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Indian Economic Update
Borrowing calendar for Central Government Securities for H1FY23 and T-Bills for Q1FY23 was announced. The Union Government will borrow INR 8.45 trillion (~59% of FY22) through ... GSecs in H1 and INR 4.32 trillion through T-Bills in Q1. RBI sets Government's WMA limit for H1FY23 at INR 1.50 trillion

Core sector growth accelerated to a 4-month high of 5.8% YoY in February 2022 compared with 4% YoY (revised upwards from 3.7%) in the previous month; during April-February 2022, core sector reported an increase of 11.1% YoY

Finance minister Mrs. Nirmala Sitharaman said that the conflict in Ukraine had impacted all countries, like the COVID-19 pandemic did, by causing disruptions in supply chains and that the unprecedented rise in the global oil prices was a challenge, while defending a 137-day hiatus in fuel price revision. She also stated that the devolution to states in FY22 is INR 900 billion higher than the revised estimate of INR 7.45 trillion.

Gross tax revenue collections for April-February 2022 stood at INR 22.7 trillion, an increase of 36.6% YoY led by a 53.3% YoY increase in direct taxes and 23.3% YoY increase in indirect taxes; direct tax collections to exceed by INR 1.6 trillion in FY22RE

Central Government’s fiscal deficit for the period April-February 2022 stands at INR 13.1 trillion (83% of RE), compared with INR 14.06 trillion in the same period last year

Current Account deficit (CAD) widened in Q3 to USD 23 billion (2.7% of GDP) against a deficit of USD 9.9 billion (1.3% of GDP) in Q2 led by higher trade deficit (+USD 16 billion QoQ). Invisible receipts were buoyant. During 9MFY22, CAD is at USD 26.5 billion (1.2% of GDP) as against a surplus of USD 32.1 billion (1.7% of GDP), during 9MFY21

Petrol and diesel prices were hiked by a further 80 paise a litre each, the ninth consecutive hike in the last 10 days, taking the total increase in rates since ending the hiatus in price revision on Mar 22, 2022 to INR 6.40/litre

The Central Government has announced a hike in dearness allowance (DA) for Central Government employees. As per the announcement, the DA has been hiked by 3%, 34% from 31% earlier. Total outgo for this will be INR 95 billion

Central Government announces wage hike under the Mahatma Gandhi National Rural Employment Guarantee scheme; to hike wages by an average of 4.2% in FY23

The Union Government extended the validity of the Emergency Credit Line Guarantee Scheme that provides 100% guarantee for additional Working Capital Term Loans till the end of FY23

The Parliament passed the Budget FY23; during the discussion, the Finance Minister said that the Government was conscious of inflation and expressed hope that the WPI will shrink, going forward

RBI announced that it will hold USD 5 billion, 18-month USD/INR sell/buy swap auction on Apr 26, 2022

India is not considering any proposal to purchase crude oil in INR from Russia at the moment, Minister of State for Petroleum and Natural Gas, Rameswar Teli said. Oil Minister Mr. Hardeep Singh Puri had previously stated that India was in talks with Russian authorities to buy oil and was evaluating issues related to insurance, freight and payment

The Union Government’s total liabilities rose by 2% in the Q3FY22 to INR 128.4 trillion, over Q2FY22, According to Ministry of Finance. Public debt rose by 45bps to 91.60% compared to the previous quarter.

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Global Update
Even as supply of crude oil from Russia has fallen since the conflict, OPEC+ members did not make any adjustments to the planned phased increase in production levels. It stuck to the ...schedule that it provided back in 2021 of increasing production by 432,000 barrels per day, for May. However, Biden announced that the US would release 1 million barrels per day for a six month period starting from May 2022 that resulted in a sharp drop in global crude oil prices, in the overnight session

Russia aims to keep supplying gas to the European customers, even as they demand shifting to paying in RUB, President Vladimir Putin said

The Biden administration is weighing a plan to release roughly a million barrels of oil a day from US reserves, for several months, to combat rising gasoline prices and supply shortages following Russia’s invasion of Ukraine, according to people familiar with the matter

Russia-Ukraine talks did provide some breakthrough yesterday. Russia offered to “fundamentally cut back” its military operations in Kyiv and the northern city of Chernihiv, sparking optimism that a peace deal could be on the way. However, Russia has not pulled back forces in the eastern part of Ukraine leading to some concerns about whether a concrete deal can be reached

FOMC members continue to provide a hawkish guidance as Harker stated that he expects a series of “deliberate, methodical” increase in the benchmark federal funds rate this year, but said he is open to a 50ps move in May, if near-term data shows more inflation. On the other hand, Bostic stated that he is sticking to his 6-rate hike call for 2022, but is open to being flexible

The UST 2-year yield briefly exceeded the UST 10-year for the first time since 2019, a reflection of market concerns that the Federal Reserve could tip the economy into recession as it battles soaring inflation

The European Central Bank should raise interest rates twice this year to increase its room to manoeuvre, should inflation outstrip projections, Governing Council member Robert Holzmann said. The ECB Chief Economist provided a more subdued guidance stating that he sees some possibility of a rate hike later in 2022

Saudi Arabia and the United Arab Emirates said the US must trust OPEC+’s strategy, as Washington and other major importers call on the group to hike oil production, following Russia’s invasion of Ukraine. Overall, OPEC members indicated that supply will not be increased to compensate for the loss in output from Russia

Ukraine’s “minimum” goal from talks with Russian negotiators starting on Tuesday in Turkey will be an improvement in the immediate humanitarian situation, Foreign Minister Dmytro Kuleba said, adding Kyiv is striving for a cease-fire agreement

US President Joe Biden on Monday submitted a USD 5.79 budget plan to Congress that calls for record peacetime military spending and further aid for Ukraine, while raising taxes for billionaires and companies and lowering Government deficits. However, several rounds of negotiations are likely before a final budget gets passed

The Bank of England softened its guidance on future interest-rate increases this month to reflect the high level of economic uncertainty, Governor Andrew Bailey said in his first public comments, since the Central Bank’s March decision.

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Equity
Benchmark indices have opened higher, even as global equity markets have fallen in the overnight session. Focus will be on PMI surveys to assess the situation in... China amidst the recent outbreak. Easing oil prices post the US President’s announcement of the largest ever release from SPR may aid the market sentiment.

During the week Sensex gained 3.33% to close at 59276.69 while Nifty advanced 3.01% to close at 17670.45

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Debt
Government bond prices are likely to open steady as participants are expected to be on the side-lines, ahead of the release of the borrowing calendar... for H1FY23, likely to be tabled today after market hours.

10Y benchmark yield ended at 6.84% as compared to 6.81% of previous week

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Oil
Global crude oil prices are trading lower on Joe Biden announcement that the US will release 1 million bpd of crude oil for six months from the... Strategic Petroleum Reserve, while OPEC+ ratified the 432K bpd supply increase scheduled for May and in line with expectations. Brent crude prices are trading at USD 104 per barrel.

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Gold
Gold prices are trading lower as the US treasury yields strengthened ahead of US employment report release, today. However, the lack of progress in the... Russia-Ukraine peace talks and the prevalent risk-off would support gold prices. Gold prices are trading at USD 1937 per ounce.

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Currency
The USD/INR pair is likely to open lower. Positive local equity market will support the INR. Any sharp movement is unlikely, due to expected RBI interventions.... The Indian Rupee depreciated to 75.83 level against the US Dollar, in the previous trading session

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Sensex
59276.69
3.33%
During the week Sensex gained 3.33% to close at 59276.69 while Nifty advanced 3.01% to close at 17670.45
 
Bond Yields
6.84%
3 bps
10Y benchmark yield ended at 6.84% as compared to 6.81% of previous week
 
Source: ICICI Bank Research, Private Banking Investment Strategy Team, Bloomberg and CRISIL.
Disclaimer: The information set out herein has been prepared by ICICI Bank in good faith and from sources deemed reliable. ICICI Bank does not provide any assurance as regards the accuracy of such information. ICICI Bank does not accept any responsibility for any errors whether caused by negligence or otherwise or for any direct or indirect loss / claim/ damage caused to any person, arising out of or in relation to the use of information communicated herein.