Monsoon above Long Period Average

Indian Economic Update

  • The cumulative southwest monsoon this year (Jun 01 – Sep 30) ended at 10% above the Long Period Average (LPA), the highest since 1994.
  • Regionally, stark spatial variation persisted in the monsoons this year, with the East and North-east region recording a rainfall deficiency. The monsoon remained active over several parts of the country after the 30th as well, and the withdrawal commenced from Wednesday.
  • With kharif sowing coming to an end, the total crop cultivation was at par with last year’s level. While rice and pulses were undersown, the stockpiles of the same with Food Corporation of India (FCI) are at a record high.
  • The overall reservoir level is at 88% of the total capacity as on Oct 03, 2019 which is considerably higher than the last year. Going ahead, this bodes well for sowing of the rabi season crop.
  • The rural wage growth has declined to 4.9% YoY in July 2019 from the stellar growth of 6.0% in the previous month, largely affected by a high base. Nonetheless, the 3-month moving average remains above 5% YoY.
  • Agricultural credit growth has remained steady at 6.8% YoY in August.
  • The contraction in tractor sales has deepened further to 16.5% YoY in August, the worst level since October 2015, and was despite a favourable base.
  • Union Cabinet announced a hike in dearness allowance for Government employees to 17% from 12%.

Global Update

  • According to the US monthly labour market report for September, the unemployment rate moved lower from 3.7% in August 2019 to 3.5% in September 2019. The pace of payrolls growth moderated from 168,000 in August 2019 to 136,000 in September 2019, although upward revisions to the tune of 52,000 were made for the previous two months. US Nonfarm Payrolls Private in the United States increased by 114,000 in September 2019 versus the revised value of 149,000 in the prior month.
  • According to the minutes from the Federal Open Market Committee's (FOMC) Sep 17 - Sep 18 monetary policy meeting, most policymakers believed that a 25 basis points rate cut was needed citing economic outlook, risk management and inflation objectives.
  • U.S. consumer prices were unchanged in September at 1.7%.

Equity

Indian equities ended higher as sentiment of market participants improved after Union Cabinet announced a hike in dearness allowance for Government employees to 17% from 12%.

 

During the week Sensex gained 1.20% to close at 38127.08 while Nifty advanced 1.17% to close at 11305.05.

Debt

Indian bonds ended higher. Investors were cautious ahead of the inflation print scheduled for release on Monday. Market participants were increasingly worried about centre's finances.

 

The 10Y benchmark yield ended at 6.50% as compared to the previous week’s close of 6.69%.

Oil

Oil is trading higher, however the US-China trade war continued to cloud prospects for the global economy and fuel demand despite a resumption in talks. Prices were also weighed down by a report of rising stockpiles in the United States.

Gold

Gold is trading steady as fading hopes for progress in US-China trade talks hit risk appetite, while markets also awaited clues on monetary easing by the US Federal Reserve.

Currency

The Indian Rupee ended flat against the US Dollar. Banks cut their long dollar bets ahead of US China trade talks. Dollars bought by foreign banks and oil importers weighed on Rupee.
The Dollar index is trading lower.
The Euro rallied to a near 3-week peak after reports that the ECB had restarted its bond-buying programme last month despite objections of its own officials and expectations of a possible favourable developments in trade talks between US and China.


Source: ICICI Bank Research, Private Banking Investment Strategy Team, Bloomberg and CRISIL.