Economy Tracker: Markets update; IN Apr REER; FY2025 RBI surplus transfer; Mar RBI FX intervention; Apr Core IIP
Money market and bond market during the week
* Banking sector liquidity in India was at a surplus of Rs991 bn on May 22 compared to a surplus of Rs2.2 tn on May 15. The weighted average call rate (WACR) was at 5.85% on May 22 (5.83% on May 15).
* Government cash balances with the RBI (estimated) was at Rs688 bn on May 16; lower than Rs966 bn on May 9.
* Indian 1-year T-bill was at 5.67% on May 23 (5.77% on May 16). The Indian 5-year G-sec yield was at 5.77% on May 23 (5.86% on May 16).
* Indian 10-year G-sec yield was at 6.25% on May 23 (6.27% on May 16).
* 1-year OIS was at 5.54% on May 23 (5.62% on May 16). 2-year OIS was at 5.43% on May 23 (5.49% on May 16).
FX market during the week
* Dollar index (DXY) was around 99.4 on May 23 against 101.1 on May 16. EUR-USD gained around 1.3% to 1.13 on May 23 from end of last week while GBP-USD gained around 1.5% to 1.348. USD-JPY gained around 2.1% to around 142.7.
* USD-INR was at 85.5 on May 23 (85.6 on May 16).
* INR 1-year forward premium was at 2.04% on May 23 (2.11% on May 16).
Equity market during the week
* Nifty-50 index fell 0.7% on May 23 from closing of last week while Nifty mid-cap. index fell 0.4% and small-cap. index gained 0.8%. Broader market index (Nifty-500) fell 0.4% from closing of last week.
Commodities market during the week
* Brent crude oil prices was around US$64.7/bbl on May 23 compared to around US$65.1/bbl on May 16.
* Gold prices increased around 4.3% over the week to around US$3,342/oz on May 23. Copper prices (LME index) increased around 0.4% as on May 23 over end of last week.
Key events/data releases during the week
* INR REER dipped to 100.8 in April from 101.5 in March. In the same period, INR moved to average around 85.6 against USD in April from 86.5 in March while CPI inflation moved down to 3.2% in April from 3.3% in March.
* The RBI approved transfer of Rs2.7 tn as surplus to the central government for FY2025. The Contingent Risk Buffer (CRB) has been increased to 7.5% of the RBI’s balance sheet (from 6.5% earlier) with the revised Economic Capital Framework (ECF). The revised ECF pegs the CRB at 6%+/-1.5% (4.5%-7.5%) and at 7.5% required a provisioning of around Rs450 bn for FY2025.
* In March, the RBI purchased US$41.5 bn and sold US$27.2 bn in spot FX markets (net purchase of US$14.4 bn in March after net sale of US$1.6 bn in February). Forward position was net short US$84 bn in March (February: net short at US$89 bn) with net short of US$12 bn in the up to 1-month bucket, net short of US$12 bn in 1-month to 3-month bucket, net short of US$40 bn in more than 3-month and up to 1-year bucket and net short of US$20 bn in the more than 1-year bucket.
* Infrastructure output (weight of 40.3% in IIP) growth in April 2025 was at 0.5% (March: 4.6%). Cement production growth was at 6.7% (March: 12.2%), followed by, coal production growth at 3.5% (1.6%), steel production growth at 3% (9.3%), electricity production growth at 1% (7.5%) and natural gas production at 0.4% ((-)12.7%). On the other hand, crude oil production growth was at (-)2.8% (March: (-)1.9%), fertilizers production growth at(-)4.2% (8.8%), and refinery products’ production growth at (-)4.5% (0.2%).
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