Economy Tracker: Markets update; IN RBI rate cut; PLI update specialty steel; UK BOE policy; US labor data by Kotak Institutional Equities
Money market and bond market during the week
* Banking sector liquidity in India was at a deficit of Rs 698 bn on February 6 compared to deficit of Rs2.2 tn on January 30 . The weighted average call rate (WACR) was at 6.45% on February 6 (6.58% on January 30).
* Government cash balances with the RBI (estimated) was at Rs1.3 tn on January 31; higher than Rs2.4 tn on January 24.
* Indian 1-year T-bill was at 6.55% on February 7 (6.57% on January 31). The Indian 5-year G-sec yield was at 6.62% on February 7 (6.62% on January 31).
* Indian 10-year G-sec yield was at 6.70% on February 7 (6.70% on January 31).
* 1-year OIS was at 6.34% on February 7 (6.33% on January 31). 2-year OIS was at 6.11% on February 7 (6.08% on January 31).
FX market during the week
* Dollar index (DXY) was 107.8 on February 7 against 108.4 on January 31 . EUR-USD gained 0.2% to 1.038 on February 7 from end of last week while GBP-USD gained around 0.4% to 1.25. USD-JPY fell around 2% to around 152.
* USD-INR was at 87.5 on February 7 (86.7 on January 31 ).
* INR 1-year forward premium was at 2.23% on February 7 (2.29% on January 31).
Equity market during the week
* Nifty-50 index gained 0.3% on February 7 from closing of last week while Nifty mid-cap. index gained 0.2% and small-cap. index gained 0.5%. Broader market index (Nifty-500) gained 0.3% from closing of last week.
Commodities market during the week
* Brent crude oil prices was around US$74.9/bbl on February 7 compared to around US$77/bbl on January 31 .
* Gold prices increased around 2.4% over the week to around US$2,866/oz on February 7. Copper prices (LME index) increased around 2.5% as on February 7 over end of last week.
Key events/data releases during the week
* The RBI MPC unanimously decided to reduce the repo rate by 25 bps to 6.25% after being on a pause for two years. The stance was also unanimously maintained at “neutral”. Real GDP growth for FY2026 was pegged at 6.7% while average inflation for FY2026 was estimated at 4.2%. The RBI's press conference clarified that the implementation of the draft LCR and project financing norms will not be before, at least, March 31, 2026.
* The government informed in the Parliament that under the Production Linked Incentive (PLI) scheme for specialty steel participating companies had made an investment of Rs188.5 bn (till December 2024) against a committed investment of Rs271 bn. The production of specialty steel was 1.26 mn tons till December 2024.
* BoE reduced its policy rate by 25 bps to 4.5% with a 7-2 majority citing substantial progress on disinflation due to a restrictive monetary policy stance so far. The policy statement stated that CPI inflation is expected to fall back to the 2% mandate after rising to 3.7% in 3QCY25.
* Nonfarm payroll (NFP) additions in US for January was at 143K; lower than consensus expectations of 169K. NFP additions for December were revised up by 51K to 307K. The unemployment rate fell to 4.0% from 4.1% in December; in line with expectations. Average hourly earnings increased by 0.5% mom (4.1% yoy).
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