Foreign portfolio investments in central government bonds designated under the fully accessible route are approaching ₹2 trillion, nearly doubling in nine months after JP Morgan included Indian debt in its index, according to Clearing Corporation of India data. As of July 16, the total investment in FAR securities has increased significantly, reaching ₹1.93 trillion from ₹947.09 billion on September 22, 2023. The index only includes government bonds issued by the RBI under a fully accessible route. Only central government bonds that mature after December 31, 2026, are eligible for FAR designation. Market participants anticipate a steady influx of funds, projecting a potential increase of up to ₹2.5 trillion over the next 5-6 months.
Top 3 Leads Today
- IMF raises India's GDP growth forecast for FY25 by 20 bps to 7.0%.
- Moody's affirms HDFC Bank's Baa3 deposit rating, stable outlook.
- US FOMC may cut rates by 25 bps at Jul 30-31 meet, says Moody's.
Indian Markets
- Money Markets Minute: The call money market rate closed below the RBI's standing deposit facility rate of 6.25% as funds demand eased. The two-day call money rate remained steady at 5.75%, while the weighted average call rate rose slightly to 6.48% from 6.47% on Monday. Indian financial markets will be closed on Wednesday for Muharram.
- Government Bond Brief: Government bond yields fell as investors increased purchases, particularly of short-term papers for asset-liability management. The 10-year benchmark 7.10% bond maturing in 2034 closed with a yield of 6.96%, down from 6.98% on Monday. Turnover rose to ₹649.00 billion on Tuesday, compared to ₹436.10 billion on Monday.
- Corporate Bond Beat: Yields on corporate bonds remained flat in the secondary market as participants refrained from making large bets due to a lack of significant domestic and global catalysts. Trading activity was subdued, especially with domestic financial markets closed on Wednesday for Muharram.
- Forex Flash: The rupee remained stable, closing at 83.5825 per dollar, just slightly stronger than Monday's close of 83.5925 per dollar. This stability came despite downward pressure from dollar purchases by oil marketing companies, as the Reserve Bank of India intervened to support the currency.
- Stocks Spotlight: Benchmark indices reached new lifetime highs. However, profit booking at higher levels led to more modest gains, with the Nifty 50 closing 0.1% higher at 24,613 points. The Sensex also rose 0.1%, ending at 80,716.55 points, marking record closing levels for both indices. Investor sentiment remained positive due to optimism ahead of the upcoming Union Budget, expectations of an above-normal monsoon, and corporate earnings meeting expectations.
International Markets
- US Stocks: All three major US stock indexes rose on Tuesday, but weaker megacap growth companies led by Nvidia Corp and Microsoft Corp limited the tech-heavy Nasdaq's advances. The Dow Jones index touched an all-time closing high on Tuesday as US retail sales data reinforced the Federal Reserve would go ahead with rate cuts. The Dow closed 1.85%, while the S&P rose 0.64%, and Nasdaq went up 0.20%.
- Treasuries: Yields on 10-year benchmark note fell to a four-month low amid expectations for a rate cut to 4.163% on Tuesday. The fall in yields was boosted by US retail sales that rose by 2.3% year-on-year in June. The revised May retail sales showed a modest increase of 0.3%, compared to the initial estimate of 0.1%. Additionally, there was a significant surge of 0.9% in core retail sales during the same period.
- Currency: The US dollar rose against the yen on Tuesday after strong US retail sales data was interpreted as reinforcing expectations that the Federal Reserve will lower interest rates to control inflation while avoiding a recession. After giving up gains, the dollar index was near flat at 104.22, while the euro rose 0.05% to $1.0899. The dollar appreciated 0.22% to 158.37 against the Japanese yen.
Trading Trends
Traded volume(in Cr) in corporate bonds by sector and maturity:
| Sectors | 0-1y | 1-3y | 3-5y | 5-10y | >10y |
|---|---|---|---|---|---|
| Financial Institution | 175 | 1649 | 230 | 91 | - |
| Housing Finance Company | 280 | 596 | 621 | 99 | - |
| NBFC | 143 | 382 | 671 | 287 | - |
| Private Sector Bank | - | 715 | 80 | 358 | - |
| Public Sector Bank | - | - | - | 265 | 475 |
Secondary trade details for recently issued primary corporate bonds:
Security Name |
Issue Date |
Trades Since Issue(Cr) |
Avg Yield(%) |
LTY (%) |
|---|---|---|---|---|
| 7.43 NBFID 04JUL34 | 2024-07-04 | 2310.00 | 7.42 | 7.39 |
| 7.36 SBI 11JUL39 | 2024-07-11 | 800.00 | 7.36 | 7.36 |
| 7.89 BOM 04JUL29 C 04JUL34 M | 2024-07-04 | 752.00 | 7.90 | 7.88 |
| 7.92 TATA CAPITAL HFL 07JUL34 | 2024-07-08 | 420.00 | 7.92 | 7.91 |
| 7.53 ICICI 03JUL34 | 2024-07-01 | 400.00 | 7.52 | 7.53 |
| 8.1701 ADITYA BIRLA HFL 25AUG27 | 2024-07-12 | 345.00 | 8.18 | 8.18 |
| 8.07 ICICI HFL 01OCT27 | 2024-07-01 | 287.75 | 8.10 | 8.09 |
| 8.1168 ADITYA BIRLA HFL 15MAY29 | 2024-07-12 | 275.00 | 8.12 | 8.12 |
| 8.10 BAJAJ FINANCE 10JUL26 | 2024-07-10 | 225.00 | 8.10 | 8.10 |
| 7.98 BAJAJ HFL 09SEP26 | 2024-07-09 | 155.00 | 8.00 | 8.00 |
| 8.23 SUNDARAM FINANCE 05JUL34 | 2024-07-05 | 90.00 | 8.22 | 8.22 |
| 10.05 MUTHOOTFINCORP 29APR30 | 2024-07-01 | 72.41 | 10.66 | 10.21 |
| 10.50 SCNL 04JAN27 | 2024-07-04 | 56.31 | 11.61 | 11.79 |
Source: Harmoney data analytics
Events This Week
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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