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Indian Economic Update
Retail inflation softened to a 3-month low of 5.1% YoY in January from 5.7% YoY in December, led by moderation in both food ...and core inflation

The index of industrial production rose by 3.8% YoY in December vs. 2.4% YoY in November. This was primarily driven by a sharp uptick in manufacturing activity by 3.9% YoY (vs. 1.2% in December), while mining and electricity sectors grew by 5.1% YoY and 1.2% YoY, respectively

Wholesale inflation softened to 0.27% YoY in January from 0.73% in December, led by moderation in food and core inflation

Trade deficit narrowed to USD 17.5 billion in January from USD 19.8 billion last month. Deficit is lower on account of lower non-oil-non-gold imports. During FYTD24, trade deficit stood at USD 207 billion vs. USD 229 billion in FYTD23

Unemployment rate in urban areas dropped to 6.5% in Q3FY24 (6.6% in Q2), the lowest since the start of the Periodic Labour Force Survey — urban series, in FY18, a release by the Statistics Ministry showed

RBI Governor stated that the ongoing year’s government borrowings are lower than expected, which should provide greater room in the banking system for resources to support private sector investments and control inflation

Large central public-sector entities – companies and undertakings – achieved 83% of their combined capital expenditure target for FY24 in April-January by spending INR 6.09 trillion, supporting the public capex-led economic growth revival.

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Global Update
US CPI, printed in at 3.1% YoY (expectations: 3%) in January vs 3.4% YoY in the past month reflecting 0.3% MoM increase vs ...0.2% MoM in the previous month

Japan’s economy unexpectedly slipped into recession after shrinking for a second quarter due to poor domestic demand. Japanese GDP contracted by 0.4% QoQ SAAR in Q42023 from 3.3% contraction witnessed in Q32023

The European Union has proposed new trade restrictions on about two dozen firms, including three based in China, accused of supporting Russia’s war efforts in Ukraine.

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Equity
The benchmark equity indices traded higher following the Asian markets. We expect the market to take support after better-than-expected... inflation rate, which fell to a 3-month low at 5.1%. This would keep the trend positive.

During the week Sensex gained 1.16% to close at 72426.64 while Nifty inclined 1.19% to close at 22040.70

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Debt
Government bond yields remained weaker this week taking cues from UST trends that retreated after much weaker-than-expected ...US retail sales. Participants to enter INR 300 billion auction with supply pressure from higher end of the yield curve.

The 10Y benchmark G-Sec was trading at a yield of 7.10% on 16 Feb, 2024 at 15:45 IST

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Oil
Oil prices traded lower as reports from IEA stated that the global demand momentum is slowing leading to a downward revision ... in its 2024 growth expectations while supply is expected to increase. However, disappointing US retail sales data weakened USD that limited the downside. Investors continue to focus on developments in the Red Sea.

Brent was trading at $82.00 on 16 Feb, 2024 at 16:42 IST

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Gold
Gold prices traded in a narrow range in response to a weaker USD and fall in UST yields as retail sales data in the US came very low.... Geopolitical tensions continue to underpin prices of the yellow metal as well. Investors focus on comments from Fed Officials for further cues on its interest rate decisions.

Gold was trading at $2018.65 Per Ounce on 16 Feb, 2024 at 16:42 IST

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Currency
The USD/INR pair remained in sync with higher global USD trend due to price correction move. However, strong labour market ...will likely limit the pair downside. Persistent intervention of RBI is likely to continue ensuring that range trading in the pair remains firmly in place.

USD/INR was trading at 83.01 on 16 Feb, 2024 at 16:40 IST

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Sensex
72426.64
1.16%
During the week Sensex gained 1.16% to close at 72426.64 while Nifty inclined 1.19% to close at 22040.70
 
Bond Yields
7.10%

The 10Y benchmark G-Sec was trading at a yield of 7.10% on 16 Feb, 2024 at 15:45 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.