Quick Summary
Indian Economic Update
The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) kept the Repo Rate unchanged at 4 per cent, for the 11th consecutive time, while maintaining an ... ‘accommodative stance’, RBI Governor Mr. Shaktikanta Das announced on Friday. The Central Bank Governor said, that the MPC had voted unanimously to maintain the ‘accommodative stance’ and added that the Reverse Repo Rate too was kept unchanged at 3.35 per cent

In its first monetary policy announcement of 2022-23, the RBI projected the inflation to be at 5.7 per cent this financial year, compared to 4.5 per cent in 2021-22. The Central Bank revised its real GDP growth projection for 2022-23 to 7.2 per cent, compared to its earlier guidance of 7.8 per cent

The Ministry of Finance, in its monthly report, said that India might find it difficult to grow faster than 8% in FY23, if crude prices persist at the current level, for too long

Chief Economic Adviser, Dr. V. Anantha Nageswaran, speaking at a webinar organised by the Indian Council for Research on International Economic Relations, commented that the introduction of a Central Bank Digital Currency (CBDC) would not lead to the elimination of Cryptocurrencies and Stable coins, as they satisfy different objectives

Ministry of Finance granted an additional borrowing permission of INR 282 billion to 10 States, for undertaking the stipulated reforms in the Power sector, in FY22 and provided an incentive of INR 1.2 trillion in FY23, for reforms in the Power sector

India and Australia will far exceed initial expectations, and raise their bilateral trade of goods and services to USD 100 billion by 2030 from about USD 27.5 billion in 2021, taking advantage of the trade deal that was signed last week, Commerce and Industry Minister Mr. Piyush Goyal, said on Wednesday

The Government has formed an advisory committee, to drive the INR 720 billion project, Semicon India. The project aims to make the country a global leader in Semiconductor manufacturing, design and innovation, an official statement said on Wednesday

State-owned fuel retailers hiked the rates of Petrol and Diesel by further 80 paise today, the 14th increase in the last 16 days, taking the overall increase since the ending of a four-and-half-month long hiatus in rate revision, to INR 10 per litre

India’s export reached an all-time high in March to USD 40.4 billion. During FY22, export increased to USD 417.8 billion, displaying an impressive growth of 43.2% YoY. Imports increased to USD 59.1 billion, on the back of higher oil imports and non-oil non-gold imports. Trade deficit stood at USD 18.7 billion in March. During FY22, trade deficit had inched up to USD 192 billion from USD 103 billion in FY21

Manufacturing PMI moderated to 54 in March, from 54.9 in February. New export orders received by Indian manufacturers also, fell in March

The Finance Minister said that India continues to remain the highest receiver of FDI, and Indian retail investors have created the capacity to absorb the shock, due to outflow of foreign funds from the country's stock markets.

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Global Update
FOMC members continue to provide strong guidance of a front-loading of policy rate hikes. Federal Reserve Bank of Chicago President, Mr. Charles Evans and his Atlanta ...colleague Mr. Raphael Bostic, favour raising the rates to neutral, while cautioning that they will monitor how the economy performs, as they proceed. However, Mr. Bullard provided a fairly hawkish guidance, indicating that he would want the policy rate to reach the 3% to 3.25% mark by end of 2022, while supporting a case for a 50bps rate hike and QT announcement, in the May policy meeting

The ECB minutes showed a great degree of division among members of the committee, on how to respond to the economic shock waves from Russia’s invasion of Ukraine. While some sought a firm end-date for asset purchases and opening an interest-rate increase in the third quarter, due to the worsening inflation outlook, others preferred a wait-and-see approach, amid the exceptionally high uncertainty

The European Union agreed to ban coal imports from Russia, in its first move targeting Moscow’s crucial energy revenue

Ukraine has urged NATO to supply more weapons, as it seeks to defend itself against any further aggression from Russia. Members of the NATO Military Alliance have been supplying Kyiv with weapons, ever since Russia’s unprovoked invasion of Ukraine in February

The FOMC minutes for the policy meeting that was held over Mar 15 to Mar 16, 2022, showed that there was strong consensus within the committee, to move forward with QT. The minutes showed that the participants had agreed upon not reinvesting the maturing securities to the tune of USD 95 billion per month, that could commence as early as the May policy meeting. The minutes also showed a strong support for a 50bps rate hike, as the focus remains on fighting off inflation pressures

China signalled, that it will step up monetary stimulus for the economy, acknowledging that Domestic and Global risks are now bigger, than previously expected

The United States targeted Russian banks and elites, with a new round of sanctions, including banning Americans from investing in Russia. The new sanctions hit Russia's Sberbank, which holds one-third of Russia's total banking assets, and Alfabank, the country's fourth largest financial institution, U.S. officials said. But, energy transactions were exempted from the latest measures, they said. Sanctions were also imposed on the relatives of key officials, such as the Russian President’s two adult daughters

The Federal Reserve Governor Dr. Lael Brainard, called the task of reducing inflation pressures “paramount”. She indicated that a 50bps rate hike could be in the offing in the May policy meeting, which will be accompanied by steps to move towards commencing a balance sheet run-off. She further highlighted, that the pace of Balance Sheet run-off could be much faster than was previously conducted, during the 2018 tightening cycle

The Federal Reserve Bank of Kansas City President, Ms. Esther George said that, raising interest rates by 50bps in May will be an option, although the decision also has to be weighed by plans for shrinking of the Fed Balance Sheet

The US, European Union and the Group of Seven, are coordinating on a fresh round of sanctions on Russia, including a US ban on investment in the country and an EU ban on coal imports

US President Joe Biden, called for a war crime trial against Russia's President Vladimir Putin, and the United States will ask the UN General Assembly to suspend Russia from the Human Rights Council. The United States and Europe have been planning new sanctions to punish Moscow, over civilian killings in Ukraine

The US Treasury has halted the Dollar debt payments from Russian Government Accounts, at US financial institutions. The move is designed to make Russia choose between draining their USD reserves held within its own country, spending new revenue it collects, or going into default

ECB officials continue to talk about the possibility of normalisation of the monetary policy. Governing Council member Mr. Bostjan Vasle said that, negative rates might end by December 2022, while Governing Council member Mr. Klaas Knot stated that the Central Bank’s primary mandate is to safeguard medium term inflation, and that it should not hesitate to act to prevent de-anchoring of expectations.

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Benchmark equity indices are trading flat, amidst mixed Asian markets, as investor’s eyed the Russia-Ukraine crisis, and digested the Fed's plan to... curb inflation. Domestically, investors await the RBI MPC outcome, as it will provide further cues to the market.

During the week Sensex gained 0.28% to close at 59447.18 while Nifty advanced 0.64% to close at 17784.35

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Government Bond prices are expected to open steady, ahead of the RBI MPC outcome and the first weekly debt sale, worth INR 320 billion. However, elevated... UST yields may weigh on the prices.

10Y benchmark yield ended at 7.11% as compared to 6.84% of previous week

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Oil prices are trading flat on the back of concerns about lower Chinese growth, and the release of strategic petroleum reserves, with Japan announcing... a release of 15 million release, along with the US commitment to already release 180 million Barrels, over a six-month period. Brent Crude prices are trading -1.3% lower, at the USD 100.23/barrel mark.

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Gold prices are trading moderately lower, reflecting the ongoing expectations of a tighter US monetary policy regime. However, the continued safe haven... appeal for gold is working to limit the sharp downside, as concerns about Chinese growth prospects have intensified, and concerns about the Russia-Ukraine conflict remain firmly in place. Gold prices are trading lower by -0.14% to the USD 1929.01/ounce.

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Rupee is likely to open higher. Hawkish Fed comments and faster pace of QT has been supporting the USD. The MPC outcome will be eyed. Any sharp movement... is unlikely, given RBI's interventions. The Indian Rupee appreciated to 75.91 level against the US Dollar, in the previous trading session.

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During the week Sensex gained 0.28% to close at 59447.18 while Nifty advanced 0.64% to close at 17784.35
Bond Yields
27 bps
10Y benchmark yield ended at 7.11% as compared to 6.84% of previous week
Source: ICICI Bank Research, Private Banking Investment Strategy Team, Bloomberg and CRISIL.
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