Fiscal consolidation is the key message from the union budget for 2024-25. The centre stage was the scheme to boost jobs and skill development to address the angst of the youth, as seen from the election outcome. The government eschewed populism and put fiscal consolidation at a faster clip. It does appear that a ratings upgrade is the prize the government is eyeing. Such an outcome will boost investments in India and also lower the cost of capital.
Top 3 Leads Today
- Budget 2024: FY25 fiscal deficit target lowered to 4.9% of GDP from 5.1%.
- Budget 2024: Hikes LTCG tax rate to 12.5%, STCG to 20%, STT on F&O also up.
- India scraps 'angel tax'; startup investors rejoice.
Indian Markets
- Money Markets Minute: The call money market rate settled at the RBI's repo rate of 6.50%, reflecting strong demand for funds amid a significant decline in liquidity surplus within the banking system. The one-day call money rate closed at 6.50%, down from 6.55% on Monday. Meanwhile, the weighted average call rate rose to 6.67%, from 6.60% on the previous day.
- Government Bond Brief: Government bond yields ended largely unchanged. While some traders were disappointed by a smaller-than-expected reduction in market borrowings, many found reassurance in the downward revision of the fiscal deficit target for 2024-25. The 10-year yield remained at 6.97%, the same as on Monday. The trading turnover was ₹865.35 billion, up from ₹459.00 billion on Monday.
- Corporate Bond Beat: The Union Budget was seen as favourable for the debt market due to a larger-than-expected downward revision in the fiscal deficit target and a token reduction in market borrowing. Despite this positive sentiment, corporate bond yields remained largely unchanged. Market activity was subdued, with transactions totalling ₹46.92 billion on the NSE and BSE combined, compared to ₹78.24 billion on Monday.
- Forex Flash: The rupee hit a record closing low against the dollar, finishing at 83.6875 per dollar compared with 83.6350 per dollar on Monday. This decline was driven by foreign portfolio investors withdrawing from the domestic stock market following Finance Minister's proposal to raise the long-term capital gains tax on all financial and non-financial assets in the Budget.
- Stocks Spotlight: Indian equity indices ended lower for the third consecutive session following a series of announcements in the Union Budget by Finance Minister. Indices started the day on a high note but erased gains and traded flat in the first half. Profit booking in the second half dragged the Nifty below 24,100. By the close, the Sensex had fallen 0.09% to 80,429.04, and the Nifty had dropped 0.12% to 24,479.
International Markets
- US Stocks: Wall Street's main indexes closed slightly lower on Tuesday, giving up tiny intraday gains in the final minutes of trade as investors focused on Alphabet and Tesla's recent reports. After the market closed, the duo released results from the so-called Magnificent Seven stocks, with both reporting good second-quarter sales numbers. As US oil prices touched a six-week low, the energy index fell 1.6%, the weakest performer. The Dow ended down 0.14%, the S&P fell 0.16%, and the Nasdaq lost 0.06%.
- Treasuries: Yields fell on Tuesday as markets focused on economic data and a slew of corporate profits, moving past U.S. President Joe Biden's decision to forgo his re-election run. The yield on the benchmark US 10-year Treasury note declined 0.9 basis points to 4.251%. Traders will look for new clues on Friday when the US core personal consumption expenditures index will be released.
- Currency: The dollar index, which measures the greenback against a basket of currencies, rose 0.14% to 104.45, while the euro fell 0.37% to $1.0849. The yen climbed 0.9% against the dollar, reaching 155.63 per dollar.
Trading Trends
Traded volume(in Cr) in corporate bonds by sector and maturity:
| Sectors | 0-1y | 1-3y | 3-5y | 5-10y | >10y |
|---|---|---|---|---|---|
| NBFC | 247 | 258 | 187 | 92 | 676 |
| Financial Institution | 35 | 710 | 495 | 150 | - |
| Public Sector Bank | - | - | - | 750 | - |
| Housing Finance Company | - | 147 | 31 | 254 | - |
| Private Sector Bank | 100 | - | - | 25 | - |
Secondary trade details for recently issued primary corporate bonds:
Security Name |
Issue Date |
Trades Since Issue(Cr) |
Avg Yield(%) |
LTY (%) |
|---|---|---|---|---|
| 7.39 IRFC 15JUL34 | 2024-07-15 | 1165.00 | 7.40 | 7.40 |
| 7.36 SBI 11JUL39 | 2024-07-11 | 884.90 | 7.36 | 7.36 |
| 7.89 BAJAJ HFL 14JUL34 | 2024-07-15 | 660.00 | 7.88 | 7.88 |
| 7.40 CANARA BANK 19JUL34 | 2024-07-19 | 450.00 | 7.39 | 7.40 |
| 7.92 TATA CAPITAL HFL 07JUL34 | 2024-07-08 | 420.00 | 7.92 | 7.91 |
| 8.71 HDB PERP 12JUL34 C | 2024-07-15 | 396.00 | 8.66 | 8.25 |
| 8.1701 ADITYA BIRLA HFL 25AUG27 | 2024-07-12 | 345.00 | 8.18 | 8.18 |
| 8.10 BAJAJ FINANCE 10JUL26 | 2024-07-10 | 315.00 | 8.09 | 8.07 |
| 7.54 BOI 19JUL34 | 2024-07-19 | 300.00 | 7.55 | 7.55 |
| 8.1168 ADITYA BIRLA HFL 15MAY29 | 2024-07-12 | 275.00 | 8.12 | 8.12 |
| 7.36 IOCL 16JUL29 | 2024-07-16 | 235.10 | 7.34 | 7.35 |
| 8.00 TATAIND 21JUL25 C 17JUL26 M | 2024-07-19 | 175.00 | 7.98 | 7.98 |
| 8.08 KMPL 21OCT27 | 2024-07-15 | 165.00 | 8.10 | 8.10 |
| 7.8650 LICHSGFIN 20AUG26 | 2024-07-12 | 160.00 | 7.87 | 7.86 |
| 7.98 BAJAJ HFL 09SEP26 | 2024-07-09 | 155.00 | 8.00 | 8.00 |
| 9.00 CHOLAINVFIN 09APR31 | 2024-07-15 | 105.00 | 9.00 | 9.00 |
| 8.20 TFSIN 16JUL29 | 2024-07-16 | 75.00 | 8.19 | 8.19 |
| 9.50 PIRAMALENTERPRISES 07JUL34 | 2024-07-09 | 56.00 | 9.50 | 9.50 |
| 10.97 HELLAINFRA 08JAN26 | 2024-07-08 | 50.00 | 12.63 | 17.00 |
Source: Harmoney data analytics
Events This Week
July 24, Wednesday:
- US Services and manufacturing PMI for July.
- US New residential sales for June.
- US EIA weekly petroleum status report for Jul 19 week.
- India PMI for July
- India M3 Money Supply for Jul 12 week.
July 25, Thursday:
- US Advance estimate GDP for Q2.
- US Advance report on durable goods for June.
- US Unemployment insurance weekly claims report for Jul 20 week.
- US Weekly export sales.
July 26, Friday:
- US Personal income and outlays for June.
- India Bank loan growth Jul 12 week.
- India Deposit growth Jul 12 week.
- India Foreign exchange reserves Jul 19 week.
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