Weekly Macro Data Coverage January 07, 2019

Key Highlights:

·Liquidity condition again tightens in the money market in last week of December, 2018

·Repo WACR differential turned negative with (-) 7 bps, which is worse in last three months

·RBI is likely to infuse another Rs. 500 billion in January, 2019 to ensure sufficient liquidity in the system

·The spread between Indian and US 10-year G-Sec bond yield has also widened by 477 bps over the last week of December, 2018

·Indian rupee is on an upward trend for the last 4 weeks.

 

Liquidity

In the last week of December, 2018, liquidity condition again tightens in the money market. The Repo WACR differential turned negative with (-) 7 bps, which is worse over a three-month period. In order to maintain liquidity at ex-ante neutrality, RBI has already infused Rs. 1.36 trillion over the last three months. In addition, the central bank is likely to infuse another Rs. 500 billion in January, 2019 to ensure sufficient liquidity in the system.

Demand for bank credit remains strong and that is evident from the credit offtake figure, which stood at 15%, last week of December, 2018. Growth in deposit, on the other hand, remains weak with a 9% expansion. This is resulting in possible asset liability mismatches spooking the system. As a result, credit to deposit ratio has already reached 78.6%. A higher credit deposit ratio also hints a higher risk of stress assets when the economic climate becomes risk averse.

Capital Market:

The capital market remains highly volatile due to policy uncertainty and fear of mild growth outlook in the United State. The 10-year Indian sovereign bond went back to 7.41% after it dropped to a one-year low in 3rd week of December. The Indian bonds may therefore become more attractive for investors as the spread between Indian and US 10-year G-Sec yield has widened to 477 bps over the last week of December, 2018. The increase in the Indian G-Sec bond yield is a reflection of investor concerns over fiscal deficit on account of slower growth in tax collection, farm loan weavers and a normalizing crude price.

Currency Trend:

From the currency market perspective, Indian rupee is recovering faster as compared to its peer. The USD-INR currency pair is trading at 69.8 in first week of January, 2019. It is known that the currency pair had dropped to an all-time low of 74.04 in mid of October, 2018. The domestic currency is on upward trend on account of improvements in capital inflows and control in trade deficit.



Interest rates and ratio:

Interest Rate

Dec.29, 2017

Nov.30, 2018

Dec.07, 2018

Dec.14, 2018

Dec.21, 2018

Dec.28, 2018

Policy Repo Rate

6.00

6.5

6.5

6.5

6.5

6.50

Call Money Rate (WA)

5.99

6.39

6.36

6.44

6.49

6.57

364-Day Treasury Bill Yield

6.42

7.22

7.15

7.04

6.97

6.42

2-Yr Indian G-Sec

7.04

7.24

7.18

7.05

7.04

7.08

10-Yr Indian G-Sec

7.49

7.64

7.41

7.41

7.26

7.41

10-Yr US G-Sec

2.71

2.84

2.89

2.78

2.71

2.64

Spread in bps (10Yr Indian-10Yr US)

478

480

452

463

455

477

AAA Indian Corporate

7.93

8.69

8.63

8.63

8.65

8.48

AA Indian Corporate

8.51

-

--

-

-

9.35

Spread AAA to10 YR Indian bond

44

105

122

85

139

107

Credit/Deposit Ratio

-

-

77.44

-

78.59

-

USD LIBOR

 

2.77

2.8

2.82

2.82

 

Source: RBI, Investing.com


Deposit (In Rs. Lakh cr)

Bank Credit (In Rs. Lakh cr)

As on Dec 21, 2018

118.18

92.88

As on Dec 07, 2018

118.85

92.06

As on Dec 21, 2017

108.21

80.68

YTD (% change)

-0.56%

0.89%

YoY (% change)

9.22%

15.11%

Source: RBI


Commercial Paper (Fortnight):

Outstanding (In Rs. Lakh cr)

Amount issued (In Rs. Lakh cr)

15-Dec-18

5.46

1.04

30-Nov-18

5.61

1.30

15-Dec-17

4.82

0.96

% Change (MoM)

-2.59%

-20.31%

% Change (YoY)

13.41%

7.76%

Source: RBI


Indices

07-Jan-18

14-Dec-18

21-Dec-18

28-Dec-18

04-Jan-2019

NSE Index

11,027.70

10805.45

10754

10,859.90

10,727.35

NSE Index Return

4.72

1.05

-1.81

0.74

0.52

BSE Index

35,965.02

35962.93

35742.07

36,076.7

35,695.10

BSE Index Return

5.6

0.81

-1.89

0.94

0.51

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