According to Macquarie Group research released on Monday, the recently announced Unified Pension Scheme is likely to increase the fiscal deficit by 15 basis points to 5.1% from the budgeted 4.9% in fiscal year 2025. The global investment banker predicts a ₹450 billion fiscal deficit impact for FY25 if the new initiative burdens the government's budget.
Top 3 Leads Today
- Gold surges to record high on US rate cut hopes, geopolitical risks.
- UPI has potential to become global remittance channel, says RBI Das.
- GDP growth rate likely to decline to 7.1% in Q1, say SBI economists.
Indian Markets
- Money Markets Minute: The call money rate ended below the RBI's standing deposit facility rate of 6.25% as demand for funds from banks decreased towards the close of trading, reflecting a comfortable surplus of liquidity in the banking system. The one-day call rate finished at 5.75%, matching the three-day call rate from Friday. The weighted average call rate was slightly lower at 6.52%, compared with 6.53% on Friday.
- Government Bond Brief: Bond yields declined as US Treasury yields fell in response to Federal Reserve Chair Jerome Powell's suggestion that it might be time to ease interest rates. However, gains in gilt prices were limited, as demand for the 10-year benchmark 7.10%, 2034 bond remained subdued below the crucial 6.85% level for the fifth consecutive day. Overall turnover increased to ₹474.55 billion, up from ₹358.35 billion on Friday.
- Corporate Bond Beat: In the secondary market, corporate bond yields remained generally stable as investors shifted their focus to the primary market. Bank of Baroda launched a ₹50 billion infrastructure bond issue, offering a coupon rate of 7.30%, which was higher than anticipated. The total trading volume on the exchanges amounted to ₹83.26 billion, compared to ₹101.61 billion on Friday.
- Forex Flash: The rupee ended unchanged against the dollar, erasing earlier gains as importers purchased dollars to fulfil their month-end payment needs. It closed at 83.9000 per dollar, slightly down from Friday's 83.8900. During the day, the rupee had reached a high of 83.8000 as the dollar weakened.
- Stocks Spotlight: The indices ended on a strong note, with the Nifty climbing back above 25,000 and edging closer to its record high. This surge followed Federal Reserve Chair Powell’s recent indication that interest rate cuts might be on the horizon. At the close, the Sensex was up 0.75% at 81,698.11, while the Nifty rose 0.76% to 25,010.60.
International Markets
- US Stocks: On Monday, the S&P 500 and Nasdaq ended down. AI giant Nvidia fell before its quarterly report this week, and investors awaited inflation data to take a view on the interest rate cut in September by the Federal Reserve. Caterpillar and American Express gained around 1% each, helping the Dow Jones end barely up. The S&P 500 fell 0.32%, Nasdaq lost 0.85%, while the Dow Jones gained 0.16%.
- Treasuries: On Monday, yields rose slightly after economic data showed corporate expenditure falling, but investors were still digesting Friday's big drop after the Fed hinted it might slash interest rates. The Commerce Department reported that non-defence capital goods orders excluding aircraft, fell 0.1% in July following a downwardly revised 0.5% increase in June. The yield on benchmark US 10-year notes rose 1.3 basis points to 3.82%.
- Currency: The US dollar rebounded from an eight-month low on Monday, while the yen climbed as geopolitical tensions in the Middle East worsened, driving investors to seek safe-haven refuge. The dollar index was up by 0.24% to 100.84, while the euro weakened by 0.28% to $1.1159. Most analysts expect US personal consumption and core inflation data, which are due on Friday, to allow for rate cuts in September.
Trading Trends
Traded volume(in Cr) in corporate bonds by sector and maturity:
| Sectors | 0-1y | 1-3y | 3-5y | 5-10y | >10y |
|---|---|---|---|---|---|
| Financial Institution | 2400 | 261 | 340 | 646 | - |
| NBFC | 536 | 281 | 219 | 462 | 238 |
| Private Sector Bank | 670 | 40 | 100 | 232 | - |
| Housing Finance Company | 311 | 71 | 50 | 136 | - |
| Telecom | 205 | 250 | 75 | - | - |
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 | 1460 | 7.35 | 7.35 |
| 7.81 TATA CHEMICALS LIMITED 20AUG2027 | 2024-08-20 | 950 | 7.81 | 7.81 |
| 8.00 IIDL 29OCT29 | 2024-08-13 | 803 | 8.01 | 7.94 |
| 9.75 SAMMAAN CAPITAL LIMITED 12APR2028 | 2024-08-12 | 168 | 9.65 | 9.71 |
| 7.95 ICICI HFL 16NOV27 | 2024-08-16 | 135 | 7.97 | 7.97 |
| 7.95 IIDL 13AUG39 | 2024-08-13 | 125 | 7.95 | 7.94 |
| 8.49 ADITYA BIRLA SUN LIFE INSURANCE COMPANY LTD - C 12AUG2034 M | 2024-08-12 | 96 | 8.48 | 8.48 |
| 10.40 NAVIFIN 13NOV26 | 2024-08-13 | 75 | 11.11 | 11.61 |
Source: Harmoney data analytics
Events This Week
August 27, Tuesday:
- US Quarterly house price index for Q2.
- US Monthly house price index for June.
- US Consumer confidence index for August.
August 28, Wednesday:
- US Metropolitan area employment and unemployment for July.
August 29, Thursday:
- US 2nd estimate GDP for Q2.
- US Unemployment insurance weekly claims report for Aug 24 week.
- US Weekly export sales.
August 30, Friday:
- US Personal income and outlays for July.
- US Agricultural prices for July.
- India Federal fiscal deficit for July.
- India FX reserves Aug 19 week.
- India GDP quarterly for Q2.
- India Infrastructure output for July.
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