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Daily Newsletter - 24th June 2024

Team Harmoney

Monetary policy can afford to maintain a neutral stance with reference to growth and a hawkish stance on inflation because the pace of disinflation has been disappointing not just in India but also in other countries, according to RBI Deputy Governor Michael Patra, the minutes of the June MPC showed. The Indian economy remains hostage to food price shocks. He said that their repetitive occurrence calls for intensifying monetary policy vigil to ward off spillovers to other components of inflation and to expectations. Food prices are holding back any consideration of possible changes in the monetary policy stance, the influential member of the committee also said.  It appears that rate cuts in India are not imminent.

Top 3 Leads Today

  • Centre anticipates Rs 70k crore GST cess surplus from 'sin' goods.
  • RBI's MPC minutes: External members make a strong case for a rate cut.
  • Forex reserves dropped $2.92 bn to $652.89 bn for the week ended June 14.

Market Recap: The Week That Was

  • Money Markets Minute: As the demand for funds decreased over the last two trading days, the one-day call money rate closed the week at 5.75% below the Repo rate on Friday, having touched 6.85% on Tuesday. At the beginning of this week, there was a significant increase in demand for banks because of the outflow of goods and services tax.
  • Government Bond Brief: Following a mostly stable week, yields fell slightly on Friday. The yields on government securities above 10-year dropped because only a limited number of investors were able to secure an allotment of 50-year bonds at the auction on Friday.
  • Corporate Bond Beat: Yields across tenure remained stable for the week in the secondary market as there were no significant domestic cues, with investors primarily focused on the primary issuance last week.
  • Forex Flash: The rupee showed signs of improvement against the dollar on Friday, bouncing back from a previous session's decline to its all-time low. This decline was influenced by the weakness in the Chinese yuan and the likely dollar outflows.
  • Stocks Spotlight:  Indian shares recorded a third consecutive week of gains, driven by a strong performance in the financial sector and increased foreign investor activity. Foreign inflows have shown a positive trend for the month, as of June 20, there have been inflows of 109.23 billion rupees, a significant improvement compared to the outflows of 255.86 billion rupees in May. However, benchmark indices closed lower on Friday, as investors took profits after reaching record highs during the week.

Most actively traded Corporate bonds in the Standard Lot Market:

ISIN Security Name Volume (Cr) Avg. Yield(%)
INE261F08EJ7 7.64 NABARD 06DEC29 3335 7.65
INE053F08395 7.44 IRFC 13JUN34 1110 7.47
INE556F08KI9 7.44 SIDBI 04SEP26 1040 7.73
INE261F08DO9 7.40 NABARD 30JAN26 970 7.74
INE115A07QS3 7.9265 LICHSGFIN 14JUL27 865 7.93

Most actively traded Corporate bonds in the Odd Lot Market:

ISIN Security Name Volume (Cr) Avg. Yield(%)
INE0NES07113 11.40 KEERTANA 13JUN27 36.13 13.36
INE01YL07185 11.75 EARLYSALARY 30MAR26 32.72 13.53
INE0GXL07039 11.85 NAVITECHN 17MAY26 31.05 11.93
INE261F08EJ7 7.64 NABARD 06DEC29 27.50 7.66
INE0GCN07039 9.95 ADANIAIRPORT 12JUN28 26.01 9.95

Traded volume in corporate bonds by maturity:

Maturity Volume(in Cr)
1Y 4250
3Y 5501
5Y 5469
7Y 173
10Y 3879

Source: Harmoney data analytics

The Week Ahead

  • Money Markets: It is anticipated that the interbank call money rate will rise on Monday due to increased demand for funds from banks considering a liquidity deficit.  Factors such as bond redemption and government month-end spending could potentially restrict the increase of the call rate in this week.
  • Government Bonds: Yields are expected to open steady on Monday, with their direction influenced by the minutes of the recent monetary policy review. These minutes will provide insights into the central bank's stance on potential interest rate cuts in future policies. Market participants will also be closely monitoring speeches by US Federal Reserve officials this week for additional insights.
  • Corporate Bonds: : The secondary market's yields are predicted to stay steady, tracking changes in government securities and gaining new insights from this week's movement in US sovereign bonds.
  • Forex: The rupee is expected to open strong on Monday, with investors closely monitoring the movement of the dollar index and the Chinese Yuan throughout the week. If the rupee remains close to its recent record lows, the RBI is expected to take steps in the foreign exchange market by selling dollars.
  • Stocks: Indian equities are expected to open on a positive note on Monday. The near-term trajectory will be influenced by India's July budget, the monsoon trajectory, and the upcoming earnings season, which is expected to have a positive impact.

Events This Week

June 24, Monday

  • First session of the new Lok Sabha to start
  • RBI to switch 9 bonds worth ₹250 billion at auction

June 25, Tuesday:

  • Nine states to raise ₹170.71 billion via bond sale

June 26, Wednesday:

  • RBI to auction 91-day T-bills of ₹40 billion, 182-day T-bills of ₹40 billion, and 364-day T-bills of ₹40 billion
  • IMD will release weekly subdivision-wise rainfall distribution data
  • EIA to release US crude inventory report for the week ended Friday

June 27, Friday:

  • Government finances for May, by CGA
  • Core sector output for May, by commerce ministry at 1700 IST.

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