India's foreign exchange reserves fell by $3.235 billion to $654.857 billion in the week ended December 6, a five-month low, according to Reserve Bank of India figures issued on Friday. In the preceding reported week, reserves increased by $1.51 billion to $658.091 billion, following an eight-week fall after reaching an all-time high of $705 billion on September 27, 2024. Meanwhile, gold reserves fell by $43 million to $66.936 billion during the period under review. The Special Drawing Rights climbed by $25 million to $18.031 billion, according to RBI data.
Top 3 Leads Today
- CARE Ratings pares down India's FY25 GDP growth forecast to 6.5%.
- Economists expect 25-basis point rate cut by RBI MPC in February meeting.
- India's markets regulator proposes retail investors participate in algo trading.
Indian Markets
- Money Markets Minute: On Friday, the interbank call money rate rose over the Reserve Bank of India's marginal standing facility rate of 6.75%, as outflows from advance payments weighed on liquidity. The three-day call money rate was 6.80%, compared with 5.75% for one-day loans previous day. Banks' CRR was lowered last weekend by the RBI. The RBI reduced banks' CRR by 25 basis points starting Dec 14 and by 25 bps starting Dec 28. The RBI has predicted that the measure will improve liquidity in the banking system by ₹1.16 trillion.
- Government Bond Brief: The benchmark government bond yields fell as traders covered short positions after the weekly gilt auction received higher-than-expected demand. The 10-year benchmark 6.79% 2034 bond yielded 6.73%, compared to 6.74% on Thursday. The benchmark bond yield fell slightly on a weekly basis.
- Corporate Bond Beat: Yields were modestly higher week on week for tenures of up to three years due to some mutual funds selling near the end of the week. All week long, yields on long-term corporate bonds were relatively flat. Investors opted to concentrate on the primary issuances last week, therefore volumes were low.
- Forex Flash: The Indian rupee fell for the sixth week in a row on Friday, weighed down by heightened dollar demand and a lower yuan. The rupee closed higher at 84.7875 against the US dollar on Friday but declined 0.1% for the week.
- Stocks Spotlight: The benchmark indices closed higher on Friday, boosted by consumer sectors on lower domestic retail inflation, and posted their fourth straight weekly rise, the longest such sequence since July. The Nifty 50 jumped 0.89% to 24,768.3, while the Sensex climbed 1.04% to 82,133.12. Both indices had fallen as much as 1.4% earlier in the session. The Nifty and Sensex rose by roughly 0.4% and 0.5%, respectively, this week.
Trading Trends
Most actively traded Corporate bonds in the Odd Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE0BUS07BK2 | INDEL MONEY 06APR26 | 32 | 12.63 |
| INE1C3207016 | TELANGANA STATE INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED 24NOV2034 | 30 | 9.58 |
| INE01YL07318 | EARLYSALARY 06MAY26 | 26 | 12.02 |
| INE1C3207032 | TELANGANA STATE INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED 31DEC2032 | 22 | 9.54 |
| INE1C3207065 | TELANGANA STATE INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED 31DEC2030 | 21 | 9.56 |
Most actively traded Corporate bonds in the Standard Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE040A08948 | HDFC BANK 04MAR25 | 1280 | 7.21 |
| INE261F08DX0 | NABARD 31JUL26 | 985 | 7.57 |
| INE721A07SB0 | SHRIRAM FINANCE 22MAY26 | 820 | 8.78 |
| INE261F08EK5 | NABARD 24FEB28 | 650 | 7.45 |
| INE752E08551 | PGC 14FEB29 | 450 | 7.08 |
Traded volume in corporate bonds by maturity:
| Maturity | Volume(in Cr) |
|---|---|
| 1Y | 7863 |
| 3Y | 3662 |
| 5Y | 2509 |
| 7Y | 454 |
| 10Y | 1909 |
Source: Harmoney data analytics
The Week Ahead
- Money Markets: The one-day call money rate may open at the Reserve Bank of India's marginal standing facility rate of 6.75% on Monday due to bank demand for cash. During the day, the call rate may trade from 6.00 to 6.80%.
- Government Bonds: On Monday, the benchmark government bond yield is expected to rise tracking rise in US treasury yield on Friday. Traders will also keep an eye out for the FOMC's statement, which is expected to drop the benchmark rate by 25 basis points early Thursday. Market participants will also monitor crude oil prices. The yield on the 6.79%, 2034 bond is expected to range from 6.70 to 6.77% on Monday.
- Corporate Bonds: Yields may hold steady for most part of the week and will track movements in domestic government bond yields for any movement. Investors may continue to focus on the primary issuance that may be offered during the week. Volumes are expected to remain thin as traders may choose to remain on sidelines before the US Federal Reserve policy meeting outcome this week.
- Forex: The rupee is likely to be under pressure against the dollar on Monday due to capital outflows and anticipation of a rate decrease by the RBI in February 2025. This week, traders will closely monitor crude oil prices and foreign fund flows for further cues. The rupee is expected to trade between 84.78 and 84.88 per US dollar on Monday.
- Stocks: The benchmark stock indices could rise on Monday and will be influenced by global stock market movements, local economic indicators, and foreign money flows this week. Additionally, the rupee and crude oil prices will be important influencers of market direction. India's wholesale pricing index-based inflation and balance of trade figures for November, which will be released on Monday, may provide additional market direction clues.
Events This Week
December 16, Monday:
- US Flash Manufacturing PMI for December.
- US Flash Services PMI for December.
- India HSBC PMI for December.
- India WPI Inflation for November.
- India Trade Deficit Government for November.
December 17, Tuesday:
- US Advance Monthly Sales for Retail & Food Services for November.
- US Industrial Production and Capacity Utilization for November.
- US Federal Open Market Committee meeting.
December 18, Wednesday:
- US International Transactions for Q3.
- US New Residential Construction for November.
- US Federal Reserve economic projections.
- US Interest rate decision.
December 19, Thursday:
- US 3rd estimate GDP for Q3.
- US Revised Corporate Profits for Q3.
- US Unemployment Insurance Weekly Claims Report for Dec 14 week.
- US Weekly Export Sales.
- US Existing Home Sales for November.
December 20, Friday:
- US State Quarterly Personal Income for Q3.
- US GDP by State for Q3.
- US State Employment and Unemployment for November.
- India FX Reserves for Dec 9 week.
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