Weekly Macro Data Coverage Dec 02, 2019

Key Highlights:

  • Overall liquidity in the banking system stands at Rs. 1.51 lakh crore during the third week of November 2019
  • RBI has infused liquidity of Rs. 3,290 crore through OMO operation during the week.
  • 5th MPC meeting on repo rate decision is due this week
  • Indian economy has posted a slow growth of 4.5% during the Sept quarter
  • 10-yr sovereign bond yield of Germany and Japan has returned to one month high
  • PMI manufacturing index stands 52.1 in November, as compared to a two year low of 50.6 in the previous month

Liquidity

The overall liquidity in the banking system stands at Rs. 1.51 lakh crore during the third week of November 2019. As a result, the over-night lending rate declined to 5.05%, which is 10 bps lower than the repo rate. The surplus liquidity therefore leaves no further room for a rate cut during the 5th MPC meet of FY20 this week. Our policy corridor, which is a Bollinger band consisting of the MSF (upper bound) and Reverse Repo (Lower bound) suggests that there exists sufficient liquidity in the system. Therefore, theoretically speaking there is no need for a rate cut at this time. However, the decision to cut rates will be primarily influenced by the need to communicate RBI’s accommodative stance along with boosting market sentiment. The forthcoming concern pertaining to a rising inflation (CPI) number, also needs addressing and the MPC may have to decide on inflation control and growth sustainability. We note that during the week, through OMO purchases, RBI has already infused a further liquidity of Rs. 3,290 crore.

Capital Market

From the capital market perspective, the 10-yr Indian sovereign yield has been hovering at 6.66% for the past three weeks. However, as RBI is conducting OMO purchases, the availability of the security in the system will reduce. This is likely to supress the yield. However, on the flip side, due to the poor Q2 GDP number (4.5%), the demand for government securities is expected to remain low. Not to forget the upward pressure of yields coming from the incremental issuances that is impending in H2 as part of fiscal expansion. In the global market, the negative yielding bonds are recovering; investors are consequently looking for high yielding debt. On this note, 10-yr sovereign bond yield of Germany and Japan has returned to a one month high.

Currency Trend

Indian rupee has been hovering in the range of 71.60 to 71.77 during the past three weeks. However, weak Q2 GDP number along with upcoming RBI’s monetary policy decision will keep the market volatile. However, part of a positive development, PMI manufacturing index for November indicates a green shoot in the sector. The PMI manufacturing index stands 52.1 in November, building itself up from a two year low of 50.6, recorded in the previous month.

Interest rates and ratio:

Interest Rate

Nov 23

Oct 25

Nov 01

Nov 08

Nov 15

Nov 22

2018

2019

2019

2019

2019

2019

Policy Repo Rate

6.50

5.15

5.15

5.15

5.15

5.15

Call Money Rate (WACR)

6.42

5.07

5.08

5.03

5.07

5.05

364-Day Treasury Bill Yield

7.27

5.32

5.30

5.24

5.23

5.17

2-Yr Indian G-Sec

7.30

5.62

5.67

5.60

5.56

5.52

10-Yr Indian G-Sec

7.77

6.58

6.54

6.67

6.66

6.66

10-Yr US G-Sec

2.99

1.71

1.95

1.84

1.77

1.77

AAA (Indian corporate)

8.83

7.97

7.65

7.53

8.06

7.63

Spread in bps (10Yr Indian- US)

478

487

460

483

489

489

Credit/Deposit Ratio

77.31

75.82

-

75.76

-

-

USD LIBOR (3 month)

2.1770

1.8028

1.5921

1.5509

1.5270

1.5414

Forward Premia of US$ 1-month

4.38

3.38

3.39

3.03

3.26

3.26

US$ 3-month

4.05

3.61

3.70

3.42

3.51

3.34

US$ 6-month

4.13

3.99

4.13

3.93

3.93

3.76
Source: RBI, Investing.com


Deposit (In Rs. Lakh cr)

Bank Credit (In Rs. Lakh cr)

As on Nov 08,2019

129.99

98.48

As on Oct 11,2019

129.38

97.88

As on Nov 09,2018

118.26

91.11

YTD (% change)

0.47%

0.60%

YoY (% change)

9.92%

8.08%
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

 

24-Nov-18

01-Nov-19

08-Nov-19

16-Nov-19

23-Nov-19

NSE Index

10,526.75

11,890.60

11,908.15

11,895.45

11,914.40

NSE Index Return

-1.46

2.65

0.15

-0.11

0.16

BSE Index

34,981.02

40,165.03

40,323.61

40,356.69

40,359.41

BSE Index Return

-1.34

2.83

0.39

0.08

0.01


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