Indian Economic Update
- India jumped 23 places to rank at 77 in World Bank’s Ease of Doing Business rankings.
- India’s eight-core industries growth came in at 4.3% YoY in September vs 4.7% YoY in the prior month.
- The 19th Financial Stability and Development Council's (FSDC) meeting discussed the liquidity crunch in the financial sector. Attended by Finance Minister Mr Arun Jaitley among others, the meeting saw concerns being raised by the government over liquidity crunch in the Non-Banking Finance Companies (NBFCs) sector.
- India and Japan agreed to conclude a Bilateral Currency Swap Agreement for USD 75 billion, an enhancement over the previous USD 50 billion currency swap agreement between the two countries. The pact is aimed at "bringing greater stability to foreign exchange and capital markets in India" and tapping foreign capital for country's developmental needs.
- The Bank of Japan decided to keep its monetary stimulus unchanged amid stubbornly low inflation and risks to the global economy including heightened trade tensions.
- The US economy grew by 3.5% (QoQ Seasonally Adjusted Annual Rate (SAAR)) in Q3 2018 (advance estimate) against the previous reading of 4.2%.
- US private payrolls rose by a sturdy 227K in October, far outstripping expectations of 187K, and prior estimate of 218K.
- In the Eurozone, headline Consumer Price Inflation (CPI) came in at 2.2% YoY, while core CPI printed at 1.1% YoY, picking up from last month’s print. Unemployment rate stayed steady at 8.1% in October.
- Turkey’s central bank held its main interest rate at 24%, but pledged further tightening if the recent interest-rate hike fail to curb inflation.
Indian equities traded higher compared to the previous week, led by financial services, IT and pharma stocks.
On Wednesday, a market rally was observed after the Government of India issued a statement saying it respects the autonomy of the RBI, and would continue to consult with the Central Bank.
During the week Sensex gained 4.98% to close at 35011.65 while Nifty advanced 5.21% to close at 10553.
Government bond prices improved slightly, due to further fall in crude oil prices which pacified the fear of domestic inflation heading higher and concerns of higher current account deficit.
On October 26, the Reserve Bank of India said it will inject INR 400 billion into the system in November through purchase of government securities.
The 10Y benchmark yield ended at 7.77% as compared to the previous week’s close of 7.87%.
Oil prices traded lower due to the fear of slower global economic growth because of rising trade war between U.S. and China. An increase in U.S. crude inventories for the sixth consecutive week also weighed the sentiments down.
Gold edged lower as the Dollar index traded near its 16-month high. The global stock markets regained its momentum giving a boost to the risk appetite of the investors. The world Gold council said that global gold demand rose slightly in the third quarter from a year before as resurgent buying from central banks and retail consumers balanced huge outflows from exchange-traded funds. It is currently trading at USD 1,230.1 per ounce.
The Rupee weakened against the US Dollar as foreign banks saw increased demand for the greenback in line with the ongoing strength of the US economy.
Investors pulled the dollar back from a 16-month high on Thursday, feeding a broad-based rally in European currencies.
China’s Yuan slid to the weakest level since May 2008, moving closer to the key level of 7 per Dollar, as the central bank weakened its daily fixing and on fresh signs that a trade war with the U.S. may escalate.
Source: ICICI Bank Research, Private Banking Investment Strategy Team, Bloomberg and CRISIL.