Quick Summary
Indian Economic Update
Prices of petrol and diesel increased by INR 0.80 per litre. With this third increase in four days, the total hike now stands at INR 2.4 per litre. The government... is ready to take befitting steps, to mitigate market volatility and "calm the rise in crude oil prices", Petroleum and Natural Gas Minister, Mr. Rameswar Teli said

RBI, this week, held a meeting with officials of three large Russian financial institutions - VTB, Sberbank and Gazprombank, to explore a possible payment mechanism, for trade between the two countries

The Bond market participants have telegraphed the RBI stating that the government should conduct around 55% of its gross borrowing for FY23 in H1-FY23. RBI is said to have informally conveyed, that it wants to avoid surprises in the borrowing calendar to the extent it can, as per media reports. Officials from the Finance Ministry and the RBI will meet early next week, to decide the government's borrowing calendar for H1-FY23

Department of Financial Services, Department of Economic Affairs and the RBI are in active talks to facilitate the INR-RUB payment route, to help Indian exporters, as per media reports

Commerce Minister Mr. Piyush Goyal said that the UAE had formally ratified the comprehensive economic partnership agreement with India that was signed between the two nations in February, and it could be implemented in the next six weeks

The government is closely monitoring the global commodity price movements and its impact amid the Russia-Ukraine war, Minister of State for Finance, Mr.Pankaj Chaudhury said. He also said that the government is committed to supporting initiatives for releases from Strategic Petroleum Reserves, to mitigate market volatility and calm the rise in crude oil prices

The government will try to launch LIC’s IPO by May 12, reports quoting a senior Finance Ministry official said

RBI Governor Das, in his address to the CII National Council in Mumbai, said that the RBI will continue to support growth and keep the system adequate with liquidity, to assist productive sectors, while maintaining the exchange rate stability. The Governor dismissed fears of spill over effects for India, due to the geopolitical tensions in Ukraine. The country is comfortably placed to deal with any challenges emanating from the geopolitical crisis, with its comfortable foreign exchange reserves, he said. 

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Global Update
The US announced a new package of sanctions on Russian elites, lawmakers, and defence companies. The U.S. will impose full blocking sanctions on more than 400 individuals ... and entities, including the Duma, Russia’s lower house of parliament and 328 of its members, more than a dozen Russian elites and 48 Russian defence companies. The US President also called for the G-20 to remove Russia

While the EU refrained from imposing further sanctions on Russia, media reports indicate that a plan to announce the phasing out of dependence on Russia for its energy needs could be announced later today. At the same time, EU countries rejected Putin’s demand that they pay in RUBs for natural gas imports

Federal Reserve Governor Waller stated that the long-term aim of the US Central Bank is to make its asset holdings only comprise of Treasuries, which may mean it decides to sell mortgage-backed securities. He also stated that longer-term structural issues, will continue to put an upward pressure on home prices and rents

Ukraine President Zelenskiy addresses French lawmakers through a video call. Zelenskiy urged people to take to the streets to show their support. Meanwhile, US President Joe Biden has arrived in Brussels for meeting of the Alliance, G7 and the EU

Moderna Inc.’s COVID-19 vaccine safely induced robust immune responses in children aged 6 months to 5 years in a new study, the company said, though the shot had modest efficacy against the Omicron variant

In the upcoming meeting on Thursday between President Joe Biden and allies in Brussels, new sanctions against Russia is expected to be announced over its invasion of Ukraine and fresh measures designed to keep the Kremlin from sidestepping the existing economic penalties, the White House said

FOMC officials continued to provide a hawkish message, indicating that the US monetary policy will tighten sharply, up ahead. Mary Daly, who is a dovish member of the FOMC, backed a move to take the policy rate above the neutral level. Bullard continued to emphasise the need for continued policy tightening. Cleveland Fed President Loretta Mester also favoured a speedier pace in increases, arguing for policy makers to get rates up to around 2.5%, by the end of the year

A full temporary lockdown was put in place on Tangshan City, a steel hub in China’s northern Hebei province, according to local authorities. China imposed its fifth lockdown over the past two weeks to stamp out a rise in COVID-19 cases

The US and UK reached a deal to ease tariffs on British steel and aluminium. The deal will allow 500,000 metric tons of steel, annually, to be imported duty free, with higher amounts subject to tariffs, starting June 01. The UK also will end retaliatory tariffs on more than USD 500 million worth of US exports

European Central Bank President Christine Lagarde said, there are signs that some Russians are attempting to bypass sanctions over the war in Ukraine, by converting RUBs into cryptocurrencies and stable coins

Russia is refocusing its military campaign in Ukraine on the East and above all, the port city of Mariupol, after Ukraine refused to compromise on Mariupol. President Zelenskiy said any compromise with Russia will require a referendum. There are also unconfirmed rumours that the EU policymakers might finally be considering a ban on oil imports, although no decision on this front is expected this week

Fed’s Powell said, the Central Bank is prepared to raise interest rates by a half percentage-point in its next meeting, if needed, deploying a more aggressive tone towards curbing inflation, than he used just a few days earlier. He said curbing high inflation is top priority for 2022 and flagged risk of war, pushing inflation expectations too high

While FOMC member Bostic stated that he favoured a six quarter 25 bps rate increase in 2022 on the back of uncertainty about the Ukraine war, he did indicate that more aggressive rate hikes could be considered if required, given the rise in inflation rates

ECB policymakers continue to make a case for moving forward on policy normalisation. For one, the ECB President played down the risk of stagflation while other members of the Governing Council - Nagel and Rehn, emphasised that, policy rates will be hiked later in 2022

S&P Global Ratings is pulling its ratings on Russian entities, after the EU announced a ban on providing credit ratings to people, entities or bodies established in Russia. According to reports, the Union Government is likely to unveil a plan to strengthen PSU general insurance firms, including the details of the previously approved capital infusion of about INR 50 billion.

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Benchmark indices have opened lower, on account of the ongoing Russia-Ukraine conflict. The US stocks ended higher on Thursday, after the jobless claims data... released, came in at its lowest level since 1969, which reflected a positive economic recovery for the country, even amid the current volatile situation.

During the week Sensex lost 0.86% to close at 57362.20 while Nifty declined 0.77% to close at 17153.00

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Government Bond prices are likely to open steady, as market participants may stay on the side-lines, due to lack of significant domestic cues and are waiting... for the borrowing calendar for April-September, likely to be detailed next week, for cues. Lack of fresh gilt supply this month is seen supporting Bonds, while traders may avoid aggressive bets, ahead of the end of the financial year.

10Y benchmark yield ended at 6.81% as compared to 6.77% of previous week

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Crude prices eased on Thursday, as the United States and its allies discussed a possible further coordinated release of oil from storage, to help calm energy... markets in the wake of Russia’s invasion of Ukraine. Brent Crude is currently trading at USD 119.3 per barrel.

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Gold prices rose to more than a one-week high on Thursday, as its safe-haven appeal was lifted by concerns over the soaring inflation and uncertainty surrounding... the war in Ukraine. Gold is currently trading at USD 1964.6/oz.

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Indian Rupee may open steady against the USD, as the greenback weakened, against a basket of major currencies in early trade, after rising yesterday, as economic... data on the labour market helped firm up expectation that the US Federal Reserve will be more aggressive in taking steps to curb inflation. However, RBI’s intervention may curb any sharp movement in the pair. The Indian Rupee closed weaker at the 76.37 level against the US Dollar, in the previous trading session.

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During the week Sensex lost 0.86% to close at 57362.20 while Nifty declined 0.77% to close at 17153.00
Bond Yields
4 bps
10Y benchmark yield ended at 6.81% as compared to 6.77% of previous week
Source: ICICI Bank Research, Private Banking Investment Strategy Team, Bloomberg and CRISIL.
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