The Reserve Bank of India held its key interest rate constant on Wednesday, as expected, but shifted its policy stance to "neutral", paving the way for rate cuts as early as December. For the tenth consecutive policy meeting, the Monetary Policy Committee maintained the repo rate at 6.50%. However, the committee's official stance shifted from "withdrawal of accommodation" to "neutral". The committee voted unanimously to amend its approach but stated that it will stay unambiguously focused on long-term inflation alignment with target while supporting growth. The RBI’s forward-looking survey found that consumer confidence rose in September 2024 due to better economic, employment, and income perceptions than in July. The latest survey showed 0.7 points of growth in consumers' future expectations index to 121.4.
Top 3 Leads Today
- Ratan Tata, who put India's Tata Group on the global map, dies at 86.
- FTSE Russell to add gilts to emerging market, regional indices starting September.
- EU's carbon tax unilateral, arbitrary, to hurt local industry – Sitharaman.
Indian Markets
- Money Markets Minute: The one-day call money rate closed slightly below the RBI's standing deposit facility rate of 6.25% due to low demand for funds amid ample banking system liquidity. It ended at 6.24%, down from 6.40% on Tuesday. The weighted average call rate was 6.43%, compared with 6.42% the previous day.
- Government Bond Brief: Yields fell as the MPC shifted to a neutral stance, ending over two years of 'withdrawal of accommodation'. The 10-year benchmark 7.10%, 2034 gilt closed at a 6.77% yield, down from 6.81% on Tuesday. Turnover rose to ₹1.23 trillion, up from ₹707.25 billion.
- Corporate Bond Beat: After the MPC shifted its stance to 'neutral', corporate bond yields fell 2-3 basis points across tenures in the secondary market, signalling potential rate cuts. Trading volume rose to ₹134.99 billion, up from ₹119.04 billion on Tuesday.
- Forex Flash: The rupee ended flat at 83.9625 per dollar, despite the RBI shifting its policy stance to 'neutral' from 'withdrawal of accommodation'. It stayed within a tight 5-paise range, near its all-time low of 83.9900 hit on Sept. 5.
- Stocks Spotlight: Indices closed slightly lower as the RBI's MPC gave no clear signal on a rate-cutting timeline. The Nifty 50 fell 0.1% to 24,981.95 points, and the Sensex dropped 0.2% to 81,467.10 points.
International Markets
- US Stocks: The S&P 500 and the Dow both hit new highs on Wednesday, after the Federal Reserve meeting minutes were made public. Alphabet shares fell 1.5% after the US Department of Justice warned it could ask a judge to order Google to divest sections of its business. These include Google Chrome web browser and Android operating system, which are intended to limit its search monopoly. The Dow Jones Industrial Average gained 1.03% to 42,512.00. The S&P 500 rose 0.71% to 5,792.04, while the Nasdaq climbed 0.60% to 18,291.62.
- Treasuries: Yields rose after minutes from the Federal Reserve's September meeting indicated future rate reduction, but investors waited for inflation data to provide more clues about the central bank's interest rate path. Treasury yields also rose in response to Logan's remarks and a 10-year note auction. The benchmark 10-year note yield jumped 3.8 basis points to 4.073%, while the 2-year note yield, which tracks interest rate forecasts, rose 4.3 basis points to 4.022%.
- Currency: The dollar rose higher on Wednesday, following the release of minutes from the Federal Reserve's September meeting, which revealed that a large majority of officials supported the massive 50-basis-point rate cut. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.38% to 102.88, its highest level since August 16.
Trading Trends
Traded volume(in Cr) in corporate bonds by sector and maturity:
| Sectors | 0-1y | 1-3y | 3-5y | 5-10y | >10y |
|---|---|---|---|---|---|
| NBFC | 1361 | 1555 | 947 | 351 | 601 |
| Financial Institution | 685 | 1895 | 1609 | 340 | - |
| Housing Finance Company | 350 | 401 | 125 | 255 | - |
| Telecom | 450 | - | - | - | - |
| Private Sector Bank | 230 | 50 | - | 50 | - |
Secondary trade details for recently issued primary corporate bonds:
Security Name |
Issue Date |
Trades Since Issue(Cr) |
Avg Yield(%) |
LTY (%) |
|---|---|---|---|---|
| 8.78 MUTHOOT FIN 04OCT29 | 2024-10-04 | 575 | 8.77 | 8.77 |
| 13.83 SHREM AJANTA INFRASTRUCTURE PRIVATE LIMITED 26SEP2027 | 2024-09-26 | 486 | 13.83 | 13.83 |
| 8.01 M&M FINANCE 24DEC27 | 2024-09-26 | 255 | 8.00 | 8.01 |
| 7.49 BOI 26SEP29 C 26SEP34 M | 2024-09-26 | 187 | 7.52 | 7.51 |
| 7.56 BAJAJ HOUSING 04OCT34 | 2024-10-04 | 176 | 7.56 | 7.56 |
| 10.30 INDOSTAR CAPITAL 25SEP27 | 2024-09-25 | 124 | 10.64 | 10.70 |
| 10.15 SAMMAAN CAPITAL LIMITED 25SEP2029 | 2024-09-25 | 105 | 10.20 | 10.08 |
| 9.90 SAMMAAN CAPITAL LIMITED 25SEP2027 | 2024-09-25 | 75 | 10.10 | 9.90 |
| 8.47 BOBCARD LIMITED PERP 30SEP2034 CALL | 2024-09-30 | 75 | 8.46 | 8.46 |
| 10.90 EARLYSALARY 27MAR26 | 2024-09-30 | 56 | 12.54 | 12.50 |
| 10.45 MUTHOOT FINCROP 24DEC32 | 2024-09-24 | 52 | 11.00 | 11.27 |
| 9.35 ADANI AIRPORT HOLDINGS LIMITED 08SEP2028 | 2024-10-01 | 50 | 9.76 | 9.76 |
| 7.96 EMBASSY OFFICE PARK REIT 27SEP27 | 2024-09-26 | 50 | 7.95 | 7.95 |
| 7.78 KMPL 17SEP29 | 2024-10-04 | 50 | 7.78 | 7.78 |
Source: Harmoney data analytics
Events This Week
October 10, Thursday:
- US Unemployment insurance weekly claims report for Oct 5 week.
- US CPI for September.
- US Real earnings for September.
- US Weekly export sales.
October 11, Friday:
- US PPI for September.
- India FX reserves for Oct 4 week.
- India Industrial production for August.
- India Manufacturing production for August.
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