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| Indian Economic Update
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India's Q4 GDP rose by 7.8% YoY, led by a lower subsidy pay out and GVA growth of 6.3%. GDP growth for the year has ...been revised higher to 8.2% YoY (7.6% earlier), as has GVA growth to 7.2% YoY (6.9% earlier). The upward surprise in GVA was driven by the agricultural sector and industrial activity.
The Centre’s fiscal deficit for FY24 came in at 5.6% of GDP, lower than the revised estimate of 5.8% (5.9% of GDP as per budget estimate), on the back of better-than-anticipated revenues and expenditure compression.
India's 8 core industries grew by 6.2% in April from 6% in March, due to higher growth achieved in natural gas, refinery products, coal, steel, and electricity sectors.
GST collections in May 2024 came in at INR 1.73 trillion, up 10% YoY as per the Ministry of Finance.
Indian manufacturing activity as measured by the PMI survey decreased to 57.5 in May from 58.8 in the previous month due to heatwaves and rising costs.
HSBC India Services PMI came in at 60.2 from 60.8 in April indicating a softening in services activities, due to factors like severe heat waves and price pressures. New domestic orders eased slightly, but remained robust, supported by strong demand conditions. Export demand also provided support, with new orders rising at the fastest pace in a decade.
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| Global Update
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OPEC+ extended its production cuts as it seeks to bolster a fragile market, but also set a date to begin bringing oil back online, later this... year. The prominent OPEC+ oil producers’ alliance is awaiting concrete Central Bank action on interest rates before factoring in the potential impact on the energy demand landscape, according to Saudi Arabia’s Energy Minister.
The J.P. Morgan Global Composite PMI Output Index rose for the seventh successive month to post 53.7 in May, up from 52.4 in April, its highest level since May 2023. Growth of service sector business activity accelerated to a 12-month high in May of 54.1 while manufacturing sector PMI rose to a 22-month high of 50.9 in May, to remain above the neutral 50.0 mark for the fourth successive month.
The ECB confirmed a widely anticipated reduction in interest rates taking the Central Bank's key rate to 3.75%, cutting the rate by 25 bps from a record 4% where it has been since September 2023. The cut was announced, despite lingering inflationary pressures in the 20-nation Euro Zone. ECB gave no indication about its next move, given the increasing uncertainty over inflation.
Euro Zone inflation rose in May to 2.6% YoY (against expected 2.5% YoY), a sign that the European Central Bank still faces a slow and uncertain journey to reach its goal of fully reining in prices.
The Bank of Canada (BoC) cut its policy rate by 25 bps to 4.75% on the back of greater confidence that inflation will durably return to the 2% target level while emphasising that it would be reasonable to expect further easing if the progress continues.
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| Equity
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The equity benchmarks opened higher, amidst the positive market sentiment influenced by the exit poll results. The uncertainty in... election results on Tuesday caused a major fall in the markets. On the back of election results, rate cut by ECB and an expected rate cut by Fed, the markets recovered through the latter part of the week. The focus remains on Government formation and MPC policy rate decisions to provide further cues on the markets.
During the week Sensex gained 3.61% to close at 76693.36 while Nifty moved up 3.37% to close at 23290.15
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| Debt
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10-Year Government Bond yields opened lower this week as UST yields lowered post weak US PCE index. The yields move upwards ...responding to the election outcome. The Government bond yields are expected to move coordinated with the UST yields amidst notable liquidity surpluses. The outcome of the weekly gilt auction and MPC meeting will influence the market sentiment.
The 10Y benchmark G-Sec was trading at a yield of 7.02% on 07 June, 2024 at 15:46 IST
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| Oil
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Brent Crude Oil prices opened flat and fell to a 4-month low as OPEC+ announced a continued supply cut but outlined a gradual ... plan to ease production cuts, raising a fear of excess supply in the market. Possibility of ceasefire in Gaza further eroded the risk premium attached to the prices. The prices went up further, driven by the rate cut announced by the ECB and the expectation of Fed rate cuts in September. Investors continue to monitor US economic data for further cues.
Brent was trading at $80.03 on 07 June, 2024 at 15:48 IST
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| Gold
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Gold prices opened positively and moved upwards led by a softer Dollar as US PCE printed lower than expected. The upward movement ...was further aided by weak ADP employment data. The ECB rate cut has given hopes of a US rate cut limiting the downside in Gold prices. The investors remain cautious and look at US economic data for further cues.
Gold was trading at $2353.90 Per Ounce on 07 June, 2024 at 15:49 IST
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| Currency
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The USD/INR pair opened low, amid lower-than-expected US PCE index. The prices remained broadly range bound through the ...week, responding to the weaker USD profile and the election outcome. A depreciation bias is likely to continue in the near term as the markets respond to the election outcomes. Rupee is experiencing a balanced pressure with Importer’s Driving Dollar demand and FII’s withdrawing of funds from the domestic market. Investors await MPC meeting outcomes for further cues. RBI intervention could continue to keep the pair in a tight range.
USD/INR was trading at 83.41 on 07 June, 2024 at 15:52 IST
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| Sensex |
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During the week Sensex gained 3.61% to close at 76693.36 while Nifty moved up 3.37 % to close at 23290.15
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| Bond Yields |
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The 10Y benchmark G-Sec was trading at a yield of 7.02% on 07 June, 2024 at 15:46 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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