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| Indian Economic Update
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WPI inflation eased to a 25-month low of 3.85% YoY in February from 4.73% YoY in January, led by a broad-based decline across food, energy ...and manufactured product prices.
India CPI inflation dipped marginally to 6.44% YoY in February from 6.52% in January, remaining above RBI’s tolerance limit of 6%.
The union government has so far released INR 479 billion for states under special assistance scheme in FY23, as per the department of expenditure's summary report for February.
According to reports, the union government is likely to keep the borrowing during H1FY24 at 55-58% of the gross borrowing target of INR 15.43 trillion for FY24.
RBI MPC member Ashima Goyal said that the US Federal Reserve should adopt a wait and watch policy towards the effect of its interest rates than adopting an excessively reactive monetary policy.
A senior finance ministry official said the government may not issue floating rate bonds in H1FY24 because of indifferent response from the market.
As many as 1.20 lakh persons have applied online to opt for higher pension under Employees Pension Scheme 1995 (EPS-95) until March 9, 2023.
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| Global Update
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Credit Suisse plans to borrow up to USD 54 billion from the Swiss Central Bank and buy back about USD 6 billion of its debt, in order to ...boost its liquidity and calm investors a day after the bank’s share price plummeted.
Federal Reserve Governor Michelle Bowman said America’s banking system remains on a steady footing even after the collapse of the Silicon Valley Bank and state regulators’ seizure of Signature Bank (SBNY). She added that the US banking system remains resilient and on a solid foundation, with strong capital and liquidity throughout the system.
Despite the strong evidence of strain in the global banking sector, the ECB stuck to its pledge of raising the deposit rate by 50 bps to the 3% mark. However, it changed its guidance to indicate that future decision-making will be data-dependent.
US banks borrowed USD 164.8 billion from two Federal Reserve backstop facilities that resulted in an expansion in the balance sheet that is taking place at the same time as quantitative tightening is in operation.
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| Equity
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Benchmark indices opened lower this week tracking Asian and US markets. Risk-off sentiment continues to weigh on... equities with concerns about further regional US banking fall-out remaining in place. Moody's downgraded the US banking sector outlook to negative citing rapidly deteriorating operating conditions. Domestic equity markets are likely to remain under pressure in the near term.
During the week Sensex lost 1.94% to close at 57989.90 while Nifty decline 1.80% to close at 17100.05
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| Debt
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UST bond yields pulled back from highs supported by mixed US labour reports. At the same time, US regional bank crisis supported ...safe haven buying into UST bonds. The sharp plunge in global bond yields amid US regional banking crisis could work as the primary bullish catalyst. India CPI came in at 6.44% YoY in February, in line with expectations. US core CPI rose 0.5% MoM vs 0.4% MoM increase expected. Thus, higher inflation to see US Fed to continue the hiking path. We expect bond prices to remain volatile in near term.
The 10Y benchmark G-Sec was trading at a yield of 7.34% on March 17, 2023 at 16:31 IST
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| Oil
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Oil prices remained volatile this week as the demand concerns on the back of monetary tightening, two US bank failures and higher US... crude oil inventories are weighing on prices. However, recent signs of rising shipping cost will be monitored closely as any sharp uptick will support prices.
Brent was trading at $75.64 on March 17, 2023 at 16:31 IST
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| Gold
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After falling more than 5% MoM in February, gold prices have risen sharply in March supported by safe-haven flows and a ...reassessment of the FOMC’s terminal rate. The yellow metal benefited from a surge in investor buying as equity markets saw a sharp decline post the collapse of SVB. Thus, the risk of contagion in the banking sector will likely see support remain for the precious metals in the near term. We expect gold prices to trade in the USD 1820/oz to USD 1920/oz range in H12023 and expect it to move higher in the USD 1900/oz to USD 2000/oz range in H22023 with an upside possibility of USD 2050/oz.
Gold was trading at $1929.81 Per Ounce on March 17, 2023 at 16:31 IST
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| Currency
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During the week, the pair traded in a tight range. The DXY index rose sharply supported by safe-haven flow amid fear of collapse of ...Credit Suisse. European currencies fell sharply against the dollar after Credit Suisse shares plummeted after its biggest investor ruled out further assistance. We expect the Rupee to trade with depreciating bias in the near term. However, RBI intervention may curb a sharp upside.
USD/INR was trading at 82.55 on March 17, 2023 at 16:31 IST
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| Sensex |
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During the week Sensex lost 1.94% to close at 57989.90 while Nifty decline 1.80% to close at 17100.05
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| Bond Yields |
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The 10Y benchmark G-Sec was trading at a yield of 7.34% on March 17, 2023 at 16:31 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.
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