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Indian Economic Update
India’s first-ever payment in rupees for crude oil purchased from the UAE is helping the world’s third largest energy consumer push for ...taking the local currency global, as it looks for similar deals with other suppliers

India’s current account deficit narrowed to USD 8.3 billion (1% of GDP) in Q2FY24 from USD 30.9 billion (3.8% of GDP) in Q2FY23 and USD 9.2 billion (1.1% of GDP) in Q1FY24, driven by a moderation of merchandise trade deficit, stronger inflows from services trade and higher remittances

RBI in its Financial Stability Report stated that while macro stress tests show banks would comply with minimum capital requirements under severe stress scenarios, the non-banking financial company sector faces higher stress relative to March 2023. It also emphasised proceeding with caution on the evolving outlook and risks

Key highlights from RBI Report on the Trend and Progress of Banking in India:

1) 12.2% expansion in the consolidated balance sheet of scheduled commercial banks (SCBs), driven by credit to retail and services sectors

2) Deposit growth increased but lagged behind credit growth

3) Capital to risk-weighted assets ratio of SCBs was 16.8% at the end of September 2023, meeting regulatory requirements

4) Improvement in asset quality continued, with the gross non-performing assets ratio at 3.2% at the end of September 2023

5) 14.8% expansion in the consolidated balance sheet of non-banking financial companies in 2022-23, led by double digit credit growth.


RBI in a press release confirmed that the reversal of liquidity facilities under the Standing Deposit Facility and the Marginal Standing Facility on weekends and holidays will start from Saturday

The Reserve Bank of India conducted a variable rate Repo auction for a third time in less than two weeks as liquidity conditions stay tight and overnight rates remain elevated.

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Global Update
The growth in China’s industrial profits gathered pace in November, helped by favourable comparisons a year ago and as ...the government’s support measures kicked in

New US state unemployment benefit claims rose by 12,000 last week to 218,000, according to the Department of Labor, indicating slower job growth in the US market

Factories in Japan produced less while retailers sold more in November, pointing to the patchy nature of the economy’s recovery.

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Equity
The benchmark equity traded higher, influenced by the trends in the US and Asian markets. The market witnessed increased optimism as ...the market is currently trading at an all-time high, with a 20% increase this year.

During the week Sensex inclined 1.59% to close at 77240.26 while Nifty gained 1.79% to close at 21731.40

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Debt
Government bond yields remained steady, following UST trends. Liquidity remained in deficit by INR 2.6 trillion on December 26th,... reaching an all-time high. The government has auctioned INR 70 billion of 2028 maturity bonds, INR 160 billion of 2033 maturity bonds and INR 100 billion of 2056 maturity bonds.

The 10Y benchmark G-Sec was trading at a yield of 7.19% on 29 Dec, 2023 at 15:45 IST

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Oil
Oil prices traded lower after rallying to their highest level in the month as further attacks on the Red Sea prompted ... fears of shipping disruptions. However, despite concerns in the Middle East and the rerouting of ships, supply has not yet been affected. On the demand side, expectations of rate cuts by the Fed are increasing which could boost economic growth and oil demand.

Brent was trading at $77.52 on 29 Dec, 2023 at 15:57 IST

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Gold
Gold prices showed signs of easing after rallying supported by a weaker USD and lower treasury yields. A larger-than-expected... fall in the US Core PCE index last week strengthened the expectations of the Fed's rate cuts in the next year.

Gold was trading at $2062.64 Per Ounce on 29 Dec, 2023 at 15:57 IST

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Currency
The USD/INR pair traded in line with the DXY. Despite higher oil prices, investors are closely monitoring developments in the ...Red Sea concerning oil shipments. Earlier in the month, the rupee hovered near record lows but refrained from weakening past the 83.4 level, thanks to repeated interventions by the RBI in foreign exchange markets.

USD/INR was trading at 83.21 on 29 Dec, 2023 at 15:57 IST

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Sensex
77240.26
1.59%
During the week Sensex inclined 1.59% to close at 77240.26 while Nifty gained 1.79% to close at 21731.40
 
Bond Yields
7.19%

The 10Y benchmark G-Sec was trading at a yield of 7.19% on 29 Dec, 2023 at 15:45 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.