India must achieve consistent economic growth of 7-10% over the next 20-30 years to break free from the middle-income trap and transform into a developed nation. This transformation would involve reaching a per capita income of $18,000 per year and establishing a $30 trillion economy by 2047, coinciding with the country's centenary anniversary of independence. These ambitious goals are outlined in the NITI Aayog's vision for 'Viksit Bharat'. The GDP would have to grow 9 times from today's $3.36 trillion, and per capita income would need to rise 8 times from today's $2,392 per year, the government's think tank said following its 9th Governing Council meeting, which was attended by chief ministers and lieutenant governors.
Top 3 Leads Today
- Digital payments increase 12.6% at March-end 2024, shows RBI data.
- India's foreign exchange reserves rise for third week, hit record high.
- India central bank's proposed liquidity norms to raise demand for bonds.
Market Recap: The Week That Was
- Money Markets Minute: Last week, the call money rate fell drastically below the Reserve Bank of India's standing deposit facility rate of 6.25% as demand for funds decreased and the liquidity surplus increased. The three-day call money rate closed at 5.75% on Friday.
- Government Bond Brief: The yield on the benchmark 10-year bond fell by 2 basis points week on week as traders liquidated their bond holdings for a profit in the final two days of last week. On Friday, the five-year benchmark bond yield fell to its lowest level since August 5, 2022, as new draft guidelines for the Basel III framework's liquidity coverage requirement drove robust demand for short to medium-term government bonds.
- Corporate Bond Beat: Yields for shorter to medium-term corporate bonds fell by 5 basis points following the decline in government bond yields last week. Investors responded to the most recent draft guidelines regarding the Basel-III framework on liquidity coverage ratio. The proposed guidelines recommend implementing stricter liquidity buffers, requiring banks to increase their holdings of liquid assets like short-term sovereign bonds, which are typically the main components of these buffers.
- Forex Flash: The rupee fell 0.1% week on week, extending its losing streak to the fourth consecutive week. The Indian rupee fell to an all-time low on Friday, weighed down by high dollar demand from domestic oil companies, most likely due to month-end payments. The rupee closed at 83.7275 against the US dollar from its previous closing of 83.6975 on Thursday.
- Stocks Spotlight: Last week, both benchmark indices rose 1.24% and 0.9% for the seventh week in a row. The Nifty50 and Sensex have fallen in the last five days due to lower-than-expected earnings from Reliance Industries, Wipro, Bajaj Finance, Axis Bank, and Nestle. The union budget on Tuesday raised capital gains taxes on equities and derivatives trading, which temporarily hurt the market. On Friday, US economic growth, a key market for IT stocks, lifted Indian benchmark indices.
Trading Trends
Most actively traded Corporate bonds in the Standard Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE020B08FG9 | 7.45 REC 31AUG35 | 2090 | 7.45 |
| INE261F08EH1 | 7.62 NABARD 10MAY29 | 1475 | 7.56 |
| INE020B08FF1 | 7.56 REC 31AUG27 | 1450 | 7.57 |
| INE261F08EI9 | 7.70 NABARD 30SEP27 | 1350 | 7.63 |
| INE377Y07508 | 7.89 BAJAJ HFL 14JUL34 | 956 | 7.88 |
Most actively traded Corporate bonds in the Odd Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE515Q08267 | 12.00 AFPL 24JAN30 | 20.05 | 12.01 |
| INE918K07PH4 | 0% NUVAMAWEALTH 21JAN28 | 19.55 | 8 |
| INE501X07604 | 10.25 AYEFINANCE 20MAR26 | 17.91 | 11.44 |
| INE614B08054 | 10.70 KARNATAKABK 30MAR27 C 30MAR32 M | 16 | 7.64 |
| INE939X07093 | 12.60 MANBAFIN 10OCT25 | 15.24 | 13.19 |
Traded volume in corporate bonds by maturity:
| Maturity | Volume(in Cr) |
|---|---|
| 1Y | 5135 |
| 3Y | 7367 |
| 5Y | 5917 |
| 7Y | 285 |
| 10Y | 4617 |
Source: Harmoney data analytics
The Week Ahead
- Money Markets: On Monday, the one-day call money rate is expected to open higher as bank demand for funds increases. Traders anticipate the call money rate to open around 6.50%, which is the RBI's repo rate. However, due to excess liquidity, interest rates may fall this week.
- Government Bonds: Government bond yields may rise modestly on Monday, after significant movements in US treasury yields and crude oil prices. The yield on the 10-year benchmark is 7.10%, and the 2034 bond is expected to trade within the range of 6.93-7.00%.
- Corporate Bonds: Corporate bond yields are expected to open stable on Monday, with the market's direction determined by the yields of government bonds and US treasuries. Due to a shortage of primary market bond supply, volumes in the secondary market are expected to increase this week.
- Forex: The rupee is expected to maintain a gradual decline as the RBI persists in intervening to regulate the rate of depreciation this week. The Indian rupee is expected to remain within the range of 83.70-83.90 against the US dollar.
- Stocks: Indian shares are expected to open higher on Monday, with further cues from the quarterly earnings announcements by Kansai Nerolac Paints, Bharat Electronics, HPCL, ACC, and other companies. Investors will also be closely monitoring the upcoming US Federal Reserve policy meeting next week to gain insights into the near-term trajectory and potential rate cuts.
Events This Week
July 30, Tuesday:
- US Federal Open Market Committee meeting.
- US Consumer Confidence Index for July.
July 31, Wednesday:
- US Interest rate decision.
- India Fiscal Deficit for June.
- India RBI Monetary and Credit Information Review.
- India Infrastructure Output for June.
August 1, Thursday:
- US Unemployment Insurance Weekly Claims Report for Jul 27 week.
- US Weekly Export Sales
- US Manufacturing PMI for July.
- US Global Manufacturing PMI for July.
August 2, Friday:
- US Employment Report for July.
- US Manufacturers' Shipments, Inventories & Orders for June.
- India FX Reserves for Jul 22 week.
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