Quick Summary
Indian Economic Update
India’s CPI inflation was at a 59-month low of 3.45% in July. Food inflation moderated at 5.1% YoY,
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while core inflation inched up to 3.4% YoY.
The Cabinet approved the revamped PM Awas Yojana – Gramin & Urban at an estimated cost of around INR 4.35 trillion and 30 million houses over the next 5 years.
FDI equity inflow to the manufacturing sectors increased by 69% to USD 165.1 billion between 2014 & 2024 compared to USD 97.7 billion in the previous 10 FYs.
India’s industrial production grew 4.2% YoY in June with manufacturing activity falling to a 7-month low of 2.6% YoY. The mining sector recorded growth at 10.3%, electricity at 8.6% and manufacturing at 2.6%.
The RBI has established a 10-member expert panel led by Deputy Governor Michael Patra to review & enhance statistical practices focusing on data quality and best practices to align India's statistics with global standards.
India’s trade deficit widened to a 9-month high of USD 23.5 billion in July, up from USD 21 billion in June, led by non-oil, non-gold deficit at USD 12 billion and a contraction in overall goods exports by 1.5% at USD 34 billion after 3 straight months of growth.
The RBI has proposed implementing risk-based pricing for bank deposit insurance to address concerns about rapid deposit withdrawals through digital modes.
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Global Update
The US CPI inflation report for July came broadly in line with expectations with YoY CPI dropping to 2.9% from 3%
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in June. This confirms that a steady & gradual disinflation trend is unfolding.
The Federal Reserve’s consumer inflation expectations survey showed that the median one and five year ahead inflation expectations were unchanged in July at 3.0% and 2.8%, respectively. Conversely, median three year ahead inflation expectations declined sharply by 0.6% to 2.3%.
US Producer prices rose in July by less than the forecast at 0.1%, reflecting the first decline in service costs this year amid an ongoing moderation in inflationary pressures.
China's consumer prices rose at a slightly faster-than-expected rate in July by 0.5% YoY partly due to weather disruptions to food supplies, while producer deflation persisted, keeping the country's underlying consumption trends soft in a test for policymakers.
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Equity
The benchmark indices opened lower amid mixed cues from the global market and cautious investor sentiment ahead of a
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key inflation data release impacting the market. The June quarter earnings season has been underwhelming with most companies reporting subdued earnings, setting a lukewarm tone for the market. We expect the market to consolidate and remain sideways while global headwinds continue to induce volatility.
During the week Sensex gained 0.77 % to close at 80289.93 while Nifty moved up 0.72 % to close at 24540.55
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Debt
10-Year Government Bond yields opened lower as investors continued to assess the US economy. The market reacted
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to the CPI & WPI inflation data released in India and the US. Investors remained cautious with the escalating tensions amid a potential imminent attack by Iran on Israel.
The 10Y benchmark G-Sec was trading at a yield of 6.98 % on August 16, 2024 at 15:57 IST
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Oil
Crude oil prices moved up sharply amid escalating tensions between Israel and Iran. The positive economic data from
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the US eased the demand concerns. The prices were volatile through the week but stayed positive for the week. Ongoing concerns and positive US data will maintain upward pressure on prices.
Brent was trading at $79.61 on August 16, 2024 at 15:51 IST
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Gold
Gold prices moved up sharply due to the rising geopolitical risks increasing safe haven investment demand. The expectation
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of US rate cut along with a weakening US dollar supported the prices. The overall positive market sentiment will limit the upside.
Gold was trading at $2504.95 Per Ounce on August 16, 2024 at 15:52 IST
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Currency
The USD/INR pair opened slightly weak and traded flat through the week. The escalating geopolitical tensions and the
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increased USD demand from local importers will maintain downward pressure on the rupee. The RBI will intervene if any sharp movement occurs in the pair ensuring that the relative range trading environment remains in place.
USD/INR was trading at 83.95 on August 16, 2024 at 15:52 IST
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Sensex
80289.93
0.77 %
During the week Sensex gained 0.77 % to close at 80289.93 while Nifty moved up 0.72 % to close at 24540.55
Bond Yields
6.98 %
The 10Y benchmark G-Sec was trading at a yield of 6.98 % on August 16, 2024 at 15:57 IST