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Indian Economic Update
The successful macroeconomic management of the COVID-19 pandemic resulted in a strong recovery of India’s economy. The country is in a better position to face ...the economic fallout of the current Ukrainian crisis, a top official from the International Monetary Fund has said. He further added that India represents about 7% of the total world economy in terms of its Purchasing Power Parity (PPP), and is one of the countries that is growing rapidly

India's Production-Linked Incentive (PLI) scheme has generated investment commitments of INR 2.34 trillion across 14 sectors, as per media reports. Automobile and auto components, advanced chemistry cell batteries, specialty steel and high-efficiency solar panels have attracted the maximum interest

Wholesale price inflation in the country jumped to a four-month high of 14.5% YoY in March from 13.1% in February, mainly due to hardening of crude oil and commodity prices, even though vegetables witnessed easing of price pressures. With this, FY22 WPI has averaged 12.9% YoY vs. 1.3% in FY21

Commerce and Industry Minister, Mr. Piyush Goyal said that INR devaluation or weakening the currency is detrimental to India’s interest, growth and competitiveness, as it increases the cost of imports, inflation and cost of interest

Public sector companies, state governments, and cooperative societies controlled by the centre or states will not be permitted to bid for other state-owned companies that the government wants to privatise, unless the centre specifically allows them to do so, said the Department of Investment and Public Asset Management under the Finance ministry

India’s FM, Mrs. Nirmala Sitharaman met IMF Managing Director Mrs. Kristalina Georgieva on Tuesday and discussed a range of issues, including the current geopolitical situation and its economic impact and highlighted the Indian government's commitment to support growth through capital expenditure

The IMF cut its global GDP projections sharply from 4.4% YoY to 3.6% for 2022 that compares with 6.1% in 2021 on the back of the Russia-Ukraine conflict and lockdowns that have been imposed in China. It scaled down its FY23 growth forecast for India by 80 Basis Points (bps) from its January projection to 8.2%. The fund sees inflation for this year at 5.7% in advanced economies and 8.7% in emerging and developing countries, significantly higher than just a few months ago.

India's foreign exchange reserves may be close to its record high, but the rapidly widening trade deficit and capital outflows could test the sustainability of external strength, though India would be tackling it from a position of strength, RBI said, in its monthly bulletin for April 2022. Flagging risks of disruptive spill overs from geopolitical hostilities, the article further added that India enters Samvat 2079, having crested the third wave of the pandemic with economic activity returning to speed in several sectors

India’s Agriculture Minister, Mr. Narendra Singh Tomar launched two new portals on Monday, namely CROP (Comprehensive Registration of Pesticides) for the registration of pesticides and PQMS (Plant Quarantine Management System) for documentation related to the import and export of agri-products and plants— with an aim to improve the ease of doing business

India will receive a ‘normal’ southwest monsoon (June-September) at 99% of the benchmark Long Period Average (LPA), the India Meteorological Department (IMD) said in its first forecast for the upcoming four-month (June-September) monsoon season. This implies that the country will receive normal rainfall from the annual phenomenon for the fourth year in a row

According to official data, India’s merchandise trade deficit in March was USD 18.5 billion, with exports increasing by about 20% to USD 42.22 billion and imports increasing from 24% to USD 60.74 billion. India exported USD 250 billion worth of services in FY22, a new record, Commerce Minister, Mr. Piyush Goyal said. Further, the total merchandise exports in FY22 has raised the figure to USD 419.65 billion.

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Global Update
Federal Reserve Chair, Mr. Jerome Powell yet again provided a fairly hawkish guidance to taming inflation by potentially endorsing two or more half percentage-point ...interest-rate increases, while describing the labour market as overheated

The ECB President, Mrs. Lagarde stated that the timing of the rate hike will remain dependent on the evolution of economic data and stated that it would be important not to remain fixated on a date or time for such an action. However, the ECB Vice President stated that both ending QE and a rate hike are possible in the July policy meeting

BoE policy maker, Dr. Catherine Mann said she’s considering whether interest rates need to rise by more than a quarter point next month. However, the BoE Governor raised concerns about the outlook, given the effect the Russia-Ukraine conflict could have, in driving prices structurally higher

The US Treasury Secretary, Mrs. Yellen said that Europe should be “careful” about imposing an outright ban on Russian oil, warning that it could hurt European and other economies, without inflicting as much impact on Russia as hoped

US central bankers should move “purposefully” and raise interest rates to neutralise - the level that neither speeds up nor slows down the economy by the end of the year, Federal Reserve Bank of San Francisco President, Ms. Mary Daly said. “The case for a 50bps adjustment is now complete,” Daly told reporters that the “economy is resilient; it can handle these adjustments”

The US economy grew at a moderate pace through mid-April, but rising prices and geopolitical developments created uncertainty and clouded the outlook for future growth, the US Central Bank said in its Beige Book survey, released on Wednesday

The European Central Bank may raise interest rates as soon as July, amid “significant” inflation risks that will probably require further tightening later in the year, according to Governing Council member, Mr. Martins Kazaks. Kazaks said that rate increases of 25bps “seem appropriate” for now, though policy makers can always discuss larger moves depending on the economic data

China’s Central Bank announced a spate of measures to help an economy that has been hit by lockdowns. In the announcement of 23 measures, the Central Bank vowed to step up the use of targeted tools, including the relending programme, which provides funds for banks to lend to sectors that include those hit by the pandemic. The various relending programmes are expected to lead to CNY 1 trillion (USD 157 billion) in additional bank loans, it said

The World Bank has lowered its estimate for global growth in 2022 to 3.2% from a January prediction of 4.1%. The decline was spurred by a cut in the outlook for Europe and Central Asia, which includes Russia and Ukraine

Ukrainian President, Mr. Volodymyr Zelenskiy said on Monday, that Russian forces had begun the campaign to conquer the Donbas region in Ukraine’s east, as Moscow continues moving troops and material into that part of the country

Russia flagged a likely further cut in interest rates and more budget spending on Monday, to help the economy adapt to biting western sanctions as it heads for its deepest contraction since 1994. "We must have the possibility to lower the key rate faster," Central Bank Governor, Mrs. Elvira Nabiullina said on Monday

The People's Bank of China cut the reserve requirement ratio for all banks by 25bps, effective from , thus releasing about CNY 530 billion in long-term liquidity to cushion a sharp slowdown in economic growth. A cut of 50bps will be applied to smaller banks

The European Union and Russia are at risk of triggering a de facto embargo on Russian gas after the bloc’s lawyers drafted a preliminary finding that the mechanism President, Mr. Vladimir Putin is demanding for payment in RUBs would violate EU sanctions

The Chinese economy grew by 4.8% YoY (expectations: 4.4%) in Q12022 against 4% increase witnessed in Q42021, driven primarily by a monetary stimulus that has supported investments and industrial production. However, private consumption slumped in response to the lockdowns that have been in place

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Equity
Benchmark indices are likely to open lower amidst subdued Asian markets as the US Fed Chair tightened his stance on inflation. Domestic earnings results ...will provide further direction to today's price action.

During the week Sensex lost 1.95% to close at 57197.15 while Nifty declined 1.73% to close at 17171.95

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Debt
Government bond prices are likely open to steady, as participants may refrain from placing large bets ahead of the weekly gilt auction worth INR 320 billion... scheduled today. Participants will also be eyeing the minutes of the MPC meeting to be released today. Elevated UST yields may also weigh on the prices today.

10Y benchmark yield ended at 7.16% as compared to 7.21% of previous week

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Oil
Brent crude prices moved higher in a narrow range in the wake of the IMF, reducing economic growth expectations and supply losses from Libya. There are also... ongoing concerns about demand, as investors focus on lockdowns that are in place in China. Brent Crude oil is trading at USD 107.40/per barrel.

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Gold
Gold prices moved lower as treasury yields continued to surge. In addition, prevailing risk-on trade dented the safe haven demand. Gold is trading at USD... 1952.70/ounce.

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Currency
The USD/INR pair is likely to open higher as the greenback remained strong, post the US Fed chair's speech. IPO related fund flows might support the local unit.... However, any sharp movement is unlikely due to expected RBI interventions. The Indian Rupee closed stronger at the 76.16 level against the US dollar in the previous trading session.

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Sensex
57197.15
-1.95%
During the week Sensex lost 1.95% to close at 57197.15 while Nifty declined 1.73% to close at 17171.95
 
Bond Yields
7.16%
-5 bps
10Y benchmark yield ended at 7.16% as compared to 7.21% of previous week
 
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.