In its monthly bulletin on Friday, the RBI predicted that weaker crude oil prices will help India's headline inflation average 4.5% in the second half of the fiscal year, despite food price volatility. "Some vegetable price shocks have begun to reverse, and if this continues and broadens, the persistence that characterised food inflation developments in the first quarter of 2024-25 may be behind us," the RBI said. Vegetable prices rose in August, raising India's retail inflation to 3.65% from 3.60% in July. In August, food costs, which make up over half of retail inflation, climbed 5.66%, up from 5.42% in July.
Top 3 Leads Today
- Forex reserves rise for 5th week, hit record high of $689.46 bn: RBI data.
- Gold breaks $2,600 barrier as Fed cut bets prolong historic run.
- India's markets regulator eases credit default swap norms for mutual funds.
Indian Markets
- Money Markets Minute: On Saturday, the call rate declined below the RBI’s repo rate of 6.50% because of the low demand for funds from banks. As liquidity tightened following the advance tax outflows last week, the call rate increased to the RBI's marginal standing facility rate of 6.75% during the week.
- Government Bond Brief: The 10-year benchmark yields fell two basis points week-on-week after the Federal Reserve began its rate-cutting cycle last week. Yields rose slightly as dealers sold stock following robust buying at the auction on Friday. The government offered ₹200 billion in benchmark 10-year bonds and ₹110 billion in 40-year paper.
- Corporate Bond Beat: Last week, yields eased by 6-7 basis points across the yield curve after the US Fed went for an aggressive 50 basis points rate cut. Volumes in the secondary market remained low as investors chose to focus on the big queue of primary market issuances from Power Finance Corp, NABARD on Friday.
- Forex Flash: Last week, the US Federal Reserve started a cycle of interest rate cuts, which helped the Indian rupee rise for the fifth day in a row on Friday. Its rise was boosted by gains in other Asian currencies and expected portfolio inflows. The rupee closed at 83.5625 against the US dollar, up from 83.68 the previous day. The Indian rupee soared to a more than two-month high of 83.4850 earlier in the session, gaining about 0.4% week on week, its biggest weekly gain this year.
- Stocks Spotlight: The Indian shares rocketed to new highs and reported weekly gains, as the US Federal Reserve's outsized interest rate decrease earlier in the week piqued investor risk appetite across global markets. The NSE Nifty 50 rose 1.48% to 25,790.95, while the S&P BSE Sensex climbed 1.63% to 84,544.31, setting new closing highs. The Sensex also crossed 84,000 for the first time on Friday. For the week, the Nifty and Sensex rose 1.7% and 2%, respectively, marking the fifth week of gains in six.
Trading Trends
Most actively traded Corporate bonds in the Standard Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE261F08DK7 | 5.70 NABARD 31JUL25 | 2525 | 7.78 |
| INE556F08KR0 | 7.47 SIDBI 05SEP29 | 1318 | 7.39 |
| INE261F08EI9 | 7.70 NABARD 30SEP27 | 1050 | 7.55 |
| INE261F08EJ7 | 7.64 NABARD 06DEC29 | 920 | 7.43 |
| INE261F08EH1 | 7.62 NABARD 10MAY29 | 880 | 7.42 |
Most actively traded Corporate bonds in the Odd Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE261F08EI9 | 7.70 NABARD 30SEP27 | 51 | 7.54 |
| INE423A07328 | 9.65 ADANIENTLTD 09SEP27 | 45 | 9.59 |
| INE906B07EO8 | 7.39 NHAI 09MAR31 | 32 | 5.24 |
| INE07HK07767 | 11.00 KRAZYBEESERVICES 30JAN26 | 21 | 12.65 |
| INE515Q08226 | 12.40 AFPL 24APR29 | 17 | 13.03 |
Traded volume in corporate bonds by maturity:
| Maturity | Volume(in Cr) |
|---|---|
| 1Y | 6760 |
| 3Y | 5858 |
| 5Y | 6286 |
| 7Y | 478 |
| 10Y | 2814 |
Source: Harmoney data analytics
The Week Ahead
- Money Markets: On Monday, the one-day call money rate is expected to rise as banks' demand for cash increases due to tight liquidity conditions in the financial system. The call rate is expected to trade within a range of 6.20-6.75% for the day.
- Government Bonds: On Monday, yields are likely to open flat. Demand for bonds maturing in more than ten years may decline ahead of the monthly gilt swap auction. The government will exchange eight short-term gilts worth ₹300 billion for four bonds on Monday. This week, traders will monitor the movement of crude oil prices for more signals.
- Corporate Bonds: Yields may remain steady across the yield curve and volumes may continue to be subdued amid lack of fresh cues this week. Market participants will closely monitor domestic government bond markets, crude oil prices for fresh cues.
- Forex: This week, the rupee is anticipated to strengthen against the dollar as it monitors fluctuations in the dollar index and crude oil prices. Market participants anticipate that the rupee will be supported by dollar sales from foreign institutions in response to fund inflows in the domestic markets, despite the possibility of some volatility during the week.
- Stocks: Due to the recent rate cuts from the US Federal Reserve, the domestic stock market is expected to trade on a strong note this week. Given rising valuations, some profit-taking is also expected as domestic shares approach their record high. This week investors will check the rupee, crude oil prices, and the activities of overseas portfolio investors. It will also take cues from the US second quarter GDP results, which will be reported on Thursday, as well as the US Core PCE price index data for August, which will be published on Friday.
Events This Week
September 23, Monday:
- US Flash PMI data for September.
- India PMI data for September.
September 24, Tuesday:
- US Monthly house price index for July.
- US Consumer confidence index for September.
September 25, Wednesday:
- US New residential sales for August.
September 26, Thursday:
- US 3rd estimate GDP for Q2.
- US Revised corporate profits for Q2.
- US Advance report on durable goods for August.
- US Unemployment insurance weekly claims report for Sep 21 week.
- US Weekly export sales.
September 27, Friday:
- US Advance economic indicators report for August.
- US State quarterly personal income for Q2.
- US GDP by state for Q2.
- India Balance Payment for Q2.
- India Current Account Balance for Q2.
- India FX Reserves for Sep 16 week.
- India Trade Deficit for Q2.
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