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Indian Economic Update
RBI Governor Mr. Das, addressing the 32nd Conference of the State Finance Secretaries, asked State Governments to find effective ways to address the ...the issues related to debt and cash management and stressed on the need for States to adopt a prudent borrowing strategy, focus on improving quality of expenditure, better handling of contingent liabilities and improving governance in cooperative banks

The Union Government earmarks INR 800 billion in interest-free loans for states undertaking capital works in FY23 under the scheme 'Special Assistance to States for Capital Investment', which had been announced during budget 2022-23

India's services PMI rose to a record high of 59.2 in June vs. 58.9 in May. The print is showing the fastest pace of expansion in over eleven years since 2011 on the back of strong demand. However, elevated inflation remains a concern as prices charged rose at the sharpest rate in almost five years.

RBI announced measures to diversify and expand sources of forex funding with an aim to mitigate volatility and dampen global spillovers. These include 1) Exemption from CRR and SLR on incremental FCNR(B) and NRE Term Deposits; 2) Removal of interest rate cap for FCNR(B) and NRE; 3) Introduction of new 7-year and 14-year G-secs under the FAR; 4) Removal of short term limit for investment in G-secs and Corporat Bonds under the MTF; 4) Increase the scope of corporate instruments under MTF; 5) Increase the utilisation scope for funds borrowed under the OFCB; and 6) Increase the limit under the European Central Bankframework to USD 1.5 billion and raise the all-in cost ceiling by 100bps

GST collections in June grew 56% YoY to INR 1.44 trillion which is the second-highest collection after April when it was about INR 1.68 trillion

The Indian Government has imposed export duty on petrol, diesel and ATF. In addition to this, a cess has been imposed on domestic crude production. Custom duty on gold has been raised by 5%

Union Food and Consumer Affairs Minister Mr.Piyush Goyal has asked the State Governments to encourage farmers to increase sowing area of paddy and wheat to boost India's exports

The Food Ministry held a meeting with edible oil industry bodies and manufacturers to discuss reduction in retail prices of oils amidst a fall in global prices

India’s exports increased by 16.8% YoY to USD 37.9 billion in June. In YoY terms, imports are up by 51% to USD 63.6 billion. During Q1FY23 imports increased by 47.5%. Thus, the trade deficit widened to a new high of USD 25.6 billion in June

India’s Revenue Secretary Mr. Tarun Bajaj said that the government intends to continue with the top GST slab of 28% for luxury and sin goods, but is open to discuss narrowing down the three slabs of 5%, 12% and 18% into two.

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Global Update
President Joe Biden will discuss possible reductions in US tariffs on Chinese goods in a meeting with his advisers set for later today ...

Federal Open Market Committee(FOMC) minutes confirmed that the FOMC is poised to continue front-loading tightening policy with a further 175bps worth of rate hikes expected over 2022 as inflation is expected to remain elevated and only gradually moderate over the year

The Central Bank of Malaysia raised its key overnight policy rate by 25bps to 2.25% in its July meeting, the second consecutive rate hike and in line with market expectations

Governor Christopher Waller and St. Louis Fed President Mr. James Bullard, who are considered to be the two most hawkish members of the FOMC, backed the need for a restrictive policy to curb price pressures but argued that the US can still avert a recession

China’s Ministry of Finance is considering allowing local Governments to sell CNY 1.5 trillion (USD 220 billion) of special bonds in the second half of this year, an unprecedented acceleration of infrastructure funding aimed at supporting the Chinese economy

The European Central Bank’s minutes confirmed that policymakers will move forward with theirplans to raise policy rates in line with the guidance provided and emphasised that an anti-fragmentation tool could be announced in the July policy meeting

The J.P.Morgan Global Manufacturing PMI fell to a 22-month low of 52.2 in June, from 52.3 in May, but remained above the neutral mark of 50.0. With China included in the calculation, the index rose from 49.6 in May to 52.5 in June. Excluding China from the calculation, the index dropped from 52.6 to 50.6, a level indicative of near-stagnation. The headline ASEAN PMI was registered at 52.0 in June, down slightly from 52.3 in May, to signal a solid overall improvement in the health of the ASEAN manufacturing sector

The S&P Global India Manufacturing PMI moderated to 53.9 in June vs. 54.6 in May. Softer increases in production, factory orders, stocks of purchases and employment all dragged down the PMI in June

The Reserve Bank of Australia raised the cash rate by 50bps to 1.35%. Policymakers warned that further tightening will continue over the months ahead, with its size and timing being guided by the incoming data and the board's view of the outlook for inflation and labour market

Shanghai is once again mass testing for COVID-19 cases, fuelling concerns that China’s financial hub will find itself back in lockdown in pursuit of COVID-19Zero. The city reported 24 new local COVID-19 cases for Tuesday.

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Equity
Benchmark indices are likely to open higher, taking cues from the upbeat sentiments in global markets with easing crude oil prices lending further tailwind to the momentum. ...Market participants are expected to closely watch the US labour market report that is due for release later today.

During the week Sensex gained 2.97% to close at 54481.84 while Nifty advanced 2.97% to close at 16220.60

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Debt
Government bond prices are likely to open lower as traders exercise caution ahead of the weekly gilts auction. Prices could fall reflecting the rise seen in global...global yields as well as increase in crude prices in the overnight session.

10Y benchmark yield ended at 7.41% as compared to 7.42% of previous week.

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Oil
Brent crude oil prices are trading lower after rebounding overnight as investors’ attention switched to the physical market where signs of tightness persisted. The EIA weekly... crude oil inventory report also showed further drawdowns. Gasoline inventories fell while refinery utilisation rates were lower. Brent crude oil prices are trading at USD 104/barrel.

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Gold
Gold prices are trading at a near 9-month low as investors continues to slash their holding of the precious metal....Gold-backed ETFs have seen their holdings fall by 39 tonnes over the past week to their lowest level in almost four months. Gold prices are trading at USD 1742/ounce.

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Currency
The USD/INR pair is likely to open higher as lower crude oil rates and the ranged trading in the DXY willact as cues for the domestic unit. FPI outflows continue ...continue to affect the INR negatively. Any sharp movement in the pair is unlikely due to RBI intervention. The Indian Rupee closed stronger against the US dollar in the previous trading session closing at the 79.18 level.

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Sensex
54481.84
2.97%
During the week Sensex gained 2.97% to close at 54481.84 while Nifty advanced 2.97% to close at 16220.60
 
Bond Yields
7.41%
-1 bps
10Y benchmark yield ended at 7.41% as compared to 7.42% 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.