Weekly Macro Data Coverage Oct 28, 2019

Key Highlights:

  • Spread between repo and call money rate (WACR) further declined to 10 bps over a week during third week of October
  • Incremental credit deposit ratio turned positive for first time in FY20 during first fortnight of October
  • 10-year Indian sovereign yield has subsided by 11bps to 7.61% over a week during third week of October
  • ECB is resuming assets buying program from October 30, 2019 onwards

Liquidity

The spread between repo and call money rate (WACR) further declined to 10bps over a week during third week of October. However, surplus liquidity in the system has subsided to Rs.1.43 lakh crore during the same time. The surplus liquidity had reached a record level of average 1.68 lakh crore during the first week of October 2019. In a positive development, the incremental credit deposit ratio turned positive for first time in FY20 during first fortnight of October. This hints a recovery in the credit cycle. It is known that due to weak demand, the incremental credit offtake in FY20 (YTD) is a tepid Rs.0.16 lakh crore, a number which was Rs.3.67 lakh crore during the same time the previous year. During the anomalous bout of offtake, investment in government and other approved securities stands at Rs.3.22 lakh crore in FY20. The investment was Rs.1.76 lakh crore a year earlier.

Capital Market

On the global capital market front, there is a sharp increase in 10-yr US sovereign yield as fed’s meeting and Q3 GDP data are due in this week. Yields in the Euro zone have been recovering from the fall in August as ECB is resuming assets buying program from October 30, 2019. This will further increase the global liquidity and hence EMs can expect higher capital inflows. On the domestic market, the 10-year Indian sovereign yield has subsided by 11bps to 7.61% over a week during the reference week. The spread between 10-yr Indian and US sovereign yield which was above 500bps for past two months has reduced to the 477 bps, consequently. The lower spread indicates that the risk appetite of investors is increasing.

Currency Trend

On the currency market, volatility in USD-INR has come down to 0.37% in October, from 0.92% in August. As the exchange rate adjusts to the revised interest rate, the currency market has been stabilizing. However, the currency market may again be volatile if the fed further change the fed rate and its stance, a decision that is due this week.


Interest rates and ratio:

Interest Rate

Oct 19

Sep 20

Sep 27

Oct 04

Oct 11

Oct 18

2018

2019

2019

2019

2019

2019

  Policy Repo Rate

6.50 

5.40 

5.40 

5.15 

5.15 

5.15 

  Call Money Rate (WA)

6.53 

5.36 

5.31 

5.26 

5.06 

5.05 

  364-Day Treasury Bill Yield

7.50 

5.60 

5.60 

5.53 

5.41 

5.37 

  2-Yr Indian G-Sec

7.59 

5.91 

5.78 

5.75 

5.67 

5.64 

  10-Yr Indian G-Sec

7.88 

6.91 

6.85 

6.47 

6.54 

6.57 

  10-Yr US G-Sec

3.08 

1.69 

1.53 

1.73 

1.75 

1.80 

  AAA (Indian corporate)

8.84 

7.70 

7.84 

7.54 

7.72 

7.61 

  Spread in bps (10Yr Indian- US)

480 

522 

532 

474 

479 

477 

  Credit/Deposit Ratio

76.3 

- 

75.67 

- 

75.66 

- 

  USD LIBOR (3 month)

2.1703 

2.1549 

1.8299 

1.8224 

1.7926 

1.8381 

  Forward Premia of US$ 1-month

5.23 

4.40 

3.98 

4.40 

3.72 

3.79 

  US$ 3-month

4.49 

4.17 

3.95 

3.87 

3.80 

3.71 

  US$ 6-month

4.36 

4.38 

4.23 

4.18 

4.08 

4.05 
Source: RBI, Investing.com


Deposit (In Rs. Lakh cr)

Bank Credit (In Rs. Lakh cr)

  As on Oct 11,2019

129.38 

97.88 

  As on Sep 13,2019

127.23 

97.12 

  As on Oct 12,2018

117.86 

89.93 

  YTD (% change)

1.69% 

0.79% 

  YoY (% change)

9.77% 

8.84% 
Source: RBI


Money Market Performance

Commercial Paper (Fortnight):

Outstanding (In Rs. Billion)

Amount issued (In Rs. Billion)

  30-Jun-19

5,039.40 

1076.9 

  15-Jun-19

5,561.80 

1078.7 

  30-Jun-18

4,918.30 

1267.3 

  % Change (MoM)

-9.39% 

-0.17% 

  % Change (YoY)

2.46% 

-15.02% 
Source: RBI 

Indices

 

19-Oct-18

27-Sep-19

04-Oct-19

11-Oct-19

18-Oct-19

  NSE Index

10,030.00 

11,512.40 

11,174.75 

11,305.05 

11,661.85 

  NSE Index Return

-2.65 

2.11 

-2.93 

1.17 

3.16 

  BSE Index

34,315.63 

38,822.57 

37,673.31 

38,127.08 

39,298.38 

  BSE Index Return

-1.20 

2.13 

-2.96 

1.20 

3.07 



Liquidity Operation by RBI:


Source: RBI, Acuité Research;

Note: Net injection (+) and Net absorption (-)

Source: RBI




Policy Corridor and WACR






Corporate debt (in Rs. Lakh Cr):






Net Debt Issuance by Centre and State Government (Rs. Billion):


 

Source: Acuité Research, RBI




Commodity Price Index (3 Month Moving Average):






Commodity Price Movement (3 Month Moving Average):






USD-INR Movement:


Source: RBI, Acuité Research

 

Birabrata Panda

Sr. Statistician/Economist