Economy Tracker: Markets Update; IN RBI policy; US penalty tariff; UK BOE policy Kotak Institutional Equities
Money market and bond market during the week
* Banking sector liquidity in India was at a surplus of Rs3.5 tn on August 7 compared to a surplus of Rs2.9 tn on July 31. The weighted average call rate (WACR) was at 5.44% on August 7 (5.49% on July 31).
* Government cash balances with the RBI (estimated) was at Rs1.1 tn on August 1; lower than Rs2.8 tn on July 25.
* Indian 1-year T-bill was at 5.61% on August 8 (5.53% on August 1). The Indian 5-year G-sec yield was at 5.90% on August 8 (5.87% on August 1).
* Indian 10-year G-sec yield was at around 6.38% on August 8 (6.37% on August 1).
* 1-year OIS was at 5.50% on August 8 (5.50% on August 1). 2-year OIS was at 5.45% on August 8 (5.47% on August 1).
FX market during the week
* Dollar index (DXY) was around 98.3 on August 8 against 99.1 on August 1. EUR-USD gained 0.5% to 1.165 on August 8 from end of last week while GBP-USD gained around 1.2% to 1.343. USD-JPY fell around 0.2% to around 147.7.
* USD-INR was at 87.6 on August 8 (87.3 on August 1).
* INR 1-year forward premium was at 2.10% on August 8 (1.97% on August 1).
Equity market during the week
* Nifty-50 index fell 0.8% on August 8 from closing of last week while Nifty mid-cap. index fell 1.1% and small-cap. index fell 1.9%. Broader market index (Nifty-500) fell 1% from closing of last week.
Commodities market during the week
* Brent crude oil prices was around US$67.7/bbl on August 8 compared to US$71.4/bbl on August 1.
* Gold prices increased around 1.1% over the week to around US$3,400/oz on August 8. Copper prices (LME index) increased around 0.4% as on August 8 over end of last week.
Key events/data releases during the week
* The RBI MPC unanimously kept the policy repo rate unchanged at 5.5% while maintaining the stance at “neutral”. The MSF rate and SDF rate were unchanged at 5.75% and 5.25%, respectively. Real GDP growth estimate for FY2026 was unchanged at 6.5% while estimating 1QFY27 GDP growth at 6.6%. Average inflation estimate for FY2026 was revised down by 60 bps to 3.1% while projecting 1QFY27 headline CPI at 4.9%.
* US government announced a penalty in the form of additional 25% on Indian exports given India’s trading relations (especially oil imports) with Russia. This penalty is on top of the 25% reciprocal tariff announced on July 31, and will be in effect from August 21.
* Bank of England reduced their benchmark policy rates by 25 bps to 4% with a 5-4 majority, highlighting the division in BoE’s MPC on policy decisions as members with a dovish view aim at lowering borrowing cost amid growth slowdown while the hawkish members remain concerned at the escalating inflation which is expected to peak at 4% (twice of their inflation target) in September 2025.
Above views are of the author and not of the website kindly read disclaimer
|
|
