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Indian Economic Update
The commerce secretary BVR Subrahmanyam said that the negotiations for a FTA with the UK will be over by the end of August and it will be ready to be ...signed before the Diwali deadline set by the two sides. They aim to double bilateral trade of both goods and services

The ADB revised the growth projections for India down to 7.2% from 7.5% earlier in April this year citing surging food and fuel prices. It further said that the downward revision is on the back of the ongoing geopolitical tensions and supply-chain disruption

The Indian Economy is expected to expand 7% in fiscal FY22-23, lower than a previous estimate of 7.4% and the central bank's projection. The Reserve Bank of India in its July bulletin has said that there are indications that inflation may be peaking, adding that the prognosis may be premature. The RBI has asserted that the Indian economy is showing resilience in a global landscape marred by fears of recession and war

India’s retail inflation for farm workers and rural labourers increased to 6.43% YoY and 6.76% YoY in June respectively owing to higher food prices

The Central Government reduced the windfall tax and export duty less than three weeks after they were imposed on the back of reduction in international fuel prices. It reduced the windfall tax on diesel and ATF by INR 2 a litre and scrapped completely a INR 6 a litre levy on petrol exports, as per a government notification. It also cut the tax on domestically produced crude by 27% to INR 17,000 per tonne from INR 23,250 per tonne earlier

As per official sources, the government will closely watch the fiscal spending to complement RBI's measures to contain inflation and manage the external account amidst capital outflows. The finance ministry will tell the ministries and departments not to expect additional funds in the revised estimates for revenue expenditure

As per retailers association of India the retails sales moderated in June to 19% growth over pre pandemic levels. The sales grew by 23% and 24% over the pre pandemic levels in April and May respectively. Headwinds of inflation on discretionary spending are still a worry as it may impact the upcoming festive sales

The Central Board of Indirect Taxes and Customs (CBIC) on sunday clarified that all pre-packaged items containing a quantity up to 25 Kg, will attract a GST of 5%. The CBIC said that the items, which are pre-packaged in above 25 Kg in a single packet will be exempt from GST.

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Global Update
The ECB raised the policy rate by a higher quantum than we expected by 50bps that was the first increase in 11 years and the biggest increase since 2000. ...The central bank emphasised that it will maintain its strategy of re-investing maturing securities under PEPP. A new tool referred to as the Transmission Protection Instrument (TPI) was introduced as an anti-fragmentation tool that will function as another backstop facility that will purchase sovereign debt under the one to ten year categories in case there are distortions in the sovereign debt market. The TPI can be initiated if member nations adhere to certain conditions. The Central Bank stated that future rate hikes are expected that a decision will be made on a meeting by meeting basis

The Central Bank of Indonesia maintained status quo while the Central Bank of South Africa hiked rates by 75bps

The Asian Development Bank has cut its growth forecasts over the next two years for developing countries in Asia. It projects 2022 GDP growth of 4.6% versus 5.2% predicted in April. It trimmed its forecast for 2023 to 5.2% from 5.3%

The EU told member states on Wednesday to cut gas usage by 15% until March as an emergency step after Russian President Vladimir Putin warned that Russian supplies sent through the biggest pipeline to Europe could be reduced further and might even stop

Chinese banks held their main lending rate—the loan prime rate unchanged—with the one-year remaining at 3.7% and the five-year is at 4.45%, even as the economy faces several headwinds. At the same time, Chinese Premier Li Keqiang signaled a focus on jobs, flexibility on the economic growth rate and a shift toward making its Covid-19 control measures more targeted

Media reports indicate that Gazprom PJSC is poised to restart gas exports through its Nord Stream pipeline to Europe on Thursday at reduced capacity while reports indicate that the EU is set to propose a voluntary 15% cut in natural gas use by member states under demand-reduction that will start next month

The White House supports prohibiting semiconductor companies from expanding certain investment in China if they take new subsidies to build plants in the US under legislation the Senate’s set to begin debating that is due later today

UK interest rates are likely to rise above 2% as the Bank of England tackles domestic inflationary pressures that are building up due to underlying weaknesses in the economy, Michael Saunders said in his final speech as a monetary policy committee member

China’s banking regulator has asked lenders to provide credit to eligible developers so they can complete unfinished residential properties after home buyers stopped paying mortgages on at least 100 projects across 50 cities

US Senator Bernie Sanders on Sunday criticised President Joe Biden's visit to Saudi Arabia, saying it rewarded a dictatorship and should have never taken place.

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Equity
Benchmark indices are likely to open with mild gains today tracking a positive sentiment in global equities. Asian indices rose in early trade today, ... while US equities closed higher on Thursday, buoyed by gains in consumer services, healthcare and basic materials sectors. All eyes are set on Fed’s meeting next week after rate hikes in Europe.

During the week Sensex gained 4.29% to close at 56072.23 while Nifty advanced 4.17% to close at 16719.45

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Debt
Government bond are expected to open steady due to caution as traders may keep to the side-lines on caution ahead of the INR 330 billion weekly gilt auction....Prices may remain under pressure due to concerns that bond portfolios of investors may be nearing capacity, following muted demand for dated securities over the past three weekly gilt auctions.

10Y benchmark yield ended at 7.41% as compared to 7.43% of previous week

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Oil
Brent crude Oil prices extended losses as concerns of weaker demand weighed on sentiment. US driving season demand remains at 8.52mbd, its lowest seasonal level since ... 2008, as high gasoline prices take their toll on consumers. This comes as some supply side disruptions ease. Libya’s NOC said that crude output will recover to 1.2mbd in about a week to 10 days from the current level of 700kbd. Brent crude prices are currently trading at USD 104/bbl.

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Gold
Gold’s prices erased losses, supported by safe-haven demand. Italian political crisis worsened after PM Mario Draghi resigned following the collapse of his ...government, sending tremors through financial markets. Gold prices are currently trading at USD 1716/oz.

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Currency
Rupee may open higher against USD due to weakness in the US Dollar index, which fell as the euro strengthened after the European Central Bank delivered a 50bps ...rate hike, more than expected, to tame inflation. Meanwhile, RBI’s intervention may curb any sharp movement in the currency pair.The Indian Rupee traded flat against the US Dollar in the previous trading session moving to the 79.95 level.

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Sensex
56072.23
4.29%
During the week Sensex gained 4.29% to close at 56072.23 while Nifty advanced 4.17% to close at 16719.45
 
Bond Yields
7.41%
-2 bps
10Y benchmark yield ended at 7.41% as compared to 7.43% of previous week
 
Source: ICICI Bank Research, Private Banking Investment Strategy Team, Bloomberg and CRISIL.
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