The RBI MPC statement of Governor Das was deemed to be hawkish. This was probably because the market, carried away with the recent international developments, started to expect a dilution instance from the MPC. There was nothing new in what Das said. The central bank will remain focused on the last mile of disinflation. All the theories about real interest rates and neutral interest rates went out of the window. Deputy Governor Patra said the present level of the repo rate appears right because the potential growth rate, on which the neutral interest rate is based, has risen. It is very tough to predict when the RBI will start to cut interest rates till the time Das dilutes his position of waiting for inflation to hit the 4% mark and stay there durably.
Top 3 Leads Today
- RBI MPC keeps repo rate unchanged at 6.5%; Inflation, GDP growth forecast for FY25 retained.
- RBI Survey shows households' 1-year-ahead inflation view up 20 bps.
- Lok Sabha passes Bill to allow government expenditure for FY25.
Indian Markets
- Money Markets Minute: Call rate ended at the RBI's marginal standing facility rate of 6.75% due to strong demand from banks amid a sharp drop in surplus liquidity. The one-day call money rate rose to 6.75% from 6.25% on Wednesday, with the weighted average call rate increasing to 6.65% from 6.48%.
- Government Bond Brief: Government bond yields rose after the MPC's status quo provided no new direction. By the afternoon, traders shifted focus to the upcoming ₹310-bln weekly bond auction due today. The benchmark 7.10% 2034 bond closed at 6.88%, up from 6.86% on Wednesday. Turnover increased to ₹672.55 bln from ₹608.15 bln.
- Corporate Bond Beat: The MPC's third bi-monthly policy statement had little impact on corporate bond yields, as the outcome matched market expectations. Secondary market trade volumes remained low, with total deals amounting to ₹73.21 bln, down from ₹83.67 bln on Wednesday.
- Forex Flash: The rupee closed at a record low against the dollar despite the RBI's efforts to sell dollars as banks continued buying for importers. After moving in a narrow 4-paise range, the rupee ended at 83.9625 per dollar, down from 83.9550 on Wednesday, when it had hit a lifetime low of 83.9725.
- Stocks Spotlight: Equity indices gave up some of the previous session's gains amid high volatility after the RBI's policy outcome did not offer positive surprises. Weak cues from global markets also affected investor sentiment, with technology stocks among the worst hit globally. The Sensex closed down 0.73% at 78,886.22, and the Nifty fell 0.74% to 24,117.
International Markets
- US Stocks: U.S. stocks surged on Thursday, with the Nasdaq and S&P 500 both closing over 2% higher after a sharper-than-expected drop in jobless claims eased concerns about a rapidly weakening labour market. The Dow Jones Industrial Average rose 683.04 points, or 1.76%, to 39,446.49, the S&P 500 gained 119.81 points, or 2.30%, to 5,319.31, and the Nasdaq Composite added 464.22 points, or 2.87%, to 16,660.02.
- Treasuries: Yields rose after unemployment claims data boosted optimism that the U.S. economy might avoid an imminent recession. Subsequently, tepid demand for a 30-year bond auction, following a weak sale of 10-year notes the previous day, further pushed yields higher. The yield on benchmark U.S. 10-year notes rose by 2.1 basis points to 3.988%, up from 3.967% late Wednesday.
- Currency: The dollar strengthened on Thursday after new US labour market data revealed a sharper-than-expected decline in unemployment benefits last week, reducing concerns about an imminent recession. The greenback's gains were most notable against the yen, following a steep decline the previous day in a volatile week marked by the unwinding of popular carry trades and speculation on potential shifts in Japanese monetary policy.
Trading Trends
Traded volume(in Cr) in corporate bonds by sector and maturity:
| Sectors | 0-1y | 1-3y | 3-5y | 5-10y | >10y |
|---|---|---|---|---|---|
| NBFC | 386 | 627 | 331 | 675 | 56 |
| Financial Institution | 75 | 345 | 235 | 51 | - |
| Housing Finance Company | 25 | 460 | 85 | 25 | - |
| Diversified | 310 | - | - | - | - |
| Private Sector Bank | - | - | - | 82 | - |
Secondary trade details for recently issued primary corporate bonds:
Security Name |
Issue Date |
Trades Since Issue(Cr) |
Avg Yield(%) |
LTY (%) |
|---|---|---|---|---|
| 7.37 IRFC 31JUL29 | 2024-07-31 | 1970.00 | 7.38 | 7.36 |
| 9.10 CHOLAINVFIN 27JUN31 | 2024-07-31 | 1765.40 | 9.10 | 9.14 |
| 7.98 BAJAJ FINANCE 31JUL29 | 2024-07-31 | 762.00 | 7.97 | 7.95 |
| 7.80 BOM 05AUG34 | 2024-08-05 | 281.10 | 7.78 | 7.80 |
| 8.30 SMFG 30JUN27 | 2024-08-05 | 250.00 | 8.38 | 8.38 |
| 8.60 GODREJFINLTD 25NOV27 | 2024-07-25 | 250.00 | 8.65 | 8.66 |
| 8.50 GODREJHSGFIN 30NOV27 | 2024-07-30 | 240.00 | 8.55 | 8.57 |
| 7.39 IIFCL 01AUG39 | 2024-08-01 | 230.00 | 7.38 | 7.39 |
| 8.50 CHOLAINVFIN 25JUL27 | 2024-07-25 | 160.00 | 8.49 | 8.46 |
| 7.39 IREDALTD 24JUL34 C 22JUL39 M | 2024-07-24 | 130.00 | 7.38 | 7.38 |
| 7.98 IIDL 05AUG34 | 2024-08-05 | 105.00 | 7.98 | 7.98 |
| 9.90 TYGER CAPITAL PRIVATE LTD - CALL 29JUL2027 MAT | 2024-07-29 | 100.00 | 10.35 | 10.35 |
| 8.1841 TFSIN 29SEP27 | 2024-08-01 | 90.00 | 8.20 | 8.20 |
| 7.87 SUMMITDIGITELLTD 15DEC29 C 15MAR30 M | 2024-08-05 | 75.00 | 8.15 | 8.15 |
| 10.30 IKFFIN 30JUL27 | 2024-08-01 | 55.10 | 11.16 | 10.52 |
Source: Harmoney data analytics
Events This Week
August 9, Friday:
- US Fed Balance Sheet for Aug 7 week.
- India Bank loan growth for Jul 26 week.
- India FX Reserves for Aug 2 week.
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