In the latest RBI MPC minutes, Michael Patra noted India's potential output is now rising faster than before the pandemic but warned of a positive output gap that requires close monitoring of demand. Conversely, Jayanth Varma cautioned against high real interest rates, arguing that despite strong growth projections, they fall short of India's potential and the needs of its demographic transition. He stressed the importance of supportive monetary policy to harness growth opportunities. The contrast highlights Patra's focus on preventing overheating, while Varma warns against stifling growth with tight policy.
Top 3 Leads Today
- Minutes show RBI's unwavering focus on inflation, comfort from growth.
- FY25 GDP growth aim of 6.5-7% seems appropriate as of now: Finmin Report.
- ICRA forecasts India's Q1 GDP growth to fall to 6%, a six-quarter low.
Indian Markets
- Money Markets Minute: The call money rate dropped to 5.75%, below the RBI's 6.25% standing deposit facility rate, as banks' demand for funds eased by the end of trade despite tighter liquidity. The weighted average call rate slightly decreased to 6.52% from 6.53% on Wednesday.
- Government Bond Brief: Government bond yields fell as traders reacted to US Treasury yields rising, following unexpectedly strong PMI data from Europe. The 10-year benchmark 7.10%, 2034 bond closed with a yield of 6.85%, down from 6.86% on Wednesday, marking its lowest level since March 31, 2022. Trading turnover was ₹644.25 billion, up from ₹524.65 billion the previous day.
- Corporate Bond Beat: Corporate bond yields remained steady in the secondary market as traders refrained from making aggressive moves ahead of the release of the RBI's Monetary Policy Committee minutes. The trading volume totalled ₹119.06 billion, slightly higher than ₹115.54 billion recorded on Wednesday.
- Forex Flash: The rupee ended steady against the dollar as the RBI's intervention balanced the downward pressure caused by dollar purchases from banks for importers and foreign fund outflows. The rupee closed at 83.9525 per dollar, moving within a narrow 4-paise range, compared to 83.9225 on Wednesday.
- Stocks Spotlight: Indices continued their winning run for a third straight session amid buying across sectors, barring IT and power. Investors now will keenly watch the unemployment claims, existing home sales and PMI data from the US, ahead of Fed Chair Powell’s speech at Jackson Hole, for confirmation of the rate cut timing. At close, Sensex was up 0.18% at 81,053.19, and the Nifty was up 0.17% at 24,811.50.
International Markets
- US Stocks: Technology companies weighed down all three major US stock indexes on Thursday as recession fears eased, and global central bank officials met at the Jackson Hole Economic Symposium. Following Wednesday's dramatically lower baseline payrolls revision, rising U.S. unemployment claims suggest the labour market is deteriorating. The Dow was down 0.43%, S&P 500 fell 0.89%, and Nasdaq fell 1.67% on Thursday.
- Treasuries: Yields rose Thursday after robust economic data all but dispelled fears of a hard landing and lowered expectations of rapid Federal Reserve easing next month. Retail sales gained 1.0% in July following a downwardly revised 0.2% decline in June, according to the Commerce Department. Last week, 227,000 Americans applied for unemployment benefits, down from 235,000 projected and 233,000 revised claims the week before. The 10-year benchmark yield rose 8.6 basis points to 3.862%.
- Currency: The dollar rose on Thursday as traders digested economic data and awaited Friday’s Fed Chair Powell’s views on cutting interest rates. The dollar recovered from 13-month low against the euro. The dollar index gained against major basket of currencies almost 0.4%.
Trading Trends
Traded volume(in Cr) in corporate bonds by sector and maturity:
| Sectors | 0-1y | 1-3y | 3-5y | 5-10y | >10y |
|---|---|---|---|---|---|
| NBFC | 821 | 1535 | 1184 | 352 | 49 |
| Financial Institution | 555 | 355 | 358 | 1375 | 50 |
| Housing Finance Company | 175 | 587 | 473 | 50 | 15 |
| Diversified | 75 | - | - | 1000 | - |
| Telecom - Cellular & Fixed line | 100 | 170 | - | 180 | - |
Secondary trade details for recently issued primary corporate bonds:
Security Name |
Issue Date |
Trades Since Issue(Cr) |
Avg Yield(%) |
LTY (%) |
|---|---|---|---|---|
| 7.36 NBFID 12AUG44 | 2024-08-13 | 1385 | 7.35 | 7.35 |
| 8.25 SBICARDS 08AUG34 | 2024-08-08 | 920 | 8.24 | 8.20 |
| 8.00 IIDL 29OCT29 | 2024-08-13 | 781 | 8.01 | 8.00 |
| 7.81 TATA CHEMICALS LIMITED 20AUG2027 | 2024-08-20 | 750 | 7.81 | 7.81 |
| 0% 360ONEPRIME 13MAR26 | 2024-08-08 | 164 | 9.00 | 9.00 |
| 9.75 SAMMAAN CAPITAL LIMITED 12APR2028 | 2024-08-12 | 150 | 9.65 | 9.75 |
| 7.95 IIDL 13AUG39 | 2024-08-13 | 125 | 7.95 | 7.94 |
| 8.05 AXISFIN 25APR28 | 2024-08-09 | 119 | 8.02 | 8.03 |
| 8.28 PNB HFL 30DEC26 | 2024-08-07 | 100 | 8.31 | 8.31 |
| 8.90 MUTHOOT FINANCE 07OCT27 | 2024-08-07 | 100 | 8.92 | 8.91 |
| 7.99 RCFL 07AUG27 | 2024-08-07 | 100 | 7.99 | 7.99 |
| 8.49 ADITYA BIRLA SUN LIFE INSURANCE COMPANY LTD - C 12AUG2034 M | 2024-08-12 | 96 | 8.48 | 8.48 |
| 7.95 ICICI HFL 16NOV27 | 2024-08-16 | 85 | 7.97 | 7.97 |
| 10.40 NAVIFIN 13NOV26 | 2024-08-13 | 72 | 11.10 | 11.22 |
| 9.85 NUVAMAWEALTH 09AUG27 | 2024-08-08 | 55 | 9.57 | 9.15 |
Source: Harmoney data analytics
Events This Week
August 23, Friday:
- US New residential sales for July.
- India Bank loan growth for Aug 9 week.
- India deposit growth for Aug 9 week.
- India Foreign exchange reserves for Aug 16 week.
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