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Indian Economic Update
Shaktikanta Das has been re-appointed as Governor of the Reserve Bank of India for another term of three years. The decision, announced in the statement from the... cabinet and effective when his current term ends December 10, will keep Das at the bank’s helm to help guide the economy’s recovery from the pandemic

India showed more signs of a recovery taking hold last month as its consumption-driving festive season kicked off, keeping it on track to regain the title of the world’s fastest-growing major economy. An array of indicators compiled by Bloomberg News pointed to a continuing rebound in demand in September, helping keep the needle on a dial measuring the so-called animal spirits steady at 5, for a third straight month. Sentiment in the dominant services and manufacturing sectors was strong, thanks to a surge in new orders. Bank loan disbursals also grew as Asia’s third-largest economy slowly emerged from the shadows of the Covid-19 pandemic. The recovery coincides with the start of India’s month-long festive season beginning with Ganesh Chaturthi in September, heralding the boom season for consumption. The International Monetary Fund, as well as India’s central bank, this month estimated the nation’s gross domestic product will grow 9.5% in the year ending March -- the quickest pace among major economies -- after contracting 7.3% last year

MPC member Ashima Goyal, in an interview, commented that while she agrees with the temporarily relaxed approach towards inflation targeting, she differed on the dependence on the CPI glide path, given the increased uncertainty and said that instead guidance should emphasise the uncertainty around the glide path

Finance Minister Nirmala Sitaraman met officials of the Civil Aviation Ministry and DoT to review the progress of capital expenditure and asset monetisation plans and asked the civil aviation ministry to ensure that more projects are implemented and that the capital expenditure in FY2023 is more than the current estimated target

The government plans to complete the privatisation process for 13 airports run by the state-owned Airports Authority of India by the end of the current fiscal year, as per media reports quoting AAI Chairman Mr. Sanjeev Kumar

MPC minutes show members are increasingly confident of the pick-up in the domestic growth on the back of rising vaccinations and easing of domestic restrictions. However, pullback in the global growth and supply constraints are the risks. While RBI has reduced its inflation projection by 40 bps to 5.3% in FY2022, higher oil and commodity prices are likely to see a pass-through into domestic inflation. We expect RBI to raise the reverse repo rate in December, 2021 and February, 2022 before changing the stance in April, 2022.

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The ECB maintained status quo on expected lines with the President confirming that the Pandemic Emergency Purchases Programme (PEPP) will end on schedule by March-2022. The ECB President downplayed the possibility of rate hikes commencing in 2022 reiterating that monetary accommodation could remain in place until 2024 Chinese real estate company--Evergrande has been able to pay overdue interest payments for coupon payments that were due on Sep 29, 2021. Media reports indicate that Chinese authorities have told the owners of Evergrande to meet payments of debt from their own personal wealth that are due over the course of 2021-22. Given that the size of outstanding debts is at USD 300 billion, it remains unclear whether the owners will have adequate wealth to cover the quantum of debt

President Joe Biden delivered a framework for the latest version of his economic agenda to congressional Democrats on Thursday. The final programme agreed upon was USD 1.75 trillion, much lower than the USD 3.5 trillion that was previously proposed

The Bank of Canada held its target for the overnight rate at the effective lower bound of 0.25%, with the Bank Rate at 0.5% and the deposit rate at 0.25%. The Bank is ending the Quantitative Easing Programme and moving into the re-investment phase, during which it will purchase Government of Canada bonds solely to replace maturing bonds

U.K. Chancellor of the Exchequer Rishi Sunak unleashed GBP 75 billion (USD 103 billion) of giveaways in a budget that defied predictions for fiscal restraint, pinning the path of future spending to predictions for a rapid economic growth. Sunak slashed taxes for pubs and restaurants, cut duties on alcohol and handed more income to some of the nation’s poorest families in a statement to Parliament on Wednesday

Three key senators released legislation that would require some U.S. companies to pay a minimum 15% rate on profits they report to their corporate shareholders, in the lawmakers’ latest bid to find consensus behind revenue-raising measures to fund President Joe Biden’s economic agenda

The U.S. Federal Communications Commission on Tuesday voted 4-0 to cancel the permission to operate in the U.S. for the unit of China Telecom, one of the three leading communications providers in China

Coal stockpiles at the U.S. power plants plunged to the lowest in at least 24 years as electricity generators burn the fuel faster than miners can dig it out of the ground. Inventories fell to 84.3 million tons in August, according to the Government data released Tuesday that is the lowest in records going back to 1997

Chinese industrial profits accelerated by 16.3% YoY in September reflecting a rise in the commodity prices that benefitted the mining industry and as lockdowns that were in place in August eased off in September

According to White House, U.S. President Joe Biden on Monday signed an order imposing new vaccine requirements for most foreign national air travellers and lifting severe travel restrictions on China, India and much of Europe, effective November 8.

The FOMC Chairman said that the risks of persistent inflation have increased but reiterated that the committee will remain patient on policy rate increases. He also emphasized that central bank will commence tapering shortly

The UK Chancellor said that inflation will pose a risk to the cost of servicing debt possibly hinting that he might exercise some fiscal restraint in the upcoming budget due later in the week.

Global Update
The ECB maintained status quo on expected lines with the President confirming that the Pandemic Emergency Purchases Programme (PEPP) will end on schedule by March-2022.... The ECB President downplayed the possibility of rate hikes commencing in 2022 reiterating that monetary accommodation could remain in place until 2024

Chinese real estate company--Evergrande has been able to pay overdue interest payments for coupon payments that were due on Sep 29, 2021. Media reports indicate that Chinese authorities have told the owners of Evergrande to meet payments of debt from their own personal wealth that are due over the course of 2021-22. Given that the size of outstanding debts is at USD 300 billion, it remains unclear whether the owners will have adequate wealth to cover the quantum of debt

President Joe Biden delivered a framework for the latest version of his economic agenda to congressional Democrats on Thursday. The final programme agreed upon was USD 1.75 trillion, much lower than the USD 3.5 trillion that was previously proposed

The Bank of Canada held its target for the overnight rate at the effective lower bound of 0.25%, with the Bank Rate at 0.5% and the deposit rate at 0.25%. The Bank is ending the Quantitative Easing Programme and moving into the re-investment phase, during which it will purchase Government of Canada bonds solely to replace maturing bonds

U.K. Chancellor of the Exchequer Rishi Sunak unleashed GBP 75 billion (USD 103 billion) of giveaways in a budget that defied predictions for fiscal restraint, pinning the path of future spending to predictions for a rapid economic growth. Sunak slashed taxes for pubs and restaurants, cut duties on alcohol and handed more income to some of the nation’s poorest families in a statement to Parliament on Wednesday

Three key senators released legislation that would require some U.S. companies to pay a minimum 15% rate on profits they report to their corporate shareholders, in the lawmakers’ latest bid to find consensus behind revenue-raising measures to fund President Joe Biden’s economic agenda

The U.S. Federal Communications Commission on Tuesday voted 4-0 to cancel the permission to operate in the U.S. for the unit of China Telecom, one of the three leading communications providers in China

Coal stockpiles at the U.S. power plants plunged to the lowest in at least 24 years as electricity generators burn the fuel faster than miners can dig it out of the ground. Inventories fell to 84.3 million tons in August, according to the Government data released Tuesday that is the lowest in records going back to 1997

Chinese industrial profits accelerated by 16.3% YoY in September reflecting a rise in the commodity prices that benefitted the mining industry and as lockdowns that were in place in August eased off in September

According to White House, U.S. President Joe Biden on Monday signed an order imposing new vaccine requirements for most foreign national air travellers and lifting severe travel restrictions on China, India and much of Europe, effective November 8.

The FOMC Chairman said that the risks of persistent inflation have increased but reiterated that the committee will remain patient on policy rate increases. He also emphasized that central bank will commence tapering shortly

The UK Chancellor said that inflation will pose a risk to the cost of servicing debt possibly hinting that he might exercise some fiscal restraint in the upcoming budget due later in the week.

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Equity
Benchmark indices may open slightly higher after its biggest fall in six months on Thursday. However, market participants broadly expect caution to...prevail in the market as further fall is on the cards, given the below-expectation earnings and stretched valuations. The global indices remain lower as the Asian share indices fell due to concerns that rising inflation may slow down the pace of economic growth.

During the week Sensex lost 2.49% to close at 59306.93 while Nifty declined 2.44% to close at 17671.65

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Debt
Government bond prices may open steady due to caution ahead of the weekly gilt auction worth INR 240 billion. The 10-year benchmark 6.10%, 2031 bond may lag other long-term gilts due ...to a fresh supply this week, as the Government has offered to sell INR 130 billion of the paper at the auction.

The 10Y benchmark yield ended at 6.38% as compared to 6.36% of previous week

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Oil
Global crude oil prices are trading higher, but headed for their first weekly losses in at least eight weeks after U.S. oil stocks rose more than expected and Iran flagged it was resuming... talks with Western powers, which could lead to an end to sanctions. All eyes are on the next meeting of the OPEC+, on Nov. 4, with analysts expecting them to stick to their plan to add 400,000 barrels per day of supply each month, until April 2022. Brent crude prices are trading at USD 84.65/barrel

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Gold
Gold prices are trading lower, but headed for third weekly gain as US bond yields and US Dollar tumbled overnight. ECB President Christine Lagarde acknowledged higher inflation on Thursday,... but pushed back against market bets that price pressures would trigger an interest rate hike as soon as next year. The U.S. economy grew at its slowest pace in more than a year in the third quarter, data on Thursday showed. Gold is trading at USD 1797.20/oz

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Currency
Indian Rupee may open steady against the Dollar as the Dollar index recovered slightly in early trade after a sharp fall on Thursday, as a slower pace of economic growth weighed on the... sentiment. Any sharp appreciation in the Rupee may be limited by persistent RBI interventions. The Indian Rupee closed higher at the 74.92 level against the US dollar in the previous trading session

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Sensex
59306.93
-2.49%
During the week Sensex lost 2.49% to close at 59306.93 while Nifty declined 2.44% to close at 17671.65
 
Bond Yields
6.38%
2 bps
The 10Y benchmark yield ended at 6.38% as compared to 6.36% 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.