India cannot risk another bout of inflation, and the monetary policy committee must proceed with caution when cutting interest rates, according to the minutes of the October meeting. Three Reserve Bank of India and three external members of the MPC kept the repo rate at 6.50% for a tenth straight decision meeting while shifting the policy stance to 'neutral'. After the MPC meeting, the Indian government reported that food prices drove September retail inflation to 5.49%, the most in nine months. The central bank's inflation target is 4%. Five of six MPC members voted to keep policy rates, while newly appointed external member Nagesh Kumar voted to decrease it by 25 basis points.
Top 3 Leads Today
- Finance Ministry to consider scrapping windfall tax on crude: Govt official.
- RBI Governor says CPI outlook points to further alignment with 4% target, MPC minutes show.
- Balance financial inclusion with due diligence, banking secy tells microfin cos.
Indian Markets
- Money Markets Minute: The call money rate closed above the RBI’s repo rate of 6.50% due to increased demand for funds from banks, driven by reduced surplus liquidity following goods and services tax outflows. The one-day call money rate ended at 6.70%, up from 5.75% on Tuesday, while the weighted average call rate rose to 6.75% from 6.65% the previous day.
- Government Bond Brief: Yields ended mostly unchanged as the upward pressure from rising US Treasury yields was balanced by domestic traders pushing down overnight indexed swap rates. The minutes from the RBI’s October MPC meeting were released after the market closed. The yield on the 10-year benchmark 7.10%, 2034 bond remained steady at 6.82%, the same as Tuesday. Market turnover stood at ₹495.00 billion, down from ₹597.40 billion on Tuesday.
- Corporate Bond Beat: Corporate bond yields remained mostly unchanged as investor focus shifted to the primary market, where the State Bank of India opened bidding for its Basel-III compliant additional tier-I bonds. In the secondary market, trading activity increased, with deals totalling ₹79.24 billion, compared with ₹62.65 billion on Tuesday.
- Forex Flash: The rupee closed at a record low against the dollar as banks bought the U.S. currency on behalf of foreign portfolio investors and importers, while the dollar index surged. Despite the RBI's ongoing dollar sales to limit a sharp decline in the Indian currency, the rupee settled at its all-time low of 84.0800 per dollar, slightly down from its previous close of 84.0775.
- Stocks Spotlight: The benchmark indices couldn't hold onto an intraday recovery, closing in the red for the third straight session, following Tuesday's 1% decline. After a turbulent day of trading, the Nifty 50 finished at 24,435.50 points, down 0.2%, while the Sensex ended at 80,081.98 points, also down 0.2%.
International Markets
- US Stocks: Mega cap companies fell on Wednesday as Treasury yields rose, and investors felt less confident about big Federal Reserve rate reduction. McDonalds and Coca-Cola were hurt by corporate news. Only utilities and real estate had advances among the 11 S&P sub-sectors. The Dow Jones sank 0.96% to 42,514.95, the S&P 500 dropped 0.92% to 5,797.42, and the Nasdaq Composite plummeted 1.60% to 18,276.65.
- Treasuries: Benchmark 10-year US Treasury yields hit a three-month high, as investors reassessed the Fed's rate-cutting stance for the coming months considering strong economic data and the forthcoming presidential elections. The benchmark 10-year rates finished at 4.24%, up from 4.204% on Tuesday. It represented the largest settlement yield since July 25.
- Currency: On Wednesday, the dollar rose above 153 against the yen for the first time in nearly three months, boosted by US economic strength and a projected difference in the pace of interest rate cuts by major global central banks. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, increased 0.26% to 104.37. The dollar rose 1% against the Japanese yen, reaching 152.57. The euro lost 0.11%, to $1.0785.
Trading Trends
Secondary trade details for recently issued primary corporate bonds:
Security Name |
Issue Date |
Trades Since Issue(Cr) |
Avg Yield(%) |
LTY (%) |
|---|---|---|---|---|
| 11.00 GMR INFRA PROJECTS PRIVATE LIMITED 26JUN2027 | 2024-06-26 | 600.00 | 15.67 | 15.71 |
| 7.44 IREDALTD 25AUG34 | 2024-06-25 | 75.00 | 7.44 | 7.44 |
| 8.35 AXISFIN 23JUN34 | 2024-06-24 | 180.00 | 8.36 | 8.35 |
| 8.07 NIIF 23AUG29 | 2024-06-21 | 430.00 | 8.07 | 8.07 |
| 10.25 AYEFINANCE 20MAR26 | 2024-06-20 | 205.04 | 11.43 | 10.63 |
| 9.10 SHRIRAMFIN 20JUN34 | 2024-06-20 | 129.00 | 9.09 | 9.09 |
| 9.25 SKFL - C 19SEP27 M | 2024-06-19 | 100.00 | 9.75 | 9.75 |
| 10.20 KRAZYBEESERVICES 19DEC25 | 2024-06-19 | 87.60 | 11.24 | 12.60 |
| 8.05 TATA CAPITAL HFL 18JUN29 | 2024-06-18 | 285.00 | 8.05 | 8.04 |
| 7.9265 LICHSGFIN 14JUL27 | 2024-06-14 | 1060.00 | 7.93 | 7.93 |
| 7.44 IRFC 13JUN34 | 2024-06-13 | 1530.00 | 7.45 | 7.40 |
| 8.55 HDB PERP - C | 2024-06-13 | 259.00 | 8.54 | 8.54 |
| 11.40 KEERTANA 13JUN27 | 2024-06-13 | 62.05 | 13.00 | 13.53 |
| 9.95 ADANIAIRPORT 12JUN28 | 2024-06-12 | 96.51 | 9.93 | 9.78 |
| 9.16 360ONEPRIME 12JUN27 | 2024-06-12 | 75.00 | 9.67 | 9.90 |
Source: Harmoney data analytics
Events This Week
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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