India jumps 30 places in ease of doing business ranking

Indian Economic Update

Key developments during the week:

  • Government of India appointed a panel led by FM, Mr. Arun Jaitley to oversee PSU bank consolidation.
  • India’s fiscal gap for April-September stood at 91.3% of budgeted target for FY2018, as receipts grew robustly while expenditure was trimmed.
  • India registered an impressive thirty places jump on the World Bank’s Ease of doing Business ranking. Significant improvement in “getting credit”, “protecting minority shareholders” and “resolving insolvency” indices led India to move to a rank of 100 in 2018 from the 130th position last year.


Global Update

US Fed policy: Maintains status quo

Fed maintains status quo on interest rates

In line with our expectations, the US Federal Reserve maintained the Fed funds rate target range at 1.00-1.25%. The statement was upbeat on recent economic growth. There were no dissenters.

Fed assessment of economic activity and labour market

The statement was largely same except that the Fed termed the economic growth ‘solid’ compared to ‘moderate’ in its earlier statement. Also, the central bank acknowledged the impact of hurricanes on the labour market as the payroll employment in September dropped. However, it highlighted the drop in unemployment rate which was 4.2% in September compared to 4.4% in August.

Fed assessment of inflation

The spike in headline inflation in September was largely on account of rise in gasoline prices. However, inflation for items other than food and energy remained soft. On a 12-month basis, both inflation measures have declined this year and are running below 2 percent.

Fed outlook – hurricanes’ impact transitory

The Fed maintained that the impact of hurricanes transitory. It said that they continue to impact economic activity, inflation and labour market in the near term, but they are unlikely to affect economy in the medium term. Regarding inflation, Fed continued to stick to its stance that it will be stabilised around the 2% target in the medium term even though it is expected to remain soft in the near term.


UK: BoE delivers a dovish hike

Bank of England (BoE) delivers 25 bps rate hike

  • Bank of England raised its key policy rate by 25bps to 0.50%, with a majority of 7-2.
  • Asset Purchase Facility (APF) kept unchanged at GBP 435 bn, voted 9-0.
  • With BoE reverting back to pre-Brexit levels on policy rate, we expect the central bank to go for a wait-watch mode for next few months and see how both economy and Brexit related talks unfold. In its recent forecasts, the central bank has assumed a “smooth Brexit”.


Other important developments during the week:

  • Bank of Japan maintained status quo in its monetary policy. The short-term interest rate and the 10-year JGB yield target were kept at -0.1% and 0% respectively. It has also kept unchanged its pledge to buy JGBs so that its holdings increase at annual pace of around JPY 80 tn.
  • US President, Mr. Trump formally nominated Fed Governor, Mr. Jerome Powell as the Chair of the Federal Reserve when the term of current Fed Chair, Ms. Yellen expires. Powell is considered to be neutral on the interest rate front and is seen as someone who would ease regulation for the banking sector.



Indian equities started the week on a record high note after public sector bank stocks extended gains on the back of Rs 2.11 lakh crore recapitalisation announcement. Energy firms gained on higher crude prices as Brent crude hit its highest level since July 2015.
Indices inched lower due to subdued global markets coupled with losses in metals, automobiles and public sector banks. Weak PMI prints from China put metal stocks under pressure. Lower than expected earnings reports also weighed on indices during mid-week.
Meanwhile, equities ended at record highs on Wednesday as robust gains in shares of banks and positive global cues drove market sentiments. World Bank’s Ease of Doing business report, which saw India register a significant 30 places leap also buoyed investor sentiment. Markets touched fresh lifetime highs. Profit booking in Public sector banks following sharp gains in the previous sessions limited the upside.


During the week Sensex gained 1.59% to close at 33685.56 while Nifty advanced 1.24% to close at 10452.50.



Indian Government bonds started the week lower, with benchmark yield posting its biggest rise in three weeks, on heavy debt supply and government’s plan to inject fresh capital in state run lenders that includes recapitalisation bonds.

Gilts gained marginally as investors resorted to value buying after steep fall in prices. The overall market sentiment continues to remain subdued.

Gilts gained sharply on short covering as outcome of US FOMC meet was in line with expectations. Further, the favourable cutoffs at the auctions also supported gilt prices.


The 10Y benchmark yield ended at 6.87% as compared to the previous week’s close of 6.81%.



Oil continued its rally for fifth day in a row. Crude prices continued their bullish movement after marking gains of over 4.5% last week, with Brent trading above the USD 60/barrel mark, on expected extension of output cuts from OPEC.
Meanwhile, Crude prices eased after the recent gain as prospects of US raising its output along with exports trimmed bullish sentiments. Iraq’s move to increase oil exports from its southern ports also weighed on prices.
Brent is on track to correct as surging US crude production and exports weighed on the global benchmark, despite efforts from OPEC and Russia to undersupply the market.



Gold started the week on a flat note. The yellow metal came under pressure amidst a strengthening dollar and growing concerns about demand prospects after China’s business activity for October took a dip, with the official manufacturing PMI falling to 51.6 against expected levels of 52.

Meanwhile, the yellow metal gained on account of higher bullion demand from Chinese retail investors and a weaker dollar towards the end of the week.



Indian Rupee started this week higher amid selling of greenback from exporters and banks. An across the board weakness in the dollar index aided the domestic currency. However, dollar purchases by public sector banks capped the rupee’s appreciation.
Rupee gained further as foreign banks resorted to heavy dollar sales triggering multiple stop losses. Persistent dollar purchases by public sector banks and mild recovery in dollar index weighed on rupee towards the end of the week.


Source: ICICI Bank Research, Bloomberg and CRISIL