T.V. Somanathan, finance secretary of the Ministry of Finance, stated that the fiscal policy will be anchored by government debt-to-GDP. "We were moving away from this fiscal deficit targeting sort of framework, where after 2026 we will look at debt-to-GDP ratio as an anchor," he said. Historically, India has failed to meet its 3% GDP budget deficit target. The federal fiscal deficit is expected to drop to 4.9% of GDP in March 2025 and below 4.5% by March 2026. Rating agencies consider India's high debt-to-GDP a major factor in its sovereign rating. Till 2027-28, Fitch Ratings predicts India's debt at 80% of GDP.
Top 3 Leads Today
- Private sector activity rises to three-month high of 61.4 in July: PMI data.
- RBI revamps regulatory framework for domestic money transfer services
- US S&P Global Manufacturing PMI slumps to 49.5, Services PMI improves to 56 in July.
Indian Markets
- Money Markets Minute: The call money market rate closed above the RBI's repo rate of 6.50%, driven by strong demand for funds amid a reduced liquidity surplus in the banking system. The one-day call money rate finished at 6.67%, up from 6.50% on Tuesday. The weighted average call rate remained steady at 6.67%, unchanged from the previous day.
- Government Bond Brief: Yields on government bonds remained steady as investor demand diminished and will take further cues from US GDP and personal income data to be released this week. The 10-year benchmark 7.10% 2034 bond closed with a yield of 6.96%, marginally lower than the 6.97% yield recorded on Tuesday..
- Corporate Bond Beat: Yields on corporate bonds remained steady across tenures on the absence of strong domestic cues and limited activity in the secondary market. Few mutual funds and banks were trading in the secondary market. Investors are still evaluating the Union Budget for 2024-25 though it offered few insights for the fixed-income market.
- Forex Flash: The rupee settled at a record low against the dollar despite the RBI's intervention, as dollar purchases by importers put pressure on the Indian currency. The rupee traded in a narrow range of 4 paise, hitting a record low of 83.7200 per dollar before closing at 83.7175 per dollar. On Tuesday, the rupee had settled at 83.6875 per dollar.
- Stocks Spotlight: The equity indices extended losses for the fourth consecutive session, driven by a decline in banking and financial services stocks. Analysts noted that the market is still adjusting to the increase in long-term and short-term capital gains taxes announced in the Budget, which had caused a sharp intraday loss on Tuesday. The Nifty 50 closed 0.3% lower at 24,413.50 points, while the Sensex closed 0.4% lower at 80,148.88 points.
International Markets
- US Stocks: The S&P 500 and Nasdaq closed at multi-week lows on Wednesday, after lacklustre earnings from Alphabet and Tesla. The S&P 500 reported worst one-day performance since December 2022 as it fell 2.3% for the first time in 356 sessions, its longest stretch since 2007.The Nasdaq Composite fell the most since October 2022 to its lowest level since June 10, and the Dow Jones concluded the day below the 40,000-point mark, marking its first dip in two weeks.
- Treasuries: Short-term treasuries sank on Wednesday, but longer-term notes surged as investors assessed economic data. Two-year US treasury yield was down 3.5 basis points to 4.41%, while yield on the benchmark 10-year US treasury note rose by 3.9 basis points to 4.278%. The Commerce Department reported that exports rose in June, narrowing the US trade deficit in goods, but trade likely slowed economic growth in the second quarter. That period's GDP report will be released on Thursday.
- Currency: The dollar index slipped 0.12% to 104.35 against a basket of major currencies, including the yen and euro. The dollar sank to its lowest level in more than two months versus the yen on Wednesday, as short yen carry trades were reversed ahead of next week's Bank of Japan and the US FOMC monetary policy meetings.
Trading Trends
Traded volume(in Cr) in corporate bonds by sector and maturity:
| Sectors | 0-1y | 1-3y | 3-5y | 5-10y | >10y |
|---|---|---|---|---|---|
| NBFC | 1100 | 1514 | 1063 | 263 | 131 |
| Housing Finance Company | 610 | 884 | 106 | 80 | - |
| Financial Institution | 175 | 581 | 679 | 235 | - |
| Public Sector Bank | - | - | - | 658 | - |
| Gas Transmission/Marketing | - | - | 450 | - | - |
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 | 1290.00 | 7.40 | 7.39 |
| 7.54 BOI 19JUL34 | 2024-07-19 | 890.00 | 7.55 | 7.55 |
| 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 | 500.00 | 7.39 | 7.40 |
| 7.8650 LICHSGFIN 20AUG26 | 2024-07-12 | 460.00 | 7.86 | 7.86 |
| 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 |
| 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 | 225.00 | 7.97 | 7.94 |
| 7.98 BAJAJ HFL 09SEP26 | 2024-07-09 | 205.00 | 7.99 | 7.96 |
| 8.08 KMPL 21OCT27 | 2024-07-15 | 165.00 | 8.10 | 8.10 |
| 9.00 CHOLAINVFIN 09APR31 | 2024-07-15 | 105.00 | 9.00 | 9.00 |
| 9.50 HINDUJA 10JUL39 | 2024-07-10 | 100.00 | 9.45 | 9.40 |
| 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 |
Source: Harmoney data analytics
Events This 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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