Economy Tracker : Markets update; IN February CPI; Jan IIP; CA BOC policy by Kotak Institutional Equities
Money market and bond market during the week
* Banking sector liquidity in India was at a deficit of Rs1.4 tn on March 12 compared to deficit of Rs569 bn on March 6. The weighted average call rate (WACR) was at 6.27% on March 12 (6.21% on March 6).
* Government cash balances with the RBI (estimated) was at Rs1.3 tn on March 7; similar to the Rs1.3 tn on February 28.
* Indian 1-year T-bill was at 6.52% on March 14 (6.53% on March 7). The Indian 5-year G-sec yield was at 6.58% on March 14 (6.53% on March 7).
* Indian 10-year G-sec yield was at 6.7% on March 14 (6.69% on March 7).
* 1-year OIS was at 6.12% on March 14 (6.19% on March 7). 2-year OIS was at 5.92% on March 14 (5.96% on March 7).
FX market during the week
* Dollar index (DXY) was 103.7 on March 14 against 103.8 on March 7. EUR-USD gained 0.4% to 1.09 on March 14 from end of last week while GBP-USD gained around 0.12% to 1.3. USD-JPY fell around 0.4% to around 148.6.
* USD-INR was at 87.1 on March 14 (86.9 on March 7).
* INR 1-year forward premium was at 2.14% on March 14 (2.13% on March 7).
Equity market during the week
* Nifty-50 index fell 0.7% on March 13 from closing of last week while Nifty mid-cap. index fell 2.1% and small-cap. index fell 3.5%. Broader market index (Nifty-500) fell 1.3% from closing of last week.
Commodities market during the week
* Brent crude oil prices was around US$71.6/bbl on March 14 compared to around US$72/bbl on March 7.
* Gold prices increased around 2.6% over the week to around US$2,984/oz on March 14. Copper prices (LME index) increased around 1.3% as on March 14 over end of last week.
Key events/data releases during the week
* February CPI inflation decelerated to 3.6% yoy (January: 4.3%). Headline CPI fell by 0.5% mom led by a sharp fall in food prices. Food inflation moderated to 3.7%, led by sharp decline in prices of vegetables, eggs, pulses, spices and meat and fish. Core inflation (CPI excluding food, beverages and fuel) inched up to 4% (January: 3.7%)
* IIP growth in January improved to 5% (December: 3.5%), due to a pick-up in the manufacturing sector. According to the sectoral classification, the IIP growth was led by the manufacturing sector at 5.5%, followed by mining (4.4%), and electricity (2.4%). In terms of the use-based classification, most categories registered positive growth, led by capital goods (7.8%) and consumer durables (7.2%), barring consumer non-durables ((-)0.2%).
* The Bank of Canada reduced policy rates by 25 bps on account of favorable inflationary dynamics and robust GDP growth, with global headwinds emanating from trade tensions and tariffs from the Trump 2.0 administration. The overnight rate, bank rate and deposit rate is now at 2.75%, 3%, 2.7% respectively.
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