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  • Indian Economic Update

  • Global Update

Indian Economic Update

  • The Monetary Policy Committee (MPC) cut the Repo Rate by 25 bps to 6.25%. The policy statement highlighted a positive outlook on inflation for the year barring major shocks with expectations of inflation easing in FY2025-26

  • S&P Global Ratings maintained a positive outlook on India’s sovereign credit ratings after the income tax cuts, expecting India to meet its fiscal deficit targets and projected GDP growth of 6.7% for FY25 and 6.8% for FY26

  • The Budget continued on the path of fiscal consolidation while giving a boost to urban consumption by reducing personal income tax with an aim to boost demand, which should drive consumption, higher capacity utilisation and pick-up in private investments

  • Net borrowing for FY26 is similar to FY25 even as gross borrowing is projected to be higher given higher repayments with scope for gross borrowings to come down if the RBI switches its holdings of government securities to expand its balance sheet

  • The Budget moved the anchor of fiscal policy from fiscal deficit to GDP ratio to total public debt-to-GDP. In addition, a gradual reduction to 50% (+/-1%) from the current level of 57.1% is planned without any large fiscal compression, which is a positive for near to medium-term growth trajectory

  • The fiscal deficit is expected to remain unchanged at INR 15.7 trillion (4.4% of GDP) in FY26 as compared to FY25

  • Indian Manufacturing PMI rose to 57.7 in January 2025, a 6-month high. Domestic and export demands were both strong, supporting growth of new orders

  • Indian Services PMI stood at 56.5 for January, the lowest since December 2022 because of softening demand

Global Update

Global Update

  • The J.P. Morgan Global Composite PMI Output Index fell to 51.8 in January, a 12-month low. The Global Services PMI dropped to a 13-month low of 52.2 while the Manufacturing PMI was at 50.1, the highest since August 2022

  • Euro zone inflation accelerated to 2.5% YoY in January as anticipated, allowing the ECB to cut interest rates further despite uncertainty caused by a surging Dollar, a looming trade war and higher gas prices

  • China levied tariffs of up to 15% on select US imports starting February 10 in response to sweeping 10% tariffs on all Chinese imports into the US

  • Governor of the Bank of Japan reiterated the aim to sustainably achieve 2% inflation as measured by the overall CPI, keeping alive market expectations of a near-term interest rate hike

  • Equity

  • Debt

  • Oil

  • Gold

  • Currency

Equity

Equity

  • The benchmark indices opened lower and traded with a slight negative bias for majority of the week taking cues from the global markets. Market participants remained cautious focusing on Q3 earnings, the MPC meeting, flows of foreign funds and other key domestic and global macroeconomic data to provide further cues for the market.
  • During the week, the Sensex gained 0.46% to close at 77860.19 while the NIFTY advanced 0.22% to close at 23559.95
Debt

Debt

  • 10-year Government Bond yields opened lower but traded with a slight positive bias through the week, closely tracking the US Treasury (UST) yields as investors weighed the tariffs proposed by the US and their subsequent delay. Market participants were focused on the MPC meeting to provide crucial guidance for the market's next direction.
  • The 10Y benchmark G-Sec was trading at a yield 6.70% of on February 07, 2025 at 16:32 IST
Oil

Oil

  • Crude oil prices opened negative and traded with a negative bias through the week. The fall was driven by increasing concerns around demand from the US as high stockpiles indicated weaker demand. OPEC+ confirmation of increased supply from April and the increasing global trade uncertainty supported demand concerns pushing prices lower. More downside is possible in the near-term.
  • Brent was trading at $ 74.85 on February 07, 2025 at 16:32 IST
Gold

Gold

  • Gold prices traded with a positive bias through the week trading above the USD 2800 mark. The threat of tariffs and weaker USD are supporting gold’s appeal as a safe haven for investment pushing prices upwards.
  • Gold was trading at $ 23559.95 Per Ounce on February 07, 2025 at 16:32 IST
Currency

Currency

  • The USD/INR pair traded with a negative bias as the Indian Rupee grew weaker. Continued FII outflows and strong USD demand from importers outweighed the impact of lower crude prices and a subdued Dollar index to create pressure on the INR. The RBI continues to intervene and stabilise the currency by limiting the fall in the Indian Rupee.
  • USD/INR was trading at 87.43 on February 07, 2025 at 16:32 IST

Feb 07, 2025

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.