India's foreign exchange reserves fell for the second week in a row, reaching a one-month low of $690.43 billion on October 11, according to statistics from the Reserve Bank of India released on Friday. The reserves decreased by $10.75 billion during the reporting week, the largest dip since April 1, 2022. They had decreased by $3.7 billion in the previous week. Changes in foreign currency assets result from the central bank's intervention in the foreign exchange market, as well as the appreciation or depreciation of foreign assets kept in reserves.
Top 3 Leads Today
- Interest rate cut at this stage would be 'premature,' India central bank chief says.
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Indian Markets
- Money Markets Minute: The interbank call money rate rose above the Reserve Bank of India's repo rate of 6.50% due to strong demand from banks despite ample liquidity on Saturday. The two-day call rate closed at 6.55%, compared to 6.50% for three-day loans on Friday. The surplus liquidity in the banking sector stood at ₹1.75 trillion on Thursday, down from ₹1.90 trillion on Wednesday, according to Reserve Bank of India data.
- Government Bond Brief: Yields climbed on Friday, matching changes in their US treasuries, as new local debt supply hampered market demand. The central bank governor's comments that lowering interest rates now would be "very premature" weighed on demand even further. The benchmark 10-year bond yield ended at 6.8193%, up from its previous closing of 6.7810%. The yield jumped three basis points last week.
- Corporate Bond Beat: Yields were unchanged across the yield curve in the secondary market this past week. There was some selling by mutual funds in three-year segment mid-week, which resulted a slight uptick in the yields for the tenure. Volumes remained low because investors lapped up primary market issuances.
- Forex Flash: The Indian rupee fell to an all-time low on Friday, pressured by equity outflows, but managed to avoid a dramatic drop because to continued dollar sales by state-run banks, most likely on behalf of the Reserve Bank of India. The rupee closed at 84.0650 against the US dollar, little changed from the previous session's close of 84.0675. It struck a record low of 84.0775 earlier in the session, narrowly surpassing its previous all-time low of 84.0750 set on Monday.
- Stocks Spotlight: On Friday, Indian equities ended a three-day losing skid as gains in Axis Bank bolstered heavyweight financials, but foreign funds outflows pulled the benchmarks down to a third weekly loss. The benchmarks fell 0.44% and 0.19%, respectively, for the third week in a row, owing to mostly dismal corporate earnings and foreign investors' withdrawal from the Indian market. The Nifty 50 index closed 0.42% higher at 24,854.05 points, having touched a two-month low earlier in the session, while the BSE Sensex rose 0.27% to 81,224.75.
Trading Trends
Most actively traded Corporate bonds in the Standard Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE261F08DX0 | 7.58 NABARD 31JUL26 | 1180 | 7.51 |
| INE020B08FJ3 | 0% REC 03NOV34 | 1136 | 6.26 |
| INE296A07SF4 | 7.90 BAJAJ FIN 17NOV25 | 1075 | 7.82 |
| INE556F08KS8 | 7.34 SIDBI 26FEB29 | 955 | 7.37 |
| INE040A08856 | 5.78 HDFC BANK 25NOV25 | 830 | 7.77 |
Most actively traded Corporate bonds in the Odd Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE0Z4807015 | 0% CYQURE INDIA PRIVATE LIMITED 17MAR2028 | 62 | 14.11 |
| INE516Y07444 | 6.75 PIRAMAL CAPITAL HSG 26SEP31 | 23 | 10.69 |
| INE658F08243 | 9.49 KIIF 08OCT34 | 23 | 9.83 |
| INE342T07486 | 10.25 NAVI FINSERV 15SEP25 | 22 | 11.08 |
| INE0NES07121 | 11.40 KEERTANA FINSERV 28JAN27 | 19 | 12.37 |
Traded volume in corporate bonds by maturity:
| Maturity | Volume(in Cr) |
|---|---|
| 1Y | 9329 |
| 3Y | 3708 |
| 5Y | 3223 |
| 7Y | 1393 |
| 10Y | 4093 |
Source: Harmoney data analytics
The Week Ahead
- Money Markets: On Monday, the one-day call money rate may be close to the RBI's repo rate of 6.50% due to early demand for funds from banks to meet reserve requirements. The call rate ranges between 6.20% and 6.75%.
- Government Bonds: Yield movements will be influenced by global market movements such as US treasury yields and crude oil prices. Spreads between state bonds and gilts are expected to narrow this week, after the RBI said that five states will raise only ₹81 billion through bonds on Tuesday. The RBI's indicative calendar for October-December indicated a borrowing amount of ₹296 billion at this week's auction. On Monday, the yield on the 10-year benchmark 7.10%, 2034 bond is expected to range between 6.78- 6.86%.
- Corporate Bonds: Yields may remain steady across the tenures this week and will mirror the movement in government bonds yields. Volumes are expected to remain low amid no fresh triggers in the corporate bond secondary market. Investors will eye fresh issuance this week.
- Forex: The rupee is expected to remain firm around 84 per dollar this week, with traders expecting the RBI to intervene in the event of a further dramatic fall. Market participants will closely monitor foreign cash flows and crude oil prices for any sharp movements in the rupee's value against the dollar. On Monday, the rupee is expected to trade in the 83.95-84.05 band.
- Stocks: The stocks are likely to open steady on Monday and traders are expected to focus on a week packed with corporate earnings and global market movements. Global stock market movements, the rupee's exchange rate, and crude oil prices will influence the market this week. FPIs and DIIs will be keenly monitored by investors to evaluate their sentiment.
Events This Week
October 21, Monday:
- US IMF and World Bank annual meetings week.
- US Monthly treasury statement of receipts and outlays for September.
October 22, Tuesday:
- US IMF World Economic outlook.
- US State employment and unemployment.
- US IMF Global financial stability report.
- US G20 finance and central bank deputies meeting.
October 23, Wednesday:
- US Existing home sales for September.
- India RBI MPC meeting minutes.
October 24, Thursday:
- US Weekly export sales.
- US Unemployment insurance weekly claims report for Oct 19 week.
- US Flash Services PMI for October.
- US Flash Manufacturing PMI for October.
- US New Residential Sales for September.
- India Global manufacturing PMI for October.
- India Services PMI for October.
October 25, Friday:
- US Advance report on durable goods for September.
- India FX Reserves for Oct 18 week.
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