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Yubi Daily Wrap
Macro News
Merchandise exports contracted by 13.9% Y-o-Y in March, to $38.4 billion (vs $37 billion in February) while imports contracted to $58.1 billion led by lower oil prices. Services exports growth moderated to 3% YoY at $27.8 billion. Trade deficit increased to $ 19.7 billion from $ 16.2 billion in February. During FY23, trade deficit stands at $ 266.8 billion vs $ 191.1 billion in FY22.
Yubi Daily Wrap
Macro Updates
Private weather forecasting agency Skymet is predicting monsoons 94% below normal (+/- 5% error), of the long-term period average of 868.6mm over the June-September period. This, if materialises, will be ill-timed for India hitting the next crop produce, adding to the wheat crop damage due to unseasonal rains during March this year.
Yubi Daily Wrap
Macro Updates
The World Bank and the Asian Development Bank have cut India’s growth forecast for FY 2023-24 citing slowdown in consumption as a major challenge. The World Bank now projects India’s GDP to moderate to 6.3% against its earlier estimate of 6.6%, while ADB pegs it at 6.4%, against 7.2% estimated earlier.
Yubi Daily Wrap
Macro Updates
India’s fiscal deficit for April-February reached Rs 14.54 trillion, nearly 83% of annual estimates. Net tax receipts were Rs 17.32 trillion rupees – 83% of the annual estimate and 17% higher than last year. Total expenditure during the period was Rs 34.93 trillion – 83.4% of the annual estimate and 11% higher than the government’s spending last year.
Yubi Daily Wrap
Macro Updates
India announced its first half borrowing plan which would entail selling bonds worth Rs 9 trillion in H1FY24, which is 58% of the Rs 15.4 trillion of borrowing envisaged for the full year. About 34% of sales are planned via 30Y and 40Y bonds, against 27% last year, with no plan on floating rate bond in H1.
Yubi Daily Wrap
Macro Updates
14 state governments and 1 UT raised Rs 41,200 crore in the last bond auction for FY23, which is 67% beyond the planned for the week. The weighted average tenure of the borrowings also rose to 16 years from 14, while the weighted average cut-off of the SGS rose by seven basis points (bps) to 7.81% on Tuesday from 7.74% in the last auction.
Yubi Daily Wrap
Macro Updates
The Indian Finance Ministry has directed the state-run lender banks to check for any contagion impacts from SVB and Signature Bank’s stresses by identifying adverse exposures and concentration risks. They’ve also been directed to take focused steps to attract deposits and increase credit offtake in states with lower penetration.
Yubi Daily Wrap
Macro News
The government passed Finance Bill 2023, which proposed removing the long-term capital gains benefits for majority of the debt MF schemes, by taxing on investors’ income tax rate – which is likely to be higher. Currently, India charges 20% long term capital gain tax, if sold after 3 years of investment. This move could reduce inflows in debt mutual funds and benefit bank deposits.
Yubi Daily Wrap
Macro News
India’s local currency bond market has recorded sales worth Rs 2.5 trillion in January to March quarter, which is highest when compared to the same quarter in all years since 2014. Bank rates have risen, and hence firms are increasingly borrowing through the bond market. In April-February 2023 period, bank credit increased by ~13%, while bond sales increased by 26.4%.
Yubi Daily Wrap
Macro Updates:
The OIS rates, primary instruments for hedging interest rate in India, have plummeted by around 34 bps since early March mirroring the decline in the 10-year US bond yield, which plunged close to 40 bps after the collapse of SVB. Currently, the 1Y OIS suggests that the RBI may raise the repo rate by 25 bps to 6.75%, with some traders even betting on a pause in rate hikes.
Yubi Daily Wrap
Macro News
The Defence Acquisition Council (DAC) of India has approved Acceptance of Necessity (AoN) for capital acquisitions worth Rs 705 billion. AoNs granted for capital acquisitions in the FY 2022-23 amount to over Rs 2.71 trillion. Out of these, 99% of the procurement will be sourced from Indian industries.
Yubi Daily Wrap
Macro Updates
Coal India will boost its power plant supplies as an unusually hot weather is increasing electricity demand. Additionally, IMD reported temperatures could be 2-3 degree Celsius above normal in some parts of Indo-Gangetic plains and eastern India during last week of March.
Yubi Daily Wrap
Macro updates
In the aftermath of SVB collapse in the US, RBI is taking stock of impacts on Indian banks and NBFCs. RBI has asked the entities to furnish details of their equity exposure and deposits in SVB. In addition, the regulator is also gathering data on similar exposure of Indian non-bank entities. RBI’s Financial Stability Report of December 2022 had indicated that even under severe stress scenarios – credit risk is manageable and that domestic banks would be able to comply with minimum capital requirements.
Yubi Daily Wrap
Macro Updates
India’s IIP rose to 5.2% in January 2023, from 4.75 in December 2022 on the back of a lower base and growth in electricity output. Growth in electricity output increased to 12.7% while manufacturing recovered to 3.7%. Generally, growth was pushed down by textiles and electronics due to slower exports dampening manufacturing.
Yubi Daily Wrap
Macro Updates
US and Asian equity markets slid (treasuries gained as safe-haven) as Silicon Valley Bank announced plan to raise $2.25 billion worth of capital after incurring losses on its portfolio, which included holdings of US Treasuries and MBS. Aggressive rate hikes by the Fed left SVB with lower interest yielding bonds – which couldn’t be sold without incurring losses. Additionally, an undiversified depositor base tapping onto their funds has pushed the bank towards a potentially weaker financial shape. Risks have risen in the short term for small and medium sized banks whose depositor base is usually less diversified.
Yubi Daily Wrap
Macro Updates
RBI and the finance ministry are chalking out a plan to roll out the next tranches of sovereign green bonds in FY 2023-24, where the government can get a ‘greenium’ – a discount on the yield that a green bond offers over the traditional G-secs. The cut off yield on a green bond is about 2-3bps lower than than G-sec of a similar maturity. In January and February 2023, the government has mobilized Rs 16,000 crore through two tranches.
Yubi Daily Wrap
Macro Updates
The spread for the 10-2-year bonds is seen narrowing for India, as yields on the long side of the tenor are rising. While such a mild inversion often hints to recession, for the Indian debt-market – the pressure is due to stronger than expected demand for longer dated debt, which has come from insurers and pension fund companies.
Yubi Daily Wrap
Macro Updates
FPIs continued offloading their investments in the Indian capital market in March first week as rising yields in has resulted in a net outflow as investors move towards the US for better returns. RBI, resultantly, has resorted to selling dollar in the market to quell the depreciatory pressures on Rupee due to outflow. Hence forex reserves have declined by $120 billion since September 2021 peak. This week, investors are set for a Rs 289.6 billion worth of state bonds sales by RBI.
Yubi Daily Wrap
Macro Updates
Intense volatility has reduced the retail participation in the cash segment of equities market by 10% in a year (40.8% in February vis-à-vis 52% a year ago). Meanwhile, retail participation in the derivatives options segment has increased, rising from 28.8% in 2019-20 to nearly 36% in FY23.
Yubi Daily Wrap
Macro Updates
Indian Meteorological Department has predicted a hotter weather for the country in the upcoming months – indicating risk to the crop production (specifically wheat) and the already strained power network. Monthly average maximum temperatures in February were the highest since 1901, pushing up the demand for electricity to all time highs. Wheat production could drag for second consecutive year, impacting domestic prices as well.
Yubi Daily Wrap
Macro Updates
Indian buyers of Russian oil are facing increasing scrutiny of financiers to keep check that the Russian oil imports are complying with the $60/barrel cap imposed by the G7. The additional steps like invoice verification, contract documents etc. are slowing the pace of approvals and can potentially weigh on the Indian imports of Russian oil.
Yubi Daily Wrap
Macro Updates
RBI released draft guidelines for minimum capital requirements for market risk. The guidelines stipulate that banks are required to have well-defined policies, procedures, and documented practices to determine which instruments to include or exclude from the trading book when calculating regulatory capital.
Yubi Daily Wrap
Macro Updates
European Central Bank Vice President Luis de Guindos said he’s “relatively optimistic” on the outlook for consumer prices, whose growth has begun to ease. “I’m relatively optimistic about the evolution of inflation,” Guindos told an event Thursday in Madrid, while highlighting that price growth still remains significantly above the 2% target.
Yubi Daily Wrap
Macro Updates
On expected lines the Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) increased the policy repo rate by 25 basis points in its February meeting to 6.50%. Cumulatively, MPC increased the policy repo rate by 250bps till now from May 2022 with an off-cycle rate hike of 40 basis points. The MPC retained its earlier stance to remain focused on withdrawal of accommodation. (Our research)
Yubi Daily Wrap
Macro Updates
Federal Reserve Chair Jerome Powell stuck to his message that interest rates need to keep rising to quash inflation and this time, the bond market listened. In particular, Powell floated the idea during an event in Washington on Tuesday that borrowing costs may reach a higher peak than traders and policymakers anticipate.
As widely expected the Monetary Policy Committee of RBI increased the policy repo rate by 25 basis points to 6.50%.
Yubi Daily Wrap
Macro Updates
The Bank of England raised interest rates a half point, saying more increases will be needed if signs of an inflationary spiral persist. Policy makers led by Governor Andrew Bailey voted 7-2 to raise the benchmark lending rate to 4%, the highest since 2008 and continuing the quickest series of hikes in three decades.
S&P Global India January Composite PMI stood at 57.5 vs 59.4 in December. Year ago the index was 53. This was 18 consecutive months of expansion.
Yubi Daily Wrap
Macro Updates
Daily borrowing in federal funds rose to USD 120bn on 27 January, according to New York Fed data published Monday, up from USD 113bn in the previous session – an indication that Federal Reserve tightening is putting increasing pressure on liquidity in the banking system. That marked the highest level since at least 2016.
On India; the IMF said that it expects growth to moderate to 6.1% in 2023 from 6.8% in 2022.
Yubi Daily Wrap
Macro Updates
RBI Governor Shaktikanta Das said that India’s current account deficit is manageable and is within the parameters of viability. He added that the latest data prints on growth, inflation and currency volatilities indicate that the worst for the financial markets and the world economy is behind us and that high interest rates for a longer period looks a distinct possibility going forward.
Daily Weekly Wrap
Macro Updates
Treasury Secretary Janet Yellen said the department doesn’t prioritize some bills over others, and that any non-payment of obligations is a default that would “undoubtedly” trigger a recession.
European Central Bank Governing Council Member Klaas Knot said that the ECB should continue with half-point interest-rate increases at the next two meetings and the time to slow the pace of hikes is “still far away”.
Yubi Daily Wrap
Macro Updates
Federal Reserve Bank of Boston President Susan Collins said she favours a more moderate pace of interest-rate increases, even as the central bank continues to tighten policy to reduce high inflation. In another statement; Federal Reserve Bank of New York President John Williams expected inflation to decline this year amid further policy tightening.
Moody’s Investors Service has affirmed the Baa3 long-term local and foreign currency bank deposit ratings of SBI. Moody’s has upgraded the long-term local and foreign currency bank deposit ratings of Bank of Baroda, Canara Bank, and Punjab National Bank to Baa3 from Ba1.
Major events of the day: Reliance Industries, JSW Steel, HDFC Life, Petronet LNG, LTI Mindtree, Union Bank of India, RBL Bank, Bandhan Bank among companies reporting earnings; Reliance Industries to also mull fund raising plan; RBI to hold government bond auctions and release weekly foreign exchange data.
Yubi Daily Wrap
Macro Updates
India’s GDP will be USD 26tn in market exchange rate terms by FY48, and India’s per capita income would exceed USD 15k , putting it among the ranks of developed economies according to EY.
The Ministry of Corporate Affairs has proposed sweeping changes to the Insolvency and Bankruptcy Code to bring more technology, transparency, and speediness to the corporate insolvency resolution process.
Yubi Daily Wrap
Macro Updates
Bank of England Governor Andrew Bailey said the risk premium on UK assets since September is “pretty much gone” but that confidence remains fragile.
European Central Bank Governing Council member Pablo Hernandez de Cos said big increases in borrowing costs will continue as officials look to further bring down Eurozone inflation.
China’s GDP grew by 3% in 2022. The GDP growth number did miss the official target of around 5.5% set in March. In 2021, China’s growth had rebounded by 8.4% from just 2.2% growth in 2020.
Yubi Daily Wrap
Macro Update
A sigh of relief as US inflation further moderated to 6.5% YoY in December from 7.1% in November. Core inflation (inflation excluding food and energy) too moderated to 5.7% YoY in December from 6% a month before. Sequentially CPI momentum decelerated with month on month CPI contracted by 0.1% in December from +0.1% in November.
Philadelphia Fed President Patrick Harker, speaking after CPI data release said, rate hikes of a quarter-percentage point “will be appropriate going forward,” following bigger increases throughout most of 2022. Separately, Fed’s Bullard said that Fed should raise interest rates above 5% expeditiously to ensure price pressures are subdued.
Yubi Daily Wrap
Macro Updates
Oil prices rose in early trade on Thursday, building on gains in the previous session as China’s demand outlook improves and concerns rise over the impact of sanctions on Russian supply.
Finance Minister Nirmala Sitharaman and UK Chancellor of Exchequer Jeremy Hunt discussed bilateral investment and trade issues. The two leaders also discussed issues relating to the G-20, of which India has assumed the Presidency for the current year.
Yubi Daily Wrap
Macro Update
The World Bank slashed its growth forecasts for most countries and regions, and warned that new adverse shocks could tip the global economy into a recession. Global growth is forecasted to increase by 1.7% in 2023 from 2.9% in 2022 and forecasted to grow by 2.7% in 2024. It said that the Indian economy will have better growth than others in FY24. Indian economy is projected to grow by 6.6% in FY24.
China’s credit expanded at a slower-than-expected pace in December as Covid-19 disruptions and a turbulent bond market weighed on borrowing activity. Aggregate financing, a broad measure of credit, was Yuan 1.31tn (USD193bn) last month, the People’s Bank of China said.
Yubi Daily Wrap
Macro Updates
Two Federal Reserve officials said that the central bank will likely need to raise interest rates above 5% before pausing and holding for some time. San Francisco Fed President Mary Daly, said she expects the central bank to raise interest rates to somewhere above 5%. Raphael Bostic, president of the Atlanta Fed, said the Fed was committed to tackling high inflation and this warrants raising interest rates into a 5% to 5.25%.
Bank of England Chief Economist Huw Pill signalled UK inflationary pressures may be easing as the labor market weakens and the economy heads into recession.
The Securities and Exchange Board of India (Sebi), in a circular issued on Monday, clarified that all payment mechanisms provided by banks and payment aggregators authorised by the RBI to be used for settlement of trades executed on the Request for Quote or RFQ platform.
Yubi Daily Wrap
Macro Updates
China opened sea and land crossings with Hong Kong and ended a requirement for incoming travellers to quarantine .
The National Statistics Office estimated India’s GDP for FY23 to grow by 7% which is higher than the projections made by RBI and World Bank. The GDP grew by 9.7% in H1FY23.
Yubi Daily Wrap
News update
IMF chief Georgieva said a third of the global economy will be in recession in 2023 and warned that 2023 will be tougher than last year as the US, EU and China will see their economies slow down.
China Beige Book shows that China’s manufacturing, services, and real estate sectors all experienced significant declines in Q4 2022, citing Covid-19 disruptions.
Yubi Daily Wrap
News update
GST collection for December rang up over INR 1.49tn – a surge of 15% YoY mainly driven by increase in retail prices of consumption items, high inflation and action taken to ensure compliance.
Governments and companies kicked off new roads, factories and other new projects worth INR 6.1tn in the December quarter. This is a 44.3% increase compared to the previous year, shows data from project tracker Centre for Monitoring Indian Economy (CMIE).
Yubi Daily Wrap
Macro updates
China’s soaring Covid-19 infections are keeping people home and causing a slump in travel and economic activity, according to the latest high-frequency data. Following the recent abrupt end to Covid Zero controls, more cities have been hit by an exit wave of infections in the past week, leading to crowded hospitals and queues at funeral parlors. That’s keeping people in Beijing, Shanghai and elsewhere from going out despite workers in some places being told to return to work even if sick.
Yubi Daily Wrap
Macro updates
The RBI monthly bulletin has warned about the risks to global growth in 2023 as the full impact of interest rate hikes will be visible next year. In its report on the state of the economy, RBI said that with every passing day, the balance of risks gets increasingly tilted towards a darkening global outlook for 2023.
Yubi Daily Wrap
Macro Updates
Federal Reserve Bank of New York President John Williams said that while inflation has showed some signs of slowing, a tight labor market and other factors are likely to keep price pressures elevated and warrant high interest rates for some time.
Cumulative advance tax collection of India during April-December FY23, comprising both corporation and personal, has surged 12.8% to INR 5.21tn against INR 4.62tn during the same period of last year.
Yubi Daily Wrap
Macro updates
The Bank of England (BoE) and the European Central Bank eased the pace of its interest rate hikes, bumping them by 50 basis points on Thursday but stressed significant tightening remained ahead and laid out plans to drain cash from the financial system as part of a dogged fight against runaway inflation.
RBI will issue two tranches of Sovereign Gold Bonds, which will open for public subscription in December and March. Sovereign Gold Bonds (SGBs) 2022-23-Series III will open for subscription during December 19-December 23 and 2022-23-Series IV during March 06-10, 2023, the finance ministry said.
Yubi Daily Wrap
Macro updates
India’s Finance Minister Nirmala Sitharaman said that the centre will be able to achieve the fiscal deficit target of 6.4% of GDP for FY23, even after factoring in INR 4.36tn additional spending.
Secretary Department of Economic Affairs, Ajay Seth said that at the first meeting of the Finance Track of G20 under India’s presidency there was broad support from members for the host nation’s priorities and agenda.
Yubi Daily Wrap
US President Joe Biden said that the US will continue to send military equipment to Ukraine but won’t deploy American service members there.
Russia’s budget surplus more than quadrupled in November despite the financial drain of the war in Ukraine. The fiscal surplus reached RUB 557bn (USD 9bn) in the first 11-months of the year.
Yubi Daily Wrap
Macro updates
European Central Bank Governing Council Member Constantinos Herodotousaid that the ECB will raise borrowing cost again, though interest rates are now close to the level where monetary policy is neither expansionary nor restrictive. Additionally, ECB’s chief economist Philip Lane said consumer-price growth is probably near its zenith, while acknowledging that borrowing costs will be raised again.
Yubi Daily Wrap 02 December 2022
Petrol and diesel sales in India saw a double-digit year-on-year growth in November as increased demand from the agriculture sector helped build on the momentum generated by the festive season. Petrol sales soared 11.7% YoY to 2.66mn tonnes in November. Diesel, the most used fuel in the country, posted a 27.6% YoY rise in sales in November to 7.32mn tonnes.