India's economic growth dropped more significantly than expected in the July-September period of FY25, falling to a seven-quarter low of 5.4%, startling economists who had forecasted growth of roughly 6.5% in the quarter. Analysts worry about growth slowing due to industrial slowdown and investment demand. These reasons indicate that the forecast of approximately 7% growth for FY25 may need to be revised downward. Market participants expect that weaker-than-expected growth may cause the RBI to cut policy rates in February at its Monetary Policy Committee meeting.
Top 3 Leads Today
- India's October infrastructure output grows 3.1% on year.
- Indian banks' credit growth moderates in October as unsecured loans slow, data shows.
- India's April-Oct fiscal deficit is at 46.5% of the FY25 target.
Indian Markets
- Money Markets Minute: On Saturday, the interbank call money rate fell below the RBI’s standing deposit facility rate of 6.25% due to low funds demand from banks. The volume in the call money market was minimal since most banks had met their weekend funding obligations by Friday. On Saturday, the two-day call rate stood at 6.00%, compared with 6.70% for three-day loans on Friday.
- Government Bond Brief: Bond yields fell sharply on Friday as growth in the second quarter was lower than anticipated at 5.4%, compared with 6.7% in the same quarter last year. The significant drop in growth data has boosted hopes that RBI may relax liquidity and lower interest rates even if the monetary policy committee does not cut the repo rate this week. The 10-year government bond yield fell to 6.74% on Friday, down from 6.80% on Thursday. Yields have fallen 13 basis points since last week.
- Corporate Bond Beat: Last week, yields on 10-year corporate bonds fell somewhat, following a steep drop in benchmark government bond yields. As a result of month-end redemptions from debt mutual fund schemes, yields for papers up to three years increased by three to four basis points. The trade volume was moderate during the week.
- Forex Flash: The Indian rupee finished November with its worst monthly performance, as Donald Trump's triumph in the presidential election lifted the dollar and US bond yields, while foreign capital outflows continued. The rupee closed at 84.4825 against the dollar on Friday, almost flat from Thursday but very close to its all-time low of 84.5075 a week ago. The rupee sank roughly 0.5% this month, the sharpest decline since March.
- Stocks Spotlight: India's key indices went up almost 1% on Friday, making up much of the ground they lost on Thursday and finishing the week higher. Gains in big companies like Reliance Industries and drugmakers helped the market rise. The BSE Sensex went up 0.96% to 79,802.79. The NSE Nifty 50 went up 0.91% to 24,131.1. The benchmarks each fell about 1.5% the previous day, but the gains made on Friday ensured that benchmarks finished the week about 1% higher.
Trading Trends
Most actively traded Corporate bonds in the Standard Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE261F08EK5 | 7.44 NABARD 24FEB28 | 3000 | 7.48 |
| INE261F08DX0 | 7.58 NABARD 31JUL26 | 1775 | 7.60 |
| INE556F08KU4 | 7.51 SIDBI 12JUN28 | 1158 | 7.52 |
| INE040A08914 | 7.97 HDFC BANK 17FEB33 | 1140 | 7.46 |
| INE244L07242 | 9.00 INDIABULLS COMMERCIAL CREDIT LIMITED 21SEP2026 | 1110 | 8.97 |
Most actively traded Corporate bonds in the Odd Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE261F08EK5 | 7.44 NABARD 24FEB28 | 3000 | 7.48 |
| INE261F08DX0 | 7.58 NABARD 31JUL26 | 1775 | 7.60 |
| INE556F08KU4 | 7.51 SIDBI 12JUN28 | 1158 | 7.52 |
| INE040A08914 | 7.97 HDFC BANK 17FEB33 | 1140 | 7.46 |
| INE244L07242 | 9.00 INDIABULLS COMMERCIAL CREDIT LIMITED 21SEP2026 | 1110 | 8.97 |
Traded volume in corporate bonds by maturity:
| Maturity | Volume(in Cr) |
|---|---|
| 1Y | 8435 |
| 3Y | 4445 |
| 5Y | 2185 |
| 7Y | 1019 |
| 10Y | 2734 |
Source: Harmoney data analytics
The Week Ahead
- Money Markets: The one-day interbank call money rate may open higher than the RBI's repo rate of 6.50% on Monday due to banks' early demand to meet reserve requirements. However, given adequate liquidity in the banking system, it is expected to ease later in the day. During the day, the call rate ranges from 6.00 to 6.75%.
- Government Bonds: Yields will probably stay stable on Monday. Yields eased last week after India's GDP growth slowed sharply for the July to September quarter, and traders expect yields to ease further during this week. The bond market will watch the RBI's MPC action. The meeting result will be announced Dec 6. The 2034 6.79% benchmark bond yields may trade in 6.71-6.77% on Monday.
- Corporate Bonds: Yields will mirror the domestic government bond yields movements this week. Investors will keenly watch the RBI’s monetary policy review this week and expect that RBI may start rate cut cycle soon. Volumes are expected to remain subdued as investors may flock primary market for better yields.
- Forex: On Monday, the Indian rupee may continue under pressure against the US dollar and watch crude oil prices. India imports mostly oil, hence rising prices enhance its import cost. Last week, Israel and Lebanon accused each other of breaking the ceasefire, boosting gasoline prices. Trades will follow the RBI's monetary policy decision this week. The rupee should trade between 84.46 and 84.55 per US dollar on Monday.
- Stocks: Benchmark indices are expected to open higher, and investors will eagerly watch the HSBC Manufacturing PMI data, which will be released on Monday. Investors will also be eyeing the RBI's monetary policy decision, which is set to be released on Friday. They will also track foreign fund outflows. According to NSDL data, FPIs sold shares worth around ₹307.38 billion in the secondary market in November 2024.
Events This Week
December 2, Monday:
- US Manufacturing PMI for November.
- India Manufacturing PMI for November.
December 3, Tuesday:
- US Total vehicle sales for November.
December 4, Wednesday:
- US Composite PMI for November.
- US Services PMI for November.
- India Composite PMI for November.
- India Services PMI for November.
December 5, Thursday:
- US OPEC Meeting.
- US Initial Jobless Claims for Nov 29 week.
December 6, Friday:
- US Nonfarm Payrolls for November.
- US Unemployment Rate for November.
- India RBI Interest Rate Decision.
- India FX Reserves for Nov 25 week.
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