Key Highlights:
Liquidity
With 3 bps, the Repo – WACR differential turned positive during last week of February, 2019. The spread was in negative trajectory for a long duration of three weeks. However, the tight liquidity condition seems to be fading out with series of OMO operation. RBI has infused Rs. 37,500 crore through OMO operation to improve liquidity in the system during past thirty days. The reason behind banking sector’s tight liquidity condition in recent weeks continues to be faster growth in credit (14.35%) as compared to deposits (10.15%). As a result, the Credit to Deposit ratio has reached 77.58% in first fortnight of February, 2019. This was recorded at 74.61%, a year earlier. With the higher C-D ratio, the commercial banks are forced to raise money from the market at a higher rate.
Capital Market:
In the domestic capital market, the 10-year Indian G-Sec bond yield has further decelerated to 7.37% during last week of February, 2019. Currently, the bond yield momentum has been supressed by the OMO operations. From the US market perspective, the 10-year US G-Sec yield stands at 2.64% during last week of February, 2019. The global benchmark yield has reduced by 12 bps within a week. The fall in 10-year US G-Sec yield is a result of lower than expected debt supply by the US government. The precedent being the country’s $9 billion surplus budget in January, 2019 as against a deficit of (-) $28 billion a year earlier.
Currency Trend:
Indian rupee has been performing well among its emerging market currency peers. The INR has appreciated to 70.39 against the USD during first week of March, 2019, the currency pair was trading at 70.98 a week earlier. The Indian rupee has been actually appreciating against the US dollar for past three weeks. Softening commodity prices including that of crude oil in the global market has clutched India’s trade deficit – positively impacting the Indian rupee. Moreover, with the stability in global financial market, FII/ FPI inflow has turned positive. We believe that the strong macro fundamentals will continue to act as a buffer for the Indian rupee.
Interest rates and ratio:
Interest Rate | Mar.,02 2018 | Feb.,01 2019 | Feb.,08 2019 | Feb.,15 2019 | Feb.,22 2018 | Mar.,01 2019 |
Policy Repo Rate | 6.00 | 6.50 | 6.25 | 6.25 | 6.25 | 6.25 |
Call Money Rate (WA) | 5.93 | 6.40 | 6.39 | 6.26 | 6.29 | 6.22 |
364-Day Treasury Bill Yield | 6.66 | 6.78 | 6.78 | 6.51 | 6.53 | 6.55 |
2-Yr Indian G-Sec | 6.90 | 6.80 | 6.75 | 6.80 | 6.67 | 6.64 |
10-Yr Indian G-Sec | 7.76 | 7.38 | 7.34 | 7.58 | 7.42 | 7.37 |
10-Yr US G-Sec | 2.86 | 2.63 | 2.66 | 2.68 | 2.76 | 2.64 |
Spread in bps (10Yr Indian-10Yr US) | 490 | 475 | 468 | 490 | 466 | 473 |
AAA Indian Corporate | 8.21 | 8.67 | 8.70 | 8.78 | 8.32 | 8.61 |
AA Indian Corporate | 8.18 | - | - | - | - | 8.56 |
Spread AAA to10 YR Indian bond | 45 | 129 | 136 | 120 | 90 | 124 |
Credit/Deposit Ratio | 74.61 | 77.79 | - | 77.58 | - | - |
USD LIBOR (3 month) | 2.32 | - | - | 2.68 | 2.59 | 2.59 |
Acuité Portfolio Debt Instrument Benchmark Estimates (as on 25th Feb
2019):
Category |
10-Yr Corporate Yield to Maturity |
AAA* |
8.32% |
AA+ |
8.39% |
AA |
8.85% |
Source: Acuité Research; # Discount Factor: 0.0625; *Outside Benchmark
Deposit (In Rs. Lakh cr) | Bank Credit (In Rs. Lakh cr) | |
As on Feb 15, 2019 | 1,21,211.8 | 94,034.9 |
As on Feb 01, 2019 | 1,21,227.6 | 94,298.5 |
As on Feb 16, 2018 | 1,10,022.7 | 82,232.1 |
YTD (% change) | -0.01% | -0.28% |
YoY (% change) | 10.17% | 14.35% |
Source: RBI
Money Market Performance
Commercial Paper (Fortnight): | Outstanding (In Rs. Lakh cr) | Amount issued (In Rs. Lakh cr) |
28-Feb-2019 | 5,208.1 | 900.8 |
15-Feb-2019 | 5,242.3 | 1,035.5 |
15-Feb-2018 | 4886.3 | 1037.7 |
% Change (MoM) | -0.65% | -13.01% |
% Change (YoY) | 6.59% | -13.19% |
Source: RBI
Indices
08-Mar-18 | 15-Feb-19 | 22-Feb-19 | 01-Mar-19 | 08-Mar-19 | |
NSE Index | 10,113.70 | 10,724.40 | 10,789.85 | 10,863.50 | 11,035.40 |
NSE Index Return | -3.61 | -0.2 | 0.51 | 0.66 | -0.21 |
BSE Index | 32,968.68 | 35,808.95 | 35,871.48 | 36,063.81 | 36,671.43 |
BSE Index Return | -3.56 | -0.19 | -0.07 | 0.55 | -0.15 |
Source: RBI
Note: Net injection (+) and Net absorption (-)
Net Debt Issuance by Centre and State Government:
Source: Acuité Research, RBI
Commodity Price Index (3 Month Moving Average):
Commodity Price Movement (3 Month Moving Average):
Corporate debt (in Rs. Lakh Cr):
USD-INR Movement:
Source: RBI, Acuité Research