Key Highlights:
·Liquidity pressure in the domestic market has intensified in 4th week of December, 2018
·Repo WACR differential stands at only one base point; this was 14 bps two week earlier
·RBI is expected to infuse another Rs. 500 billion through OMO operations in January, 2019
·Credit deposit ratio further increased to a high of 77.44
·10 years Indian G-Sec bond yield dropped by 15 bps to 7.26% in 4th week of December
·Indian rupee has appreciated sharply by 2.30% against USD last week
Liquidity
Liquidity pressure in the domestic market has intensified in 4th week of December, 2018. The Repo WACR differential stands at only one base point; this was 14 bps two week earlier. Generally, liquidity condition remains tight during a quarter end due to quarterly GST payments to the government. The differential was also only 2 bps during the same period previous year. In order to facilitate sufficient liquidity in the system, RBI has infused Rs. 250 billion through OMO operation over the last two weeks. Moreover, the central bank is expected to infuse another Rs. 500 billion in January, 2019. Credit deposit ratio on the other hand further increased to 77.44. This is a result of faster credit offtake (15%) as compared to deposit growth (9.6%). The faster credit offtake is mounting pressure on domestic liquidity and it is apparent from these numbers that are in a state of flux.
Capital Market:
Capital market remains highly volatile in 4th week of December. Generally, global bond yields go up with the Fed’s tightening monetary policy. However, the current trend is a result of market’s anxiety regarding government intervention. After US president expressed concern over Fed’s rate hike decision, yield expectations are difficult to peg. The 10 years Indian G-Sec bond yield dropped by 15 bps to 7.26% in 4th week of December. The spread between 10-year Indian and US sovereign bond yields (despite the December hike) therefore declined - now standing at 455 bps. The capital market is expected to remain volatile till the market finds a new equilibrium point in the post fed rate hike scenario. It is known that Fed has increased fed rate by 25 bps, with the new range being 2.0 -2.50%.
Currency Trend:
Indian rupee has appreciated
sharply by 2.30% against USD last week. Indian rupee is gaining momentum due to
favourable environment created by global commodity markets and a reluctant
Federal Reserve. It is observed that in YTD term, Indian rupee is recovering
fastest among its peers due to favourable domestic factors. Having said this,
the currency pair is expected to remain volatile in response to global shocks
in coming months.
Interest rates and ratio
Interest Rate |
Dec.22, 2017 |
Nov.23, 2018 |
Nov.30, 2018 |
Dec.07, 2018 |
Dec.14, 2018 |
Dec.21, 2018 |
Policy Repo Rate |
6 |
6.5 |
6.5 |
6.5 |
6.5 |
6.5 |
Call Money Rate (WA) |
5.98 |
6.42 |
6.39 |
6.36 |
6.44 |
6.49 |
364-Day Treasury Bill Yield |
6.4 |
7.27 |
7.22 |
7.15 |
7.04 |
6.97 |
2-Yr Indian G-Sec |
6.78 |
7.3 |
7.24 |
7.18 |
7.05 |
7.04 |
10-Yr Indian G-Sec |
7.45 |
7.77 |
7.64 |
7.41 |
7.41 |
7.26 |
10-Yr US G-Sec |
2.4 |
2.99 |
2.84 |
2.89 |
2.78 |
2.71 |
Spread in bps (10Yr Indian-10Yr US) |
505 |
431 |
480 |
452 |
463 |
455 |
AAA Indian Corporate |
7.77 |
8.76 |
8.69 |
8.63 |
8.63 |
8.65 |
AA Indian Corporate |
- |
- |
- |
-- |
- |
- |
Spread AAA to10 YR Indian bond |
32 |
99 |
105 |
122 |
85 |
139 |
Credit/Deposit Ratio |
73.63 |
77.3 |
- |
77.44 |
- |
|
USD LIBOR |
1.69 |
2.69 |
2.77 |
2.8 |
2.82 |
2.82 |
|
Deposit (In Rs. Lakh cr) |
Bank Credit (In Rs. Lakh cr) |
As on Dec 07, 2018 |
118.85 |
92.04 |
As on Nov 23, 2018 |
118.14 |
91.33 |
As on Dec 07, 2017 |
108.38 |
79.98 |
YTD (% change) |
0.60% |
0.78% |
YoY (% change) |
9.66% |
15.07% |
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% |
Indices
|
29-Dec-17 |
07-Dec-18 |
14-Dec-18 |
21-Dec-18 |
28-Dec-18 |
NSE Index |
10530.7 |
10693.7 |
10805.45 |
10754 |
860754 |
NSE Index Return |
2.97 |
-1.68 |
1.05 |
-1.81 |
0.98 |
BSE Index |
34,056.8 |
35673.25 |
35962.93 |
35742.07 |
36,076.7 |
BSE Index Return |
0.36 |
-1.44 |
0.81 |
-1.89 |
0.94 |