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Indian Economic Update
Monsoon rains in the last two weeks have helped in bridging the deficit in kharif sowing from -4.2% YoY last week to a surplus of ...+1.2% YoY on 21 July 2023

India’s general government debt, which comprises central and state government debts, moderated to 80.9% of the GDP in FY23 from 83.3% in FY22, Minister of State for Finance, Pankaj Chaudhary told Rajya Sabha

Retail inflation for farm workers and rural labourers inched up marginally to 6.31% YoY and 6.16% YoY respectively in June as compared to 5.99% and 5.84 % in May this year

According to the Deputy Governor Rajeshwar Rao, the Reserve Bank of India will soon issue guidance to banks for the identification of risks to their credit portfolio from climate-related issues

The Centre on Wednesday said it has discontinued the sale of wheat and rice to states under the Open Market Sale Scheme with effect from June 13 to maintain adequate buffer stock and control price rise amid concerns of kharif crop being impacted due to expected shortfall in monsoon rains

The government will release INR 170 billion as the 14th instalment of PM KISAN scheme to about 81 million farmers. The number of beneficiaries under PM KISAN has increased from 31 million in the first tranche paid during December 2018 to March 2019.

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Global Update
The FOMC raised rates by 25 bps on expected lines, taking the fed funds rate to the 5.25% - 5.50% range that would imply a cumulative ...525 bps increase since March 2022. Jerome Powell stated that future actions would be data-dependent and there are risks on both sides although the FOMC is still working with a soft-landing scenario

ECB raised its key deposit rate by 25 bps (from 3.50% to 3.75%), its ninth increase in a row as it continued to battle persistent inflation. “The Governing Council’s future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels,” the ECB said

China named Pan Gongsheng as Governor of the Central Bank, strengthening his position as head of the institution tasked with boosting the world’s second-largest economy.

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Equity
The benchmark equity indices were volatile this week tracking the Asian equity market. Indices jumped after the Fed hiked policy rate to... a 22-year high with the door open for a further hike if data warranted. We expect indices to be on the positive side as monthly F&O and a slew of corporate earnings could keep the market volatile.

During the week Sensex declined 0.79% to close at 66160.20 while Nifty lost 0.50% to close at 19646.05

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Debt
Government bond prices opened higher this week as 10-year UST rose by 5 bps on the back of lower-than-expected US consumer ...and wholesale inflation numbers. Prices were lower after the 10-year UST fell by 5 bps to 3.740% after the UK inflation fell to 7.9%, prompting another rate hike of 50 bps by BoE. This will be weighed in at the US Federal Reserve meeting next week. Given the light domestic calendar, bond prices will be trading range bound

The 10Y benchmark G-Sec was trading at a yield of 7.16% on 28 July, 2023 at 16:45 IST

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Oil
Brent Crude oil traded higher, to a near three-month high on rising US gasoline demand & hopes for Chinese stimulus measures. Oil... prices traded higher with a small recovery after falling ~1% in the overnight session, after data showed US crude inventories fell less than expected and the Fed raised interest rates. However, concerns surrounding supply cuts have helped the oil prices recover.

Brent was trading at $83.79 on 28 July, 2023 at 15:57 IST

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Gold
Gold prices traded flat after rising post the Fed's decision to further hike the rate by 25 bps, leaving the door open for the September ...rate increase. However, cautious mood ahead of the first estimates of the US GDP for Q2 and the ECB monetary policy meeting has weighed in on the gold prices thus limiting the upside

Gold was trading at $1953.38 Per Ounce on 28 July, 2023 at 15:57 IST

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Currency
USD/INR pair traded flat as the greenback is trading lower due to the elevated crude prices in international markets and... month-end USD demand from importers. Positive cues from the domestic equity market and inflow of foreign funds will provide support to the pair. Besides, any sharp movement in the pair will need intervention by RBI.

USD/INR was trading at 82.26 on 28 July, 2023 at 15:57 IST

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Sensex
66160.20
-0.79%
During the week Sensex declined 0.79% to close at 66160.20 while Nifty lost 0.50% to close at 19646.05
 
Bond Yields
7.16%

The 10Y benchmark G-Sec was trading at a yield of 7.16% on 28 July, 2023 at 16:45 IST
 
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.