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Indian Economic Update

S&P Global has said that India is likely to become the third-largest economy and transition to the upper middle income ... category by FY31, if an average annual GDP growth of 6.7% is maintained till the end of the decade. The nominal GDP is projected to grow to USD 7 trillion by FY31.

India’s direct tax collection rose about 16% YoY (INR 9.95 trillion) till September 15, 45% of the FY25 target (INR 22.07 trillion) in line with annual trend. Individuals & businesses have paid INR 4.36 trillion in advance tax, a 23% YoY increase.

The RBI Governor said that while inflation in India has weakened, there is still “distance to cover” adding that India's economy could grow at a rate of around 7.5% or more. This surpasses RBI's current forecast of 7.2% for the financial year.

RBI Governor stated that decisions on interest rate moderation will be based on long-term inflation trends rather than monthly data, emphasising that decisions will be based on local factors and a rate cut by the FOMC will not influence decision making. The MPC will meet from October 7th to October 9th to decide on the interest rate, which has remained at 6.5% amid food inflation risks.

The Economic Affairs Secretary has stated that the US Fed’s outsized rate cut “will not significantly impact foreign inflows” into India. Separately, the Chief Economic Advisor also said the impact of the US Fed rate cut will be muted for India as it was mostly priced in.

The Centre has sanctioned INR 460 billion in capex loans to states out of the INR 1.5 trillion allocated for FY25. INR 250 billion of this has been released. States must meet specific performance criteria to receive further funds, including achieving a 10% growth in capex.

The Government is considering changing the base year for GDP computation to 2022-23 from the current 2011-12 to better reflect the economy. MoSPI will propose this change with new estimates expected by February 2026.
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Global Update

The US Central Bank kicked off an anticipated series of interest rate cuts with a larger than usual 50 basis point ... reduction. Fed Chair added that the cut was meant to show policymakers’ commitment to sustaining a low unemployment rate now that inflation has eased.

Chinese banks maintained their benchmark lending rates for September, as policymakers hold off on further monetary stimulus despite financial institutions struggling with record-low profit margins and industrial output growth at a 5-month low in August.

Japan's export growth slowed sharply in August as shipments to the U.S. fell for the first time in 3 years. However, machinery orders unexpectedly shrank in July, a worrying sign for an economy struggling to mount a solid recovery.

UK inflation held steady in August but sped up in the services sector. This is closely watched by the Bank of England, data showed adding to bets that the Central Bank will keep interest rates on hold.
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Equity

The benchmark indices opened positive amid positive momentum in the US market. The market continued moving upwards at a ... steady pace factoring in the US Fed rate cut despite mixed trading in Asian markets. The expectation of rate cut by RBI and strong FII & DII flows will further boost positive sentiment in the domestic markets.

During the week Sensex gained 1.99% to close at 84544.31 while Nifty moved up 1.71% to close at 25790.95
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Debt

10-Year Government Bond yields opened slightly negative mirroring UST yield. The yields remained volatile but range ... bound for most of the week tracking the UST momentum. The unexpected 50 basis point rate cut is expected to pave the way for domestic rate cuts, fostering a positive market sentiment.

The 10Y benchmark G-Sec was trading at a yield of 6.88% on September 20, 2024 at 15:51 IST
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Oil

Crude oil prices opened positively, as supply concerns caused by hurricane Francine continued. The Fed rate cut is ... expected to boost economic activity in the US and increase demand from the US, but the 50 basis point cut has raised concerns about the US labour market limiting the upside. This in combination with rising tensions in the Middle East continue to keep oil prices on an upward trend.

Brent was trading at $74.47 on September 20, 2024 at 16:20 IST
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Gold

Gold prices remained stable through the week as the market waited for Fed announcements. Ongoing geopolitical risks and ... signs of economic weakness in both the U.S. and China supported demand for the safe-haven metal. This is expected to keep gold hovering near record levels.

Gold was trading at $2636.7 Per Ounce on September 20, 2024 at 16:21 IST
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Currency

The USD/INR pair opened slightly negative trading downward through the week. Increase in demand for USD by domestic oil ... importers, amid rebound in oil prices was balanced by the foreign inflows keeping the rupee stable. The RBI is expected to intervene if the rupee faces significant pressure, stabilising the currency.

USD/INR was trading at 83.54 on September 20, 2024 at 16:20 IST
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Sensex

84544.31
1.99%

During the week Sensex gained 1.99% to close at 84544.31 while Nifty moved up 1.71% to close at 25790.95

Bond Yields

6.88%

The 10Y benchmark G-Sec was trading at a yield of 6.88% on September 20, 2024 at 15:51 IST