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Indian Economic Update
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In a bid to spur public spending, the Finance ministry has provided a one-time relaxation in the spending guidelines for Q4-FY22, to enable the Central... Ministries and departments to expedite capital expenditure, while retaining that the spending ceiling should not exceed the revised estimates
India Ratings and Research on Thursday said the country’s economy is likely to grow by 7.6% in 2022-23. The agency said the economy will show a meaningful expansion, after a gap of two years, as the real GDP in 2022-23 is expected to be 9.1% higher than that in 2019-20 (pre-COVID level)
India’s Wholesale Price Index (WPI) inched down to 13.6% YoY in December, from a record high of 14.2% YoY in Nov. The decline in WPI inflation was driven by a fall in the prices of fuel items’, with wholesale fuel and power inflation climbing down to 32.3% from 39.8% in November 2021. During Apr-Dec, 2021, WPI inflation stands at 12.5% YoY
Union Government released INR 950.8 billion to the States as January Tax devolution, including an advance instalment of INR 475.4 billion, almost double the entitlement, during the month of January
CPI inflation for farm workers rose to a 13 month high of 4.78%, while that of rural workers rose to 5.03%, in December 2021, primarily due to higher prices of certain food items
Union Finance Minister Nirmala Sitharaman while addressing a press conference in the national capital about the Antrix Devas issue said that Government of India would use the SC order to defend the government position on Antrix-Devas, citing the instance of fraud practices while the process of liquidation would be initiated
According to media reports quoting a finance ministry official, states may borrow significantly less than projected INR 3.24 trillion Q4-FY22 and would probably instead use their surplus cash balances to meet the expenditure, rather than through market borrowings
E-way bill generations stood at INR 33.2 million in the first 16 days of January with a daily average of INR 2.07 million. Daily e-way bill generation under the GST stood at INR 2.11 million for the week ended January 16, 5.4% lower than in the previous week, reflecting a moderation in goods dispatches
India’s Commerce and Industry Minister while chairing a review meeting of all major Export Promotion Councils (EPCs), said that India is set to achieve USD 650 billion exports target in FY22
Government of India has received about INR 399 billion as proceeds from dividend, from Public Sector Enterprises during FY22, according to the Department of Investment and Public Asset Management (DIPAM) Secretary
According to RBI’s bulletin for December 2022, higher cut-offs at the variable rate reverse repo auctions have led to the effective reverse repo rate moving closer to the repo rate at 4% and resulted in hardening of money market rates
RBI bulletin sees a strong pipeline of initial public offerings lined up for 2022 and the likely inclusion of Indian Sovereign Bonds on the global bond indices, support inflows from foreign portfolio investors in 2022
India’s PM Mr. Narendra Modi said that India's Global Innovation Index ranking has improved from 81 in 2015 to 46 now, while addressing a virtual interaction with startups on Saturday
India’s Commerce and Industry Minister Piyush Goyal on Sunday assured full government support to the leaders of India’s top IT companies in pushing the growth of the sector and taking services exports to USD 1 trillion, in a decade
Addressing the World Economic Forum’s Davos agenda, the Prime Minister of India said that, India is promoting ease of doing business by reducing corporate tax to the most competitive levels. He said that this is the best time to invest in India.
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Global Update
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The ECB minutes for the policy meeting that was held in December 2021, showed considerable divergence of opinion about the inflation outlook among the ...members of the Governing Council. However, the ECB President Lagarde stated that the Central Bank has no reason to act as fast as the Fed
The US Government has given approval for three Baltic NATO members -Estonia/Lithuania/Latvia to send American made weapons to Ukraine
The Biden administration is monitoring real-time data obtained from businesses operating in China to determine whether the outbreak of the Omicron variant of coronavirus poses a risk to the U.S. supply chain
The Chinese government said that it will take further measures to clamp down on the technology sector
The US President, Biden, made the following statements: (a) supported FOMC’s normalisation plans and said that it is the Central Bank’s job to lead inflation, (b) will not ease tariffs on China, (c) will have to break USD 2 trillion fiscal stimulus bill into smaller parts, for it to pass Congress and (d) warned the Russian President against moving in to Ukraine
China cut its lending rates for a second straight month, after the Central Bank lowered the borrowing costs on medium-term loans earlier this week, in a bid to support a slowing economy. The PBOC cut the one-year loan prime rate to 3.70% by 10 bps than last month’s 3.80% level. The five-year loan prime rate was lowered to 4.60% from 4.65%
China Aoyuan Group Ltd. Will not make payments on 4 Dollar bonds and said, that will trigger defaults on all other offshore debts, becoming the latest Chinese developer to succumb to the industry’s liquidity crisis. However, Chinese high yielding real estate sector bonds have rallied in response to the monetary easing delivered by the PBOC and expectations that the worst could be over
China’s Central Bank pledged to use more monetary policy tools to spur the economy and ease credit stress, as signs of a property market slump worsens, said PBOC Deputy Governor Liu Guoqiang. He stated that the Central Bank will open the monetary policy tool box wider, maintain a stable overall money supply and avoid a collapse in credit
China's biggest homebuilder by sales, Country Garden, bought back USD 10 million of its own bonds on Monday, as its bond fell again amid the country's ongoing property crisis
EU countries broadly agree they need to change EU laws to allow slower debt reduction, move away from complex calculated indicators and come up with an EU fiscal framework that is actually respected, senior EU officials said
The PBOC cut the benchmark policy rates by 10 bps with the 7-day reverse repo rate cut from 2.2% to 2.1% and the MLF rate cut from 2.95% to 2.85%, to support the economy that is facing renewed weakness from a property market slump and repeated lockdowns that are being imposed in response to repeated virus outbreaks
Commentary from ECB officials continued to remain dovish. The ECB President Lagarde said that the drivers of inflation should ease over the course of the year, while ECB member Schnabel said that ECB must not raise rates too quickly
US President Joe Biden is set to meet Japanese Prime Minister Fumio Kishida virtually, this week; the two leaders would advance their shared vision for a “free and open Indo-Pacific” and discuss COVID and the climate crisis.
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Equity
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Benchmark indices are likely to open lower, tracking the momentum from Asian share indices. Asian share indices slipped in early trade, following the... fall in US indices over concerns of tightening monetary policy and slowing growth. Rising cases in major States also remain a concern domestically.
During the week Sensex lost 3.58% to close at 59037.18 while Nifty declined 3.50% to close at 17617.15
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Debt
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Government bond prices may open steady in the absence of significant cues while traders await the next signal on yields from the RBI.... stance.
10Y benchmark yield ended at 6.62% as compared to 6.56% of previous week
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Oil
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Oil prices have continued their early-year surge in the New Year, thanks in large part to easing worries about the Omicron variant as well as tight oil and... gas supplies, amid growing geopolitical uncertainties. Over the past week, drone attacks against targets in the UAE and escalating tensions between Russia and Ukraine have taken centre stage in the oil markets. Oil is currently trading at USD 86.6 per barrel, lower by 0.85%.
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Gold
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Gold fades its uptick from fresh two-month highs of 1848 USD/oz. The metal’s pullback from the year-long resistance line could be linked to the market’s ... fears over the US Federal Reserve’s (Fed) next moves, amid recently mixed data and the policymaker’s readiness to act. Gold is currently trading at USD 1839.65/oz, lower by 0.15%. |
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Currency
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Rupee may open lower against the USD, as the Dollar index remained firm over expectations of Fed tightening the monetary policy at a faster pace than... previously anticipated, while US yields were observed to be steady. RBI’s intervention may curb any sharp movement in the pair. The Indian Rupee closed weaker at the 74.51 level against the US Dollar in the previous trading session.
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Sensex |
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During the week Sensex lost 3.58% to close at 59037.18 while Nifty declined 3.50% to close at 17617.15
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Bond Yields |
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10Y benchmark yield ended at 6.62% as compared to 6.56% of previous week
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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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