India's industrial output fell for the first time in over two years, dragged down by sluggish mining activity and decreased energy generation, according to official figures released on Friday. Industrial output decreased 0.1% year on year in August, despite experts' estimates of 1.2% rise in a Reuters poll. The index had previously contracted in October 2022, falling 4.1%. Industrial output increased by 4.7% in July. Manufacturing output increased 1% year on year, but energy generation declined 3.7% and mining activity fell 4.3%, according to the report. The sectors expanded by 10%, 15.3%, and 12.3%, respectively, a year ago.
Top 3 Leads Today
- India's FX reserves halt 7-week rising streak, come off record high.
- Noel Tata appointed chairman of Tata Trusts.
- Chinese finance minister hints at increasing the deficit.
Indian Markets
- Money Markets Minute: The interbank call money rate fell below the Reserve Bank of India's standing deposit facility rate of 6.25% due to low demand for bank funds. The banks' demand was low due to ample banking system liquidity. The three-day call money rate was 5.85%, compared to 5.75% for one-day loans on Thursday.
- Government Bond Brief: Indian government bond yields were steady on Friday as investors remained cautious following the rupee's historic lows and uncertainty about the Reserve Bank of India's interest rate cuts. India's benchmark bond yield has fallen 28 basis points since April, owing to strong demand and a minor increase in supply of government bonds. The 10-year benchmark yield ended at 6.79% on Friday.
- Corporate Bond Beat: Yields up to 3-year fell on weekly basis after the banks turned active buyers for corporate papers in the secondary market. Yields were mostly steady across the curve for the first few sessions last week as traders waited for monetary policy review. After the RBI’s changed its stance to neutral but did not cut its key interest rate last week, the yields fell at the shorter end of the curve.
- Forex Flash: The Indian rupee slipped below 84 per dollar for the first time on Friday, weighed down by fears over the recent surge in oil prices and the withdrawal of foreign money from the equity market. The rupee closed at 84.06, down 0.1% on the day, having hit a record low of 84.07 earlier in the session. The drop past the 84 mark is notable because the Reserve Bank of India had held that level for more than two months.
- Stocks Spotlight: On Friday, Indian benchmarks posted daily and weekly losses, driven down by foreign fund outflows, lagging corporate performance, and rising Middle East tensions. The Nifty 50 fell 0.14% to 24,964.25, while the Sensex dropped 0.28% to 81,381.36, dragged down by financials and Tata Consultancy Services, India's largest software company. Both indices are down 5% from their September 27 highs, with losses in eight of the last ten sessions.
Trading Trends
Most actively traded Corporate bonds in the Standard Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE556F08KS8 | 7.34 SIDBI 26FEB29 | 2680 | 7.35 |
| INE261F08EI9 | 7.70 NABARD 30SEP27 | 2670 | 7.50 |
| INE261F08EK5 | 7.44 NABARD 24FEB28 | 1690 | 7.44 |
| INE134E08LD7 | 6.50 PFC 17SEP25 | 1540 | 7.59 |
| INE020B08FJ3 | 0% REC 03NOV34 | 1281 | 6.23 |
Most actively traded Corporate bonds in the Odd Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE0Z4807015 | 0% CYQURE INDIA PRIVATE LIMITED 17MAR2028 | 49 | 14.21 |
| INE01YL07292 | 10.90 EARLYSALARY 27MAR26 | 35 | 12.42 |
| INE572J07711 | 9.84 SPANDANA SPHOORTY 28JUN26 | 30 | 10.77 |
| INE996U07248 | 10.40 SI CREVA CAPITAL SERVICES PRIVATE LIMITED 01OCT2026 | 30 | 14.02 |
| INE0BNQ07113 | 10.90 AVANTI FINANCE 30SEP26 | 23 | 11.51 |
Traded volume in corporate bonds by maturity:
| Maturity | Volume(in Cr) |
|---|---|
| 1Y | 11784 |
| 3Y | 8694 |
| 5Y | 8058 |
| 7Y | 734 |
| 10Y | 4118 |
Source: Harmoney data analytics
The Week Ahead
- Money Markets: On Monday, the one-day call money rate may open near the RBI's repo rate of 6.50% due to bank demand for cash to meet reserve requirements. According to dealers, the call rate is likely to move between 6.00-6.60% during the day on Monday. Dealers expect liquidity to tighten marginally with a total net outflow of ₹198.88 billion.
- Government Bonds: Yields may ease this week once the market sees off the release of CPI inflation data. RBI officials have said inflation would rise in September due to the base effect, but it would align with the 4% target in the months ahead. Inflation data could offer cues if the RBI will cut rates in December or February. An increase in the weightage on the J P Morgan index for India bonds could see more inflows. The 10-year benchmark 7.10%, 2034 bond yields are seen trading in 6.74-6.83% band on Monday.
- Corporate Bonds: Volumes are likely to remain modest and yields may remain steady this week. Traders will check movement of domestic government bonds yields to take cues for corporate bond yields movements. Investors are likely to focus on any fresh issuances in the primary market this week.
- Forex: The rupee may face greater pressure this week due to foreign funds outflow, but the RBI may only accept modest depreciation to keep it stable. Given the strong FX reserves, traders anticipate the RBI to sensibly limit volatility. The rupee is likely to trade near 83.95-84.05 band on Monday.
- Stocks: The stocks are likely to be open volatile on Monday as they eye key domestic and global economic data this week. Investors will eye quarterly Indian corporate results, and inflation data for further cues. While, have further insights from European Central Bank’s interest rate decision, US retail sales data for September due to be announced on Thursday this week.
Events This Week
October 14, Monday:
- US Columbus Day.
- US OPEC Monthly market report.
- India WPI inflation for September.
- India CPI for September.
October 15, Tuesday:
- US Monthly budget statement for August.
October 16, Wednesday:
- US Export and import price index for September.
- India Trade deficit government for September.
- India M3 Money supply.
October 17, Thursday:
- US Jobless claims for Oct 4 week.
- US Retail sales for September.
- US Industrial production for September.
October 18, Friday:
- India Bank loan growth for Sep 30 week.
- India FX reserves Oct 7 week.
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