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| Indian Economic Update
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RBI expects GDP growth for Q1FY25 to remain close to 7.5% and remains optimistic that India is on the cusp of a long-awaited economic... take-off, bolstered by rising aggregate demand a pivot in personal consumption.
The RBI May bulletin points to a durable alignment, with the 4% headline inflation target that may recommence only in the second half of the year and sustain till numbers closer to the target are sighted during the course of FY26.
The RBI approved dividend transfer of INR 2.11 trillion for FY24. The amount, a record and more than double of the budgeted INR 1.02 trillion, will help in shoring up fiscal revenues. Official sources indicated that part of the extra inflows of around Rs 1.3 trillion, could be used by the government for scaling up the capex budget.
India’s Chief Economic Advisor, V Anantha Nageswaran called on the industry to reciprocate the government's deregulation bid with concrete action in improving the quality of products and earning consumer trust, adding that next-generation reforms are needed to transition from a lower-middle income to an upper-income country.
The government is planning to update the base year of the Consumer Price Index (CPI) to FY24 from FY12 at present and that of other macro-indicators such as the GDP, IIP and WPI to FY23. For the CPI, the new base year is expected to come into effect from January 2026.
The HSBC Flash PMI (Flash India Composite Output Index) rose to 61.7 in May from 61.5 in April, propelled by a sharp acceleration in services activity, signalling that business activity expanded at the third-strongest rate in nearly 14 years.
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| Global Update
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Fed members indicate that restrictive policy needs further time to be worked on and there is less scope to cut interest rates,... than previously expected.
ECB members reaffirmed that policy rates could be cut in the June policy meeting, adding that the pace of future policy rate reductions should be a staggered process and must match the gradual slowdown of inflation.
European Central Bank President Christine Lagarde says she is ‘really confident’ that Eurozone inflation is under control, as the impact of the energy crisis and supply-chain bottlenecks fades.
The US Treasury Secretary stated that the US and Europe need to respond to China's industrial policies in a ‘strategic and united way’ to keep manufacturers viable on both sides of the Atlantic. She further urged German Bank officials to tighten sanctions on Russia.
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| Equity
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The equity benchmarks opened lower, tracking developments in the Asian and US markets, due to aggressive selling by FIIs, continuing... on the net selling by both DIIs and FIIs in the previous trading session. Markets trended upwards, while remaining range bound. Investors will wait for the general election result before taking fresh positions. The outlook remains constructive, reflecting robust domestic demand prospects.
During the week Sensex gained 1.97% to close at 75376.17 while Nifty moved up 2.16% to close at 22950.9
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| Debt
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10-Year Government bond yields opened flat and continued to decline, mirroring the downward trend in the US Treasury ... market. The continued downward move in yields is a result of traders’ response to the RBI dividend transfer announcement that would suggest an improvement in the fiscal position.
The 10Y benchmark G-Sec was trading at a yield of 7.00% on 24 May, 2024 at 15:47 IST
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| Oil
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Brent crude oil prices opened lower, with dampened hopes of interest rate cuts in the US. Concerns about crude oil demand... persist and Fed officials have continued concerns about the sticky inflation and suggestions of continued high rates. Investors are focusing on the June 1 OPEC meeting for further guidance on oil supply.
Brent was trading at $80.73 on 24 May, 2024 at 15:45 IST
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| Gold
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Gold prices opened flat and moved downwards, led by stronger DXY and UST Yields. Hawkish FOMC minutes, strong PMI data... and low jobless claims ensured that rate cuts are not coming anytime soon. Investors are focusing on US consumer sentiment data and PCE data that are due next week for further cues.
Gold was trading at $2342.45 Per Ounce on 24 May, 2024 at 15:47 IST
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| Currency
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The USD/INR pair opened flat, tracking the dollar index trends, as importer demand for dollars was offset by falling... crude oil prices, while investors awaited the release of the US FOMC meeting minutes for cues on future monetary policy decisions. However, ongoing RBI intervention will likely ensure that any sharp movement in the pair will be limited.
USD/INR was trading at 83.12 on 24 May, 2024 at 15:46 IST
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| Sensex |
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During the week Sensex gained 1.97% to close at 75376.17 while Nifty moved up 2.16% to close at 22950.9
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| Bond Yields |
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The 10Y benchmark G-Sec was trading at a yield of 7.00% on 24 May, 2024 at 15:47 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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