The Reserve Bank of India has urged state governments to establish clear and time-bound plans for fiscal consolidation, with transparent reporting of liabilities, considering elevated debt levels. The RBI's report on State Finances highlighted concerns over rising subsidy spending, including farm loan waivers and free or subsidised services, as sources of fiscal stress. While states' total liabilities fell to 28.5% of GDP by March 2024 from 31% in March 2021, they remain above pre-pandemic levels, underscoring the need for a credible debt consolidation roadmap.
Top 3 Leads Today
- SEBI Approves Investments by REITs and InvITs in Select Unlisted Shares, Liquid MF Plans.
- Economists see India FY25 CAD 1.2% of GDP; robust services exports to limit gap.
- Remittances to India seen rising to $129 billion in 2024, says World Bank.
Indian Markets
- Money Markets Minute: The call rate ended at 5.75% on Thursday, down from 5.85% on Wednesday, as banks' demand for funds eased towards the day's close. This marked a level below the RBI's standing deposit facility rate of 6.25%. Meanwhile, the weighted average call rate rose slightly to 6.71% from 6.69% the previous day.
- Government Bond Brief: Yields rose, tracking US Treasuries, after the Federal Reserve revised its 2025 rate cut projection to 50 basis points from 100 bps in September. The 10-year benchmark 6.79%, 2034 bond closed at 6.79%, its highest since 28 November, with turnover jumping to ₹525.95 billion from ₹217.20 billion on Wednesday. The spread between Indian and US bond yields narrowed to its lowest in nearly two decades.
- Corporate Bond Beat: Corporate bond yields rose by 2-3 basis points across tenures in the secondary market on Thursday, following an upward rally in government securities. Trading activity saw deals worth ₹62.68 billion, down from ₹99.64 billion recorded on Wednesday.
- Forex Flash: The rupee closed at a record low of 85.0700 against the dollar on Thursday, pressured by a stronger dollar index following the US Federal Reserve's indication of a slower pace of rate cuts in 2025. Earlier, the Fed reduced rates by 25 basis points as anticipated. The rupee moved within a narrow 5-paise range before settling lower from Wednesday's close of 84.9525.
- Stocks Spotlight: Indices, Sensex and Nifty, fell over 1% on Thursday, marking their fourth straight session of losses as global market weakness weighed on investor sentiment. The fall was attributed to the US Federal Reserve's cautious outlook on rate cuts, which dampened optimism. At the close, the Sensex dropped 1.2% to 79,218, while the Nifty declined 1.02% to 23,951.25.
International Markets
- US Stocks: The benchmark indices ended mostly unchanged on Thursday after the Federal Reserve signalled fewer rate cuts and higher inflation next year. Economic data supported this view, with jobless claims dropping and third-quarter GDP growth revised up to 3.1%. The Dow gained 0.04% to 42,342.24, the S&P 500 fell 0.09% to 5,867.08, and the Nasdaq fell 0.10% to 19,372.77.
- Treasuries: The benchmark yield climbed to their highest levels since May, with the 10-year yield rising 7.2 basis points to 4.57%, as investors adjusted to the Federal Reserve's cautious approach to easing policy. The 30-year bond yield increased to 4.7456%, while the 2-year yield, closely tied to interest rate expectations, dipped to 4.314%. The yield curve steepened to its widest gap in over two years.
- Currency: The dollar regained ground after an initial dip, reflecting the market's reaction to the Fed's measured approach to policy easing. The dollar index increased by 0.11% to 108.38, while the euro rose slightly to $1.0364. Against the yen, the dollar climbed 1.69% to 157.41.
Trading Trends
Traded volume(in Cr) in corporate bonds by sector and maturity:
| Sectors | 0-1y | 1-3y | 3-5y | 5-10y | >10y |
|---|---|---|---|---|---|
| NBFC | 154 | 960 | 259 | 781 | 37 |
| Financial Institution | 30 | 450 | 483 | 351 | - |
| Housing Finance Company | 250 | 155 | 8 | 487 | - |
| Diversified | 600 | - | - | - | - |
| Private Sector Bank | 205 | 25 | 28 | 125 | - |
Secondary trade details for recently issued primary corporate bonds:
Security Name |
Issue Date |
Trades Since Issue(Cr) |
Avg Yield(%) |
LTY (%) |
|---|---|---|---|---|
| 9.35 TELANGANA STATE INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED 31DEC2027 | 2024-12-06 | 667 | 9.41 | 8.92 |
| 7.69 LIC 11DEC26 | 2024-12-12 | 400 | 7.69 | 7.69 |
| 7.23 DME DEVELOPMENT LIMITED 11DEC2034 | 2024-12-11 | 350 | 7.36 | 7.36 |
| 7.75 SUNDARAM FINANCE 11DEC26 | 2024-12-13 | 275 | 7.74 | 7.75 |
| 7.92 INDIA INFRADEBT LIMITED 06JUN2030 | 2024-12-06 | 273 | 7.93 | 7.90 |
| 7.09 IRFC 16DEC34 | 2024-12-16 | 270 | 7.11 | 7.16 |
| 9.35 TELANGANA STATE INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED 31DEC2030 | 2024-12-06 | 250 | 9.46 | 9.10 |
| 9.35 TELANGANA STATE INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED 31DEC2029 | 2024-12-06 | 241 | 9.47 | 9.10 |
| 9.35 TELANGANA STATE INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED 24NOV2034 | 2024-12-06 | 178 | 9.61 | 9.14 |
| 9.35 TELANGANA STATE INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED 29DEC2028 | 2024-12-06 | 155 | 9.65 | 9.10 |
| 9.35 TELANGANA STATE INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED 30DEC2033 | 2024-12-06 | 150 | 9.66 | 9.11 |
| 9.35 TELANGANA STATE INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED 31DEC2032 | 2024-12-06 | 141 | 9.64 | 9.10 |
| 9.00 CREDILA FINANCIAL SERVICES LIMITED 13DEC2029 | 2024-12-13 | 141 | 9.09 | 9.10 |
| 11.25 INDEL MONEY 06APR26 | 2024-12-06 | 139 | 12.52 | 13.09 |
| 9.35 TELANGANA STATE INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED 31DEC2031 | 2024-12-06 | 131 | 9.66 | 9.00 |
| 7.7215 BAJAJ FIN 26MAR27 | 2024-12-10 | 115 | 7.75 | 7.75 |
| 10.30 KRAZYBEE 12JUN26 | 2024-12-12 | 92 | 11.83 | 12.85 |
| 10.97 HELLA INFRA MARKET LIMITED 06JUN2026 | 2024-12-06 | 83 | 14.78 | 17.50 |
| 7.8461 ABHFL 10MAR28 | 2024-12-12 | 50 | 7.86 | 7.86 |
Source: Harmoney data analytics
Events This Week
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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