Economy Tracker: Markets update; IN RBI liquidity measures; EZ ECB policy; MY BNM policy; TR CBT policy by Kotak Institutional Equities
Money market and bond market during the week
* Banking sector liquidity in India was at a deficit of Rs569 bn on March 6 compared to deficit of Rs1.8 tn on February 27. The weighted average call rate (WACR) was at 6.21% on March 6 (6.31% on February 27).
* Government cash balances with the RBI (estimated) was at Rs1.3 tn on February 28; lower than Rs2.1 tn on February 21.
* Indian 1-year T-bill was at 6.53% on March 7 (6.53% on February 28). The Indian 5-year G-sec yield was at 6.53% on March 7 (6.54% on February 28).
* Indian 10-year G-sec yield was at 6.69% on March 7 (6.73% on February 28).
* 1-year OIS was at 6.19% on March 7 (6.24% on February 28). 2-year OIS was at 6% on March 7 (6% on February 28).
FX market during the week
* Dollar index (DXY) was 103.8 on March 7 against 107.6 on February 28. EUR-USD gained 4.4% to 1.083 on March 7 from end of last week while GBP-USD gained around 2.7% to 1.29. USD-JPY gained around 1.7% to around 148.
* USD-INR was at 86.9 on March 7 (87.5 on February 28).
* INR 1-year forward premium was at 2.13% on March 7 (2.08% on February 28).
Equity market during the week
* Nifty-50 index gained 1.9% on March 7 from closing of last week while Nifty mid-cap. index gained 3% and small-cap. index gained 5.5%. Broader market index (Nifty-500) gained 2.8% from closing of last week.
Commodities market during the week
* Brent crude oil prices was around US$72/bbl on March 7 compared to around US$73.4/bbl on February 28.
* Gold prices increased around 1.8% over the week to around US$2909/oz on March 7. Copper prices (LME index) increased around 2.9% as on March 7 over end of last week.
Key events/data releases during the week
* The RBI announced (1) OMO purchase of Rs1 tn in two tranches of Rs500 bn each on March 12 and March 18 and (2) 3-year tenor FX buy/sell swap auction of US$10 bn scheduled for March 24; in a bid to inject durable liquidity. Since the December policy, RBI has injected around Rs4 tn of durable liquidity through CRR cuts (around Rs1.1 tn), OMO purchases (around Rs1.4 tn in both primary and secondary markets), and FX buy/sell swaps (around Rs1.3 tn) along with liquidity management tools such as VRRs.
* The European Central Bank (ECB) decided to reduce policy rates by 25 bps on the back of a downward inflation trajectory and subdued growth outlook. Accordingly, the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will be decreased to 2.50%, 2.65% and 2.90% respectively, with effect from March 12, 2025.
* Bank Negara Malaysia on Thursday maintained its overnight policy rate at 3.00%, citing a balanced outlook on growth and inflation.
* The Central Bank of Turkey reduced their benchmark interest rates by 250 bps to 42.5% as inflation in February came in at 39.1% after being above 40% for the last two years. The policy mentioned that the inflation trends would be reviewed and rates would be adjusted cautiously depending on the prevailing conditions..
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