India's economic growth slowed to a 15-month low of 6.7% in the April-June quarter, partly due to "lower" government spending following the implementation of the model code of conduct for the recent Lok Sabha elections, RBI Governor Shaktikanta Das said on Saturday. RBI predicted 7.1% growth for April of the current year. He said consumption, investment, manufacturing, services, and construction have grown by more than 7%, driving GDP growth. Only two factors have marginally reduced the growth rate. The RBI governor noted that those are agriculture and government expenditure by both central and state.
Top 3 Leads Today
- India outperforms other major economies even as growth slows in April-June to 6.7% YoY.
- Indian banks' body to seek easing of proposed norms for retail deposits, sources say.
- India's forex reserves hit record high of $681.69 billion as of Aug 23.
Market Recap: The Week That Was
- Money Markets Minute: The interbank call money rate finished at the RBI's repo rate of 6.50% as demand for funds decreased at the end of the week, and government month-end expenditure began on Friday last week. However, the call rate increased modestly on Wednesday as the liquidity surplus shrank slightly. The call rate remained unchanged week-on-week.
- Government Bond Brief: Yields ended nearly unchanged on Friday, although the benchmark yield fell for the second month in a row on anticipation that rate cuts will begin in the US in September. The benchmark 10-year yield closed at 6.8647%. The yield declined 6 basis points in August, following a 9-basis-point drop the month before.
- Corporate Bond Beat: Yields have remained steady across the curve for the past several weeks amid lacklustre trade and no fresh triggers in the secondary market. Few mutual funds and banks were seen trading in the secondary market to churn their portfolios.
- Forex Flash: The rupee was little changed as state-run banks' dollar demand outweighed probable inflows into local shares on Friday. In August, most Asian currencies rose 2% to 6%, but the rupee fell 0.2% for the second straight month. Unwinding yuan-funded long bets on the rupee, weak equities inflows and high dollar demand from local importers kept the currency under pressure for much of the month, bringing it to 83.9725, a record low. Last week, the rupee finished at 83.8625 versus the US dollar.
- Stocks Spotlight: On Friday, Nifty 50 rose for the twelfth straight session, making it the longest rise in the market's history. Hopes of an imminent US interest rate cut pushed the market to a new high. The Sensex ended 0.28% to 82,365.77, while the benchmark Nifty 50 gained by 0.33% to 25,235.9 on Friday. Both reached all-time highs. Last week, the benchmark indices rose 1.6%; over August, they went up about 1%. This is their third straight weekly and monthly gain.
Trading Trends
Most actively traded Corporate bonds in the Standard Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE261F08DI1 | 5.23 NABARD 31JAN25 | 2620 | 7.61 |
| INE261F08EJ7 | 7.64 NABARD 06DEC29 | 1314 | 7.50 |
| INE261F08EH1 | 7.62 NABARD 10MAY29 | 1135 | 7.51 |
| INE115A07QU9 | 7.75 LICHSGFIN 23AUG29 | 1020 | 7.74 |
| INE121A08PQ5 | 9.50 CHOLAINVFIN PERP 22AUG34 C | 932 | 9.11 |
Most actively traded Corporate bonds in the Odd Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE516Y07444 | 6.75 PIRAMALHFC 26SEP31 | 69 | 10.68 |
| INE121A08PQ5 | 9.50 CHOLAINVFIN PERP 22AUG34 C | 32 | 1.18 |
| INE0M2307073 | 9.62 AP BEV 31MAY29 | 21 | 9.09 |
| INE468N07BC5 | 0% ECAP 27JAN27 | 19 | 12.52 |
| INE07HK07742 | 10.20 KRAZYBEESERVICES 19DEC25 | 18 | 11.29 |
Traded volume in corporate bonds by maturity:
| Maturity | Volume(in Cr) |
|---|---|
| 1Y | 8955 |
| 3Y | 5220 |
| 5Y | 6574 |
| 7Y | 1208 |
| 10Y | 2839 |
Source: Harmoney data analytics
The Week Ahead
- Money Markets: The one-day call money rate will likely open higher than the RBI's repo rate of 6.50% on Monday, as bank demand for funds is expected to increase but fall later in the day as bank demand eases. This week, liquidity is likely to remain in surplus.
- Government Bonds: On Monday, yields may fall following India's GDP growth for the April–June quarter, which came in at 6.7%, less than projected. This may increase expectations that the RBI will begin cutting interest rates in December of this year. On Monday, benchmark 10-year bonds may trade in the 6.83-6.89% band.
- Corporate Bonds: This week, yields are expected to remain steady, and volumes will remain subdued. Traders will closely watch US treasury yields for any sharp decline or rise to ascertain interest rate trajectory. Corporate bond yields will likely track government bond yield movement as well.
- Forex: On Monday, the rupee may weaken against the dollar and is expected to trade at 83.80-83.98 a dollar. The dollar may advance against the rupee as US data showed that a key inflation measure met expectations while personal spending and income increased, supporting expectations that the Federal Reserve may cut interest rates by 25 basis points in September rather than 50 basis points. The rupee will also track any sharp movements in crude oil prices and geopolitical West Asia situation this week.
- Stocks: This week, domestic equities can be choppy as investors may book some profits because major indexes have been trading close to all-time highs. To determine the market's future course of action, investors will closely monitor the global stock markets, crude oil prices, and the rupee movement against the dollar. Investments by foreign portfolio investors will also be tracked.
Events This Week
September 2, Monday:
- US Labor Day- Financial markets closed
- India Manufacturing PMI for August.
September 3, Tuesday:
- US Construction spending for July.
- US Global manufacturing PMI for August.
September 4, Wednesday:
- US International trade in goods & services for July.
- US M3 for July.
- US Domestic auto industry sales for August.
- India HSBC Composite PMI for August.
- India HSBC Services PMI for August.
- India M3 Money supply for Aug 19 week.
September 5, Thursday:
- US Unemployment insurance weekly claims report for Aug 31 week.
- US Services data PMI for August.
September 6, Friday:
- US Employment report for August.
- US Weekly export Sales.
- India Bank loan growth Aug 19 week.
- India FX Reserves Aug 26 week.
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