower oil imports. Excluding Government spending, GDP growth in FY21 drops to -
9.5%, translating into a contraction of 2.1% in the second half.
• FY21 GVA growth estimated at -7.2%: The Gross Value Added (GVA) growth is
pegged at -7.2% in FY21 vs. 3.9% in FY20, largely led by a sharp contraction in
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industrial and services sector while agriculture sector growth is expected only
FY21 GVA growth is pegged
slightly lower at 3.4%. This translates into a modest 0.3% growth in the second at -7.2%, implying a
half vs. 14.9% contraction in H1FY21. All sectors, barring Mining and Trade, Hotels growth of 0.3% in the
& Transport, are expected to record an YoY expansion in the second half. second half.
Agriculture sector growth is pegged at a steady 3.4% in H2FY21. Industry sector is
expected to grow at 1.1% vs. a steep 20.5% drop in the first half, with implied
H2FY21 growth for Manufacturing, Electricity and Construction sectors anticipated
at 0.5%, 7.1% and 4.4%. Services sector is expected to report a contraction of
1.1% in the second half, thanks to a huge 12% drop in Trade, Hotels, Transport &
Communication—a consequence of continued restrictions on the sector. Other
services, including Financial, Real Estate & Business services as well as
Community, Social & Personal Services, are expected to record an YoY expansion
in the second half.
• Retail FY21 GDP growth estimate at -8%: Faster normalisation of business

We now expect FY21 GDP
activities amid gradual lifting of restrictions, higher festive and pent-up demand
growth at -8% vs. -10.5%
and policy support has translated into a faster-than-anticipated economic recovery
estimated earlier, with
over the last few months. This is reflected in a strong rebound seen in several high
growth in FY22 pegged at
frequency indicators. Our analysis shows that nearly 65% of the 70 odd indicators 9.5%, supported by a
are currently hovering at near or pre-COVID levels, indicating a fairly broad-based favourable base
recovery from a steep contraction seen during the initial months of the lockdown.
That said, the GDP estimates do not entirely capture the stress faced by the
informal sector. Additionally, the deterioration in global growth outlook amid
surging COVID-19 infections poses downside risks to India’s growth prospects.
Sustenance of demand improvement beyond the festive season is crucial for a
credible economic recovery, particularly in the wake of limited external support.
We, therefore, remain cautious, and retain our GDP growth estimate at -8% for
FY21, with a favourable base leading to an optically strong growth of 9.5% in FY22.
Figure 222: India’s FY21 real GDP growth expected at -7.7% by the CSO
The CSO has estimated India’s real GDP growth for FY21 at -7.7% vs. 4.2% growth in the previous fiscal, marking the
first annual contraction in last four decades and the steepest since independence.
% Annual GDP growth trend
12.0
9.5
10.0 8.1 8.5 8.3
7.9 7.7 7.9 7.4 8.0
8.0 7.0
6.4 6.1
5.2 5.5
6.0 4.2
4.0 3.1
2.0
-
(2.0)
(4.0)
(6.0)
(8.0)
-7.7 -8.0
(10.0)
FY21NSEe
FY22NSEe
FY15
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY16
FY17
FY18
FY19
FY20
FY21AE
Source: CSO, CMIE Economic Outlook, NSE
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Market Pulse
Figure 223: Annual real GDP growth trend (% YoY)

FY17 FY18 FY19 FY20 FY21AE Implied H2FY21
Gross Domestic Product (GDP) 8.3 7.0 6.1 4.2 -7.7 -0.1%
Private Consumption (PFCE) 8.1 7.0 7.2 5.3 -9.5 -0.6%
Government Consumption (GFCE) 6.1 11.8 10.1 11.8 5.8 17.0%
Gross Capital Formation (GCF) 3.7 10.0 9.5 -2.0 -15.3 -1.5%
Gross Fixed Capital Formation (GFCF) 8.5 7.2 9.8 -2.8 -14.5 -0.8%
Net trade of goods & services -5.7 257.7 -11.8 -29.2 -136.3 -86.2%
Exports of goods & services 5.0 4.6 12.3 -3.6 -8.3 -5.8%
Imports of goods & services 4.4 17.4 8.6 -6.8 -20.5 -11.3%
Gross Value Added (GVA) 8.0 6.6 6.0 3.9 -7.2 0.3%
Agriculture 6.8 5.9 2.4 4.0 3.4 3.4%
Industry 7.7 6.3 4.9 0.9 -9.6 1.1%
Mining and Quarrying 9.8 4.9 -5.8 3.1 -12.4 -8.3%
Manufacturing 7.9 6.6 5.7 0.0 -9.4 0.5%
Electricity 10.0 11.2 8.2 4.1 2.7 7.1%
Construction 5.9 5.0 6.1 1.3 -12.6 4.4%
Services 8.5 6.9 7.7 5.5 -8.8 -1.1%
Trade, Hotels, Transport, Storage, Comm. 7.7 7.6 7.7 3.6 -21.4 -12.0%
Fin. Svcs, Real Estate & Business Svcs. 8.6 4.7 6.8 4.6 -0.8 7.1%
Community, Social & Personal Svcs. 9.3 9.9 9.4 10.0 -3.7 3.3%
Source: CSO, NSE.
Figure 224: Share in GDP (%)

FY17 FY18 FY19 FY20 FY21AE
Gross Domestic Product (GDP) 100.0 100.0 100.0 100.0 100.0
Private Consumption (PFCE) 56.1 56.0 56.6 57.2 56.1
Government Consumption (GFCE) 9.8 10.2 10.6 11.3 13.0
Gross Capital Formation (GCF) 33.0 33.9 35.0 32.9 30.2
Gross Fixed Capital Formation (GFCF) 30.8 30.8 31.9 29.8 27.6
Net trade of goods & services -1.1 -3.6 -3.0 -2.0 0.8
Exports of goods & services 20.2 19.7 20.9 19.3 19.2
Imports of goods & services 21.3 23.4 23.9 21.4 18.4
Discrepancies 2.3 3.5 0.9 0.6 -0.1
Gross Value Added (GVA) 100.0 100.0 100.0 100.0 100.0

Agriculture 15.2 15.1 14.6 14.6 16.3
Industry 31.5 31.4 31.1 30.2 29.4
Mining and Quarrying 3.1 3.0 2.7 2.7 2.5
Manufacturing 18.1 18.1 18.1 17.4 17.0
Electricity 2.2 2.3 2.3 2.3 2.6
Construction 8.1 8.0 8.0 7.8 7.3
Services 53.3 53.4 54.3 55.2 54.3
Trade, Hotels, Transport, Storage, Comm. 18.9 19.1 19.4 19.4 16.4
Fin. Svcs, Real Estate & Business Svcs. 22.0 21.6 21.8 21.9 23.4
Community, Social & Personal Svcs. 12.3 12.7 13.1 13.9 14.4
Source: CSO, NSE
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Market Pulse
Figure 225: Government spending to support growth in H2FY21

Even as the recovery is expected to be broad-based in the second half, the biggest growth driver is likely to be
government consumption. Excluding Government spending, GDP growth in FY21 drops to -9.5%, translating into a
contraction of 2.1% in the second half.
% %
Private Consumption (PFCE) growth trend Government Consumption (GFCE) growth trend
10.0 16.0
7.5 7.4 7.3 7.9 8.1 14.2
7.3 6.7 7.0 7.2
8.0 6.4 14.0
5.5 5.3
6.0 4.9 4.5 5.0 11.4 11.8 11.8
12.0
4.0 10.1
9.4
2.0 10.0 8.8
0.0 7.6 7.5
8.0 6.5
-2.0 6.1 5.8
6.0 5.2
-4.0
4.1
-6.0 4.0
-8.0
-10.0 2.0 0.6 0.6
(9.5)
-12.0 0.0
FY15
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY16
FY17
FY18
FY19
FY20
FY21AE
FY06
FY15
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY16
FY17
FY18
FY19
FY20
FY21AE
% %
Investment (GFCF) growth trend Exports and imports growth trend
20.0 40.0
16.4 16.3
13.9 Exports Imports
15.0 30.0
11.012.1
9.8
7.7 8.5
10.0 6.5 7.2 20.0
4.9
3.2
5.0 1.6 2.6 10.0
0.0
0.0
-5.0 (2.8)
-10.0
-10.0
-15.0 -20.0
(14.5)
-20.0 -30.0
FY21AE
FY07
FY18
FY06
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY19
FY20
FY21AE
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
Source: CSO, NSE
Figure 226: Gross value added (GVA) across sectors.

% %
Annual GVA growth trend 10.0 Agriculture GVA growth trend
8.8
10.0 8.3 8.1 8.0 8.0 8.0
7.4 7.2 8.0
8.0 6.9 6.6
6.1 6.0 6.8
6.0 5.2 5.4 6.4
4.3 5.9
3.9 5.5 5.6
4.0 6.0
4.8
2.0 4.0
4.0 3.4
0.0 2.9
2.4
-2.0
2.0 1.5
-4.0 0.6
-6.0
0.0
-8.0 -7.2 -0.2 -0.2
-10.0 -0.9
-2.0
FY21AE
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21AE
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Market Pulse
% Industry GVA growth trend % Services GVA growth trend

9.8 9.4
13.2 10.0 9.1
15.0 8.7 8.3 8.5
7.8 7.8 7.7 7.7
8.0 7.0 6.5 6.9
9.6 8.8 9.6 5.9
10.0 8.0 7.9 7.7 5.5
7.0 6.3 6.0
4.9
5.0
4.0 3.6 3.3 3.8 4.0
0.9 2.0
0.0 0.0
-2.0
-5.0
-4.0
-10.0 -6.0
-9.6 -8.0
-15.0 -10.0 -8.8
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21AE
FY17
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY18
FY19
FY20
FY21AE
Source: CSO, NSE
Figure 227: Nominal vs. real GDP and GVA growth

% %
Nominal vs. real GDP growth Nominal vs. real GVA growth
25.0 20.0
Real GDP growth Nominal GDP growth
20.0 15.0
15.0
10.0
10.0
5.0
5.0
0.0
0.0
-5.0
-5.0
-10.0 -10.0
FY13
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21AE
FY08
FY11
FY06
FY07
FY09
FY10
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21AE
Source: CSO, NSE
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Market Pulse
RBI Monetary Policy: Status quo on rates; Inflation/growth forecasts revised upwards
In the last policy review meeting, the RBI’s Monetary Policy Committee (MPC) unanimously voted to keep the policy
repo rate unchanged at 4% and maintain an accommodative stance for as long as necessary (refer to our note titled
“RBI Monetary Policy: Status quo on rates; Inflation/growth forecasts upgraded” for details. The elevated inflation
trajectory has been primarily driven by supply-side disruptions and cost-push factors, as stated by all members. The
Governor noted that while general economic activity remains below last year’s levels, high-frequency indicators point
towards a recovery. He also added that demand in urban areas is picking up due to unlocking activity and falling COVID
cases while rural demand continues to strengthen and has been the main driver. Performance of the manufacturing
sector has been encouraging, with the Government expected to enhance fiscal support towards the end of FY21.
Concerns regarding uncomfortably low short-term interest rates and relevance of the flexible inflation targeting
framework were addressed. Dr. Varma stated that low short-term rates come with the risk of inflationary pressures and
a further fall below the policy corridor could aggravate these pressures. Dr. Mridul K. Saggar clarified that the current
policy is in line with the Central Bank’s mandate and have previously served the economy well by moderating inflation
and inflation expectations. He also highlighted the importance of using macroprudential policies and sterilization
instruments to mitigate risks to macro-financial stability emanating from the persistence of negative real rates.
Even as the MPC is expected to remain focused on reviving growth and closing output gap in the near-term, sustenance
of an uncomfortably high inflation trajectory and emerging green shoots in the economy leave limited room for further
monetary easing at this juncture. In this context, we expect the MPC stay put for now and continue to use liquidity
management as a preferred tool to address growth concerns, while trying to keep short-term rates within the policy
corridor. The Union Budget, scheduled to be presented on February 1 st, remains the key event to watch out for.
• Supply-side bottlenecks keep inflation trajectory elevated: In the December
policy review, the RBI’s MPC unanimously voted to keep the policy repo rate
unchanged at 4% and maintain an accommodative stance for as long as necessary.
Elevated inflation trajecotry, according to all members, is largely driven by supply-
side disruptions and higher margins levied by firms trying to recover lost income.
Retailers’ margins on food prices, higher taxes on petroleum products and
alcoholic beverages and higher prices in healthcare, transport and personal care
services are factors responsible for the unusually large gap between the retail (CPI)
and wholesale inflation (WPI). Barring food where prices should ease amidst a
favorable Rabi outlook, most other factors leading to higher inflation are here to
stay, with continued improvement in demand conditions adding to the woes.
• Growth outlook dependent on policy support: The National Accounts data for
Q2FY21 show a GDP contraction of 7.5%, positively surprising the RBI’s (-9.8%
estimate) as well as market expectations. Dr. Das stated that general economic
activity remains below last year’s levels but high-frequency indicators point
towards a recovery. He also added that demand in urban areas is picking up due to
unlocking activity and falling COVID-19 cases while rural demand continues to
strengthen and has been the main driver. Performance of the manufacturing sector
is an encouraging sign and firms have achieved profits by changing their cost
structure. The sector has also seen an improvement in demand conditions,
according to the RBI’s industrial outlook survey, and capacity utilization levels. The
government is expected to provide additional fiscal support over the remaining
months of the fiscal year which is likely to reach firms through varying channels.
Growth indicators have been encouraging but recovery has not been broad based,
making continued policy support crucial.
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Market Pulse
• Concerns regarding uncomfortably low short-term rates and flexible inflation

targeting framework: Dr. Varma expressed his apprehension about the current
short-term rates stating that reviving investment requires low long-term rates.
Such low rates at the short-end bear the risk of inflationary pressures since they
do not aid supply. Dr. Mridul Saggar addressed the ongoing debate regarding the
relevance of flexible inflation targeting framework, clarifying that the current
policies are in line with the Central Bank’s amandate and have previously served
the economy well by moderating inflation and inflation expectations. The drop in
short-term rates below the operational policy rate (reverse repo rate) is a result of
surplus liquidity in the system, partly attributed to record foreign capital inflows
into the country. That said, risks to macro-financial stability arising from this must
be mitigated with the possible use of macro-prudential policies and sterilization
instruments.
• Rate cuts ruled out for now: Even as the MPC is likely to remain focused on
reviving growth and closing output gap in the near-term (expected by H2FY22),
sustenance of an uncomfortably high inflation trajectory and emerging green
shoots in the economy leave limited room for further monetary easing at this
juncture. At the same time, the MPC noted that a premature hike in policy rates can
hold back economic recovery that is beginning to gain momentum. In this context,
we expect the MPC stay put for now and continue to use liquidity management as
a preferred tool to address growth concerns, while trying to keep short-term rates
within the policy corridor. The Union Budget, scheduled to be presented on
February 1st, remains the key event to watch out for.
Figure 228: Word cloud of the minutes of August and December 2020 MPC review meetings
We have compared the word clouds of the minutes of the March 2020 and December 2020. Clearly, growth was the
prime objective of the MPC in March, and understandably so, inflation has gained prominence again over the last few
months, with its number of mentions far outnumbering growth-related words, signalling the discomfort.
March 2020 MPC review meeting December 2020 MPC review meeting
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Market Pulse
Figure 229: Current policy rates

Key rates Current value
Repo Rate 4.0%
Reverse Repo Rate 3.35%
Marginal Standing Facility (MSF) Rate 4.25%
Bank Rate 4.25%
Cash Reserve Ratio (CRR) 3.0%
Statutory Liquidity Ratio (SLR) 18.0%
Source: RBI
Figure 230: Policy rates kept unchanged in the recent policy review meeting
Figure 231: Real interest rates have remained negative for almost a year now
India headline CPI inflation has remained above the upper-bound of RBI’s target range of 4% +/- 2% since the last
seven consecutive months and over 10 out of last 11 months. This has translated into persistence of negative real
interest rates for almost a year now.
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Market Pulse
Figure 232: Views of erstwhile MPC members from December 2019 to August 2020 review meetings
Members December 2019 MPC February 2020 MPC March 2020 MPC May 2020 MPC August 2020 MPC
Dr. Chetan Ghate
Since the last review, Since the last review,
Weakness in growth Broader economic Acute downside risks to
several high frequency economic activity has
remains broad-based. activity is beginning to growth have mounted
indicators have seen a gradual. In
Industrial Outlook show preliminary signs due to COVID-19 and
declined sharply. This terms of output loss,
Growth Survey shows of a turn-around. lockdown measures. A
has not only led to a the worst is behind us
persistence of Tighter monetary large decline in global
large negative output even as the underlying
pessimistic demand conditions important to growth to also affect
gap but also a drop in damage is difficult to
conditions in Q3FY20. meet the 4% target. exports adversely.
potential output. diagnose.
Inflationary Supply-side pressure in Inflation has remained
New disinflationary
expectations have the food sector remains above the RBI’s upper
Inflationary pressures have
moderated. The current a concern. COVID-19 band of 6% for the last
expectations have risen emerged due to drop in
spike in CPI inflation is imparting a deflationary six months. There are
sharply on account of crude oil prices and
Inflation temporary, but future shock is unclear. Both different inflationary
spike in food prices. demand slowdown.
prints should be 3-month and 1-year and deflationary
Low service inflation is Supply-side disruptions
carefully watched ahead inflationary pressures that need to
unlikely to sustain. in the food sector
expectations have be watched carefully
poses an upside risk
spiked sharply. going forward.
Policy Pause; stance: Pause; stance: 50bps cut; stance: 25bps cut; stance: Pause; stance:
action accommodative accommodative accommodative accommodative accommodative
Dr. Pami Dua
Consumption and There are some signs of Lockdown has brought COVID-19 induced Some signs of recovery
investment activity a modest revival, even economic activity to a lockdown has led to a were visible in June but
remain weak. Steeper as overall economic standstill. There are collapse in economic localised lockdowns
decline in imports vs. activity continues to ramifications stemming activity, which has have been restraining
exports indicates a remain weak. Credit from supply side come to a near growth. The restoration
Growth
more acute slowdown flow to the commercial disruptions, demand standstill. Except for of economic activity
in domestic vs. global sector has picked up in contraction, slowdown agri, economic activity depends on how soon
demand. last two months. in global growth and a may continue to remain supply disruptions are
loss in consumer/ sluggish even after the repaired and demand
investor confidence. lifting of the lockdown. revives.
Inflation is expected to
CPI inflation trajectory Headline inflation is
Headline inflation is Inflation is expected to remain high in Q2 and
is heading downwards expected to ease in H2
projected to rise in the moderate but remain at then moderate in H2.
on easing food prices, FY21 and fall to sub-
Inflation near-term, but elevated levels. Supply Prints over the next few
collapse in crude oil 4% led by low crude oil
moderate to below disruptions in China months are crucial to
prices and weakening prices, and weak
target by Q2FY21. poses upside risk. gauge supply/demand
aggregate demand. demand.
disruptions on prices.
Dr. Ravindra H. Dholakia
Growth slowdown may Prolonged lock-down Growth in FY21 to fall
Green shoots visible.
be prolonged, and the has seriously adverse into the negative zone
RBI’s forecast points at The economy is caught
real growth may remain economic and social for the first time in 40
growth slowdown in a deep stagflation
sub-7.5% for the next implications. FY21 GDP years. Nominal GDP
Growth bottoming in Q2FY20 where the supply shock
couple of years leading growth may range growth may also come
and recovering is much more adverse
the negative output gap between 4 to 4.5%, negative-reflected in
gradually in Q3/Q4 and than demand shock.
to expand. leading to further fall in demand, and
FY21.
widening of output gap. high unemployment.
Expansionary policies
during stagnation first
results in higher
Headline inflation Inflationary
Headline CPI inflation Inflation to fall to 2.8% inflation and then
expected to remain expectations of
by Q4FY21 is expected in Q4FY21. Real policy output expansion.
above the 4% target households and
to be only around rate in India is very high Imputed inflation for
Inflation and closer to the upper businesses show a
2.5%, making the at ~1.2-1.6% vs. other Mar-May ignores the
bound of the target diverging trend. RBI’s
current real policy rate countries where it is huge change in
range over next 2-3 inflation est. four
unduly high. zero or negative. consumption patterns
months. quarters down is 3.2%.
during lockdown,
thereby providing
misleading signals.
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Market Pulse
Dr. Mridul Sagar
Downside risks to
growth forecasts
remain high. “The
recovery path is linked
to the course the
Growth
pandemic might take
and a full normalisation
will be difficult till
pandemic is
overcome.”
Recent inflation prints
have elements of
fuzziness. “Risks to
inflation arise from
price stickiness and
supply disruptions.” “It
Inflation
remains to be seen how
much inflation falls
later in the year due to
demand destruction,
base effects and
improved supplies.”
Policy Pause; stance:
action accommodative
Dr. Michael Debabrata Patra
Outlook remains grim,
Weakness in overall Activity remains weak, Economic dislocations
“The damage due to with recovery expected
activity may likely with some signs of due to COVID-19 are
COVID-10 is so deep to be slow and hesitant.
prolong into Q3. growth stabilising, but severe. Prospects for
and extensive that The situation is likely to
However, the upturn in they are far from the economy now hinge
Growth India’s potential output worsen before it gets
retail inflation calls for gaining economy-wide around how pervasive
has been pushed down, better, with a durable
a pause, leaving scope traction. Coronavirus and severe COVID-19
and it will take years to recovery contingent on
for calibrated policy outbreak poses new turns out to be, and
repair.” sustained policy
actions in future. risks. how long it lasts.
support.
“The breach in the Persisting drop in GDP “..inflation surprises of
upper tolerance band growth to keep core recent months are
of the MPC’s inflation inflation benign. Spike undermining the MPC’s
Inflation is expected to
target band in the Dec “..Inflation has peaked in food prices can be actions..” “Imputation
rise further over next 2-
print may well recur in and will likely ease well looked through for of headline inflation,
3 months. Persistence
Inflation the months ahead.” below the target in the policy purposes supply disruptions and
of high food inflation
second half of 2020- continual cost push
and its spill-over into
21.” interventions in price
non-food is a key risk.
formation has
complicated the MPC’s
conduct”
Shri Shaktikanta Das
Activity has weakened Demand conditions Growth impulses face Growth in FY21 to fall Economic outlook
further with GDP remain weak, even as strong headwinds from into negative zone. remains uncertain even
growth in Q2 declining some green shoots are sluggish demand and While supply side is as the recent data has
for the 6th quarter in a visible. Global activity disruptions in supply of expected to ease shown some recovery.
Growth row. Beyond Q2, has slowed down, with labour and key inputs. gradually as lockdown Recovery going forward
however, some positive weakened prospects Erosion of consumer/ is lifted, demand side would depend on
signs have emerged. due to Corona virus. investor confidence will continue to weigh containment of COVID-
may worsen the growth on economic activity for 19 and unlocking of
outlook even further. some time to come. economic activities.
Inflation has surged in Headline inflation rose Weak demand outlook Price pressures to Near-term price
Inflation last 3 months reflecting for the 5th consecutive and lower crude oil moderate amid weak pressures are expected
a spike in vegetable month led by a surge in prices should keep demand conditions, to continue due to cost-
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Market Pulse
prices, leading to rise in vegetable prices but is upside risks to inflation easing of supply issues push factors and
inflationary expected to moderate. firmly contained, even in the food sector and a supply disruptions.
expectations. Benign Nevertheless, inflation in the face of sharp drop in crude oil Generalised
core inflation suggests uncertainty remains temporary supply chain prices. inflationary pressures
weak demand. high. disruptions. in times of recession is
a matter of serious
concern.
Dr. Janak Raj
Domestic activity has “..Though difficult to “..Economic activity is
remained weak due to quantify, it is clear that expected to contract in
reduced investment aggregate demand will 2020-21. While supply
and consumption weaken significantly in lines are likely to be
Growth
demand. Some high- the near future, which restored as lockdown is
frequency indicators, will impact the growth relaxed, demand would
however, show a prospects for the year take far longer to revive
modest turnaround. as a whole.” to pre-COVID levels.”
Headline inflation Barring near-term Inflation over the
surged due to spike in pressure, inflation medium-term is
vegetable prices. outlook has turned expected to be benign
Inflation
Inflation expectations benign due to demand due to fall in crude oil
have moderated but slowdown and a sharp prices and collapse in
still remain elevated. drop in crude oil prices. domestic demand.
Policy Pause; stance: 75bps cut; stance: 40bps cut; stance:
action accommodative accommodative accommodative
Shri Bibhu Prasad Kanungo
Q2 GDP growth was
weaker than projected
earlier. High frequency
Growth indicators point to
continued weakness in
Q3. Some green shoots
are emerging.
Temporary demand-
supply imbalance led to
a spike in food inflation.
Inflation
CPI inflation to rise in
H2 but fall below the
target in Q2FY21.
Policy Pause; stance:
action accommodative
Source: RBI.
Figure 233: Views of new MPC members during last two review meetings
Members October 2020 MPC December 2020 MPC
Dr. Shashanka Bhide
Macro indicators point towards a recovery in Q2. RBI Recovery in Q2 over Q1 was broad-based. Sustenance
surveys indicate an expected improvement in capacity of this requires support from domestic demand amidst
Growth
utilization and demand conditions. GDP is expected to see uncertain external demand conditionsm, which in turn
a sustained revival, with growth turning positive by Q4. requires both fiscal support and decline in COVID threat.
Food and fuel main cause of elevated inflation trajectory. Supply chain disruptions are largely responsible for high
Inflation Measures to fix supply-side bottlenecks needed to reduce inflation, which is primarily led by food inflation. Indirect
cost pressures on prices. taxes on petroleum fuels have kept transport costs high.
Policy action Pause; stance: accommodative Pause; stance: accommodative
Dr. Ashima Goyal
Sharp fall in growth due to COVID but this is a chance to Measures to ensure availabilty of liquidity helped firms
loosen current financial conditions. Greater demand survive and revive demand so growth in Q2 is above
Growth
needed to bridge output gap. The Govt. has some room to expectations. Firms have begun to invest but will take a
increase spending and encourage private investment. year to reach pre-COVID GDP level.
Above target but recovery of supply-side issues, good Headline inflation came in above expectations due to
Inflation
rainfall and appropriate reforms should ease inflation. supply shocks but forecasted to soften in H2FY21.
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Policy action Pause; stance: accommodative. Pause; stance: accommodative.

Prof. Jayanth R Varma
Sectors with more competition have been badly affected
Investments were weak pre-COVID requiring a long term
while larger, more prominent firms have stayed afloat.
Growth response in interest rates. Concern about high long-term
Short term rates below 3% come at a risk of speculatory
rates harming the economy.
inventory build-up.
“One of the hallmarks of a credible inflation targeting
Reduction in short term rates and failure to comply with
Inflation regime is a substantial compression of the inflation risk
the policy corridor comes at a risk of higher inflation.
premium.”
Dr. Mridul K Saggar
Growth might turn positive by Q4 but will remain below
Improvement in macroeconomic indicators is encouraging
trend. Improvement in high-frequency indicators could
Growth but well below pre-COVID levels. Expect output gap to
be a result of pent-up demand. Higher fiscal spending by
close only in H2FY22.
end of FY21 could provide additional support to growth.
Currently above the upper limit of the tolerance band and Inflationary pressures have persisted primarily led by
Inflation caused by supply-side disruptions, rising gold prices and food inflation due to unseasonal rains and remain supply
fuel taxes. driven.
Dr. Michael D Patra
Indian economy has entered a technical recession for the
“Economic activity is recovering but hesitantly and
first time ever and growth post the pandemic could follow
Growth unevenly. This warrant continuing policy support till it is
a different pattern. Monetary and fiscal policy face
set on a firm trajectory of self-sustaining expansion.“
tightening constraints.
Inflation will remain on an elevated trajectory while
Headline inflation, above upper limit since June 2020, led
Inflation firms keep margins high in order to earn income lost
by supply pressures and cost pushes.
during the pandemic.
Shri Shaktikanta Das
High-frequency indicators signal recovery but remain
High-frequency indicators indicate an improvement, most below FY20-levels. Rural demand has played a big role
likely to be led by rural demand. Improvement in capacity due to favourable soil conditions. Hopes of an early
Growth
utilization is encouraging but risk of a second COVID wave vaccine have been encouraging. Capacity utliization has
could slow recovery. Expect growth to turn positive by Q4. improved in manufacturing sector but investment
demand needs to gain momentum.
Inflation has been unrelenting and highlights crucial role
Above 6% threshold led by food inflation, additional costs
played by monetary policy in these times. Need
Inflation borne by firms and shortage of labour. Expect food
measures to curb supply side pressures and dampen
inflation to moderate in the coming months.
food inflation.
Source: RBI.
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RBI Surveys: Sentiments improving; SPF’s FY21E GDP at -8.5%

The RBI released the results of the recently conducted forward-looking surveys including the Consumer Confidence
Survey (Nov’20), Households’ Inflation Expectations Survey (Nov’20), and Survey of Professional Forecasters on
Macroeconomic Indicators (round 67th). All these surveys point to a modest improvement in current economic situation
and employment scenario and incrementally more positive outlook on future consumption and investment activity. Key
highlights of the survey results are as follows.
• Consumer Confidence Survey (November 2020 round)18: Consumer confidence,
Consumer confidence, as
as measured by the current situation index (CSI), improved marginally from the measured by the current
record-low print of 49.9 in September 2020 to 52.3 in November. That said, it situation index (CSI),
remained much lower than the year-ago level, reflecting weak consumer improved marginally in
sentiments on general economic situation, employment scenario, price levels and November 2020.
household incomes. Respondents, however, expect the prevailing economic
situation to improve over the next 12 months. This led to the future expectations
index (FEI) for the one-year ahead period remaining steady at a one-year high of
115.9 in November 2020. That said, discretionary spending is expected to remain
weak in the coming year as well.
Figure 234: Consumer confidence indices
Current Situation Index Future Situation Index
140
130
120 115.9
110
100
97.9
90
85.6
80
70
60 52.3
50
40
May-
Nov-11
Nov-12
Nov-13
Nov-14
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
May-
May-
May-
May-
May-
May-
May-
May-
May-
15
11
12
13
14
16
17
18
19
20
Source: RBI, CMIE Economic Outlook. CSI and FEI are compiled based on net responses on the economic situation, income, spending, employment and the price level for
the current period and a year ahead, respectively. CSI/FEI = 100 + Average of Net Responses of the above parameters
Figure 235: Summary of survey responses

One-year ahead expectations compared with current
Current perception compared to one-year ago
Variable situation
Sep-20 Nov-20 Sep-20 Nov-20
Economic Situation -70.6 -66.5 15.3 15.7
Employment -71.6 -68.5 22.5 18.9
Price level -80.4 -88.3 -59.5 -58.4
Change in price level (inflation) -79.1 -85.5 -71.3 -73.4
Income -53.8 -54.7 43.2 40.3
Spending 26.1 39.7 58.1 63.0
Essential items 46.7 57.4 66.6 70.4
Non-essential items -49.1 -49.7 -0.1 -5.3
Consumer Confidence Index 49.9 52.3 115.9 115.9
Source: RBI, CMIE Economic Outlook.
18
Consumer Confidence Survey: Perceptions and expectations on the general economic situation, the employment scenario, the overall price situation and own income
and spending were obtained from field and telephonic interviews with 5,319 households during October 30– November 12, 2020 across 13 major cities.
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• Households’ Inflation Expectations Survey19: Household inflation expectations

declined for the three-month as well as one-year ahead periods, with near-term Household inflation
expectations broadly aligning with the medium-term. That said, inflationary expectations for the three-
months as well as one-year
expectations remained at elevated levels for yet another survey. On the positive
ahead periods declined in
side, number of respondents expecting higher prices for non-food products came
the latest survey.
down marginally in the latest survey. Median household inflation expectations for
three-months ahead period stood at 10.1% vs. 10.4% in Sep’20. For the one-year
ahead period, median inflation expectations declined from near four-year high of
10.3% to 10.1% in Nov’20.
Figure 236: Median inflation rate: Perception and Figure 237: Median inflation rate: Perception and one-
three-months ahead expectations year ahead expectations
% Median inflation rate - perception and three-months % Median inflation rate - perception and one-year ahead
11 ahead expectations expectations
Three months ahead Current One-year ahead Current
10 11
9
9
8
7
7
6
5 5
May-16
May-17
May-18
May-19
May-20
Nov-17
Nov-15
Nov-16
Nov-18
Nov-19
Nov-20
Feb-16
Feb-17
Feb-18
Feb-19
Feb-20
Aug-15
Aug-16
Aug-17
Aug-18
Aug-19
Aug-20
May-16
May-17
May-18
May-19
May-20
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
Feb-16
Feb-17
Feb-18
Feb-19
Feb-20
Aug-15
Aug-16
Aug-17
Aug-18
Aug-19
Aug-20
Figure 238: Household median inflation expectations

Survey period (%) Current perception Three-months ahead expectations One-year ahead expectations
Jan-20 7.6 8.6 9.2
Mar-20 7.6 8.5 9.0
May-20 9.3 10.4 10.2
Jul-20 9.9 10.5 10.3
Sep-20 9.8 10.4 10.3
Nov-20 8.8 10.1 10.1
Figure 239: Households expecting general price movements in coherence with movements in price expectations
of various product groups: Three months ahead and one-year ahead (percentage of respondents)
Survey period Food Non-food Households durables Housing Cost of services
Three-months ahead
Mar-20 65.4 64.6 55.8 61.1 64.7
May-20 63.3 59.8 46.5 42.6 57.3
Jul-20 62.8 61.0 49.9 43.6 58.4
Sep-20 62.1 61.0 50.4 45.9 60.5
Nov-20 62.7 63.5 52.4 54.0 60.7
One-year ahead
Mar-20 71.9 71.8 63.2 69.9 72.3
May-20 62.3 59.5 0.9 50.3 62.3
Jul-20 63.9 64.5 55.2 51.2 65.7
Sep-20 63.0 64.8 55.5 53.6 66.6
Nov-20 66.4 65.9 56.7 62.1 68.9
19
It is a bi-monthly survey conducted by the RBI. It provides directional information on near-term inflationary pressures as expected by the respondents and may reflect
their own consumption patterns. Hence, they should be treated as households’ sentiments on inflation.
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• Survey of Professional Forecasters (SPF)20 on macroeconomic indicators: The The RBI’s SPF points to a
results of the Survey of Professional Forecasters conducted by the RBI show that contraction in FY21 GDP
growth forecast for FY21 has been revised upwards by 60bps to -8.5% led by growth of 8.5%, with
upward revision in private consumption as well as investment. That said, it is growth recovering to 9.5%
slightly higher than ours’ and RBI’s estimate of -8% and -7.5% respectively. While on a low base.
Private Final Consumption Expenditure is expected to decline by 9.7% (vs. -11.0%
earlier), contraction in investment activity is expected to be much more severe,
with drop in Gross Fixed Capital Formation now pegged at -19.1%, albeit better
than the earlier estimate of -21%. Forecasts for Real GVA growth has also been
lowered by 20pp to -8.2%, primarily led by a huge 250bps upward revision in
industrial sector (-10.5% YoY vs. -13% earlier). The FY22 GDP growth has also
been revised upwards by 130bps to 9.5%, partly reflecting the base effect.
Headline inflation for FY21 is expected to harden to 6.3%, 70bps higher than the
previous round, largely led by persistence of higher food inflation owing to supply-
side bottlenecks, even as estimate for core inflation has been broadly maintained.
On the fiscal front, the combined fiscal deficit is expected at 12.5% of GDP in
FY21—a tad higher than the previous survey, with the Centre’s fiscal deficit pegged
at 7.7% of GDP. On the external front, estimate for current account surplus for
FY21 has been revised upwards from 0.5% of GDP in the previous survey to 1.2%
of GDP, reflecting a much lower contraction in exports as compared to imports.
Figure 240: Annual forecasts (median) for FY21 and FY22

FY21 FY22
Forecasts issued on Forecasts issued on
6-Aug-20 9-Oct-20 4-Dec-20 6-Aug-20 9-Oct-20 4-Dec-20
# of respondents 32 33 29 32 33 29
Real GDP at constant prices (% YoY) -5.8 -9.1 -8.5 7.4 8.2 9.5
PFCE (% YoY) -6.0 -11.0 -9.7 8.0 8.5 9.9
GFCF (% YoY) -9.8 -21.0 -19.1 6.8 10.0 12.2
Real GVA at basic prices (% YoY) -5.8 -8.4 -8.2 7.0 8.2 9.1
Agriculture & allied activities (% YoY) 3.4 3.7 3.5 3.5 3.2 3.2
Industry (% YoY) -9.7 -13.0 -10.5 7.1 9.7 11.2
Services (% YoY) -6.1 -9.7 -9.7 8.2 9.1 9.5
Combined CPI inflation (avg, %) 4.4 5.6 6.3 4.0 4.2 4.5
Core CPI inflation (avg., %) 4.5 5.3 5.3 4.0 4.4 4.2
Wholesale inflation (avg, %) -0.8 -0.4 0.2 2.4 2.0 2.6
WPI non-food mfg. products (avg, %) 0.1 0.5 0.7 2.0 1.8 2.0
Bank credit (% YoY) 5.0 5.0 5.5 9.5 8.5 8.0
Combined fiscal deficit (% of GDP) 12.0 12 12.5 9.0 9.0 9.5
Centre’s fiscal deficit (% of GDP) 7.5 7.5 7.7 5.4 5.5 5.8
Merchandise exports (% YoY) -14.6 -14.7 -11.3 10.0 10.2 12.5
Merchandise imports (% YoY) -20.1 -22.7 -23.2 16.5 20.6 23.2
Current account balance (% of GDP) 0.4 0.5 1.2 -0.6 -0.6 -0.4
20
Twenty-three panelists participated in the 66th round of the survey conducted during November 12-December 1, 2020. The survey results are summarized and
consolidated in terms of their median forecasts.
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Insights
Invited Article: Tackling global inequality in a world impacted by COVID and climate
change: Lessons from Peterloo and Black Lives Matter 21
Richard Betts, Dr. Erkin Erimez and Kubra Koldemir
“We must accept finite disappointment, but never lose infinite hope.” Martin Luther King
In our latest blog, we argued how systemic issues such as climate change and biodiversity loss must not be looked at
in isolation but together as, in our highly interconnected world, many issues such as these are heavily interconnected.
In this article, we aim to explore connections between environmental issues and systemic social concerns that are also
prevalent in our society. In this context, we will also explore why it is important for all of us to prioritize reducing
inequality in our societies and introducing more human rights-centered policies into our institutions.
We live our lives amidst major global changes and inequalities. It is these circumstances that largely determine how
healthy, wealthy and educated each of us will be in our own lives. Clearly, working hard and our life choices also matter
but these matter much less than where and when we were born. Giving just one example, in terms of health inequality,
a child born in some of the poorest countries is 60-times more likely to die than a child born in many developed
countries. There are African countries where more than one out of every 10 children born today are expected to die
before they are 5 years old. Conversely, in developed countries, only 1 in 250 children die before they are 5 years old.22
With globalization in recent decades, billions have been lifted out of poverty, especially in emerging countries like China
and India. Basic services like health care, education, and sanitation have also improved. However, while there has been
great progress in moving billions out of poverty and in the creation of a burgeoning middle class in developing
economies, it is also true that the gulf between the extremely wealthy and the rest has been increasing. An Oxfam report
published in 2020 found that the world’s 2,153 billionaires had more wealth than the 4.6 billion people who make up
60 % of the planet’s population2 and also estimated that women and girls put in 12.5 billion hours of unpaid care work
on a daily basis, contributing at least $10.8 trillion a year to the global economy, more than 3 times the size of the global
tech industry. Their unpaid work helps maintain and drive our economies, businesses and societies but the unpaid work
is done by women and girls who often have little time or opportunity to get an education, earn a decent living or have a
say in how our societies are run. Hence, many are amongst the most vulnerable in our societies. 23
We have a moral responsibility to even the odds and give everyone, everywhere, the chance of a good life.
While climate change is an urgent and global issue that transcends any borders, it is also true that we must also urgently
tackle inequalities and human rights abuses. Many inequalities are at risk of being exacerbated by climate change
whereby many of the most vulnerable people and those that have contributed least to the problem are most at risk.
As an example, most of the poorest countries in the world lie in the tropics where temperature increases due to global
warming may make areas uninhabitable, forcing millions of people to abandon their homes. Mass immigration on this
scale would pose major geopolitical risks directly impacting stability and peace across the world.
21
The views expressed in this article are those of the authors and do not necessarily reflect the views of NSE.
22
https://ourworldindata.org/global-economic-inequality
23
https://www.oxfam.org/en/press-releases/worlds-billionaires-have-more-wealth-46-billion-people
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Market Pulse
Conversely, in the global ‘North’, in the early years of global warming, some areas may benefit from global warming as
agricultural productivity may increase.
In a similar vein, in terms of biodiversity, the areas with highest biodiversity are in the tropics. In these regions, many
millions of people rely directly on nature, working in areas such as agriculture, fishing and ecotourism and hence nature
loss can directly impact their livelihoods. In the developed ‘north’, where proportionately many more people work in
services, biodiversity risks may be more indirect, for example due to negative impacts on supply chains from sourcing
key materials from the emerging market countries.
Indeed, COVID has underscored how in our highly interconnected planetary system we are all vulnerable to supply chain
disruption and nature-based risks. As discussed in a previous blog COVID, is a public health crisis that has also spurred
an economic and confidence crisis. The pandemic has highlighted how people in different parts of the world have been
affected very differently by the very same pandemic. Simply put, COVID-19 is not an equal opportunity virus: the most
at risk are those in poor health, those unable to work remotely and those whose daily lives expose them to greater
contact with others. In short, it disproportionately affects the poor in poor countries and communities in need within
advanced economies like the United States where access to health care is not guaranteed.
Even now that there is a vaccine that is starting to be rolled out, it is unlikely the vaccine will be widely available in all
places in the immediate future, risking exacerbating inequalities such as between rich and poor countries.
In tacking inequalities, we need a human rights-based agenda that sets out to illustrate how human rights can provide
both a normative framework and a set of accountability mechanisms to accelerate success in finding proper solutions.
Maybe to understand this concept, we first need to look at moments in history that had a direct impact on the
development of some of those human rights.
One example is the initial declaration of rights by the Founding Fathers of the United States. It was revolutionary in its
vision at a time when most people lived in empires governed by absolutist monarchies. According to the declaration:
“All men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these
are Life, Liberty and the pursuit of Happiness."
Yet most of the Founding fathers were also slave-owners and black Americans had to wait a long time before it was
widely accepted that they too had the same unalienable rights. Women had to wait until the 20th century for equal
suffrage… Gay rights came even later…
We hold these truths of how we are all created equal to be self-evident, however universal rights were not actually made
universally available and many groups had to fight hard, and are still fighting, for rights and recognition…
Many historical examples can be cited of how protest played a significant role in bringing change and social progress
and by shining a light on injustice. Often those protesting were initially portrayed as looters or criminals by those in
power so to discredit their cause and maintain the status quo. An example from 2020 has been the mass protests that
followed the death of George Floyd in the US where protests against police brutality, especially toward black people,
quickly spread across the United States and internationally with an estimated 15 million to 26 million protesters in the
United States alone3. Certainly, there were some leaders who had been raising their voice in support of this movement
many years before there was a public outcry on the scale witnessed in 2020.
Subsequent to a global outcry, many global firms have come out in public for support the ‘Black Lives Matter’ movement
and published new or revised Black Lives action plans as well as giving renewed focus to stronger diversity and inclusion.
In 2020, KPMG published a revised Black Lives action plan to help accelerate change and announced 5 priority areas. 24
24
https://www.nytimes.com/interactive/2020/07/03/us/george-floyd-protests-crowd-size.html
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A famous example from the UK is what is known today as the Peterloo Massacre, which took place in Manchester in
1819. After over 60,000 peaceful pro-democracy and anti-poverty protesters had assembled, the UK Government sent
the army in to break up the protests. An estimated 18 people died and nearly 700 men, women and children received
serious injuries. However, the incident shone a light on the plight of the factory workers. There was a national outcry.
This ultimately led to change in helping ordinary people win the right to vote, to the rise of the Chartist Movement from
which the Trade Unions arose, and in the establishment of the progressive Manchester Guardian newspaper, which is
widely read today in the UK and internationally.
Another recent example, climate protests, led by the likes of Greta Thunberg, have raised much awareness globally
regarding the climate crisis. In sum, peaceful protests are of fundamental importance to democracy and the historical
record is replete with examples as to how they helped drive and accelerate change by shining a light on injustices.
One way of achieving human rights– as history shows – is peaceful protests. Another way is for everyone in society to
do their part. During the peaceful protests in the US there were many lawyers’ associations that dedicated themselves
to helping the protesters. Protesters needing legal support after having been in peaceful protests received free of charge
consultation and support from lawyers.25
The financial industry, indeed, all industries, also has a role to play in helping to tackle and reduce inequalities. For
example, financial institutions and investors can divest from any assets they consider as having high ESG risks or that
are not consistent with their ethical policies or beliefs. High-profile recent examples include divestment from fossil
fuels, munitions, tobacco and palm oil producers. In terms of human rights, another example could include not investing
in private detention centers where individuals are kept based on unethical immigration policies or on peaceful
protesting.26 As an example, MSCI ESG indices already have exclusions in all the above-mentioned investment
categories.
NGOs also have a key role to play, such as by building a liaison between private and government institutions and by
initiating partnerships. For example, the NGO United Way Greater Toronto from Canada has the objective of finding ways
to address issues at the heart of income disparity between neighbourhoods by developing sustainable and scalable
tactics and frameworks that corporations, governments and community groups can use to tackle these issues together.
Over the past year, United Way Greater Toronto and BMO have convened a group of local business leaders to form
public-private partnership.27
Inclusive growth is critical for eliminating inequalities in society. Inclusive growth is about creating broader
opportunities for participation in economic and social life. The quality of inclusive growth could be affected by political
freedoms, as stated above for right to protest, and social opportunities such as education and health. The role of
institutions in supporting inclusive growth and the implementation of inclusive policies are important. Acemoglu and
Robinson found in their research that the institutions relevant for economic development have an inclusive effect. 28 To
achieve inclusive growth, çivil society needs to be strong enough to monitor and oversee the actions of the state. If
these two forces are in a fairly balanced state also it also helps strengthen the rule of law and democracy in society. The
rule of law and democracy are two enablers of inclusiveness and inclusive growth.
Insufficient progress on SDG 16 “Peace, Justice and Strong Institutions” and SDG 10 “Reduced Inequalities” by global
corporations was also highlighted by an impact research called “Sustainability Governance Scorecard” by Argüden
Governance Academy, which evaluates companies through a governance lens. According to the study, corporations’
strategy and results alignment were low for SDG 16 (29%, 24%) and SDG 10 (37%, 33 %).
25
ttps://www.fox5atlanta.com/news/more-than-200-lawyers-offering-to-represent-protesters-free-of-charge/ https://www.law.com/texaslawyer/2020/06/03/texas-
lawyers-offer-free-help-to-people-arrested-during-protests-
26
https://uk.reuters.com/article/usa-immigration/bank-of-america-to-stop-financing-operators-of-private-prisons-detention-centers-idUSL2N23X1JL
27
https://www.weforum.org/agenda/2020/01/ngos-business-inclusive-economic-growth/
28
D. Acemoglu, J. Robinson: Why Nations Fail: The Origins of Power, Prosperity and Poverty, New York 2012. And Narrow Corridor, Newyork 2019
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Market Pulse
Conclusion
Reducing inequality is important for enabling markets to function effectively. If income distribution is skewed,
consumption may not be sufficient for some industries or companies to operate due to a lack of demand, which will
reduce competitiveness.
When inequality increases, there is a risk people will become disenfranchised and lose trust in institutions. Government,
private sector and civil society all need to cooperate to help build an inclusive and “equal” society.
Company boards and investors also have responsibilities for helping to achieve these goals. Boards need to define
company values in such a way that inclusiveness and reducing inequality become part of a company’s DNA. The private
sector and government need to encourage each other to take measures supporting inclusive and just societies and
building strong institutions.
The pandemic has underlined how inequality is a global problem that needs to be urgently addressed to help enable a
more sustainable and inclusive future. In our highly interconnected world, effective solutions to systemic social and
environmental issues can so often be found by tackling them not in isolation but together.
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RBI Working Paper: Measuring Trend Inflation in India29

The RBI’s Working Paper titled ‘Measuring Trend Inflation in India’, co-authored by Harendra Kumar Behera and Deputy
Governor Michael Debabrata Patra advocate retention of the current inflation target of 4% in the medium term. This
view is premised on their study that estimates a steady decline in trend inflation since 2014 to 4.1-4.3% just the COVID-
19 outbreak using a hybrid New Keynesian Phillips Curve model. Additionally, the estimated Phillips Curve has flattened
over time due to less persistent inflation—a consequence of credible monetary policy based on flexible inflation
targeting framework and forward-looking consumer behaviour.
The authors argue that the concept of trend inflation lies at the crux of drafting appropriate monetary policy and guides
the Monetary Policy Committee (MPC) towards setting a suitable inflation target for the Indian economy. The inflation
target needs to be fixed in alignment with trend inflation, as the actual inflation tends to converge to trend inflation after
bouts of fluctuations. An inflation target that lies far from estimated trend inflation can destabilize or dampen inflation
expectations.
• Flexible inflation targeting process in India and the importance of trend

inflation: The Reserve Bank of India (RBI) adopted a flexible inflation targeting
(FIT) framework in June 2016 under which the Monetary Policy Committee (MPC)
works towards the given mandate of price stability. The RBI is committed to
maintaining consumer price inflation of 4% with a band of +/- 2%. The current
inflation target is valid till March 2021 and will be reviewed after assessing the
macroeconomic situation of the country. Estimating trend inflation is a crucial part
of this process and will guide the MPC towards setting an appropriate target for the
future.
The authors stress on the role played by trend inflation while drafting appropriate
monetary policy for a country. Analysis of trend inflation over a substantial time
period can give a good indication of the stability of inflation expectations and the
need for use of additional monetary policy instruments. A target set above trend
inflation could result in higher and more volatile observed inflation which may
destabilize inflation expectations. A target set lower could dampen inflation
expectations and “impart a deflationary bias to the economy”.
• Authors use a hybrid NKPC model for estimation: The New Keynesian Phillips
Curve (NKPC) model is commonly used in inflation models and this paper uses a
hybrid NKPC. The authors use current inflation, trend inflation and the output gap
to understand inflation expectations and economic conditions and procure CPI and
GDP data from the Handbook of Statistics of the Indian Economy by the RBI. The
output gap used is an estimate of principal components derived after applying
appropriate filters to GDP data.
• Decline in trend inflation rates to 4.1-4.3% since 2014 until Q12020: Prior to
the NKPC estimation, they emphasize the volatility of the output gap and inflation
rate but highlight reduced volatility of the inflation rate after the FIT framework
was implemented. They also highlight the negative output gap between January
and March 2020 which points to the prevalence of economic trouble before the
pandemic hit India. Analysis to understand the inflation regimes indicates a decline
29
Harendra Kumar Behera; Michael Debabrata Patra (December 28, 2020): Measuring Trend Inflation in India .
https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/WPSN15C6B918FCCF2C4E398FF3BA2F13753532.PDF
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in real time estimates of trend inflation from 5% in 2013 to 4.1% in 2019.

Smoothed probability estimates indicate a decline from around 5% in 2009 to
4.3% in early 2020. The authors’ estimation of the Phillips Curve shows trend
inflation falling gradually while their estimation of stochastic volatility shows a fall
in the impact of supply shocks on inflation.
• Maintain 4% inflation target in the medium term: The authors findings point
towards a decline in trend inflation prior to the adoption of FIT. The new framework
aided this decline and the probability weighted average of trend inflation lay
between 4.1-4.3% before COVID-19 affected India. According to Behera and
Patra, the flatter Phillips curve can be attributed to less persistent inflation, a result
of increased trust in the mechanism of monetary policy which can be seen in the
forward looking behaviour of firms and households. This change of behaviour
implies the requirement of smaller policy changes in the future to achieve the
target. They conclude that a 4% inflation target in the medium term should be
maintained.
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Market Performance
Market Round-up
Equity markets end 2020 on a very high note
Following a strong equity market performance in the month of November, positive momentum continued in December,
with global equity markets ending 2020 at all-time high levels. Initiation of roll-outs of multiple COVID-19 vaccines and
consequent expectations of a faster cyclical recovery and increasing global trade activity, coupled with continued policy
support, kept investor sentiments buoyant for yet another month. While the US and Japan announced passage of
additional fiscal stimulus packages, the European Central Bank enhanced the monetary policy support. Additionally, a
provisional post-Brexit trade agreement between the UK and European Union has reduced trade uncertainty between
the two, thereby adding to positive market sentiments. These positive developments overshadowed the pain caused by
continued surge in COVID-19 infections globally, particularly in the US, Europe and UK, thereby leading to re-imposition
of lockdown restrictions. The rally was stronger in emerging markets (EM), supported by strengthened risk-on
sentiments on the back of highly accommodative monetary policies. While the MSCI World Index went up by 4.2% in
December following a strong 12.7% return in the previous month, MSCI Emerging Market Index generated a return of
7.2% (+9.2% in November). In 2020 as a whole, MSCI Emerging Market Index return was only a tad higher at 15.8%
(+52.2% during Apr-Dec 2020) vs. 14.1% generated by MSCI World Index (+45.2% during Apr-Dec 2020).
Indian equity markets outperformed the broader EM pack in the month of December, with the Nifty 50 and Nifty 500
Index rising by a strong 7.8% and 7.5% in December, on top of a 11.4% and 11.9% increase in the previous month
respectively. Signs of continued improvement in economic activity—reflected in several high frequency indicators,
continued decline in daily COVID cases and strong foreign capital inflows strengthened the rally in Indian equity
markets. For the year as a whole, Indian markets performed in-line with the broader EM pack, with the Nifty 50 and
Nifty 500 rising by 14.9% and 16.8% respectively.
Global fixed income markets saw a marginal increase in bond yields, particularly at the long-end, as vaccine roll-outs
raised hopes of a faster economic recovery, leading to flight of capital to riskier asset classes including equities and
commodities. The short-end, however, remained benign amid expectations of sustenance of an easy monetary policy,
thereby leading to further steepening of the yield curve. Back home, expectations of a gradual normalisation of liquidity
stance led to short-term rates rising marginally last month, even as long-end remained broadly steady. While the 10-
year G-sec yield fell by mere 2bps MoM to end the month of December at 5.9% (-66bps in 2020), the 1-year G-sec yield
shot up by 43bps to 3.7% during this period even as it is still down 180bps in 2020. Commodities also rallied sharply,
in-line with other risky asset classes, attributed to a weak dollar and vaccine optimism.
• Domestic equity markets end 2020 at record-high levels: Indian equity markets
The Nifty 50 and Nifty 500
generated positive returns for the third month in a row, supported by signs of
Index rose by a strong
continued economic recovery, sustained decline in COVID-19 cases, initiation of
7.8% and 7.5% in
COVID-19 vaccination programme and strong foreign capital inflows. Several high- December, on top of a
frequency indicators point to a continued recovery in economic activity that started 11.4% and 11.9%
in August, even as ascertaining its sustenance in the absence of limited external increase in the previous
support is difficult at the current juncture. The NSO’s First Advance Estimate for month respectively.
FY21 at -7.7% (vs. out estimate of -8%) implies a modest 0.1% decline in GDP
Market volatility rose by
growth in the second half but is contingent on strong Government spending.
6.5% in December after
Positive domestic developments apart, global cues including vaccine roll-outs, falling sharply in the
expansion in fiscal and monetary policy support and a provisional trade deal previous month.
agreement between the UK and EU also supported the rally.
The Nifty 50 and Nifty 500 Index rose by a strong 7.8% and 7.5% in December, on
top of a 11.4% and 11.9% increase in the previous month respectively. While mid-
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cap stocks (Nifty Mid-cap 100) underperformed large and small-caps at 5.7%
return, Small-cap Index (Nifty Small-cap 100) rose by 7.8% in December. For 2020
as a whole, Nifty 50 and Nifty 500 Index went up by 14.9% and 16.7% respectively,
reversing the sharp fall seen in the first quarter of 2020 by a wide margin. Market
volatility index, India VIX, shot up by 6.5% in December after falling by 20% in the
previous month, translating into an increase of ~81% in 2020.
In cash markets, average daily turnover fell by 6.6% MoM to Rs625bn after rising
by a strong 27.8% MoM in the previous month. Average daily turnover in the cash
market in the calendar year 2020 shot up by 157% to Rs537bn as compared to the
average daily turnover of Rs343bn in 2019. Average daily derivative turnover in
December also declined by 11.8% MoM to Rs1,163bn following a strong 13.6%
growth in the previous month. In 2020, average daily equity derivative turnover
rose by 23.1% to Rs1,093bn.
Sector-wise, all sectors generated positive returns in December led by Real Estate
(+20.2%), Information Technology (+11.4%) and Metals (+11.2%). Except for
Banks (-2.8% in 2020) and Media (-8.6% in 2020), all other sectors ended 2020 in
green, with Pharmaceuticals and Information Technology leading at 60.6% and
54.9% returns respectively.
• Expectations of gradual policy normalization weighed on short-term rates:

Indian fixed income markets
After a strong rally seen in the previous two months of October and November,
took a breather in December
domestic fixed income markets took a breather in December. This was led by rising amid expectations of a
expectations of a gradual normalisation in the RBI’s policy and liquidity stance gradual normalisation in the
owing to persistence of short-term rates below the policy corridor over the last few RBI’s policy and liquidity
months and a faster-than-expected economic recovery. Consequently, the the stance.
ultra-short-end (1-year and below) shot up amid expectations of no further
monetary easing, long-end remained broadly steady. While the 10-year G-sec yield
fell by mere 2bps MoM to end the month of December at 5.9% (-66bps in 2020),
the 1-year G-sec yield shot up by 43bps to 3.7% during this period even as it is still
down 180bps in 2020.
On the global front, while China 10-year bond yield fell by 8bps in December,
following a similar increase in the previous two months (+3bps in 2020), Germany
10-year bond yield remained steady to end the year at -0.58% (-39bps in 2020).
The US 10-year yield inched up by 7bps in December to 0.9% (-100bps in 2020),
while Japan 10-year bond yield fell by a modest 1bps to 0.02% (+4bps YTD).
• FII remained strong buyers of Indian equities in December: Foreign Institutional

Net FII inflows into Indian
Investors were strong buyers of Indian equities for the third month in a row in
equity markets remained
December as risk-on sentiments remained buoyant amid vaccine optimism, strong at US$8.5bn in
enhanced policy support and a provisional trade-deal agreement between the UK December, translating into
and EU. Following 13-year high net inflows of US$9bn in November (Source: record-high quarterly inflows
Refinitiv Datastream), FIIs net buying of Indian equities stood at US$8.5bn—the US$20.2bn in Q4 2020
second highest monthly figure in last 13 years. This has translated into record-high (2020: US$22.4bn)
quarterly net FII inflows of US$20.2bn in the last quarter of 2020, with net inflows
for the year as a whole at US$22.4bn. FIIs, however, were only modest buyers of
Indian debt in December, with net inflows at US$410mn, translating into record-
high net outflows of US$16.9bn in 2020. Domestic institutional investors (DIIs)
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have remained strong sellers of Indian equities for the third month in row, with net
outflows at Rs373bn in December, translating into net outflows of Rs357bn in
2020.
• Rally in global equity markets remained strong for yet another month in
December: The strong global market rally in November continued in December, Global equity markets ended
2020 at all-time high levels,
with markets ending the year 2020 at lifetime highs. Initiation of roll-outs of
with EMs outperforming DMs
multiple COVID-19 vaccines and consequent expectations of a faster cyclical
in December.
recovery and increasing global trade activity, coupled with continued policy
support, kept investor sentiments buoyant for yet another month. While the US and While the MSCI World Index
Japan announced passage of additional fiscal stimulus packages, the European went up by 4.2% in
December, MSCI Emerging
Central Bank enhanced the monetary policy support. Additionally, a provisional
Market Index generated a
post-Brexit trade agreement between the UK and European Union has reduced
return of 7.2%.
trade uncertainty between the two, thereby adding to positive market sentiments.
These positive developments overshadowed the pain caused by continued surge
in COVID-19 infections globally, particularly in the US, Europe and UK, thereby
leading to re-imposition of lockdown restrictions. The rally was stronger in
emerging markets (EM), supported by strengthened risk-on sentiments on the back
of highly accommodative monetary policies. While the MSCI World Index went up
by 4.2% in December following a strong 12.7% return in the previous month, MSCI
Emerging Market Index generated a return of 7.2% (+9.2% in November). In 2020
as a whole, MSCI Emerging Market Index return was only a tad higher at 15.8%
(+52.2% during Apr-Dec 2020) vs. 14.1% generated by MSCI World Index
(+45.2% during Apr-Dec 2020).
US: The US equity markets generated positive returns for the second month in a
row, with the S&P 500 Index and Dow Jones Index rising by 3.7% (+16.3% in
2020) and 3.3% (+7.3% in 2020) respectively in December to record-high levels,
albeit tad lower returns given by the broader developed market pack. Passage of
the new Coronavirus bill in the US, reduced political uncertainty and vaccine roll-
out boosted market sentiments. This more than outweighed near-term concerns
regarding continued surge in COVID-19 infections, and consequent lockdowns.
On the macro front, high frequency indicators pointed to continued economic

recovery, albeit at a slower pace. The Manufacturing Purchasing Managers’ Index
(PMI) rose further from 56.7 in November to 57.1 in December, pointing to the
strongest factory growth since September 2014. The Services PMI fell sharply from
November's five-and-a-half-year high of 58.4 to 54.8 in December. The
unemployment rate remained steady at 6.7% in December, a tad lower than
market expectations but still remains well below the pre-COVID level. However,
the US economy cut 140k jobs in December—much lower than market
expectations of a 71k rise, marking the first drop in employment since May.
Consumer demand remained steady, with retail sales rising by 4.1% YoY in
December even as the growth rate has been coming off over the last few months.
5.7% YoY in October, marking the fifth consecutive month of positive YoY change,
but it was slightly below an upwardly revised 5.9% growth in September. On the
policy front, The US Federal Reserve, in the recent policy review, kept policy rates
and asset purchase programme unchanged, and upgraded its outlook for the US
economy.
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Europe: European markets also rallied for the second consecutive month in
December, thanks to initiation of COVID-19 vaccinations, a provisional trade-deal
agreement between the UK and EU and enhanced policy support. This outweighed
the concerns regarding a sharp surge in COVID-19 cases over the last few weeks.
Following a 12-15% return in the previous month, The FTSE 100 and DAX 30
surged by 3.1% and 3.2% respectively in December, while CAC Index rose by a
modest 0.6% after rising by a strong 20% in the previous month. While the UK’s
FTSE 100 and France’s CAC index and ended the year with a 14.3% and 7.1%
decline respectively, DAX 30 generated a modest 3.6% return, massively
underperforming the broader DM pack last year.
On the macro front, pace of economic recovery slowed down—a consequence of

re-imposition of restrictions following a second wave of infections in several
European countries. Manufacturing PMI rose from 53.8 in November to 55.2 in
December. Services PMI, on the other hand, remained deep in the negative zone at
46.4 in December, marking the fourth successive month of contraction (sub-50
reading) in the services sector. The euro area unemployment rate inched down
marginally to 8.3% in November from 8.4% in the previous month. On the negative
side, retail sales registered a decline of 2.9% YoY and 6.1% MoM in December,
missing market expectations of a 0.8% YoY increase. This was reflected in the
deterioration in consumer confidence in November to -17.6, even as it improved
from there to -13.9 in December.
In the UK, economic recovery remained shaky as the highly infectious new COVID
strain led to a rapid rise in cases. Manufacturing PMI in the UK inched up further
from 55.6 in November to 57.5 in December—the steepest pace of expansion in
the manufacturing sector since November 2017. Services PMI, on the other hand,
remained in the contraction zone for yet another month as economic activity
weakened due to tightened COVID-19 restrictions. Growth in retail sales
weakened from 5.8% in the previous month to 2.4% YoY in December but fell by
3.8% on a MoM basis. Consumer confidence improved from a six-month low of -33
in November to -26 in December as sentiments improved after the launch of
vaccination programme. On the policy front, the Bank of England left policy rates
on hold (Bank Rate at 0.1%) while also leaving the size of its bond buying program
unchanged at £875 bn after expanding it £150 bn in the month of November.
However, the Central Bank cautioned about the UK economy witnessing a bigger
hit to the economy than expected over the last few months.
Asia: The Asian markets also ended the month and year with strong returns.
Positive cues related to vaccination roll-outs and renewed hopes of a cyclical
recovery and increase in global trade activity boosted market sentiments. While
the Hang Seng Index (Hong Kong) and Nikkei 225 Index (Japan) shot up by 3.4%
(-3.4% in 2020) and 3.8% (16.0% in 2020) respectively in December, SSE
Composite Index (China) underperformed with a 2.3% return (+12.6% in 2020).
Meanwhile, Indian markets generated strong returns, with the Nifty 50 rising by
7.8% YoY in December and ended the year with a 14.9% return.
On the macro front, recent high-frequency indicators in India pointed to continued

economic recovery. The CSO’s Advance Estimate of -7.7% for FY21 reflects a
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strong recovery in the second half, led by robust Government spending.

Manufacturing PMI inched up to 56.4 in December, while Services PMI slowed
down to 52.3. Consumption demand, however, has remained strong, thanks to a
festive/pent-up demand, as reflected in robust two-wheeler and passenger sales,
reversal in the YoY contracting trend in non-oil non-gold imports and strong growth
in fuel and power consumption.
Economic activity in China remained steady, with a) manufacturing PMI falling from
a decade high of 54.9 in November to 53 in December, marking the eighth straight
month of expansion, b) industrial production growing at a strong 7% YoY in
November, c) exports growing at an all-time high of 21.1% YoY in November, well
above market expectations and marking the sixth straight month of increase, and
d) retail sales rising by 5.0% YoY in November—the steepest increase since
December 2019.
• Commodities rallied in December amid rising hopes of economic recovery:

Commodities rallied for yet
Commodities also rallied in line with other riskier asset classes, supported by a another month in December,
weaker US dollar and rising hopes of a cyclical recovery. Crude oil prices shot up supported by a weaker US
by 8.8% in December on top of a 27.1% increase in the previous month to the end dollar and rising hopes of a
year at US$51.9/bbl, even as it is still down 21.8% in 2020. Not just crude, most cyclical recovery.
other hard commodities also witnessed a surge in December, led by iron ore and
tin. Safe haven commodities also generated decent returns in December after
underperforming over the previous two months with prices of both gold and silver
rising by 7% and 16.6% in December, thanks to a weak dollar.
• Continued dollar weakness supported EM currencies: The US dollar weakened

further in December amid expectations of a new fiscal package in the US. The US dollar weakened
Additionally, vaccine roll-outs and rising hopes of a cyclical recovery led to flight of further in December amid
capital to riskier asset classes. This led to the US dollar Index (DXY) falling by 2.1% expectations of a fiscal
in December on top of a 2.3% drop in the previous month, with the Euro and Pound stimulus as well as
appreciating by 2.3% and 2.4% against the US dollar respectively. This, in turn, strengthened risk-on
benefited emerging market currencies, with the MSCI Emerging Market Currency environment.
Index rising by 1.6% in December (+11% from March-lows). Meanwhile, the INR
also gained strength and ended the year 1.3% higher at 73.1 against the dollar (-
2.4% in 2020).
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Market performance across asset classes

Figure 241: Performance across equity indices, fixed income, currency and commodities
Indicator Name Dec-20 1M ago 3M ago 12M ago 1M (%) 3M (%) 6M (%) 12M (%) YTD (%)
Equity Indices
NIFTY 50 13,982 12,969 11,248 12,168 7.8 24.3 35.7 14.9 14.9
NIFTY 500 11,518 10,719 9,342 9,873 7.5 23.3 35.9 16.7 16.7
MSCI INDIA 1,600 1,472 1,338 1,370 8.7 19.6 33.8 16.8 16.8
India Volatility Index (%) 21 20 20 12 6.5 8.0 -27.6 80.8 80.8
MSCI WORLD 2,690 2,583 2,367 2,358 4.1 13.6 22.2 14.1 14.1
S&P 500 COMPOSITE 3,756 3,622 3,363 3,231 3.7 11.7 21.2 16.3 16.3
DOW JONES INDUSTRIALS 30,606 29,639 27,782 28,538 3.3 10.2 18.6 7.3 7.3
HANG SENG 27,231 26,341 23,459 28,190 3.4 16.1 11.5 -3.4 -3.4
FTSE 100 6,461 6,266 5,866 7,542 3.1 10.1 4.7 -14.3 -14.3
NIKKEI 225 27,444 26,434 23,185 23,657 3.8 18.4 23.1 16.0 16.0
Fixed Income
India 10YR Govt Yield (%) 5.89 5.91 6.02 6.55 -2bps -12bps 1bps -66bps -66bps
India 5YR Govt Yield (%) 5.10 5.08 5.39 6.36 2bps -29bps -18bps -126bps -126bps
India 1YR Govt Yield (%) 3.76 3.33 3.71 5.56 43bps 5bps 3bps -180bps -180bps
India 3Month T-Bill Yield (%) 3.11 2.96 3.35 5.15 14bps -25bps -8bps -204bps -204bps
US 10YR Govt Yield (%) 0.91 0.84 0.68 1.91 7bps 24bps 26bps -100bps -100bps
Germany 10YR Govt Yield (%) -0.58 -0.57 -0.52 -0.19 0bps -5bps -12bps -39bps -39bps
China 10YR Govt Yield (%) 3.20 3.28 3.16 3.17 -8bps 5bps 31bps 3bps 3bps
Japan 10YR Govt Yield (%) 0.02 0.03 0.02 -0.02 -1bps 1bps -1bps 4bps 4bps
Currency
USD/INR 73.1 74.1 73.8 71.4 -1.3 -1.0 -3.2 2.4 2.4
EUR/USD 1.2 1.2 1.2 1.1 2.3 4.3 8.9 9.0 9.0
GBP/USD 1.4 1.3 1.3 1.3 2.4 5.7 10.6 3.2 3.2
USD/YEN 103.2 104.3 105.5 108.7 -1.0 -2.2 -4.3 -5.0 -5.0
USD/CHF 1.1 1.1 1.1 1.0 2.4 3.9 7.2 9.6 9.6
USD/CNY 6.5 6.6 6.8 7.0 -0.6 -4.0 -7.6 -6.1 -6.1
Commodities
Brent Crude Oil (US$/bbl) 51.9 47.7 41.0 66.3 8.8 26.6 25.8 -21.8 -21.8
LME Aluminium (US$/MT) 1,974 2,036 1,729 1,781 -3.1 14.2 23.2 10.8 10.8
LME Copper (US$/MT) 7,749 7,569 6,668 6,149 2.4 16.2 29.1 26.0 26.0
LME Lead (US$/MT) 1,976 2,062 1,802 1,914 -4.2 9.6 12.1 3.3 3.3
LME Nickel (US$/MT) 16,554 15,985 14,480 13,950 3.6 14.3 29.8 18.7 18.7
LME Tin (US$/MT) 20,545 18,642 17,449 17,178 10.2 17.7 22.2 19.6 19.6
LME Zinc (US$/MT) 2,729 2,776 2,388 2,280 -1.7 14.3 34.0 19.7 19.7
SHC Iron Ore Spot (US$/MT) 159 131 120 92 21.5 32.1 56.2 72.3 72.3
Gold Spot Price (US$/troy ounce) 1,898 1,774 1,900 1,521 7.0 -0.1 6.4 24.8 24.8
Silver Spot Price (US$/troy ounce) 26 23 23 18 16.6 13.6 45.3 47.8 47.8
Platinum Spot Price (US$/ounce) 1,068 979 884 971 9.1 20.8 31.2 10.0 10.0
Palladium Spot Price (US$/ounce) 2,342 2,400 2,335 1,920 -2.4 0.3 22.9 22.0 22.0
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Figure 242: Performance across NSE sector indices

Indicator Name Dec-20 1M ago 3M ago 12M ago 1M (%) 3M (%) 6M (%) 12M (%) YTD (%)
Auto 9,194 8,892 7,908 8,248 3.4 16.3 36.8 11.5 11.5
Bank 31,264 29,609 21,452 32,162 5.6 45.7 46.3 -2.8 -2.8
FMCG 34,177 31,719 29,842 30,122 7.8 14.5 13.7 13.5 13.5
IT 24,251 21,765 19,951 15,652 11.4 21.6 64.4 54.9 54.9
Media 1,649 1,503 1,548 1,804 9.7 6.5 22.8 -8.6 -8.6
Metals 3,255 2,926 2,243 2,801 11.2 45.1 63.4 16.2 16.2
Pharma 12,916 11,839 11,773 8,040 9.1 9.7 29.4 60.6 60.6
Real Estate 314 261 212 299 20.2 48.1 54.9 5.1 5.1
Figure 243: NIFTY sector performance during December 2020 (rebased to 0)
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Market Pulse
Figure 244: India 10Y G-sec yield—long-term trend Figure 245: India 10Y G-sec yield—last one-year trend
% %
India 10-year benchmark g-sec yield-long-term trend India 10-year benchmark g-sec yield movement
10 7.0 over last 12 months
9 6.8
8 6.6
6.4
7
6.2
6
6.0
5
5.8
4
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20 5.6
Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20
Figure 246: India sovereign yield curve

India’s sovereign yield curve has steepened meaningfully since the announcement of RBI’s first policy response to
COVID-19 in late March 2020. A sharp drop in policy rates during the initial months of COVID-19 outbreak and
subsequently surplus liquidity in the system, thanks to a slew of measures taken by the RBI and its intervention in the
FX market amidst a surge in foreign capital outflows, resulted in a sharp drop in yields at the short-end of the curve to
levels below the reverse repo rate. However, the RBI, in its recent monetary policy, expressed concerns regarding the
sharp fall in short-term rates below the policy corridor, thereby leading to expectations of a gradual normalization in
liquidity conditions over the coming months. This led to a slight increase in rates at the ultra-short-end of the curve,
with 1-year G-sec rising by a steep 43bps. The short-end may rise further over the coming months depending on the
liquidity stance take by the RBI.
% India sovereign yield curve
31-Dec-19 26-Mar-20 27-Nov-20 31-Dec-20
8.0
7.1
7.2
6.8
6.6
6.4 6.5
5.6
5.0
4.8
4.0
3.2 3.1
2.9
2.4
3M 6M 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 11Y 12Y 13Y 14Y 15Y 19Y 24Y 30Y
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Market Pulse
Figure 247: Sovereign yield curve across G20 countries as of December 31st, 2020
Dec 2020 3m 6m 1y 2y 3y 4y 5y 6y 7y 8y 9y 10y 30y
US 0.08 0.09 0.11 0.12 0.17 0.36 0.64 0.91 1.64
Japan -0.10 -0.10 -0.13 -0.12 -0.13 -0.12 -0.11 -0.10 -0.08 -0.05 0.00 0.02 0.65
Germany -0.73 -0.75 -0.73 -0.71 -0.77 -0.76 -0.74 -0.74 -0.69 -0.68 -0.63 -0.58 -0.17
France -0.68 -0.62 -0.61 -0.72 -0.73 -0.70 -0.65 -0.60 -0.56 -0.50 -0.41 -0.34 0.36
UK -0.03 -0.04 -0.13 -0.16 -0.11 -0.10 -0.08 -0.05 0.02 0.06 0.15 0.20 0.76
Italy -0.61 -0.50 -0.47 -0.47 -0.41 -0.22 -0.10 0.04 0.11 0.31 0.40 0.52 1.43
Canada 0.07 0.12 0.16 0.20 0.26 0.30 0.39 0.41 0.68 1.21
EU -0.73 -0.75 -0.73 -0.71 -0.77 -0.76 -0.74 -0.74 -0.69 -0.68 -0.63 -0.58 -0.17
Argentina 44.98 57.05 53.00
Australia 0.05 0.07 0.11 0.19 0.34 0.46 0.61 0.74 0.86 0.98 1.98
Brazil 2.06 2.16 2.86 4.41 5.36 5.49 6.60 6.98
China 2.70 2.76 2.84 2.97 3.22 3.20 3.77
India 3.07 3.36 3.76 3.87 4.41 4.76 5.10 5.54 5.73 5.94 5.96 5.89 6.55
Indonesia 3.30 3.53 3.92 5.04 5.33 6.10 7.04
South Korea 0.66 0.89 0.97 1.17 1.34 1.72 1.83
Mexico 4.33 4.29 4.28 4.40 4.55 5.01 5.30 6.59
Russia 4.21 4.24 3.57 4.37 4.45 5.35 5.74 5.91
South Africa 3.75 4.53 6.67 8.74 10.81
Turkey 14.74 15.41 14.80 14.57 13.72 12.77 12.51
Figure 248: Sovereign yield curve across G20 countries as of December 31st, 2018
Dec 2018 3m 6m 1y 2y 3y 4y 5y 6y 7y 8y 9y 10y 30y
US 2.38 2.49 2.60 2.50 2.47 2.51 2.59 2.69 3.02
Japan -0.15 -0.18 -0.15 -0.14 -0.15 -0.15 -0.15 -0.14 -0.14 -0.09 -0.03 0.00 0.71
Germany -0.85 -0.72 -0.60 -0.59 -0.55 -0.46 -0.27 -0.15 -0.05 0.01 0.11 0.25 0.88
France -0.90 -0.79 -0.65 -0.44 -0.29 -0.14 0.04 0.22 0.28 0.52 0.65 0.71 1.64
UK 0.73 0.77 0.76 0.75 0.74 0.80 0.90 0.95 1.00 1.07 1.17 1.27 1.82
Italy 0.03 0.52 0.96 1.55 1.84 2.10 2.34 2.33 2.57 2.77 3.56
Canada 1.64 1.78 1.88 1.86 1.87 1.90 1.89 1.92 1.97 2.18
EU -0.85 -0.71 -0.60 -0.59 -0.55 -0.46 -0.27 -0.15 -0.05 0.01 0.11 0.25 0.88
Argentina 27.35 32.92
Australia 1.94 1.91 1.83 1.86 1.92 2.04 2.12 2.20 2.30 2.32 2.81
Brazil 6.48 6.50 6.58 7.35 8.11 8.52 9.19 9.27
China 2.58 2.90 2.91 3.01 3.23 3.27 3.75
India 6.67 6.89 6.81 7.01 7.10 7.19 7.24 7.31 7.38 7.44 7.42 7.37 7.61
Indonesia 6.10 6.30 6.31 7.66 7.87 7.98 8.80
South Korea 1.75 1.84 1.83 1.91 1.89 1.94 1.96
Mexico 8.30 8.64 8.54 8.62 8.65 8.91
Russia 7.77 8.04 7.39 7.69 8.18 8.44 8.54 8.71
South Africa 7.25 5.97 8.11 8.89 9.91
Turkey 22.28 21.46 22.00 18.84 17.89 16.98 15.83
164/212
Market Pulse
Corporate bond market performance

Liquidity measures announced by the RBI over the last several months have resulted in a significant moderation in in
the interest rate structure across the board, thereby reducing risk premia and leading to record corporate bond
issuances. Corporate spreads, particularly, have seen a meaningful drop across the term structure, leading to spreads
with respect to similar tenor G-secs falling to as low as 20bps in November. Corporate spreads at the short-end (3-
month papers), however, rose a bit in December amid expectations of a gradual normalisation of RBI’s policy stance
and liquidity conditions given concerns raised by the RBI regarding a sharp drop in short-term rates below the policy
corridor. Spreads for other tenors, however, remained broadly stable in December.
Figure 249: Spreads for 3-month corporate bonds across segments

bps
Spreads for 3-month corporate bonds across segments
3M Corp (-) 3M G-sec 3M NBFC (-) 3M G-sec 3M PSU (-) 3M G-sec
340
300
260
220
180
140
100
60
20
-20
Jul-19
Jul-20
May-19
Sep-19
May-20
Sep-20
Mar-19
Mar-19
Nov-19
Nov-20
Oct-19
Mar-20
Oct-20
Jan-19
Jan-20
Jun-19
Feb-20
Aug-19
Jun-20
Aug-20
Dec-18
Apr-19
Dec-19
Apr-20
Dec-20
Source: Refinitiv Datastream, Bloomberg.
Figure 250: Spreads for 3-year corporate bonds across segments.

bps
320
280
240
200
160
120
80
40
0
-40
May-20
Jul-19
Jul-20
May-19
Sep-19
Sep-20
Nov-19
Nov-20
Jan-19
Mar-19
Mar-19
Oct-19
Jan-20
Mar-20
Oct-20
Jun-19
Feb-20
Aug-19
Jun-20
Aug-20
Dec-18
Apr-19
Dec-19
Apr-20
Dec-20
Source: Refinitiv Datastream, Bloomberg.
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Market Pulse

bps
230
200
170
140
110
80
50
20
-10
May-20
May-19
Jul-19
Sep-19
Jul-20
Sep-20
Mar-19
Mar-19
Oct-19
Mar-20
Nov-19
Oct-20
Nov-20
Jan-19
Jan-20
Jun-19
Feb-20
Jun-20
Dec-18
Apr-19
Aug-19
Dec-19
Apr-20
Aug-20
Dec-20

bps
180
160
140
120
100
80
60
40
20
May-…
May-…
Jul-19
Sep-19
Jul-20
Sep-20
Nov-19
Jan-19
Mar-19
Mar-19
Oct-19
Jan-20
Mar-20
Nov-20
Oct-20
Jun-19
Feb-20
Aug-19
Jun-20
Dec-18
Apr-19
Dec-19
Apr-20
Aug-20
Source: Refinitiv Datastream, Bloomberg, NSE. Dec-20
Figure 253: AAA-rated corporate bond yield curve Figure 254: AA-rated corporate bond yield curve
% %
AAA-rated corporate yield curve AA-rated corporate yield curve
9.0 31-Dec-19 30-Jun-20 31-Dec-20 9.0 31-Dec-19 30-Jun-20 31-Dec-20
8.0
8.0
7.0
7.0
6.0
6.0
5.0
5.0
4.0
3.0 4.0
3M 6M 1Y 2Y 3Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y 3M 6M 1Y 2Y 3Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y
Source: Bloomberg, NSE.
166/212
Market Pulse
Figure 255: Change in AAA-rated corporate bond yields Figure 256: Change in AA-rated corporate bond yields
during October-November across tenors during October-November across tenors
bps Increase in AAA-rated corp bond yields across tenors bps Increase in AA-rated corp bond yields across tenors
in 2020 in 2020
0 0
-50
-50
-100 -60
-82
-103 -100
-93
-150 -131 -134 -104
-143 -115
-153 -150 -126
-166 -140
-200
-155
-226 -200
-250 -232 -231 -229
-251 -203
-222 -221 -217 -221
-300 -250
3M 6M 1Y 2Y 3Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y 3M 6M 1Y 2Y 3Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y
Source: Bloomberg. *Data for October is as of October 20th, 2020.
Figure 257: Net lending under RBI’s liquidity adjustment facility

Surplus liquidity in the system widened further in December, with net lending under LAF rising from an average of
Rs4.1trn in October and Rs5.3trn in November to ~Rs5.6trn in December.
Rs bn
Net lending under RBI's Liquidity adjustment facility
Outstanding amount under repo operations
Outstanding amount under reverse repo operations Figure greater than zero
4000
Net lending under LAF indicates deficit liquidity in
the system
2000
-2000
Figure less than zero indicates

-4000
surplus liquidity in the system
-6000
Surplus liquidity has

-8000
increased further in the
month of November
-10000
Jul-18
Jul-20
May-18
Sep-18
May-20
Nov-19
Mar-18
Mar-20
Oct-20
Jan-18
Feb-19
Jan-20
Jun-19
Aug-19
Dec-18
Apr-19
Dec-20
Source: CMIE Economic Outlook.
167/212
Market Pulse
Institutional flows across market segments in India

FIIs were net buyers in Indian equities in FY21…: FIIs’ continued to buy Indian
equities in December, amid ample global liquidity as a result of dovish policy stance by
global central banks, weakening of the US dollar, better than expected economic recovery
in the second quarter and positive market sentiment following encouraging news on the
COVID-19 vaccine roll-out. FIIs bought equities worth US$29bn this fiscal as of end of
December – the highest inflow since FY2012-13 when FII net inflows touched US$26bn.
…but net sellers in the debt segment: In contrast to the trend in equity markets this
fiscal, FIIs’ net flows in the debt segment remained low. FIIs have been net sellers to the
tune of US$5bn in the Indian debt in this fiscal till end of December. FII outflows in debt
segment rose significantly since Mar’20, as lockdowns to curtail the COVID-19 pandemic
were enforced globally. While FII buying in Indian equities resumed in May’20 post sharp
correction and easing of lockdown restrictions on economic activities, net purchases in
debt segments have remained low, amid fall in the yields due to monetary policy easing
by the RBI and imminent concerns over India’s long-term growth outlook in wake of the
pandemic and Government’s fiscal situation.
Figure 258: Overall net inflows of FIIs in India
168/212
Market Pulse
Domestic institutional investors’ (DIIs) continued to sell Indian equites: Post record
buying in the months of May, June and July this year, DIIs have remained net sellers for
the rest of the fiscal year which steepened since September as seen in the chart below.
FIIs have sold stocks worth Rs867bn in the current fiscal thus far, due to redemption
pressures and profit booking.
Figure 259: Overall net inflows by DIIs in Indian equity markets
169/212
Market Pulse
Fund mobilisation through NSE

Market Statistics: Primary market
Fund-raising through QIPs witnessed an uptick MoM: Companies raised Rs10.7bn
through equity issuances in December, with nearly 70% of the funds through QIPs and
remaining 30% through Preferential Allotment, Rights Issue and IPOs. Fund-raising by
corporates through equity issuances (IPOs, Rights Issue, Preferential Allotment and
QIPs) had dropped in the first two months of this fiscal post imposition of a nation-wide
lockdown that shut business activities. However, equity issuances picked up by the end
of first quarter as lockdown restrictions were eased by the Government and business
activities resumed. Corporates have raised Rs1,358bn in this fiscal thus far, with QIPs
and Preferential Allotment being the most preferred option (nearly 60% of the total equity
issuances).
Debt fund-raising continued to rise in December: Debt markets continued to witness

high fund-raising activity in December (+48% MoM), with corporates raising nearly 99%
of the total funds or Rs1,309bn through debt markets (CPs and bonds) as compared to
Rs882bn in November and Rs881bn in October. Corporates continued to borrow in debt
markets during the year as borrowing costs were brought down due to monetary policy
easing by RBI.
Figure 260: Funds mobilised through NSE platform

Particulars Dec-20 Nov-20
Amount Amount
No. of Amount Raised No. of Amount
Raised Raised
Issues (Rsm) Issues Raised (Rsm)
(USDm) (USDm)
Equity issuances
IPOs 2 1,351 18 2 69,972 942
Rights Issue 1 299 4 1 713 10
Preferential Allotment 8 1,678 23 6 68,593 923
QIPs 4 7,423 101 1 2,500 34
Total equity raised 10,751 146 141,777 1,909
Debt issuances
Public issue of NCDs 1 8,146 111 - - -

Public issue of G sec, T-Bills & SDLs 98 3,228,442 43,853 89 2,241,601 30,178
Private Placement of NCD* 67 464,145 6,305 45 351,513 4,732
Private Placement of CPs* 157 837,250 11,373 122 531,150 7,151
Total debt raised 4,537,983 61,641 3,124,264 42,061
Total funds raised (equity + debt) 4,548,734 61,787 3,266,041 43,969

Source: NSE.
Note: In case of debt issuances, the above table reports no. of ISINs instead of issues.
170/212
Market Pulse
New listings in the month

December witnessed five new listings on NSE Main Board: Two (2) companies listed
on NSE Main Board through IPOs and three (3) through direct listing in December. The
month also witnessed eight (8) SME companies migrate to the Main Board. Out of the 13
company listings that happened on NSE main board in December, eight (8) companies
gained on their respective listing dates.
Figure 261: Companies listed on NSE in Dec’20

Listing Gross
Market
Listing Date Security Name Gain Turnover Listing
Cap (Rsm)
% (Rsm)
02-Dec-20 Marine Electricals (India) Limited 3.4 4,835 31 Migrated from SME to NSE Main Board
04-Dec-20 Supreme Engineering Limited 9.8 636 7 Migrated from SME to NSE Main Board
07-Dec-20 Global Education Limited -74.4 511 3 Migrated from SME to NSE Main Board
11-Dec-20 Accuracy Shipping Limited 4.9 471 0 Migrated from SME to NSE Main Board
14-Dec-20 Burger King India Limited 87.5 51,523 22,858 IPO
14-Dec-20 Rudrabhishek Enterprises Limited 5.0 1,732 2 Migrated from SME to NSE Main Board
18-Dec-20 RKEC Projects Limited -8.6 1,006 3 Migrated from SME to NSE Main Board
18-Dec-20 Ravinder Heights Limited -85.0 1,810 1 New Listing
18-Dec-20 Anant Raj Global Limited -42.1 6,507 30 New Listing
23-Dec-20 Mangalam Global Enterprise Limited 18.9 1,200 2 Migrated from SME to NSE Main Board
24-Dec-20 Mrs. Bectors Food Specialities Limited 73.6 34,907 21,270 IPO
24-Dec-20 Fairchem Organics Limited -3.6 8,472 110 New Listing
24-Dec-20 Godha Cabcon & Insulation Limited 4.9 403 0 Migrated from SME to NSE Main Board
Source: NSE.
171/212
Market Pulse
Trend of NSE’s turnover across different segments

Impact of macro indicators on NSE’s turnover
On an average, NSE’s turnover recorded a sharp rise in the Cash market over the months
during FY2020-21. Its monthly turnover grew by an average of 72.7% on an YoY basis
over the period of Apr-Dec in 2020 and registered an average monthly turnover of
Rs12.1trn.
The long-term trend has been similar for the equity derivatives as well. Post a roller
coaster ride in 2019, NSE’s monthly turnover recorded a strong growth in 2020, thanks
to a sharp rise in volatility over the first half of the year, continuous rise in the global equity
prices and a significant rise in total liquidity due to monetary policy easing by global
central banks. In FY21, total turnover in equity derivatives segment recorded 29.4%
growth till December on YOY basis over the same period in FY20.
In contrast, the overall trend has been quite different in the currency segment. Monthly
turnover remained stagnated during 2014-17, before rising gradually over the next three
years. In FY2020-21, total turnover in currency derivatives segment recorded 27.8%
growth till December on YOY basis over the same period in 2019-20.
Figure 262: NSE’s total monthly turnover across segments
Source: NSE.
Note: Total turnover for derivatives includes gross traded value of futures and total premium turnover of options.
172/212
Market Pulse
Better than expected economic recovery and ample liquidity helped NSE’s turnover
to grow further: Sharp revival in economic activities over the last two (2) quarters as
lockdown restrictions were lifted and ample liquidity has given a boost NSE’s turnover
across all segments. Surge in trading by retail investors and FIIs have led a rally in equity
prices post sharp correction of March’20, despite selling by DIIs.
Figure 263: Impact of global slowdown on overall turnover growth across segments
173/212
Market Pulse
V-shaped recovery in India and liquidity support from the RBI drove NSE’s volumes
higher: Several high frequency indicators that reflect a sharp economic recovery in India
and ample liquidity support provided by the central bank of India may have driven NSE’s
volume growth further over the last two months.
Figure 264: Growth rates of Cash turnover and economic slowdown in India (IIP and GVA growth)
174/212
Market Pulse
A sharp rise in FIIs’ net inflows has also magnified NSE’s turnover growth, even as
DIIs net investment turned negative: A sharp rise in FII net inflows had helped in the
growth of NSE’s turnover this fiscal, thanks to an uptick risk appetite because of better
than expected recovery in economic growth in the September quarter and encouraging
news on the COVID-19 vaccine front. The rally in equity markets continued even as DIIs
continued to sell equities this fiscal.
Figure 265: Growth of NSE’s turnover vs. Institutional flows
175/212
Market Pulse
Institutional investments through NSE platform

FIIs continued the buy spree in December: FIIs’ net inflow in the NSE’s cash market
touched Rs483bn in December, albeit lower than previous month. While FIIs were net
buyers of equities, DIIs continued to sell. FIIs bought equities worth Rs1,328bn in the
secondary markets in this fiscal till December. DIIs, however, sold equities worth
Rs1,190bn during the same period.
Trading activity of institutional investors in equity derivatives segment were tad

lower: DIIs’ net investment in equity derivatives segment from Rs20bn net purchases in
November to Rs2bn net sales in December. FIIs turned net sellers of Rs50bn in
December from net buyers of Rs 34bn in November. In the current fiscal, DIIs and FIIs
have sold equity derivative contracts worth Rs259bn and Rs103bn respectively on a net
basis.
Institutional investors were net sellers in the Currency derivatives market: While FIIs
have been net sellers of currency derivatives for two consecutive months, DIIs have been
net sellers for three consecutive months. FIIs and DIIs have sold contracts worth Rs31bn
in December as compared to Rs23bn in the previous month on a net basis. The
institutional investors have been net sellers in currency derivatives for the current fiscal
too.
Figure 266: Foreign and domestic institutional flows (Rs bn) upto Dec’20
Dec-20 Nov-20 FY21TD FY20TD
Category Buy Sell Net Buy Sell Net Buy Sell Net Buy Sell Net
Cash Market
DII 801 1,161 (360) 697 1158 (461) 7,130 8,319 (1190) 6,560 6,135 425
FII 1,747 1,264 483 2534 1,876 658 12,966 11,638 1328 9,633 9,743 (111)
Futures & Options
DII 792 789 2 772 752 20 6,369 6,471 (103) 7,270 7,608 (338)
FII 5,006 5,056 (50) 5,290 5,255 34 47,007 47,266 (259) 40,022 39,937 85
Currency Derivatives
DII 55 68 (12) 50 50 (0) 470 493 (23) 746 725 21
FII 776 795 (19) 774 797 (23) 6,502 6,619 (117) 5,102 5,135 (33)
Interest Rate Derivatives
DII 9 8 1 4 4 (0) 49 48 1 138 143 (5)
FII 0 0 0 0 0 0 4 6 (2) 36 33 3
Source: NSE. * DII – Domestic Institutional Investors, FII – Foreign Institutional Investors; Above table reports premium turnover for Options contracts.
176/212
Market Pulse
Figure 267: Foreign and domestic institutional flows (Rsbn) during FY20 and CY20
FY20 CY20
Category Buy Sell Net Buy Sell Net
Cash Market
DII 9,777 8,653 1124 10,347 10,837 (490)
FII 13,166 14,155 (989) 16,499 16,050 450
Futures & Options
DII 9,908 10,155 (248) 9,007 9,019 (12)
FII 56,304 56,153 151 63,289 63,482 (192)
Currency Derivatives
DII 1,007 999 8 731 767 (36)
FII 7,550 7,412 138 8,950 8,896 54
Interest Rate Derivatives
DII 174 178 (4) 86 83 3
FII 47 40 6 15 13 1
Source: NSE*DII – Domestic Institutional Investors, FII – Foreign Institutional Investors; Above table reports premium turnover
for Options contracts
177/212
Market Pulse
Total turnover in CM and derivatives market

Monthly traded value in NSE’s cash segment this year was the highest in December:
NSE’s total turnover increased by 2.7% MoM in December to touch Rs13.7tn – the highest
monthly turnover on record. Ample global liquidity and risk-on sentiment among FIIs
have led to a rally in Indian equities, which has in turn helped growth in NSE’s turnover.
Nifty 50 index and Nifty 500 index surged 7.8% and 7.5% MoM during the same period.
Contrary to the uptick in trading activity witnessed in cash segment in December, trading
in equity derivative segment was tad lower (-3% MoM) than the previous month. Total
turnover declined 3.8% MoM in futures to Rs22.7trn in Dec’20, while increasing 4.1%
MoM in options to Rs2.8trn over the month, against Rs23.7trn and Rs2.7trn respectively
in November.
Currency derivatives market also witnessed heightened trading activity in December. The
total turnover in currency derivatives segment surged 10.7% MoM in December to touch
Rs5.7tn as compared to Rs5.2tn in the previous month. While currency futures turnover
increased 10.7% MoM, trading in currency options declined 4.7% MoM.
Figure 268: Total turnover in different segments (Rsbn) during Apr’20 to Dec’20
Segment Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20
Cash Market 9,059 10,006 13,509 13,487 12,827 12,236 10,990 13,374 13,748
Equity futures 15,497 17,586 23,151 23,521 20,994 22,761 21,852 23,698 22,795
Index futures 5,947 6,406 8,597 7,772 6,212 7,407 7,391 8,263 6,915
Stock futures 9,550 11,180 14,554 15,749 14,782 15,354 14,461 15,434 15,880
Equity options 1,419 1,616 2,388 2,297 1,930 2,354 2,547 2,689 2,800
Index options 1,209 1,368 1,985 1,797 1,505 1,902 2,126 2,228 2,250
Stock options 210 248 403 500 425 453 421 461 550
Currency derivatives 3,733 3,687 4,573 4,305 4,484 5,445 4,651 5,156 5,710
Currency futures 3,722 3,678 4,562 4,294 4,472 5,431 4,639 5,143 5,698
Currency options 11 9 11 11 12 14 12 13 13
Interest rate derivatives 94 119 166 115 88 80 60 37 55
Interest rate futures 94 119 166 115 88 80 60 37 55
Interest rate options 0.02 0.02 0.01 0.00 0.00 0.00 0.00 0.00 0.0
Commodity futures 0.6 0.8 2.1 0.5 0.9 0.7 0.1 0.2 14.5
Source: NSE. *NA refers to not applicable as Interest rate options were launched in Dec’19; Above table reports premium turnover for Options contracts
178/212
Market Pulse
Average daily turnover in CM and derivatives market

NSE’s average daily turnover (ADT) in the Cash market for December: While NSE’s
monthly turnover in December touched record high, the average daily turnover declined
by 6.6% MoM. Despite the MoM decline, ADT in the month of December was higher than
the ADT for CY2020 and FY2020-21TD. Average trading in Mutual Funds declined 67.8%
MoM in December after increasing 317% MoM. The average daily turnover in SME
segment declined 33.8% MoM - the fourth sequential monthly decline. Notably, average
trading in InvITs witnessed an uptick of 67%.
Figure 269: Average daily turnover in Cash market (Rsm)

Product Dec-20 Nov-20 % Change FY21TD FY20TD % Change FY20 CY20
Cash Market 624,891 668,706 (6.6) 581,039 349,283 66.4 364,399 536,996
Exchange Traded Funds 2446 2,645 (7.5) 2,477 2,013 23.0 2,069 2,414
SME Emerge 28 42 (33.8) 36 56 (36.8) 53 38
Sovereign Gold Bonds 39 50 (22.5) 33 9 289.6 10 29
InvITs 115 69 67.0 114 44 157.1 51 103
Mutual Funds (Close Ended) 2 6 (67.8) 2 1 36.3 1 2

Source: NSE.
December witnessed a decline in trading of stock and index derivatives: Average daily
turnover of NSE’s equity derivatives in December declined 11.8% MoM to touch
Rs1,163bn as compared to Rs1,319bn in the previous month. While ADT in single stock
derivatives declined 6% MoM, ADT in index derivatives declined by a steep 20% MoM,
largely on account of decline in trading in equity futures contracts.
The ADT in equity derivatives in the current fiscal till December, however, recorded a
jump of 25% YoY to touch Rs1,127bn compared to Rs902bn during the same period last
fiscal. Average daily premium turnover of stock options touched Rs24bn in December
(+8.4% YoY) - the highest on record.
Figure 270: Average daily turnover in Equity derivatives (Rsm)

Single stock derivatives
Stock futures 721,813 771,724 (6.5) 675,235 600,305 12.5 602,216 658,078
Stock options premium 24,988 23,042 8.4 19,530 8,620 126.6 9,245 17,372
Index futures
Bank Nifty 162,317 242,200 (33.0) 175,163 109,477 60.0 113,155 162,086
Nifty 151,984 170,970 (11.1) 170,097 145,750 16.7 157,060 174,999
Nifty IT 0 0 NA 8 142 (94.3) 121 22
Index options
Bank Nifty 62,987 73,669 (14.5) 50,554 20,356 148.4 22,493 44,980
Nifty 39,293 37,741 4.1 36,512 17,062 114.0 21,090 35,521
Nifty IT 0 0 NA 0 0 (31.3) 0 0
Source: NSE. Above table reports premium turnover for Options contracts
179/212
Market Pulse
Currency derivatives trading witnessed a marginal increase in December: The

average daily turnover of currency derivatives improved marginally by 0.7% MoM to touch
Rs260bn in December compared to Rs257bn in the previous month. While, USD-INR
contracts – the highly traded contracts on NSE’s platform - witnessed a decline of 7.5%
MoM, GBPINR contracts witnessed a significant jump in trading activity this month. The
average daily turnover of GBPINR contracts increased 51.9% MoM and 543.8% MoM in
futures and options contracts respectively. The ADT in currency derivatives surged 24%
this fiscal as of end of December compared to same period in the previous fiscal.
Figure 271: Average daily turnover in Currency derivatives (Rsm)

Currency futures
EURINR 20,903 20,397 2.5 17,410 6,389 172.5 7,000 15,281
EURUSD 369 179 106.4 247 510 (51.6) 472 275
GBPINR 50,030 32,932 51.9 29,667 13,345 122.3 15,368 27,618
GBPUSD 524 352 48.9 336 488 (31.2) 514 399
JPYINR 3,742 5,069 (26.2) 4,328 2,798 54.7 3,109 4,256
USDINR 183,412 198,228 (7.5) 173,087 157,791 9.7 171,331 182,669
USDJPY 3 5 (51.4) 3 10 (66.8) 9 4
Currency options
EURINR 0.98 0.44 123.8 0.19 0.02 796.1 0.06 0.19
EURUSD 0.00 0.00 NA 0.00 0.00 24.6 0.00 0.00
GBPINR 9.34 1.45 543.8 1.42 0.12 1121.5 0.25 1.23
GBPUSD 0.01 0.00 NA 0.02 0.01 164.1 0.01 0.03
JPYINR 0.01 0.00 111.8 0.01 0.02 (68.5) 0.02 0.01
USDINR 559.40 655.96 (14.7) 568.16 498.23 14.0 548.49 600.47
USDJPY 0.00 0.00 NA 0.00 0.00 NA 0.00 0.00

Source: NSE. Above table reports premium turnover for Options contracts
Trading in interest rate derivatives improved: Average daily turnover of interest rate
futures in December improved 33% MoM, as the month witnessed trading activity in new
contracts. While 645GS2029 – the highly traded contract on NSE – witnessed a 95.5%
MoM decline in ADT in December, average trading in 577GS2030 increased 58.2% MoM.
Figure 272: Average daily turnover in Interest rate futures (Rsm)

Interest rate futures (Rsm)
577GS2030 2,397 1,516 58.2 582 0 NA 0 437
645GS2029 16 352 (95.5) 3,730 693 438.0 8,617 5,795
795GS2032 13 0 NA 19 288 (93.4) 229 28
619GS2034 22 0 NA 4 0 NA 44 3
757GS2033 35 0 NA 26 7 246.7 230 32

Source: NSE. Data for only those contracts which were traded in the month of December 2020 have been reported in the above table.
180/212
Market Pulse
Turnover of top traded symbols over the month

The turnover of top 10 traded stocks declined 28.9% MoM in the month of December,
resulting in a decline in the share of these stocks in the overall CM turnover from 29.5%
in November to 20.4% in December. While turnover of nine out of the top-10 stocks
declined MoM in December, INFY was the only stock that recorded a growth in cash
market turnover during the month.
Figure 273: Top 10 symbols based on total turnover of Cash market (Rs m)
Symbol Dec-20 Nov-20 % Change
RELIANCE 460,696 847,982 (45.7)
BAJFINANCE 354,785 575,368 (38.3)
HDFCBANK 313,885 347,878 (9.8)
ICICIBANK 270,265 342,950 (21.2)
SBIN 260,939 353,069 (26.1)
INFY 242,616 231,188 4.9
INDUSINDBK 234,090 420,753 (44.4)
AXISBANK 225,641 337,925 (33.2)
TATASTEEL 222,319 228,741 (2.8)
HDFC 221,064 262,060 (15.6)

Source: NSE
The turnover of the top 10 traded stocks in the single stock derivatives segment declined
15.1% MoM in December, resulting in a decline in the share of these stocks from 33.9%
to 27.9% of the overall single stock futures turnover and from 42.2% to 31.7% of the
overall single stock options turnover. Reliance continued to be the top traded stock in
Cash, Futures and Options segment.
Figure 274: Top 10 symbols based on total turnover of Stock futures (Rs m)
RELIANCE 785,842 1,230,307 (36.1)
BAJFINANCE 517,801 734,832 (29.5)
ICICIBANK 430,997 531,751 (18.9)
BHARTIARTL 428,210 325,402 31.6
INFY 418,084 330,765 26.4
HDFCBANK 412,639 432,191 (4.5)
SBIN 395,099 504,601 (21.7)
TATASTEEL 382,251 315,106 21.3
KOTAKBANK 335,994 402,262 (16.5)
AXISBANK 326,557 424,275 (23.0)

Source: NSE
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Market Pulse
Figure 275: Top 10 symbols based on total turnover of Stock options (Rs m)
RELIANCE 36,615 62,168 (41.1)
SBIN 21,666 27,157 (20.2)
BAJFINANCE 20,919 28,154 (25.7)
TATASTEEL 17,900 13,807 29.6
BHARTIARTL 14,169 8,186 73.1
ICICIBANK 13,716 16,082 (14.7)
INFY 13,610 7,510 81.2
MARUTI 12,342 7,435 66.0
AXISBANK 11,804 14,045 (16.0)
TATAMOTORS 11,608 9,774 18.8

Source: NSE
182/212
Market Pulse
Client category-wise participation in total turnover

This section gives a detailed analysis on client-wise participation in total trading activities
across all product segments at NSE. The clients are broadly classified into six categories,
viz. Foreign institutional investors (FIIs), Domestic institutional investors (DIIs),
Corporates, Proprietary traders, Individual investors and Others. The Individual investors
category includes individual domestic investors, NRIs, sole proprietorship firms and
HUFs. The category Others includes Partnership Firms/LLP, Trust / Society, AIF,
Depository Receipts, PMS clients, Statutory Bodies, FDI, OCB, FNs, QFIs, VC Funds,
NBFC, etc. which are not included in any other categories mentioned above.
The share of individual investors witnessed a steady rise in the last six years: The last
six (fiscal) years have witnessed a considerable change in the distribution of NSE’s total
turnover in Cash market across different client categories. Notably, the market share of
individual investors rose sharply from 33% in FY16 to 46% in FY21 till December end
while the percentage share of FIIs and public and private corporates declined during the
same period. The significant rise in the share of individual investors in FY21 can be
attributed to the increase in new investor registrations witnessed in this fiscal. NSE has
added nearly 57 lakh new investors in the first nine months of the current fiscal year.
While the percentage share of DIIs in the overall turnover was steady during FY16-FY20,
it has witnessed a decline in the current fiscal (7%). The percentage share of corporates
has halved during this period from 10% to 5%. After a decline in market share during
FY17 and FY18, Proprietary traders maintained their market share between 22%-24% in
the last three years.
Figure 276: Share of client participation in Capital Market at NSE (%)

Others PRO Individuals investors FII DII Corporates
100%
4 5 6 7 8 7
90%
21 17 18
80% 22 23 24
70%
60% 33 36
39
50% 39 39
46
40%
30% 23 21
16
15 15
20%
10 10 11
9
10% 10 10 7
10 12 11 6 5 5
0%
Source: NSE.
Note: DII: Domestic Institutional Investors, FII: Foreign Institutional Investors, Prop traders: Proprietary Traders, Individual investors: individual domestic investors,
NRIs, sole proprietorship firms and HUFs, Others: Partnership Firms/LLP, Trust / Society, AIF, Depository Receipts, PMS clients, Statutory Bodies, FDI, OCB, FNs, QFIs,
VC Funds, NBFC, etc. FY21 considers data till December’20.
Individual investors and FIIs gained significant share in the Equity derivatives
segment: The last six years has witnessed the share of individual investors increase
significantly in equity derivatives segment, in-line with change in the share in cash
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Market Pulse
segment. While the share of FIIs in overall cash turnover has fallen in the last six years,
their share in equity derivatives has increased. The FIIs share of total premium turnover
in the segment jumped up from 16% in FY16 to 22% in FY21 till December end. The share
of proprietary traders’ and corporates has gradually declined from 31% to 28% and 15%
to 8% respectively over the same period, which was primarily offset by the rise in
participation by individual investors and FIIs. DIIs’ contribution, however, remains low
over the period due to the extant regulatory restrictions.
Figure 277: Share of client participation in Equity Figure 278: Share of client participation in Equity
Derivatives (Notional Turnover) at NSE (%) derivatives (Premium Turnover) at NSE (%)
Corporates DII Corporates DII
FII Individuals investors FII Individuals investors
PRO Others PRO Others
100% 100%
5 8 9 9 9 9 7 7 7 6 8 7
90% 90%
80% 80% 26 26 25
31 27 28
33
70% 49 42 42 38 40 70%
60% 60%
50% 29 27
50% 31 31 31
28
29
40% 28 40%
23 27 29 31
30% 30%
17 22 25
16 19
20% 19 20% 22
12 14
14 12 14 2 2 4 4
10% 4
10% 3
11 8 11 9 15 13 14 13 11
8 7 8
0% 0%
FY16 FY17 FY18 FY19 FY20 FY21 FY16 FY17 FY18 FY19 FY20 FY21
Source: NSE.
Note: DII: Domestic Institutional Investors, FII: Foreign Institutional Investors, Prop traders: Proprietary Traders, Individual investors: individual domestic investors, NRIs,
sole proprietorship firms and HUFs, Others: Partnership Firms/LLP, Trust / Society, AIF, Depository Receipts, PMS clients, Statutory Bodies, FDI, OCB, FNs, QFIs, VC Funds,
NBFC, etc. FY21 considers data till December’20.
Proprietary traders’ and corporates lost their market share in index futures in last six
years: The market share of proprietary traders has gradually declined in terms of overall
index futures turnover from 31% in FY16 to 27% in FY21 till December end, followed by
Corporates whose share has declined from 14% to 8% over the same period. This overall
fall in their shares has been largely offset by an increase in total trade by individual
investors from 32% to 41% during the same period. The share of FIIs rose marginally
from 14% in FY16 to 15% in the current fiscal after touching 18% in previous fiscal. The
share of DIIs, however, remained low during this period, which can be attributed to the
regulatory restrictions on their trading activities in the derivatives segment.
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Market Pulse
Figure 279: Share of client participation in Index Futures at NSE (%)

Corporates DII FII Individuals investors PRO Others
100%
7 8 9 8 8 7
90%
80% 29 26 27 27
31 30
70%
60%
50% 34 33
32 33 33 41
40%
30%
14 16 14 17 18
20%
1 1 1 2 15
2
10% 1
14 14 14 13 13 8
0%
Source: NSE.
FIIs hold the highest share in stock futures turnover: While DIIs’ contribution in stock
futures turnover has increased marginally from 3% in FY16 to 5% in FY21 till December,
the share of FII trading in stock futures has increased significantly from 17% to 27%
Among other categories, Individual investors contributed 25% of the total trades in FY21
thus far - nearly same as FY16 - after rising to 31% in FY18. Proprietary traders and
corporates have lost their share in the market, which was mainly compensated by FIIs
and DIIs. In FY21, Proprietary traders and Corporates contributed 27% and 9% of total
turnover and remaining 7% were traded by Others in the segment.
Figure 280: Share of client participation in Stock Futures at NSE (%)

Corporates DII FII Individuals investors PRO Others
100%
7 7 7 6 8 7
90%
80% 26 25 25 23
30 27
70%
60%
28 25
30 31 25
50% 26
40%
30% 18 24 28
17 21 27
20%
3 3 4 5 6
10% 5
16 13 15 13 10 9
0%
Source: NSE.
185/212
Market Pulse
Proprietary traders and retail investors hold the largest share in Index options
trading: While the share of proprietary traders in Index options declined from 53% of the
total premium turnover in FY16 to 38% in FY21 till December end, they hold the largest
share in index options turnover as on date. The fall in market share of prop traders was
which was largely offset by share of individual investors with a rise from 22% to 32% over
the same period. Among other clients, share of Corporate declined from 11% to 6% over
the period, whereas FIIs’ share increased from 11% to 16%. DIIs’ investment remains
negligible in the segment throughout the period due to regulatory restrictions in
derivatives segment.
Figure 281: Share of client participation in Index Figure 282: Share of client participation in Index
Options (Notional Turnover) at NSE (%) Options (Premium Turnover) at NSE (%)
PRO Others
PRO Others
100% 100% 3
4 7 7 8 9 8
9 9 10 9 9
90% 90%
80% 80%
33 33 38
40 70% 53 44 44 38
70% 55 45 39
46
60% 60%
50% 50%
29 29
40% 40% 27
28 30 25 32
25
30% 21 26 28 22
30%
20% 19 20% 21
13 11 15 15
10 12 10 14 14 16
10% 10%
10 7 7 11 9 7 11 10 11
0% 9 9 6
0%
Source: NSE.
186/212
Market Pulse
While FIIs enjoy double-digit share in equity futures segment and index options segment,
their share in stock options turnover has fallen significantly from 11% in FY16 to 5% in
FY21 till December end, which was offset by proprietary traders and Individual investors.
Out of total premium turnover in stock options, around 47% were traded by Proprietary
traders and 33% by Individual investors in FY21 till December end.
Figure 283: Share of client participation in Stock Figure 284: Share of client participation in Stock
PRO Others PRO Others
100% 100%
7 6 5 4 7 7 6 5 5 8
10 10
90% 90%
80% 80%
37 36 40 40
39 42 40 43
70% 70% 42 44
46 47
60% 60%
50% 50%
32 32
40% 31 31 40% 31
31 30
32 30
30% 32
30%
32 33
20% 17 20%
15 17 15 13 13 12
10 11
10% 8
6 10%
10 12 5
9 9 10 8 6 10 10 10 9
0% 5
0%
Source: NSE.
Note: DII: Domestic Institutional Investors, FII: Foreign Institutional Investors, Prop traders: Proprietary Traders, Individual investors: individual domestic
investors, NRIs, sole proprietorship firms and HUFs, Others: Partnership Firms/LLP, Trust / Society, AIF, Depository Receipts, PMS clients, Statutory Bodies, FDI,
OCB, FNs, QFIs, VC Funds, NBFC, etc. FY21 considers data till December’20.
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Market Pulse
Proprietary traders-excl. banks maintained the highest market share in the currency
segment, even as its share declined significantly over the last six years. Among other
categories, Individual investors have been able to increase their share in these segments
over this period from 12% in FY16 to 22% in FY21. FIIs have a significant share in
Currency futures since FY19, while DIIs—excluding banks do not have much presence in
both futures and options.
Figure 285: Share of client participation in Currency Figure 286: Share of client participation in Currency
Derivatives (Notional Turnover) at NSE (%) Derivatives (Premium Turnover) at NSE (%)
Corporates FII
Corporates FII
Banks PRO ex-banks
Banks PRO ex-banks
Individuals investors Others
Individuals investors Others
100% 1 100% 3 3 2 2 2 3
2 2 2 4 4
12 12 13 90% 12 12 13 14
90% 16 18
20 22
24
80% 80%
70% 70%
60% 60% 49 49 52 47
43
60 62 63 55 43
50% 52 50%
50
40% 40%
30% 30% 14 12 10
16 8
8 17
20% 10 8 6 5 20% 1 4
10 14 16 16
1 3 9 9 3
10% 3 9 10% 19 18
14 13 11 12 10 10
10 9 7 9
0% 0%
Source: NSE.
Note: DII: Domestic Institutional Investors, FII: Foreign Institutional Investors, Prop traders: Proprietary Traders, Individual investors: individual domestic
investors, NRIs, sole proprietorship firms and HUFs, Others: Partnership Firms/LLP, Trust / Society, AIF, Depository Receipts, PMS clients, Statutory Bodies, FDI,
188/212
Market Pulse
Figure 287: Share of client participation in Currency Futures at NSE (%)

Corporates FII Banks
PRO ex-banks Individuals investors Others

100% 3 3 2 2 2 3
90% 12 12 13 14
18
22
80%
70%
60% 49 49 52 47
43
42
50%
40%
30% 14 12 10
16 8
17
20% 1 4
15 16 16
3
10% 19 18
12 10 10 9
0%
Source: NSE.
Figure 288: Share of client participation in Currency Figure 289: Share of client participation in Currency
Corporates FII Corporates FII
Banks PRO ex-banks Banks PRO ex-banks
Individuals investors Others Individuals investors Others
100% 1 1 1 1 2 4 100% 1 1 1 2 1 2
11 12 13 9 10 13
90% 19 90% 17
25 22 21
80% 27
80%
70% 70%
60% 60%
50% 78 75 74 50% 80 76 75 64
64 62
60 63
40% 57 40%
30% 30%
20% 20%
2 2
2 2
2 2 2 2 3 3
10% 2 2 2 3 3 10% 1
1 2 2
2 4
1 3 12 3 13
7 8 7 8 6 8 9 8 10 7
0% 0%
Source: NSE.
189/212
Market Pulse
The participation of retail client and banks in interest rate futures has inched up in
FY21: The distribution of turnover in interest rate futures across client categories
changed significantly, particularly in FY21 as compared to the previous fiscal years. The
share of Proprietary traders—excluding banks declined from 52% in FY19 to 29% in FY21
till December end. This fall in market share was mainly offset by banks, corporates and
individual investors. Notably, the market share of banks rose from 16% in FY16 to 28%
in FY21 thus far.
Figure 290: Share of client participation in Interest Rate Futures at NSE (%)
Corporates FII Banks
DII ex-banks PRO ex-banks Individuals investors
Others
100% 3 1 0
3 0 0
4 4 5
5 5 13
90%
80%
70% 40 51 48 29
52
51
60%
5
50% 3 3
2
40% 1 4 28
18
20
16 19
30% 2 20
0 2 1
20% 3
1
23 27 24 25
10% 20 18
0%
Source: NSE.
Note: DII: Domestic Institutional Investors, FII: Foreign Institutional Investors, Prop traders: Proprietary
Traders, Individual investors: individual domestic investors, NRIs, sole proprietorship firms and HUFs,
Others: Partnership Firms/LLP, Trust / Society, AIF, Depository Receipts, PMS clients, Statutory Bodies, FDI,
190/212
Market Pulse
Figure 291: Share of client participation in Cash market of NSE (%)

Client category Dec-20 Nov-20 % Change FY21TD FY20TD Change FY20 CY20
Cash market
Corporates 4.2 3.9 0.3 4.8 5.2 (0.4) 5.3 5.0
DII 7.1 6.9 0.2 7.1 9.9 (2.9) 10.2 7.8
FII 11.0 16.5 (5.5) 11.3 15.2 (3.9) 15.2 12.0
Individuals investors 45.4 41.4 4.0 45.6 39.3 6.3 38.8 44.0
Prop traders 26.5 25.5 0.9 24.2 22.8 1.4 22.7 23.9
Others 5.9 5.8 0.1 7.1 7.7 (0.6) 7.8 7.2
Source: NSE.
Figure 292: Share of client participation in Equity derivatives of NSE (%)

Equity Derivatives (Premium Turnover)
Corporates 8.6 7.9 0.7 8.2 11.4 (3.1) 11.0 8.6
DII 3.1 2.9 0.2 3.0 4.5 (1.5) 4.4 3.3
FII 19.7 20.0 (0.3) 22.2 24.2 (2.0) 24.6 23.0
Individuals investors 28.4 30.9 (2.5) 30.9 27.5 3.4 27.4 30.0
Prop traders 32.2 30.5 1.7 28.2 25.1 3.2 24.9 27.3
Others 8.0 7.9 0.1 7.3 7.3 0.0 7.8 7.7
Equity Derivatives (Notional Turnover)
Corporates 6.3 6.4 (0.0) 6.8 9.3 (2.5) 9.2 7.2
DII 0.1 0.1 (0.0) 0.2 0.3 (0.1) 0.3 0.2
FII 11.3 12.5 (1.2) 13.7 19.6 (5.9) 19.2 14.6
Prop traders 44.8 41.8 3.1 39.9 33.2 6.7 33.2 38.6
Others 8.3 9.0 (0.6) 8.9 8.7 0.1 8.9 9.0
Source: NSE.
191/212
Market Pulse
Figure 293: Share of client participation in various segments of Equity derivatives of NSE (%)
Index Futures
Corporates 9.2 8.1 1.2 8.3 12.8 (4.5) 12.5 9.2
DII 0.9 0.6 0.3 0.7 2.0 (1.3) 1.8 0.9
FII 13.3 11.7 1.6 15.0 17.8 (2.8) 18.2 15.9
Prop traders 30.2 28.6 1.5 27.4 26.7 0.7 26.6 27.2
Others 8.7 8.5 0.1 7.4 7.3 0.0 7.8 7.7
Stock Futures
Corporates 8.9 8.3 0.6 8.6 11.0 (2.4) 10.5 8.7
DII 4.6 4.6 (0.0) 4.7 5.9 (1.2) 5.9 5.0
FII 23.9 25.6 (1.7) 27.2 27.4 (0.1) 28.0 27.8
Prop traders 31.4 29.6 1.8 26.9 23.6 3.3 23.2 25.8
Others 7.8 7.5 0.3 7.2 7.3 (0.1) 7.7 7.5
Index Options (Premium Turnover)
Corporates 5.4 5.1 0.3 6.0 8.9 (2.9) 8.7 6.4
DII 0.0 0.0 0.0 0.0 0.0 (0.0) 0.1 0.0
FII 13.5 14.9 (1.5) 16.4 21.5 (5.1) 21.1 17.1
Prop traders 41.1 40.4 0.8 37.8 33.0 4.7 32.7 36.7
Others 7.2 7.6 (0.4) 7.8 7.9 (0.0) 8.6 8.2
Index Options (Notional Turnover)
Corporates 6.2 6.3 (0.1) 6.8 9.2 (2.4) 9.1 7.2
DII 0.0 0.0 0.0 0.0 0.0 (0.0) 0.0 0.0
FII 11.2 12.4 (1.2) 13.5 19.6 (6.1) 19.2 14.5
Prop traders 45.2 42.1 3.1 40.3 33.4 6.8 33.4 38.9
Others 8.3 8.9 (0.6) 8.9 8.9 (0.0) 9.1 9.0
Stock Options (Premium turnover)
Corporates 5.8 4.7 1.1 5.4 9.2 (3.8) 8.7 5.7
DII 0.0 0.0 (0.0) 0.0 0.0 0.0 0.0 0.0
FII 3.9 4.5 (0.7) 4.5 8.4 (3.9) 7.7 4.8
Prop traders 47.6 47.7 (0.1) 46.9 43.1 3.8 43.8 46.6
Others 9.4 10.6 (1.2) 10.3 6.5 3.7 7.7 10.3
Stock Options (Notional turnover)
Corporates 6.3 4.9 1.4 5.7 8.8 (3.1) 8.3 5.9
DII 0.0 0.0 (0.0) 0.0 0.0 0.0 0.0 0.0
FII 5.1 6.1 (1.0) 5.9 11.2 (5.2) 10.5 6.4
Individuals investors 31.9 30.9 1.0 31.8 32.5 (0.7) 31.9 31.6
Prop traders 47.4 47.2 0.2 46.5 41.6 4.9 42.2 46.0
Others 9.3 10.9 (1.6) 10.0 5.9 4.2 7.1 10.1
Source: NSE. Note: DII: Domestic Institutional Investors, FII: Foreign Institutional Investors, Prop traders: Proprietary Traders, Individual investors: individual domestic
investors, NRIs, sole proprietorship firms and HUFs, Others: Partnership Firms/LLP, Trust / Society, AIF, Depository Receipts, PMS clients, Statutory Bodies, FDI, OCB,
FNs, QFIs, VC Funds, NBFC, etc. FY21 considers data till Octobber’20.
192/212
Market Pulse
Figure 294: Share of client participation in Currency derivatives of NSE (%)

Currency Futures
Corporates 9.0 8.5 0.4 8.7 9.8 (1.0) 10.1 9.3
FII 13.8 15.3 (1.5) 15.7 15.5 0.2 15.6 15.7
Banks 10.9 10.7 0.2 8.0 10.9 (2.9) 10.4 8.3
DII ex-banks 0.3 0.2 0.0 0.2 0.2 (0.0) 0.2 0.2
Prop traders ex-banks 42.9 43.2 (0.4) 42.5 43.7 (1.2) 43.3 42.5
Others 1.8 1.4 0.4 2.5 2.0 0.5 2.5 2.8
Currency Options (Premium Turnover)
Corporates 8.6 8.1 0.5 7.1 11.5 (4.4) 10.1 7.1
FII 6.5 6.1 0.4 3.9 2.4 1.5 2.9 3.9
Banks 2.6 3.2 (0.6) 2.8 2.1 0.7 2.2 2.7
DII ex-banks 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Prop traders ex-banks 59.9 62.9 (3.0) 62.7 60.9 1.8 61.7 62.9
Individuals investors 20.8 17.4 3.4 21.3 21.6 (0.3) 21.6 21.4
Others 1.6 2.3 (0.7) 2.3 1.5 0.7 1.5 2.0
Currency Derivates (Premium Turnover)
Corporates 9.0 8.5 0.4 8.7 9.8 (1.1) 10.1 9.3
FII 13.8 15.2 (1.5) 15.7 15.5 0.2 15.5 15.7
Banks 10.9 10.7 0.2 7.9 10.9 (2.9) 10.4 8.3
DII ex-banks 0.3 0.2 0.0 0.2 0.2 (0.0) 0.2 0.2
Others 1.8 1.4 0.4 2.5 2.0 0.5 2.5 2.8
Currency Options (Notional Turnover)
Corporates 6.6 6.8 (0.1) 5.6 9.2 (3.6) 8.1 5.5
FII 4.7 4.4 0.3 3.3 2.1 1.2 2.5 3.4
Banks 2.1 3.1 (1.0) 2.7 2.0 0.8 1.9 2.5
DII ex-banks 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Others 3.3 3.5 (0.2) 3.8 2.0 1.8 2.0 3.4
Currency Derivatives (Notional Turnover)
Corporates 7.8 7.6 0.1 7.1 9.5 (2.4) 9.1 7.4
FII 9.1 9.8 (0.7) 9.4 8.6 0.7 9.0 9.5
Banks 6.4 6.9 (0.5) 5.3 6.3 (1.0) 6.2 5.4
DII ex-banks 0.1 0.1 0.0 0.1 0.1 (0.0) 0.1 0.1
Others 3.2 3.1 0.1 4.1 3.4 0.7 3.6 4.0
Source: NSE.
193/212
Market Pulse
Figure 295: Share of client participation in Interest rate futures of NSE (%)
Interest rate futures
Corporates 36.1 25.7 10.4 24.5 17.9 6.7 18.1 21.7
FII 0.6 0.9 (0.3) 0.6 1.3 (0.6) 1.2 0.8
Banks 27.6 23.3 4.3 27.5 19.9 7.6 19.7 23.2
DII ex-banks 8.7 9.5 (0.7) 5.1 4.8 0.3 4.3 3.8
Others 0.0 0.1 (0.1) 0.1 0.2 (0.1) 0.2 0.2
Interest rate options (Premium Turnover)
Corporates NA NA NA 41.6 24.5 17.0 22.4 24.4
FII NA NA NA 0.0 0.0 0.0 0.0 0.0
Banks NA NA NA 18.9 19.5 (0.5) 3.4 4.1
DII ex-banks NA NA NA 0.0 0.0 0.0 0.0 0.0
Prop traders ex-banks NA NA NA 33.0 49.2 (16.2) 58.9 56.7
Individuals investors NA NA NA 6.5 6.7 (0.3) 14.3 13.9
Others NA NA NA 0.0 0.0 (0.0) 0.9 0.9
Interest rate options (Notional Turnover)
Corporates NA NA NA 47.2 21.7 25.5 25.3 27.6
FII NA NA NA 0.0 0.0 0.0 0.0 0.0
Banks NA NA NA 15.6 14.9 0.7 4.1 4.4
DII ex-banks NA NA NA 0.0 0.0 0.0 0.0 0.0
Prop traders ex-banks NA NA NA 30.5 55.1 (24.6) 57.7 55.4
Individuals investors NA NA NA 6.6 8.2 (1.6) 11.9 11.7
Others NA NA NA 0.0 0.0 (0.0) 1.0 1.0
Interest rate derivatives (Premium Turnover)
Corporates 36.1 25.7 10.4 24.5 17.9 6.7 18.1 21.7
FII 0.6 0.9 (0.3) 0.6 1.3 (0.6) 1.2 0.8
Banks 27.6 23.3 4.3 27.5 19.9 7.6 19.7 23.2
DII ex-banks 8.7 9.5 (0.7) 5.1 4.8 0.3 4.3 3.8
Others 0.0 0.1 (0.1) 0.1 0.2 (0.1) 0.2 0.2
Interest rate derivatives (Notional Turnover)
Corporates 36.1 25.7 10.4 24.8 17.9 6.9 18.3 22.0
FII 0.6 0.9 (0.3) 0.6 1.3 (0.7) 1.2 0.8
Banks 27.6 23.3 4.3 27.4 19.9 7.5 19.3 22.2
DII ex-banks 8.7 9.5 (0.7) 5.1 4.8 0.3 4.2 3.6
Others 0.0 0.1 (0.1) 0.1 0.2 (0.1) 0.3 0.3
Source: NSE.
VC Funds, NBFC, etc. FY21 considers data till December’20. Interest options were introduced in December 2019.
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Market Pulse
Asset category-wise open interest (average daily volume)

Figure 296: Average daily volume of open interest in Equity derivatives (million contracts)
Equity Derivatives
Stock Futures 3,818 3,373 13.2 3,278 4,325 (24.2) 4,294 3,514
Stock Options 2,555 1,858 37.5 1,923 1,448 32.8 1,490 1,843
Equity Derivatives - Index Futures
Bank Nifty 1.8 1.9 (7.9) 1.7 1.8 (6.7) 1.7 1.6
Nifty 13.9 13.0 6.5 12.1 18.7 (35.5) 17.9 13.0
Nifty IT - - NA 0.0 0.0 (96.6) 0.0 0.0
Equity Derivatives - Index Options
Bank Nifty 27.9 26.9 3.5 20.7 14.7 40.3 14.7 19.2
Nifty 157.3 144.6 8.7 128.7 102.3 25.9 104.2 123.9
Nifty IT - - NA 0.0 0.0 (96.0) 0.0 0.0
Source: NSE
Figure 297: Average daily volume of open interest in Currency derivatives (no of contracts)
Category Dec-20 Nov-20 % Change FY21TD FY20TD % Change FY20 CY20
Futures
EURINR 331,973 223,935 48.2 199,847 66,925 198.6 74,622 174,490
EURUSD 18,286 2,653 589.4 5,959 44,112 (86.5) 34,538 5,962
GBPINR 201,875 172,700 16.9 102,766 69,886 47.0 74,553 99,223
GBPUSD 2,387 3,220 (25.9) 2,554 5,312 (51.9) 4,877 2,809
JPYINR 36,814 49,291 (25.3) 36,330 50,513 (28.1) 49,206 38,555
USDINR 4,317,218 2,699,441 59.9 2,861,659 2,798,847 2.2 3,123,879 3,167,151
USDJPY 80 92 (13.5) 65 313 (79.4) 297 110
Options
EURINR 10,196 3,279 211.0 1,799 503 257.6 807 1,778
EURUSD 0 0 NA 0 0 (83.6) 0 0
GBPINR 38,514 6,899 458.3 6,090 720 745.3 1,770 5,795
GBPUSD 1 0 NA 7 1 1092.2 3 7
JPYINR 87 57 51.7 102 183 (44.0) 170 109
USDINR 4,105,855 3,853,501 6.5 3,280,016 2,784,997 17.8 2,932,818 3,303,286
Source: NSE
Figure 298: Average daily volume of open interest in Interest rate derivatives II (no of contracts)
Category Dec-20 Nov-20 % Change FY21TD FY20TD % Change FY20 CY20
Interest rate futures
577GS2030 46,927 35,319 32.9 10,307 - NA NA 7,751
645GS2029 2,904 12,632 (77.0) 42,234 4,833 NA 67,979 55,819
795GS2032 8,500 8,500 0.0 8,500 28,864 (70.6) 24,646 9,383
619GS2034 1,250 1,250 0.0 453 - NA 4,525 340
757GS2033 7,761 7,813 (0.7) 7,986 604 1221.4 24,646 7,373

Source: NSE; Data for only those contracts which were traded in the month of December 2020 have been reported in the above table.
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Market Pulse
Internet-based trading
Internet-based trading (IBT) gained momentum in FY21: Internet-based trading in
FY21 till December strengthened in cash, equity and currency derivatives segment of NSE
as compare to the same period in FY20, largely due to increase in retail participation in
these segments. On an average, daily turnover through internet-based trading rose by
58% YoY in Cash market to reach Rs150n in FY21 till December (vs. Rs94bn over the
same period in FY20),
A similar trend was recorded for Equity derivatives segment as well, where the average
turnover rose by 35% YoY over the same period to reach Rs300bn daily in FY21 till
December vs Rs221bn in the previous fiscal year. Notably, IBT gained momentum since
March’20, particularly since the nationwide lockdown as retail investors and traders
started utilising this platform to trade from their homes.
Average daily turnover in currency derivatives through IBT increased by 30.7% over the
period of Apr-Dec’20 on YoY basis. The trend, however, was quite different for Interest
rate derivatives, which witnessed a fall in its daily average by 26.5% to Rs1.2bn over Apr-
Dec’20 as compared to Rs1.6bn over the same period in previous FY.
Figure 299: Average daily turnover of internet-based trading (Rs m)

Segment Dec-20 Nov-20 % Change FY21TD FY20TD % Change FY20 CY20
Cash Market 156,574 150,873 3.8 150,038 94,974 58.0 90,639 131,804
Equity Derivatives* 274,979 343,713 -20.0 299,877 221,335 35.5 217,432 276,105
Index Futures 105,381 161,325 -34.7 131,682 81,833 60.9 82,859 120,027
Stock Futures 138,682 150,027 -7.6 141,797 127,182 11.5 121,620 132,633
Index Options 25,644 27,654 -7.3 22,154 10,228 116.6 10,875 19,759
Stock Options 5,272 4,707 12.0 4,244 2,091 103.0 2,078 3,685
Currency Derivatives* 41,286 39,388 4.8 40,198 30,764 30.7 31,717 38,800
Currency Futures 41,162 39,272 4.8 40,082 30,662 30.7 31,610 38,682
Currency Options 123 116 6.0 116 102 12.9 108 118
Interest Rate Derivatives* 709 396 79.1 1,210 1,653 (26.8) 1,495 1,164
Interest Rate Futures 709 396 79.1 1,210 1,653 (26.8) 1,494 1,163
Interest Rate Options 0 0 NA 0 0 1326.4 0 0

Source: NSE.
Note: Average trading volume is calculated as the average of gross traded value i.e., buy side turnover + sell side turnover.
*Premium turnover is considered in case of options contracts.
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Market Pulse
Record statistics
NSE’s trading volume touched new records in November and December: NSE hit
record turnover in the Cash market to touch Rs1,475bn on November 27th, 2020 vs
Rs990bn on August 31st and Rs835bn on May 29th this year. Among other segments,
Index options premium turnover also registered highest turnover on December 22 nd,
2020 to touch Rs171bn after creating a record on November 11 th, 2020 to touch
Rs164bn. The previous records were attained on August 31 st (Rs160bn) and March 19th
(Rs146bn) this year. largely led by significant rise in FII net inflows. Stock options also
touched highest turnover on December 21 st to touch Rs33bn.
The volatility in Indian equities measured by India Volatility Index increased 80.8% this
year, accentuated by the impact of the COVID-19 pandemic, as result of sharp rise in
trading across several segments. Though other major segments have recorded a
significant growth in their average turnover, they did not cross their previous record
levels. Index futures had recorded its highest turnover of Rs860bn on September 20 th,
2019 after the Finance Minister slashed the corporate tax rate from 30% to 22%.
Figure 300: Segment-wise record turnover till December 31st, 2020

Segment Turnover (Rsbn) Trading Date
Cash market 1,475 27-Nov-20
Index futures 860 20-Sep-19
Stock futures 1,954 25-Jan-18
Index options (premium) 171 22-Dec-20
Stock options (premium) 33 21-Dec-20

Source: NSE
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Market Pulse
Spatial distribution of trading activities

Region-wise distribution of new investors registered
Post a temporary fall during Sep-Nov’20 across all regions, total number of registrations
recorded a record rise of 43% on MoM basis and 121% on YoY basis to reach 870
thousand new investors in December 2020, compared to 610 thousand in Nov’20 and
merely 393 thousand in Dec’19.
Out of 870 thousand registration in Dec’2020, 315 thousand new investors were
registered in West, followed by 286 thousand registration in North and 190 thousand
registered in the southern part of the country. The remaining 79 thousand registration
happened in East.
As can be seen in the following figure, all regions recorded a significant rise in total
number of registrations in December on monthly basis. The share of total registration
across regions changed over the month particularly for northern and southern part of the
country. While western part contributed around 36% of total registration (vs. 35% in
November), followed by northern India with 33% market share (vs. 30% in November),
southern and eastern regions contributed around 22% and 9% registration respectively
(marginally lower than the previous month).
Figure 301: Region-wise distribution of new investors registered

1000
900 870
Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20
800
700
600
'000
500
406
400
315
286
300
190
200
145
128
96
100 79
37
0
East India North India South India West India Total
Source: NSE.
Note: East India is Mizoram, Odisha, West Bengal, Assam, Manipur, Arunachal Pradesh, Tripura, Nagaland, Meghalaya, Sikkim, Chhattisgarh; 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 Telengana, Kerala, Andhra Pradesh, Tamil Nadu, Karnataka, Pondicherry, Lakshadweep And
Andaman & Nicobar.
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Market Pulse
Total registration remains concentrated in few major districts. Over the month of
November, around 7% of all new investors are from Mumbai region, which is marginally
higher than Delhi (6%). Among others, 3% of all registration over the month happened in
Pune, followed by Bangalore (2%). Besides, a significant number of investors are
registered in Ahmedabad, Surat, Jaipur, Hyderabad, Jaipur and Ahmed-Nagar over the
last month.
Figure 302: Number of new investors registered in top 10 districts

70
58 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20

60 55
48 48
50
40
'000
30
24
21
20 16 18 17
15
10 11 11 11
9 9 10 9 9 9
10
Source: NSE
Note: Top 10 districts are chosen based on Sep’20 data.
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Market Pulse
Region-wise distribution of individual investor turnover in the cash market

The share of individual investors’ turnover in the Cash market remains similar across
regions. Western region continues to contribute largest share over the period in terms of
turnover and trade volumes in the Cash market with around 36.5% of total turnover by
individual investors and 41.7% of total trade volume in Dec’20. Among other regions,
North India contributed around 28.6% of retail turnover and 28.2% of retail volume. Total
contribution of eastern India remains low throughout the period.
Figure 303: Region-wise distribution of individual Figure 304: Region-wise distribution of individual
investors’ turnover in cash market (%) investors’ traded volumes
East India North India South India West India East India North India South India West India
100% 100%
39.3 36.0 36.2 36.1 36.8 36.8 36.0 36.1 36.5 36.5
80% 80% 43.9 39.3 39.8 39.8 41.2 40.8 40.3 41.7 41.5 41.7
60% 60%
25.5 25.6 25.9 26.8 26.7 28.3 28.1 27.4 26.8
24.0
22.6 22.6 22.6 22.1 22.2 23.1 22.2 22.3 21.8
20.4
40% 40%
28.4 30.2 30.3 30.0 28.5 28.6 27.9 27.8 27.8 28.6
20% 20% 27.5 29.3 29.1 28.9 28.2 28.5 28.2 27.7 27.6 28.2
8.3 8.4 8.3 8.2 8.2 8.8 8.6 8.7 8.4 8.6 8.5 8.3 8.6 8.4
0% 8.0 8.0 7.9 8.0 7.8 8.0 0%
Source: NSE.
Like total registration, the distributional pattern of total turnover and trade volume is
mostly concentrated across few districts over the last five months. Total contribution of
top 10 districts remained same at ~38% to total retail turnover over the last four months.
Amongst them, Mumbai and Delhi have contributed around 11.5% and 7.9% of total
turnover respectively over the month, which are somewhat similar over the previous
months, while Ahmedabad contributed 4.1%, followed by Pune and Bangalore (3.6% and
3.3% respectively).
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Market Pulse
305: Top 10 districts based on Cash turnover of individual investors
Aug-20 Sep-20 Oct-20 Nov-20 Dec-20

14
% of Cash turnover of individual investors
12 11.5 11.5
10
8.1 7.9
8
6
4.1 4.1
3.6 3.6 3.4 3.3
4
2.0 2.0
1.6 1.6 1.5 1.5 1.6 1.5 1.2
2 1.3
0
Mumbai Delhi-NCR Ahmedabad Pune Bangalore Surat Hyderabad Jaipur Kolkata Rajkot
(MH/TN/RG)
Source: NSE.
Note: Individual investors include Individual / Proprietorship firms and HUF. Top ten districts are chosen based on Sep’20 data.
Figure 306: Top 10 districts based on individual investors traded

14.0
11.87 12.09
12.0 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20
% of traded volume of individual investors in cash market
10.0 9.22 9.44
8.0
6.0
4.24 4.36
4.0 3.40 3.41 3.27
3.06
2.40 2.34
2.32
1.95 1.85
2.0 1.63 1.57 1.62
1.48 1.61
0.0
Mumbai Delhi - NCR Bangalore Ahmedabad Pune Hyderabad Surat Kolkata Chennai Jaipur
(MH/TN/RG)
Source: NSE
Note: Individual investors include Individual / Proprietorship firms and HUF. Top ten districts are chosen based on Sep’20 data
201/212
Market Pulse
Investment through mutual funds in India

Average asset under management (AAUM) of mutual funds (MFs) continues to rise
since May’20: After a significant fall post the Covid-19 pandemic, AAUM of mutual funds
started recovering since May’20 to fully offset the overall decline and end at Rs29.8trn in
Nov’20, thanks to a continuous rally in the global market, ample liquidity in the system,
emergency approval of multiple vaccines in several countries and a V-shape recovery in
the global economy. In contrast, there is a continuous fall in the number of MF schemes
since March’20 partly due to rise in concentration to large-cap companies,
recategorization and rationalisation of mutual funds by the market regulator and
weakening debt market over the period. Total number of MF scheme has gradually
dropped to 1,738 in November which is around 9% lower than 1,916 schemes in Mar’20.
Figure 307: Monthly trend of total MF schemes and average AUM

AAUM for the month (Rstrn) - RHS No. of Schemes
2,000 35
1,950 30
1,900
25
1,850
20
1,800
15
1,750
10
1,700
1,650 5
1,600 0
Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20
Source: AMFI. *AAUM-Average Asset under Management.
Net sales by MFs declined in November with gross purchase: Over the last year, there
were several ups and downs in net investments of mutual funds. MFs turned net sellers
in Feb’20 with Rs20bn net sales, which deteriorated further with Rs2.1trn net outflows in
Mar’20 as economic outlook weakened globally due to COVID-19 pandemic. Later, net
investment of MFs improved over the next two months to reach Rs708bn over the month
of May as securities market recovered partially across major economies, before declining
again in June to merely Rs73bn net investment.
Post a temporary recovery in July, DIIs net investment turned negative in August and
their net sales increased further in September to Rs521bn as gross sales increased at a
higher rate than gross purchase. Recently, there is a significant improvement in their net
investment and reach to 9-month high of Rs986bn over the month of Oct’20 before falling
again to Rs272bn in Nov’20.
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Market Pulse
Figure 308: Monthly trend of total investment through mutual funds

Fund mobilized during the month (Rsbn)
Repurchase/Redemption during the month (Rsbn)
Net Inflow (+ve)/Outflow (-ve) for the month (Rsbn) - RHS
25,000 2,000
1,500
20,000 1,000
500
15,000
0
(500)
10,000
(1,000)
5,000 (1,500)
(2,000)
0 (2,500)
Source: AMFI.
November saw a sharp contraction in fund mobilisation through of new MF schemes:

Total investment through new MF schemes remains quite volatile over the last two years,
as shown in the following chart. Fund mobilisation through new MFs was significantly low
during Apr-Jun’20 as compared to the same period last year, before increasing sharply
in July. However, the rise in investment was temporary in nature and fell sharply in
August similar to that in the last year. Thereafter, there was a rise in total number of new
schemes that contributed a higher amount of funds over the month. Seven and 11 more
schemes were launched in September and October respectively to mobilise ~Rs35bn and
Rs31.9bn funds, while only 4 new schemes were launched in November to raise Rs13bn.
Figure 309: Monthly trend of total investment through new schemes

Funds mobilized through new schemes (Rsbn) - RHS No. of new Schemes
25 250
20 200
15 150
10 100
5 50
0 0
Source: AMFI.
203/212
Market Pulse
Policy developments
India
Policy measures by the SEBI during the month30
December 2nd, 2020 Operational guidelines for Transfer and Dematerialization of re-lodged physical shares
SEBI, vide circular dated September 7th, 2020, had fixed March 31st, 2021 as the cut-off date
for re-lodgement of share transfer requests and had stipulated that such transferred shares
shall be issued only in demat mode. In this regard, SEBI has issued detailed operational
guidelines for crediting the transferred shares into the respective demat account of the
investors.
December 8th, 2020 Additional Payment Mechanism (i.e. ASBA, etc.) for Payment of Balance Money in Calls
for partly paid specified securities issued by the listed entity
SEBI had introduced Application Supported by Blocked Amount (ASBA) as the sole payment
mechanism in the IPO and Rights issues to protect investors’ interest and reduce investor
grievances relating to refund. As payments through ASBA mechanism is faster and investor-
friendly, SEBI has decided to introduce additional payment mechanism for making
subscription and/or payment of calls in respect of partly paid specified securities through
Self Certified Syndicate Banks (SCSBs) and intermediaries such as Trading Members/
Brokers - having 3-in-1 type account and Registrar and Transfer agents (RTA). The additional
channels for making subscription and/or paying call money are: (1) Online ASBA, (2) Physical
ASBA, and (3) Additional Online mode.
The payment period for payment of balance money in Calls shall be kept open for fifteen
days. The intermediaries including the issuer company and its RTA shall provide necessary
guidance to the specified security holders in use of ASBA mechanism while making payment
of calls.
December 9th, 2020 e-Voting Facility Provided by Listed Entities
Under Regulation 44 of SEBI (Listing Obligations and Disclosure Requirements) Regulations,

2015, listed entities are required to provide remote e-voting facility to its shareholders, in
respect of all shareholders’ resolutions. There are multiple e-voting service providers (ESPs)
providing e-voting facility to listed entities in India, which necessitates registration on
various ESPs and maintenance of multiple user IDs and passwords by the shareholders. In
order to simplify the voting process, SEBI has decided to enable e-voting to all the demat
account holders, by way of a single login credential, through their demat accounts/websites
of Depositories/Depository Participants. Demat account holders would be able to cast their
vote without having to register again with the ESPs. The same shall be implemented in two
phases as prescribed in the said circular.
December 18th, 2020 Framework for issue of Depository Receipts-Clarifications

SEBI vide circular dated October 10th, 2019 had laid down a Framework for issue of
Depository Receipts. SEBI has issued a few changes based on representations received
from market participants. NRIs can now hold DRs issued by the company under the SEBI
(Share Based Employee Benefits) Regulations 2014. The listed company shall provide the
30
For more details, please visit http://www.sebi.gov.in
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Market Pulse
information of such NRI DR holders to the designated depository for the purpose of
monitoring of limits.
December 21st, 2020 Review of inclusion of Historical Scenarios in Stress Testing in Commodity Derivatives
Segment
SEBI vide circulars dated July 11th, 2018 and July 21st, 2020, inter alia, had prescribed
norms related to Stress Testing for the commodity derivatives segment, which included
norms regarding historical scenarios. In view of the recent negative final settlement price in
the crude oil futures markets, SEBI had prescribed an Alternate Risk Management
Framework, in its circular dated September 21st, 2020, that would be applicable in case of
near zero and / or negative prices for any underlying commodities/futures. SEBI had received
representation to review the requirement of including all the price movements during the
last 15 years, in the historical scenarios prescribed for stress testing. SEBI has now
recommended that the Price movements corresponding to a Z-score of 10 will replace
extreme price movements beyond that threshold in peak historical returns of all the
commodities. Mean and sigma of returns over the applicable MPOR period across 15 years
would be used for calculation of the Z-score.
December 21st, 2020 Core Settlement Guarantee Fund, Default Waterfall and Stress Test for Limited Purpose
Clearing Corporation (LPCC)
Based on consultation with various stakeholders, SEBI permitted setting up of a Limited

Purpose Clearing Corporation (LPCCs) for clearing and settlement of repo transactions in
debt securities. In order to enhance robustness of the risk management system in LPCCs,
Sebi has revised certain norms relating to core settlement guarantee fund (SGF), stress
testing and default waterfall procedure.
December 31st, 2020 Extension of timeline for implementation for creation of security in issuance of listed
debt securities and ‘due diligence’ by debenture trustee(s)
SEBI, vide circular dated November 03,2020, specified requirements with regard to creation
of security in issuance of listed debt securities and due diligence to be carried out by
debenture trustee(s), which were applicable from January 01, 2021. Owing to
representation received from debenture trustees, and the challenges arising out of the
prevailing business and market conditions due to COVID-19 pandemic, the implementation
date of the provisions of the aforesaid circular has now been extended to April 01,2021.
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Market Pulse
December 31st, 2020 Relaxation in timelines for compliance with regulatory requirements
In view of the prevailing situation due to Covid-19 pandemic and representation received
from the Stock Exchanges, it has been decided to extend the timelines for compliance with
the following regulatory requirements by the trading members / clearing members:
S. No. Compliance requirements for which timelines Extended timeline/Period

are extended of exclusion
1. Maintaining call recordings of orders/instructions February 28, 2021
received from clients.
2. KYC application form and supporting documents Period of exclusion shall be
of the clients to be uploaded on system of KRA from January 01, 2021 till
within 10 working days. February 28, 2021. A 15-
day time period after
February 28th, 2021, is
allowed to clear the back
log.
With regard to KYC application form and supporting documents of the clients to be uploaded
on system of KRA by the members, Stock Exchanges / Clearing Corporation shall direct their
members to clear the backlog, if any, by January 31, 2021.
December 31st, 2020 Procedural guidelines for Proxy Advisors
Clause 1(c) of the SEBI circular August 3rd, 2020 is modified as under:
“Proxy Advisors shall alert clients, within 24 hours of receipt of information, about any
factual errors and any impending material revisions to their reports. Further, any such
material revisions to their reports shall be communicated to the clients within 72 hours of
receipt of the information, while ensuring that adequate time is available for clients to make
an informed decision.”
Clauses1(c) and 1(e) of SEBI circular dated August 3rd, 2020 shall be applicable with effect
from February 1st, 2021.
December 31st, 2020 Circular on Mutual Funds
1. The uniform applicability of NAV in respect of purchase of units of mutual fund

schemes upon realization of funds which was to come into effect from January 1 st,
2021 has now been extended to February 1st, 2020.
2. SEBI has modified clause a & d in paragraph 2.2.1 pertaining to Trade Execution and
Allocation and paragraph 2.3.2 pertaining to audit trail and time stamping of orders
in circular dated September 17th, 2020.
3. All other conditions specified in SEBI circular dated September 17 th, 2020 shall
remain unchanged.
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Market Pulse
Global policy developments

ESMA updated guidance on waivers from pre-trade transparency.31
ESMA updated guidance on waivers from pre-trade transparency for equity and non-equity instruments. It covers
guidance related to request for quote systems, guidance on how trading venues should apply for a waiver to their
national competent authority, and updates on frequently encountered issues when assessing waiver notifications.
ESMA Registers DTCC Data Repository (Ireland) PLC as trade repository under EMIR and SFTR.32
DTCC Data Repository (Ireland) PLC is based in Ireland and this registration is part of the DTCC Group strategy to ensure
it continues to offer services to EU clients after the end of the transition period. After 31 December 2020, the UK-based
TR of the Group (DTCC Data Repository PLC – DDRL UK) will cease to be registered with ESMA and DTCC Data Repository
(Ireland) PLC will be the only TR of the Group operating in the EU.
SEC modernizes framework for fund valuation practices.33
It has voted to adopt a new rule that establishes an updated regulatory framework for fund valuation practices. The rule
is designed to clarify how fund boards of directors can satisfy their valuation obligations in wake 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.
SEC adopts rules to modernize key market infrastructure responsible for collecting, consolidating, and
disseminating equity market data.34
SEC adopted rules to modernize the infrastructure for the collection, consolidation, and dissemination of market data
for exchange-listed national market system stocks (“NMS market data”). The adopted rules update and significantly
expand the content of NMS market data to better meet the diverse needs of investors in today’s equity markets. The
adopted rules also update the method by which NMS market data is consolidated and disseminated, by fostering a
competitive environment and providing for a new decentralized model that promises reduced latency and other new
efficiencies.
Regulatory change for firms as Brexit transition period ends.35
On December 31st, 2020 the transition period ended, and the EU law is no longer applicable in the UK. Passporting
between the UK and EEA states has ended and the temporary permissions regime (TPR) has now come into effect for
those firms and funds that notified to FCA that they wanted to enter this regime to continue new and existing regulated
business within the scope of their previous permissions in the UK for a limited period, while they seek full authorisation
from FCA, if required. It also allows EEA-domiciled investment funds that market in the UK under a passport to continue
temporarily marketing in the UK. The Government has created the financial services contracts regime (FSCR) which
allows, for a limited period, EEA passporting firms not in the TPR to continue to service UK contracts entered into prior
to the end of the transition period (or prior to when they enter FSCR) in order to conduct an orderly exit from the UK
market as the transition period has ended.
31
https://www.esma.europa.eu/press-news/esma-news/esma-updates-guidance-waivers-pre-trade-transparency
32
https://www.esma.europa.eu/press-news/esma-news/esma-registers-dtcc-data-repository-ireland-plc-trade-repository-under-emir-and
33
https://www.sec.gov/news/press-release/2020-302
34
https://www.sec.gov/news/press-release/2020-311
35
https://www.fca.org.uk/news/news-stories/regulatory-change-firms-brexit-transition-period-ends
207/212
Market Pulse
Economic calendar for major countries (January 2021)

Date Country Indicator Name Period Reuters Poll Prior Period Unit
4 Jan 2021 Japan Jibun Bank Mfg PMI Dec 49.7 Index (diffusion)
4 Jan 2021 China (Mainland) Caixin Mfg PMI Final Dec 54.8 54.9 Index (diffusion)
4 Jan 2021 India IHS Markit Mfg PMI Dec 56.6 56.3 Index (diffusion)
4 Jan 2021 Euro Zone Markit Mfg Final PMI Dec 55.5 55.5 Index (diffusion)
4 Jan 2021 United Kingdom Markit/CIPS Mfg PMI Final Dec 57.3 57.3 Index (diffusion)
4 Jan 2021 Brazil Markit Mfg PMI Dec 64.0 Index (diffusion)
4 Jan 2021 United States Markit Mfg PMI Final Dec 56.5 Index (diffusion)
6 Jan 2021 Japan Services PMI Dec 47.8 Index (diffusion)
6 Jan 2021 China (Mainland) Caixin Services PMI Dec 57.8 Index (diffusion)
6 Jan 2021 India IHS Markit Svcs PMI Dec 54.0 53.7 Index (diffusion)
6 Jan 2021 Euro Zone Markit Serv Final PMI Dec 47.3 47.3 Index (diffusion)
6 Jan 2021 United Kingdom Markit/CIPS Serv PMI Final Dec 49.9 49.9 Index (diffusion)
6 Jan 2021 United States Markit Svcs PMI Final Dec 55.3 Index (diffusion)
7 Jan 2021 Euro Zone HICP Flash YY Dec -0.2% -0.3% Percent
7 Jan 2021 Euro Zone Consumer Confid. Final Dec -13.9 -13.9 Net balance
8 Jan 2021 Euro Zone Unemployment Rate Nov 8.5% 8.4% Percent
8 Jan 2021 Brazil Industrial Output YY Nov 3.5% 0.3% Percent
8 Jan 2021 United States Non-Farm Payrolls Dec 71k 245k Person
8 Jan 2021 United States Unemployment Rate Dec 6.8% 6.7% Percent
11 Jan 2021 China (Mainland) CPI YY Dec 0.1% -0.5% Percent
11 Jan 2021 Russia CPI YY Dec 4.7% 4.4% Percent
12 Jan 2021 India CPI Inflation YY Dec 5.28% 6.93% Percent
13 Jan 2021 Euro Zone Industrial Production YY Nov -3.3% -3.8% Percent
13 Jan 2021 United States CPI YY, NSA Dec 1.3% 1.2% Percent
14 Jan 2021 India WPI Inflation YY Dec 1.30% 1.55% Percent
15 Jan 2021 United Kingdom GDP Estimate YY Nov -11.6% -8.2% Percent
15 Jan 2021 United States Industrial Production MM Dec 0.4% 0.4% Percent
18 Jan 2021 China (Mainland) Industrial Output YY Dec 6.8% 7.0% Percent
18 Jan 2021 China (Mainland) GDP YY Q4 6.1% 4.9% Percent
20 Jan 2021 United Kingdom CPI YY Dec 0.3% Percent
20 Jan 2021 South Africa CPI YY Dec 3.2% Percent
21 Jan 2021 Brazil Selic Interest Rate 20 Jan 2.00% Percent
21 Jan 2021 Euro Zone ECB Refinancing Rate Jan 0.00% Percent
21 Jan 2021 South Africa Repo Rate Jan 3.50% Percent
21 Jan 2021 Japan JP BOJ Rate Decision 21 Jan -0.10% Percent
22 Jan 2021 Japan CPI, Core Nationwide YY Dec -0.9% Percent
25 Jan 2021 Russia Unemployment Rate Dec 6.1% 6.1% Percent
26 Jan 2021 United States Consumer Confidence Jan 88.6 Index
26 Jan 2021 Russia Industrial Output Dec -3.0% -2.6% Percent
28 Jan 2021 United States Fed Funds Tgt Rate 27 Jan Percent
28 Jan 2021 Russia Unemployment Rate Dec 6.1% 6.1% Percent
29 Jan 2021 Japan Unemployment Rate Dec 2.9% Percent
Source: Refinitiv Datastream
208/212
Market Pulse
Annual Macro Snapshot

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
National income
GDP (Current) (Rs trn) 76.3 87.4 99.4 112.3 124.7 137.7 153.9 171.0 189.7 203.4
GDP (Current) Growth (%) 19.9 14.4 13.8 13.0 11.0 10.5 11.8 11.1 11.0 7.2
GDP (Constant) Growth (%) 8.5 5.2 5.5 6.4 7.4 8.0 8.3 7.0 6.1 4.2
GVA (Constant) Growth (%) 8.0 5.2 5.4 6.1 7.2 8.0 8.0 6.6 6.0 3.9
Agriculture growth (%) 8.8 6.4 1.5 5.6 -0.2 0.6 6.8 5.9 2.4 4.0
Industry growth (%) 7.9 3.6 3.3 3.8 7.0 9.6 7.7 6.3 4.9 0.9
Services growth (%) 7.8 5.9 8.3 7.7 9.8 9.4 8.5 6.9 7.7 5.5
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 1,51,677
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 1.7
Primary articles (%) 17.9 9.8 11.4 9.9 2.2 -0.4 3.5 1.3 2.8 6.8
Fuel & power (%) 12.3 13.9 7.1 7.1 -6.1 -19.7 -0.2 8.1 11.6 -1.8
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 7.9
Bank credit growth (%) 21.5 17.0 14.1 13.9 9.0 10.9 8.2 10.0 13.3 6.1
Non-food credit growth (%) 21.3 16.8 14.0 14.2 9.3 10.9 9.0 10.2 13.4 6.1
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 -5.2
POL exports growth (%) 47.8 34.9 8.7 4.3 -10.7 -46.1 3.4 18.8 24.5 -11.8
Non-POL exports (%) 39.3 19.3 -4.2 5.1 0.8 -8.6 5.4 9.0 6.6 -4.1
Imports growth (%) 28.5 32.4 0.2 -8.4 -0.3 -15.0 1.0 21.2 10.5 -8.0
POL exports growth (%) 21.9 46.4 5.7 0.7 -16.4 -40.1 5.3 25.0 29.9 -7.5
Non-POL exports growth (%) 31.3 26.8 -2.3 -13.0 9.1 -3.8 -0.2 20.1 4.5 -8.1
Net FDI (US$bn) 11.3 21.9 19.8 21.6 31.3 36.0 35.6 30.3 30.7 43.0
Net FII (US$bn) 30.3 17.2 26.9 4.8 42.2 -4.1 7.6 22.1 -0.6 -1.4
Trade Balance – RBI (US$bn) -189.7 -195.7 -147.6 -144.9 -130.1 -112.4 -160.0 -180.3 -157.5
Current Acc. Balance (US$bn) -78.2 -87.8 -32.4 -26.7 -22.1 -15.2 -48.7 -57.2 -24.6
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
209/212
Market Pulse
Our reports on the economy and markets since the beginning of 2020
Sr. No. Date Report

1 11-Jan-21 Macro Review: FY21 GDP Advance Estimates
2 05-Jan-21 India Ownership Tracker September 2020
3 31-Dec-20 Macro Review: Q1FY21 Balance of Payments
4 05-Dec-20 Macro Review: RBI Monetary Policy
5 28-Nov-20 Macro Review: Q1FY21 GDP
6 26-Nov-20 Q2FY21 Corporate Performance Review
7 13-Nov-20 Macro Review: IIP and Inflation
8 28-Oct-20 Conversations on Corporate Governance: Dialogue 3
9 28-Oct-20 Market Pulse October 2020: A monthly review of Indian economy and markets
10 16-Oct-20 Macro Review: India monthly trade
11 13-Oct-20 India Fiscal Stimulus 3.0
12 13-Oct-20 Macro Review: IIP and Inflation
13 09-Oct-20 Macro Review: RBI Monetary Policy
14 06-Oct-20 India Ownership Tracker June 2020
15 05-Oct-20 The State of States in India: A 360-degree view
16 30-Sep-20 Macro Review: Q1FY21 Balance of Payments
17 29-Sep-20 Conversations on Corporate Governance: Dialogue 2
18 28-Sep-20 Market Pulse September 2020: A monthly review of Indian economy and markets
19 16-Sep-20 Macro Review: India monthly trade
20 14-Sep-20 Macro Review: IIP and Inflation
21 01-Sep-20 Macro Review: Q1FY21 GDP
22 28-Aug-20 Conversations on Corporate Governance: Dialogue 1
23 26-Aug-20 Market Pulse August 2020: A monthly review of Indian economy and markets
24 22-Aug-20 Q1FY21 Corporate Performance Review
25 17-Aug-20 Macro Review: India monthly trade
26 14-Aug-20 Macro Review: IIP and Inflation
27 06-Aug-20 Macro Review: RBI Monetary Policy
28 31-Jul-20 COVID-19 and Beyond: IMF’s take on the world economy and prospects for India
29 28-Jul-20 Market Pulse July 2020: A monthly review of Indian economy and markets
30 24-Jul-20 Q4FY20 Corporate Performance Review
31 15-Jul-20 Macro Review: India monthly trade
32 13-Jul-20 Macro Review: IIP and Inflation
210/212
Market Pulse
33 01-Jul-20 Macro Review: Q4FY20 Balance of Payments

34 26-Jun-20 Market Pulse June 2020: A monthly review of Indian economy and markets
35 16-Jun-20 Macro Review: India monthly trade
36 15-Jun-20 Macro Review: IIP and Inflation
37 04-Jun-20 Impact of COVID-19 on Agriculture: NSE webinar key takeaways
38 01-Jun-20 Macro Review: Q4FY20 GDP
39 31-May-20 Market Pulse May 2020: A monthly review of Indian economy and markets
40 29-May-20 India Ownership Tracker March 2020
41 22-May-20 Macro Review: RBI Monetary Policy
42 17-May-20 Macro Review: India COVID-19 Stimulus Package (Fifth Tranche)
43 16-May-20 Macro Review: India COVID-19 Stimulus Package (Fourth Tranche)
44 15-May-20 Macro Review: India COVID-19 Stimulus Package (Third Tranche)
45 14-May-20 Macro Review: India COVID-19 Stimulus Package (Second Tranche)
46 13-May-20 Macro Review: India COVID-19 Stimulus Package (First Tranche)
47 13-May-20 Macro Review: IIP and Inflation
48 30-Apr-20 Market Pulse April 2020: A monthly review of Indian economy and markets
49 27-Apr-20 COVID-19: India Macro and Market Outlook
50 17-Apr-20 RBI response to COVID-19
51 16-Apr-20 Macro Review: India monthly trade
52 14-Apr-20 Macro Review: IIP and Inflation
53 14-Apr-20 Key takeaways from RBI Monetary Policy Report
54 27-Mar-20 India policy response to COVID-19
55 20-Mar-20 Market Pulse March 2020: A monthly review of Indian economy and markets
56 16-Mar-20 Macro Review: Q3FY20 Balance of Payments
57 11-Mar-20 A deep dive into Investment in India
58 09-Mar-20 India Ownership Tracker December 2019
59 02-Mar-20 Macro Review: Q3FY20 GDP
60 29-Feb-20 Quarterly Briefing: Takeover and Corporate Governance in India
61 20-Feb-20 Market Pulse February 2020: A monthly review of Indian economy and markets
62 06-Feb-20 Macro Review: RBI Monetary Policy
63 01-Feb-20 Decoding the Union Budget FY2020-21
64 20-Jan-20 Market Pulse January 2020: A monthly review of Indian economy and markets
65 08-Jan-20 Macro Review: FY20 GDP Advance Estimates
66 01-Jan-20 Macro Review: Q2FY20 Balance of Payments
211/212
Market Pulse
Economic Policy & Research

Tirthankar Patnaik, PhD tpatnaik@nse.co.in +91-22-26598149
Prerna Singhvi, CFA psinghvi@nse.co.in +91-22-26598316
Runu Bhakta, PhD rbhakta@nse.co.in +91-22-26598163
Ashiana Salian asalian@nse.co.in +91-22-26598163
Simran Keswani skeswani@nse.co.in +91-22-26598163
Marketing
Rajesh Jaiswal rjaiswal@nse.co.in +91-22-26598380
Disclaimer
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a part of this report shall at all times vest with NSE. No part of this report may be sold/distributed/licensed/
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photocopying, recording or otherwise) to any person/entity whatsoever without the prior written permission of NSE.
Extracts from this report may be used or cited provided that NSE is duly notified and acknowledged as the source of such
extract.
This report is intended solely for information purposes. This report is under no circumstances intended to be used or
considered as financial or investment advice, a recommendation or an offer to sell, or a solicitation of any offer to buy
any securities or other form of financial asset. The Report has been prepared on best effort basis, relying upon
information obtained from various sources. NSE does not guarantee the completeness, accuracy and/or timeliness of
this report neither does NSE guarantee the accuracy or projections of future conditions from the use of this report or any
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January 2021

NATIONAL STOCK EXCHANGE OF INDIA LIMITED

Published by Economic Policy and Research, National Stock Exchange of

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

Any/all Intellectual Property rights in this report including without

Turnover of top traded symbols over the month ........................................................................................ 181

Dr. Tirthankar Patnaik

Stories of the month

Government-owned companies in the current market rally.

maintained but with a reduced absolute portfolio allocation, partly 100 8

US$145bn since 2010 merely leading to a larger share in existing

ownership in 294 stocks now, vs 137 in 2014) and higher

Figure 1: NSE-listed universe: Ownership pattern by total market cap (%)

Other institutional Other institutional

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

Source: AMFI, NSE

Figure 10: Annual net FII inflows trend

Figure 13: Client category-wise share in NSE’s cash market turnover

Ownership pattern of the Nifty 50 universe (September 2020)

Other institutional Other institutional

Govt., 5.6 FIIs, 26.0 Govt., 4.7

DMFs, 14.9 DMFs, 14.6

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

Ownership pattern of the Nifty 500 universe (September 2020)

Institutional ownership in Nifty 500 inched up led by FIIs: In terms of institutional

DMFs, 7.9 Foreign

DMFs, 16.2 DMFs, 15.9

FIIs, 42.2 Banks, FIs &

Sector-wise ownership pattern and allocation to key stakeholders

0 10 20 30 40 -400 -300 -200 -100 0 100 200 300

Figure 30: DMF vs Nifty 50—Sector-wise OW/UW trend (bps)

FIIs trimmed exposure to Financials but retained an outsized bet; turned

Financials 40.9 Cons. Staples -382

0 10 20 30 40 50 -500 -250 0 250 500 750 1000

Figure 33: FII vs Nifty 50—Sector-wise OW/UW trend (bps)

Sector-wise ownership of the Nifty 500 universe (September 2020): As of September

DMFs remained cautious on smaller financial companies and turned incrementally

0 5 10 15 20 25 30 -300 -200 -100 0 100 200 300

Figure 38: DMF vs Nifty 500—Sector-wise OW/UW trend (bps)

Source: CMIE Prowess, NSE

sequentially lower exposure at 35.3% (-257bps QoQ)—the lowest in last 15 quarters, a

0 10 20 30 40 -400 -200 0 200 400 600 800

Figure 41: FII vs Nifty 500—Sector-wise OW/UW trend (bps)

Institutional ownership concentration analysis

Institutional ownership gets incrementally more concentrated to larger companies:

10 8.4 7.8 8.0 7.8 8.1 7.7 7.9 7.7

20 14.915.716.215.8 13.9 14.615.415.915.5

38% 338 80%

1,100 30% 300 55%

700 20% 200 35%

500 15% 150 25%

Concentration of Institutional money in the top 10%:

Looking back at 2020: A year full of challenges

• Unlike India, US and many European countries continued to suffer with

Status of the Coronavirus pandemic

Source: Refinitiv Datastream, Source: Refinitiv Datastream,

Figure 58: COVID-19 active cases across countries:

Source: Refinitiv Datastream,

Figure 59: Daily Coronavirus cases across countries:

Source: Refinitiv Datastream,

Figure 60: Case fatality rates across countries:

Source: Refinitiv Datastream,

Source: Refinitiv Datastream, Source: Refinitiv Datastream,

Figure 63: New Coronavirus cases in India across states