Weekly Macro Data Coverage December 31, 2018

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

Source: RBI, Investing.com


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%

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

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

 

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