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| Indian Economic Update
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India's Gross Domestic Product (GDP) witnessed a sharp acceleration in Q4FY23 at 6.1% YoY (higher than estimates) as... compared with 4.5% in the previous quarter.
The Centre’s fiscal deficit narrowed to 6.4% of the GDP in FY23 from 6.71% in FY22. During the year, Direct Taxes grew by 18% while Indirect Taxes grew at a lower rate of 7% YoY.
The RBI's foreign exchange transactions and the absence of excess liquidity helped the central bank post profits in the last fiscal and transfer INR 874 billion to the Centre as compared with INR 303 billion last year.
Urban unemployment during Q4FY23 declined further to 6.8% from 7.2% in Q3FY23 owing to a better than expected economic activity in the fourth quarter and strong service sector-led growth during the quarter.
Foreign Direct Investment into India declined by 22% to USD 46 billion in FY23 dragged by lower inflows in computer hardware, software and automobile industries, according to Department for Promotion of Industry and Internal Trade data.
The Indian Meteorological Department stuck to its forecast of a “normal” monsoon for this year (at 96% of LPA) as it released the second long-range outlook last week.
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| Global Update
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The US Senate has passed the bill to raise the debt ceiling up to Jan 1, 2025. It will go to the US President for enactment. ...
The IMF said, US interest rates will likely need to remain higher for longer to tame inflation and Washington needs to tighten fiscal policy to bring down its federal debt.
China’s economy grew by 4.5% in Q1-2023, although momentum seems to be waning in April. The rebound in growth was primarily led by a surge in consumer spending, with the economy re-opening in late 2022.
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| Equity
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The benchmark equity indices opened higher this week after an overnight gain in the US equity market as Joe Biden and congressional leaders ...reached a tentative deal to raise the debt ceiling. However, indices turned negative after tracking Asian and US markets. The upbeat Indian GDP and continued buying by FII will likely support the Indian equity market in the near term.
During the week Sensex gained 0.07% to close at 62547.11 while Nifty gained 0.19% to close at 18534.10
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| Debt
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The government bond prices opened lower as overnight UST 10Y yield fell below 1% after the US PCE index came more than expected, ...weighing on the future rate hike. Prices traded in a tight range. The upbeat Indian GDP data will also lend support to IGB (Indian Government Bond). In the near term, IGB is expected to trade range-bound before the RBI MPC meeting next week.
The 10Y benchmark G-Sec was trading at a yield of 6.99% on 02 June, 2023 at 15:47 IST
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| Oil
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Brent prices were volatile this week. The week started with higher oil prices after US lawmakers said, they had reached a provisional... agreement to raise the debt ceiling. However, prices traded lower as pressured by a stronger USD and weak data from top oil importer China that instilled demand fears. Also, a large build in US crude stocks last week triggered fears of oversupply.
Brent was trading at $75.27 on 02 June, 2023 at 15:47 IST
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| Gold
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Gold prices traded higher, driven by downbeat United States Treasury Bond yields that portray the market’s optimism about... US policymakers’ deal on debt-ceiling extension to January 2025. Softening of USD too, helped the yellow metal prices rise.
Gold was trading at $1980.41 Per Ounce on 02 June, 2023 at 15:47 IST
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| Currency
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The USD/INR pair traded lower this week as greenback traded lower, led by upbeat market sentiment as investors await debt ceiling ...deal. The USD index took a breather after Fed officials suggested skipping the June rate hike. Fed Governor Philip Jefferson said that skipping a rate hike would allow the Fed “to see more data before making decisions about the extent of additional policy firming.” We expect Rupee to trade with appreciation bias in the near term. However, given the RBI intervention in the market, any sharp movement in the local currency is unlikely to happen.
USD/INR was trading at 82.30 on 02 June, 2023 at 15:47 IST
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| Sensex |
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During the week Sensex gained 0.07% to close at 62547.11 while Nifty gained 0.19% to close at 18534.10
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| Bond Yields |
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The 10Y benchmark G-Sec was trading at a yield of 6.99% on 02 June, 2023 at 15:47 IST
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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.
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