The week of July 5 saw India’s foreign reserves reach a fresh high of $657.155 billion, a critical economic defence. The inclusion of government bonds in the JP Morgan global bond index from June 28 may not have affected bond yields, but the forex kitty increased by $5.16 billion in the week to July 5. The week to June 28 saw reserves fall $1.713 billion to $651.997 billion after two weeks of decline. The previous peak for the reserves was $655.817 billion for the week ended June 7, this year.
Top 3 Leads Today
- Direct tax mop-up rises 20% to ₹5.74 trillion on higher corporate advance tax.
- India's retail inflation rises to 5.08% in June; IIP grows 5.9% in May.
- India's credit ratings upgrade is long overdue: RBI Guv Shaktikanta Das.
Market Recap: The Week That Was
- Money Markets Minute: Last week, the call money rate remained stable around the repo rate at 6.50%. Liquidity in the system remained adequate, with daily average net liquidity absorption of around ₹1.3 lakh crore, indicating that the RBI continues to manage excess liquidity in the banking system effectively.
- Government Bond Brief: On a weekly basis, the 10-year government bond benchmark yield ended a bit lower after falling 2 basis points the previous week. The yields recovered from their slight decline to close Friday barely changed despite a drop in US peers, as weakening US inflationary pressures reinforced predictions on interest rate cuts.
- Corporate Bond Beat: Yields declined across tenures last week, mirroring a drop in US bond yields and robust investor demand for corporate bonds with maturities of up to five years. In the secondary market, yields on three- and five-year bonds had declined by 4-5 basis points. Volumes were low in the secondary market last week as investors absorbed primary issuances.
- Forex Flash: The rupee remained relatively steady week on week against the dollar. On Friday, the rupee’s gains were limited by the continued demand for dollars from importers, including local oil companies. Rising global crude oil prices exerted upward pressure on the rupee, as India is a major oil importer.
- Stocks Spotlight: Last week, the Indian benchmark indices rose 0.7%, marking the sixth consecutive week of advances. On Friday, the benchmark indices reached new closing highs as IT stocks joined a remarkable rally that has been going on for over a month. This surge was fuelled by the positive results of market leader Tata Consultancy Services, which indicated an early recovery in the sector. The IT stocks index rose 4.5%, driven by increased expectations of a US rate drop in September after consumer prices unexpectedly declined in June.
Trading Trends
Most actively traded Corporate bonds in the Standard Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE0KUG08035 | 7.43 NBFID 04JUL34 | 2308 | 7.42 |
| INE040A08997 | 3.00 HDFC BANK 30SEP24 | 2260 | 7.75 |
| INE261F08EJ7 | 7.64 NABARD 06DEC29 | 1550 | 7.63 |
| INE261F08DX0 | 7.58 NABARD 31JUL26 | 1290 | 7.70 |
| INE556F08KI9 | 7.44 SIDBI 04SEP26 | 1010 | 7.71 |
Most actively traded Corporate bonds in the Odd Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE572J07711 | 9.84 SPANDANA 28JUN26 | 29.27 | 9.56 |
| INE06E507199 | 10.47 HELLAINFRA 26SEP25 | 27.537 | 13.06 |
| INE342T07494 | 10.50 NAVIFIN 18JUN27 | 27.38 | 11.06 |
| INE0U0U07027 | 10.80 MATRIXPHARMA 05AUG25 | 21.62 | 11.18 |
| INE516Y07444 | 6.75 PIRAMALHFC 26SEP31 | 21.1074 | 11.14 |
Traded volume in corporate bonds by maturity:
| Maturity | Volume(in Cr) |
|---|---|
| 1Y | 7550 |
| 3Y | 5627 |
| 5Y | 3406 |
| 7Y | 413 |
| 10Y | 4633 |
Source: Harmoney data analytics
The Week Ahead
- Money Markets: On Monday, the one-day call money rate is expected to open firm around the Repo rate of 6.50% as demand for funds could rise in the early trade. However, given the ample liquidity in the banking system, the rate is expected to fall.
- Government Bonds: Yields will likely rise on Monday following the release of higher-than-expected CPI inflation in June on Friday after market hours last week. India's headline consumer inflation jumped to 5.08% in June from 4.80% in May. Investors will monitor India’s wholesale price inflation and balance of trade data for June, which will be announced on Monday.
- Corporate Bonds: Yields may open firm and rise on Monday, following higher-than-expected June CPI inflation data. Investors are expected to refrain from making significant investments in the secondary market before the release of the full Budget for 2024-25 on July 23.
- Forex: On Monday, the rupee will closely follow the fluctuations in crude oil prices and the movements of the dollar index. The dollar index movement may influence investors, as the US producer price index gained 0.2% in June after being flat in May. This data came from the US Labor Department on Friday after market hours.
- Stocks: Domestic shares are likely to experience a volatile session at the start of the week as key indices are at record highs. Investors may book profits ahead of the Union Budget, which will be announced on July 23. Investors will also keep a close eye on the quarterly results of L&T, Bajaj Auto, Infosys, Jio Financial Services, etc., which will be released this week.
Events This Week
July 15, Monday
- US Federal Reserve Board of Governors closed meeting.
- India WPI data for June.
- India Trade Balance for June.
July 16, Tuesday:
- US Advance monthly sales for retail & food services for June.
- US manufacturing & trade for May.
July 17, Wednesday:
- US New Residential Construction for June.
- US Industrial Production and Capacity Utilization for June.
- US EIA Weekly Petroleum Status Report for Jul 12 week.
July 18, Thursday:
- US Unemployment Insurance Weekly Claims Report for Jul 13 week.
- US Weekly Export Sales.
July 19, Friday:
- US State Employment and Unemployment for June.
- India FX Reserves for Jul 8 week.
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