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Indian Economic Update
India’s WPI inflation for June eases to 15.2% from 15.9% in May. Food inflation rose to 12.4% vs. 10.9% last month led by fruits and eggs, perishable ...inflation remains elevated and fuel and power index was stable at 40.4%

India CPI inflation eased to 7.01% in June vs. 7.04% YoY in May. On a MoM basis, CPI index rose by 0.5% compared with 0.9% in May 2022. Core inflation eased to 5.96% YoY compared with 6.08% in May 2022 led by an excise duty reduction

Maharashtra Government cuts VAT on petrol and diesel by INR 5 & INR 3 per litre respectively

India's trade deficit widens to USD 26.2 billion with merchandise exports in June at USD 40.1 billion rising 23% YoY while imports increased by 57.6% to USD 66.3 billion

With consumer price inflation remaining high, Finance Minister Mrs. Nirmala Sitharaman on Tuesday said the Government is watchful of the price situation and will continue the pointed attack on inflation. The Finance Minister also said that a favourable monsoon will lead to good production and rural demand

The Index of Industrial Production (IIP) increased by 19.6% YoY in May 2022 compared with an increase of 27.6% YoY in May 2021. On a MoM basis, it increased by 2.3%. Over a 3-year period, IIP is still weak

The country’s exports are likely to register a ‘reasonable level’ of growth in the current financial year despite the global uncertainties on the trade front, Commerce and Industry Minister Piyush Goyal has said

RBI allows payments for cross-border trade in rupee in a move aimed to promote growth of global trade with an emphasis on exports

Exuding confidence that the price situation will gradually improve in the second half of the current fiscal, RBI Governor Shaktikanta Das on Saturday said the central bank would continue to take monetary measures to anchor inflation with a view to achieving strong and sustainable growth. Das’ statement may lead to expectations of revisions in the inflation projections in the coming policy updates

The ministerial panel on casino, race course and online gaming will meet on Tuesday to finalise its report on taxing these activities, ahead of the Goods and Services Tax (GST) Council meeting in the first week of August, UP Finance Minister said

E-way bills generated by businesses for inter-state commerce in June were up by 1.2% MoM and 36.2% YoY, suggesting that the July Goods and Services Tax (GST) collections will likely be around INR 1.5 trillion.

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Global Update
Fed’s Bullard said that it favoured sticking with a 75 bps rate increase later this monthrather than an even bigger move. Waller also backed 75 bps rate increase ...and said thatany bigger move hangs on data. Susan Collins viewed that inflation is too high and bringing it down is a top priority

China’s Premier Li Keqiang highlighted the risks of imported inflation as the economy recovers, stressing that grain and energy supplies are key to keeping prices in check

Markets responded to a sharp rise in US CPI inflation from 8.6% in May to 9.1% in June. The fed funds futures market is pricing in a high probability of a 100 bps rate hike in the July policy meeting itself

FOMC members provided a hawkish message. Federal Reserve Bank of Atlanta President Raphael Bostic said, “Everything is in play” for policy action while Federal Reserve Bank of Cleveland President Loretta Mester said the sharp rise in inflation in June suggested that 75 bps rate hike is possible in the July policy meeting

The new Australian Government supports the trade pact signed with India and they are expected to soon approach their parliament for an approval of the agreement, Commerce and Industry Minister Piyush Goyal has said

The Monetary Authority of Singapore tightened their policy unexpectedly. It has an exchange rate target and has subsequently allowed the local currency to appreciate by re-opening the mid-point of the policy band up to the prevailing level

The Bank of Canada surprised the market by hiking rates by 100 bps against expectations of 75 bps hike. It provided a hawkish guidance indicating that more rate hikes are possible going forward

Bank of England Governor Andrew Bailey said policy makers are prepared to move borrowing costs higher in bigger steps to control inflation implying that a 50 bps rate hike is on the cards in the August policy meeting

White House National Security Adviser Jake Sullivan said that US President Biden will make the case for greater oil production from OPEC nations to bring down gasoline prices when he meets Gulf leaders in Saudi Arabia this week

The lower house of the Russian parliament will gather on 15 July for an extraordinary session, its council decided on Monday, just days after President Vladimir Putin warned that he had not even started to get serious about the war in Ukraine

As the US payrolls release surprised the upside increasing by 372K in June, FOMC member Williams reiterated that the focus of the central bank is to bring inflation in check implying that a further rate increase is likely going forward

The ECB should increase interest rates by as much as 125 basis points by September if the inflation outlook doesn’t improve, according to Governing Council member Robert Holzmann.

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Equity
Benchmark indices are likely to open higher amidst mixed Asian Equity markets. China’s economic data showed a mixed picture as the Q2 GDP ...and June industrial output data missed the investors’ expectations, while retail sale came in better than expected. This will guide the price action in today’s session along with earnings results.

During the week Sensex lost 1.32% to close at 53760.78 while Nifty declined 1.05% to close at 16049.20

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Debt
Government bond prices are likely to open steady ahead of the weekly debt sale worth INR 320 billion. Prices reacted negatively yesterday as a multi-decade high US CPI... print stocked fears for larger rate hikes by the US Fed going ahead. However, dovish comments by Fed members will bring the benchmark rate to the neutral levels.

10Y benchmark yield ended at 7.43% as compared to 7.41% of previous week

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Oil
Oil prices pared nearly all losses as investors focused on the prospect of a large US rate hike later this month that could stem inflation but at the same ... time hit oil demand. Brent crude are currently trading at USD 100.18/ bbl.

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Gold
Gold prices fell as markets stressed over whether the Federal Reserve will opt for a record hike on Jul 27 2022 ...or continue to prioritise growth over inflation. Gold prices are currently trading at USD 1711.65/oz.

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Currency
The USD/INR pair is likely to open higher. The greenback weakened against the major currencies today as the FOMC hawkish members hinted towards lower than ...100 bps hike in the upcoming July policy meet. Any sharp movement in the pair is unlikely due to RBI interventions.The Indian Rupee depreciated against the US dollar in the previous trading session moving to the 79.89 level.

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Sensex
53760.78
-1.32%
During the week Sensex lost 1.32% to close at 53760.78 while Nifty declined 1.05% to close at 16049.20
 
Bond Yields
7.43%
2 bps
10Y benchmark yield ended at 7.43% as compared to 7.41% 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.