Weekly Macro Data Coverage - October 22, 2018

Key Takeaways:

  • Systemic Liquidity low given high credit to deposit ratio and WACR-Repo parity
  • 3M USD LIBOR rate indicates global liquidity condition also under pressure
  • RBI OMOs have however helped in stabilizing liquidity for the moment
  • Corporate bond issuances continue to have a negative growth in September, 2018 as yields remain unattractive. Even the formerly attractive Commercial Paper issuances have suffered lately
  • INR-$ pair expected to trade at Rs. 73.75 in October 2018
  • Improvement in trade balance and strong NRI deposits are giving positive sentiment for the forex market

Liquidity:
Domestic money market continued to experience liquidity pressures in October as Repo WACR differential stands at 9 bps. Credit offtake has been expanding at a solid pace of 12.5% in October.It is noted that the liquidity condition in the banking system has worsened with the fall in Repo-WACR differential to a negative territory in the 3rd week of September. However, with the infusion of Rs. 200 billion by RBI through OMO operation, the liquidity condition in the banking sector had marginally improved during late September.

Capital Market:
There is a marginal improvement in the capital as spread between 10-year Indian G-Sec bond and 10-year US bond has improved by 10 bps to 477 bps in second week of October. Therefore, the market for Indian debt has become more attractive (for foreign portfolio managers) as compared to the previous year when the spread was only 464 bps. On account of higher yield, commercial bond issuances have dropped by (-) 27.9% in September, 2018 on a MoM basis.

Currency Trend:
With the volatility in the global financial market, Indian rupee continues to remain weak. Currently, the USD-INR pair has been trading at an all-time high ofRs. 73.51. The pair is expected to hover around Rs. 73.75 in October, besides the net FPI inflows remains negative. Improvement in trade balance and strong NRI deposits are giving positive sentiment for the forex market. Moreover, volatility in the forex market is likely to be high as the 7th US Federal Open Market Committee (FOMC) meeting (due on 7-8th November, 2018) is around the corner.


Interest Rate and Ratio

Oct. 13, 2017 Sep. 14, 2018 Sep. 21, 2018 Sep. 28, 2018 Oct. 05, 2018 Oct. 12, 2018
Policy Repo Rate 6.00 6.50 6.50 6.50 6.50 6.50
Call Money Rate (WA) 5.86 6.46 6.57 6.49 6.34 6.41
364-Day Treasury Bill Yield 6.22 7.68 7.66 7.73 7.77 7.58
2-Yr Indian G-Sec 6.41 7.99 7.83 7.76 7.79 7.65
10-Yr Indian G-Sec 6.91 8.07 8.03 8.00 8.02 7.96
10-Yr US G-Sec 2.27 3.07 3.07 3.23 3.15 3.19
10Yr India Spread 4.64 5.00 4.96 4.77 4.87 4.77
AAA Indian Corporate 7.50 8.86 8.89 8.85 9.00 8.31
AA Indian Corporate 7.95 9.63 9.82 9.74 9.74 9.49
AAA to10 YR Indian bond spread 0.59 0.79 0.86 0.85 0.98 0.35
Credit/Deposit Ratio 72.54 76.08 - 76.13 - -
USD LIBOR (3 Month) 1.384 - 2.315 2.39 2.408 2.428
Source: RBI, Investing.com
  Deposit (In Rs. Lakh cr) Bank Credit (In Rs. Lakh cr)
As on Sep 28, 2018 117.99 89.82
As on May 11, 2018 113.43 85.21
As on Sep 29, 2017 109.18 79.83
YTD (% change) 4.02% 5.42%
YoY (% change) 8.08% 12.51%

Source: RBI

Bond Market:


Commercial Paper (Fortnight):		 Outstanding  (In Rs. Lakh cr) Amount issued (In Rs. Lakh cr)
30-Sep-18 5.56 1.12
31-Aug-18 6.32 1.60
30-Sep-17 3.93 1.16
% Change (MoM) -12.04% -27.93%
% Change (YoY) 41.45% -3.24%

Source: RBI


Changes in Corporate Bond Position (in Rs. lakh cr):

Source: RBI, Acuité Research


Liquidity Operation by RBI:

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


USD-INR Movement (65.08 in Sept, 2017 to 72.22 in Sept, 2018)

Source: RBI, Acuité Research

 

Sector wise Credit Offtake (YoY Growth)

  Aug-17 Apr-18 May-18 Jun-18 Jul-18 Aug-18
Overall Offtake 5.5 10.68 11.13 11.1 10.55 12.42
Agriculture and allied activities 6.54 5.87 6.44 6.55 6.59 6.57
Industry -0.27 1.01 1.45 0.89 0.35 1.95
Micro & small 0.79 0.3 0.23 0.71 0.02 2.6
Medium -8.35 3.64 4.07 2.69 2.93 6.47
Large -0.04 1.01 1.53 0.83 0.28 1.63
Services 5.01 20.72 21.95 23.33 23.04 26.66
Transport operators 4.54 11.58 11.33 11.02 12.32 13.93
Computer software -3.83 2.53 5.91 8.48 4.09 4.25
Tourism, hotels & restaurants -5.64 3.12 3.26 1.4 0.6 1.89
Shipping -28.6 -13.71 -11.73 -11.52 -7.1 -5.11
Professional services 13.85 14.06 19.34 20.18 17.11 23.53
Trade 4.69 13.65 15.49 15.24 13.97 15.98
Commercial real estate -3.05 1.57 3.29 5.24 2.43 6.29
NBFCs 0.28 29.49 29.98 35.37 40.28 43.95
Personal loans 15.73 19.09 18.6 17.89 16.74 18.21
Consumer durables -9.77 -4.35 17.05 17.26 18.91 -81.45
Housing 13.18 14.88 15.5 15.83 16.52 16.99
Credit card outstanding 32.59 35.18 33.11 31.31 30.83 37.37
Education 0.78 -1.37 -0.8 -1.27 -1.72 -1.22
Vehicle loans 9.15 9.94 10.41 11.09 11.17 12.68
Other personal loans 31.3 35.54 32.18 27.52 21.32 29.15

Industry wise Credit Offtake (YoY Growth):


Sector 		Aug-17 Apr-18 May-18 Jun-18 Jul-18 Aug-18
Overall Industry -0.27 1.01 1.45 0.89 0.35 1.95
Mining and quarrying -6.27 6.35 22.51 22.2 24.61 30.12
Food processing 0.04 5.63 5.21 3.29 1.39 1.79
Beverages and  tobacco 4.49 -12.54 -7.65 -15.66 -22.14 -22.88
Textiles -0.73 5.08 5.57 5.5 4.25 2.51
Leather and leather  products 2.38 8.33 6.31 4.83 5.15 5.39
Wood and wood  products -1 7.34 9.79 9.63 10.06 9.53
Paper and paper  products -8.04 -7.14 -6.59 -4.47 -5.01 -3.83
Energy 0.9 16.02 19.73 21.84 5.87 10.78
Chemical and chemical products 2.74 -1.75 4.22 2.26 4.91 7.67
Rubber, plastic and  their products 5.99 10.62 10.65 6.88 7.61 10.99
Glass and glassware -6.25 9.2 15.02 18.04 28.63 25.89
Cement and cement  products 1.39 -2.34 5.74 2.72 -4.82 -5.47
Basic metal and metal products -0.15 -0.88 -3.64 -5.51 -8.34 -7.81
Engineering -3.53 4.4 4.82 4.25 4.32 5.98
Auto ancillary 1.2 3.85 0.52 5.98 5.99 6.68
Gems and Jewellery 3.18 -1.42 0.5 -1.28 0.06 -2.35
Construction 6.52 10.63 8.27 7.3 10.54 8.38
Power 0.18 -0.76 -1 -1.21 0.41 1.59
Telecommunication -4.68 4.22 5.35 6.8 9.53 10.51
Roads -6.79 -8.01 -4.9 -5.66 -5.41 -0.03
Other industries 2.45 -1.1 -2.41 -4.96 -11.04 -3.42

Source: RBI, Acuité Research