For the second consecutive month, India's retail inflation remained below the central bank's 4% target, but vegetable prices continued to rise, damping chances for a dovish tone at the next monetary policy meeting. Annual retail inflation in August was 3.65%, up from the revised 3.60% in July and the 3.5% predicted by economists. The high-base effect caused India's primary inflation measure to fall below the Reserve Bank of India's 4% target in July after nearly five years. Food prices, which make up over half of retail inflation, climbed 5.66% in August, up from 5.42% in July. In August, vegetable prices grew 10.71% year on year, compared with 6.83% the prior month. Cereal inflation was 7.31% in August, compared to 8.14% the previous month, while pulse inflation was 13.6%, compared to 14.77% in July.
Top 3 Leads Today
- India IIP growth edges up to 4.8% in July.
- Gold hits all-time high as Fed rate-cut hopes bolster appeal.
- ECB cuts key deposit facility rate by 25 bps to 3.50%.
Indian Markets
- Money Markets Minute: The call money rate for one-day loans settled at 5.75%, unchanged from Wednesday, as low demand for funds and increased surplus liquidity pushed the rate below the RBI's standing deposit facility rate of 6.25%. The weighted average call rate was 6.52%, slightly down from 6.54% on Wednesday.
- Government Bond Brief: Government bond yields fell as traders placed aggressive bets ahead of India's CPI data. The 10-year benchmark 7.10%, 2034 bond ended at a 6.81% yield, down from 6.83% on Wednesday. Market-wide turnover was ₹702.60 billion, compared with ₹740.75 billion the previous day.
- Corporate Bond Beat: Corporate bond yields remained steady in the secondary market as investors held back ahead of India's August CPI data. Total deals amounted to ₹99.44 billion, up from ₹41.77 billion on Wednesday.
- Forex Flash: Despite a stronger dollar index, the rupee ended steady as RBI's dollar sales prevented it from breaching the crucial 84-per-dollar mark. After trading in a narrow 3-paise range, the rupee settled at 83.9650 per dollar, just shy of its record low of 83.9900, compared with Wednesday's close of 83.9775.
- Stocks Spotlight: On the weekly options expiry day, short covering in heavyweight stocks during the final hour pushed benchmark indices to record intraday and closing highs. Positive global sentiment from in-line US August inflation data also supported the rally. The Nifty 50 and Sensex each ended nearly 2% higher at record closing levels of 25,388.90 and 82,962.71 points, respectively.
International Markets
- US Stocks: All three benchmarks closed higher on Thursday after the latest inflation data reinforced the view that the Federal Reserve will cut 25 basis points at its FOMC meeting next week. The producer pricing index for final demand rose by 0.2% exceeding expectation of a 0.1% increase. The core number, which excludes volatile food and energy prices, gained 0.3%, exceeding the 0.2% expectation. At the close, the Dow Jones index was up 0.58%, the S&P 500 was up 0.75%, and the Nasdaq Composite was up 1% on the strength of strong tech stock performance.
- Treasuries: Yields rose slightly across the curve on Thursday but remained at some of the year's lowest levels, following a $22 billion sale of 30-year bonds that received below-average bids from investors. The yield on the 30-year bond rose by 3.3 basis points to 3.996%. The 2-year Treasury yield rose 1.2 basis points to 3.6579%, while the 10-year yield jumped 3 basis points to 3.683%.
- Currency: The dollar fell against other major currencies on Thursday. The euro surged against the dollar on Thursday after the European Central Bank decreased interest rates and ECB president Christine Lagarde tempered expectations for another cut next month, stating that the bank will let economic data define the next policy step. The dollar index fell 0.52% to 101.25, while the euro gained 0.54% to $1.1071.
Trading Trends
Traded volume(in Cr) in corporate bonds by sector and maturity:
| Sectors | 0-1y | 1-3y | 3-5y | 5-10y | >10y |
|---|---|---|---|---|---|
| NBFC | 1868 | 2171 | 168 | 299 | 35 |
| Financial Institution | 25 | 870 | 358 | 235 | 115 |
| Housing Finance Company | 600 | 171 | 353 | 207 | - |
| Private Sector Bank | 200 | 185 | 5 | 9 | - |
| Investment Company | - | 204 | 10 | 2 | - |
Secondary trade details for recently issued primary corporate bonds:
Security Name |
Issue Date |
Trades Since Issue(Cr) |
Avg Yield(%) |
LTY (%) |
|---|---|---|---|---|
| 8.27 CANARA BANK PERP 29AUG29 C | 2024-08-29 | 1793 | 8.27 | 8.18 |
| 7.22 HPCL 28AUG29 | 2024-08-28 | 1074 | 7.22 | 7.22 |
| 7.37 IIFCL 02SEP34 | 2024-09-02 | 620 | 7.36 | 7.36 |
| 7.61 LICHSGFIN 29AUG34 | 2024-08-29 | 525 | 7.61 | 7.60 |
| 7.45 AXISBANK 05SEP34 | 2024-09-05 | 440 | 7.44 | 7.45 |
| 7.72 THDC 02SEP34 | 2024-09-03 | 355 | 7.72 | 7.71 |
| 8.55 CENTURYTEX 30AUG29 | 2024-08-30 | 350 | 8.57 | 8.58 |
| 7.74 LICHSGFIN 11FEB28 | 2024-08-29 | 285 | 7.76 | 7.76 |
| 7.42 SBI 29AUG34 C 29AUG39 M | 2024-08-29 | 270 | 7.41 | 7.42 |
| 8.35 CENTURYTEX 30AUG27 | 2024-08-30 | 260 | 8.35 | 8.35 |
| 8.35 JSW STEEL LIMITED - C 29AUG2029 M | 2024-08-29 | 220 | 8.34 | 8.34 |
| 9.25 MOFSL 03SEP32 | 2024-09-03 | 215 | 9.23 | 9.23 |
| 8.43 JSW STEEL LIMITED - C 29AUG2031 M | 2024-08-29 | 150 | 8.43 | 8.43 |
| 8.00 DATAINFRA - C 29AUG34 M | 2024-08-29 | 145 | 8.08 | 8.08 |
| 7.9918 L&T FINANCE 25MAR27 | 2024-09-05 | 125 | 8.02 | 8.02 |
| 7.36 IREDALTD - C 09SEP39 M | 2024-09-10 | 115 | 7.35 | 7.36 |
| 7.25 IRFC 29AUG34 | 2024-08-29 | 115 | 7.25 | 7.25 |
| 8.8570 SHRIRAMFIN 02SEP27 | 2024-09-02 | 100 | 9.03 | 9.03 |
| 9.03 CREDILA 04MAR26 | 2024-09-04 | 100 | 9.11 | 9.09 |
| 8.10 ABFL 07SEP29 | 2024-09-09 | 85 | 8.11 | 8.10 |
| 8.0490 ADITYA BIRLA HFL 03DEC27 | 2024-09-05 | 70 | 8.04 | 8.07 |
| 8.8871 HEROFINCORP 06OCT26 | 2024-09-06 | 57 | 8.91 | 8.90 |
| 7.26 BOB 09SEP34 | 2024-09-09 | 50 | 7.26 | 7.26 |
| 8.40 GODREJHSGFIN 05JAN28 | 2024-09-05 | 50 | 8.42 | 8.42 |
Source: Harmoney data analytics
Events This Week
September 13, Friday:
- US Import & Export Price Indexes for August.
- India Foreign Exchange Reserves for Sep 6 week.
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