India's foreign exchange reserves fell for the sixth week in a row to a near three-month low of $675.65 billion as of November 8, according to data from the Reserve Bank of India released on Friday. The reserves declined by $6.5 billion during the reporting week, bringing them down $29.2 billion from the record high of $704.89 billion set in late September. Changes in foreign currency assets are driven by the central bank's activity in the forex market and the appreciation or depreciation of foreign assets kept in reserves.
Top 3 Leads Today
- India-China bilateral trade hits $10.7 billion in October, contracts 0.46%.
- Moody's says Indian economy in 'sweet spot,' predicts 2024 growth of 7.2%.
- India Inc capex slows down marginally to ₹9.4 trillion in FY24: Care Ratings.
Indian Markets
- Money Markets Minute: The four-day interbank call money rate ended Thursday at the RBI of India's standing deposit facility rate, indicating minimal demand for funds due to large surplus liquidity. Despite the long weekend, demand for cash remained low because banks had sufficient surpluses to meet regulatory obligations. The four-day call money rate closed at 6.25%, compared to 6.60% for one-day loans on Wednesday. The financial markets were shut on Friday to commemorate Guru Nanak Jayanti.
- Government Bond Brief: Yields rose last week owing to an increase in US Treasury yields and unsatisfactory cut-off prices in the weekly gilt auction in an already cautious market. The results showed sluggish investor demand for gilts in the face of negative global and domestic interest rate indications. The benchmark 7.10% 2034 bond yielded 6.86%, compared with 6.84% on Wednesday. The bond's yield closed at its highest level since October 28.
- Corporate Bond Beat: Yields were slightly higher for the 3-year tenure following the rise in government bond yields but remained stable for the other tenures. Trade was limited in a truncated week as investors preferred to stay on the sidelines due to uncertainty regarding the Reserve Bank of India's views on interest rate cuts.
- Forex Flash: The Indian rupee fell to its lowest closing level on record on Thursday but outperformed its regional rivals as state-run banks' dollar sales offset a rising greenback and weakness in local markets. The rupee closed at 84.3950 on Thursday against the US dollar, down slightly from 84.3775 the previous day. The currency remained largely stable from week to week.
- Stocks Spotlight: Indian equities fell on Thursday, marking their sixth weekly loss in a row, as fears about a slowdown in spending combined with concerns about earnings moderation and foreign outflows. Both benchmarks lost around 2.5% over the past week. The NSE Nifty 50 declined 0.11% to 23,532.7 points, dropping below its 200-day moving average for the first time since April 2023. The BSE Sensex fell 0.14%, closing at 77,580.31.
Trading Trends
Most actively traded Corporate bonds in the Standard Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE040A08948 | 7.79 HDFC BANK 04MAR25 | 1575 | 7.65 |
| INE261F08DI1 | 5.23 NABARD 31JAN25 | 1502 | 7.23 |
| INE535H07BP5 | 7.95 SMFG 30JUN25 | 1400 | 20.80 |
| INE261F08DX0 | 7.58 NABARD 31JUL26 | 1230 | 7.54 |
| INE040A08856 | 5.78 HDFC BANK 25NOV25 | 1110 | 7.75 |
Most actively traded Corporate bonds in the Odd Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE0BUS07BJ4 | 11.00 INDEL MONEY LIMITED 07FEB2026 | 20 | 12.39 |
| INE906B07EJ8 | 7.60 NHAI 11JAN31 | 18 | 5.25 |
| INE658F08227 | 9.49 KIIF 08OCT28 | 16 | 9.85 |
| INE062A08462 | 7.98 SBI PERP 24OCT34 C | 14 | 2.82 |
| INE01HV07320 | 0% VIVRITI CAPITAL 13DEC24 | 12 | 10.00 |
Traded volume in corporate bonds by maturity:
| Maturity | Volume(in Cr) |
|---|---|
| 1Y | 11214 |
| 3Y | 2560 |
| 5Y | 1718 |
| 7Y | 640 |
| 10Y | 1672 |
Source: Harmoney data analytics
The Week Ahead
- Money Markets: The interbank call money rate will likely open close to the RBI's repo rate of 6.50%, as bank demand for funds may be stronger in early transactions. However, traders anticipate that call rates will fall as the banking system's liquidity surplus grows. On Monday, the call rate is predicted to move between 6.00 and 6.70%.
- Government Bonds: Yields will open firm on Monday after Friday's surge in US treasury yields. Crude oil price fluctuations may impact domestic government bonds as well. On Monday, the government will swap ₹200 billion worth of eight bonds for seven gilts. On Monday, the yield on the 10-year benchmark 7.10% 2034 bond is expected to range between 6.82 and 6.90%. The yield on the 6.79% 2034 bond is expected to trade between 6.79 and 6.86%.
- Corporate Bonds: Yields are projected to rise this week in tandem with rising US treasury yields. Hopes for additional US interest rate cuts were shattered due to concerns that Trump's policies may reignite inflation after a long battle against pricing pressures following the pandemic. Trade volumes are expected to remain low.
- Forex: The rupee is expected to stay weak versus the dollar on Monday, as foreign funds may continue to dump domestic stocks and bonds. However, traders expect the RBI to intervene if the rupee falls below 84.40 this week. On Monday, the rupee may trade between 84.35 and 84.45 per dollar.
- Stocks: On Monday, the benchmark indices are expected to be volatile, following the softness of global stocks. Given the recent volatility and FII selling pressure, investors will likely stay cautious. The rupee's exchange rate and crude oil prices may also influence the market's trajectory this week.
Events This Week
November 18, Monday:
- US Treasury International Capital Data for September.
November 19, Tuesday:
- US New Residential Construction for October.
- US State Employment and Unemployment for October.
November 20, Wednesday:
- US EIA Weekly Petroleum Status Report for Nov 15 week.
November 21, Thursday:
- US Unemployment Insurance Weekly Claims Report for Nov 16 week.
- US Weekly Export Sales.
- US Existing Home Sales for October.
- US Advance Quarterly Services for Q3.
November 22, Friday:
- US Flash Manufacturing PMI for November.
- US Flash Services PMI for November.
- India HSBC Composite PMI for November.
- India HSBC Manufacturing PMI for November.
- India HSBC Services PMI for November.
- India FX Reserves for Nov 11 week.
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