Indian Economy
The consumer price index-based inflation rose marginally to 4.48% in Oct 2021 as against 4.35%in the prior month due to a rise in food prices. Consumer Food Price Index (CFPI) also rose 0.85% as compared to 0.68% in the previous month. Within food items, vegetables fell 19.43% in Oct as against a 22.47% decline in the previous month. However, the inflation rate in fuels rose 14.35% in the reported month as against a 13.63% rise in Sep 2021.
The index of industrial production (IIP) rose 3.1% YoY in Sep 2021 compared with a 1% rise in Sep 2020. Manufacturing output grew 2.7% in Sep 2021 as compared with 0.4% growth in Sep 2020. Mining grew 8.6% in Sep 2021 as compared with 1.4% growth in Sep 2020. Electricity grew 0.9% as against 4.9% in Sep 2020. The cumulative growth during Apr-Sep (FY22) stood at 23.5% compared to a contraction of 20.8% during the same period a year ago.
The Prime Minister of India has launched two innovative, customer-centric initiatives of the Reserve Bank of India (RBI), the retail direct scheme and the integrated ombudsman scheme. The RBI Retail Direct Scheme aims to improve retail investors' access to the government securities market. The Reserve Bank-Integrated Ombudsman Scheme intends to strengthen the grievance redress procedure for customer complaints against the central bank's regulated firms.
The Governor of the Reserve Bank of India remarked that strong growth impulses and fast-moving economic indicators express confidence in the economy, which is expected to grow at 9.5 percent this fiscal year.
Indian Equity Market
Indian equity markets managed to end the week in the green after witnessing intermittent weakness. Bourses commenced the week on a positive note with buying interest supported by an upbeat U.S. Oct payrolls report.
Gains were subdued soon after, mirroring the weak global cues amid intensified inflation worries.
However, markets regained momentum on the last trading day of the week, as more corporate earnings results poured in and continued strongly into the green. The domestic bourses also reflected its Asian and global peers as they reemerged from the shock of a surprisingly strong U.S. inflation reading.
On the BSE sectoral front, the majority of the indices closed in the green.
S&P BSE Capital Goods was the top gainer, up 4.59%, followed by S&P Oil & Gas and S&P BSE Power which rose 4.46% and 3.72%, respectively.
Indian Derivatives Market Review
Nifty Nov 2021 Futures stood at 18,133.45, a premium of 30.70 points above the spot closing of 18,102.75. The total turnover on NSE's Futures and Options segment for the week stood at Rs. 326.08 lakh crore as against Rs. 278.09 lakh crore for the week to Nov 3.
The Nifty Put-Call ratio stood at 1.66 compared with the previous week's close of 081.
Domestic Debt Market
Bond yields fell initially during the week under review after the central government reduced the excise duty on gasoline and diesel to check inflation after fuel prices surged to record levels.
However, gains were wiped out following an increase in yields on U.S. Treasury after the consumer price index in U.S. jumped 6.2% in Oct 2021 from a year earlier, hitting the highest level since 1990. This led to concerns among market participants that the U.S. Federal Reserve may increase rates earlier than expected which may lead to foreign fund outflow from the Indian economy.
The yield on the 10-year benchmark paper (6.10%GS 2031) inched up 1 bps to close the week at 6.37% compared to the previous close of 6.36%.
Yields on the gilt securities increased on 2,3 and 10-year maturities by up to 31 bps and fell across the remaining maturities by up to 5 bps barring 5.11 and 13-year paper which closed steady.
Corporate bond yields fell across the maturities in the range of 2 bps to 11 bps barring 1 and 15-year paper which expanded 4 bps and 7 bps respectively.
The difference in the spread between AAA corporate bond and gilt securities expanded on 1 and 2-year paper by 18 bps and 19 bps respectively while it contracted across the remaining maturities in the range of 2 bps and 14 bps.
Regulatory Updates in India
The Securities Exchange Board of India (SEBI) has allowed foreign portfolio investors (FPIs) to write off all debt securities that they were unable to sell. This applies to only those FPIs that decide to surrender their registration. It further stated that the method outlined in the operating rules must be followed for write-off.
The Securities and Exchange Board of India (SEBI) has revised its rules to allow the introduction of silver exchange-traded funds, which will broaden the choices for investing in commodities through stock exchanges. Indian mutual funds are currently permitted to develop gold tracking ETFs (Exchange Traded Funds). According to SEBI, a silver ETF scheme is a mutual fund that invests primarily in silver or silver-related products using silver as the underlying product. The new rules will take effect on Dec 9, 2021.
The Union government has issued updated mining concession laws, which will allow for the sale of 50% of mineral production from captive mines, free transfer of mines, and partial lease surrender. Earlier this year, the Mines and Minerals (Development and Amendment) Act, 1957 (MMDR Act) was amended in a number of ways. The modifications aimed to boost employment and investment in the mining industry, as well as increase state revenues, increase production and ensure mines were operating within a certain time frame.
According to the finance ministry's monthly Economic Review, India is on its path to becoming the world's fastest-growing major economy, armed with the essential macro and micro growth drivers.
SEBI has made significant adjustments to improve the monitoring and enforcement of related party transaction rules. The definitions of 'related-party and 'related-party transactions' have been changed by the regulator (RPTs). According to the new rules, a related party is defined as any person or entity who is a member of the promoter or promoter group of the listed entity. Furthermore, any person or company that held 20% or more of the listed entity's stock directly or indirectly (including through their relatives) during the preceding fiscal year and 10% or more with effect from April 1, 2023, shall be regarded as a related party. Material RPTs with a threshold of less than Rs. 1,000 crore or 10% of the listed entity's consolidated annual turnover will require prior permission of the listed entity's shareholders. All RPTs and subsequent major revisions, as defined by the audit committee, shall require the approval of the audit committee, according to SEBI.
The Reserve Bank of India (RBI) has launched its first worldwide hackathon, dubbed "HARBINGER 2021-Innovation for Transformation,' with the theme of "smarter digital payments." The hackathon's registration will open on Nov 15, according to a statement from the central bank.
The government has announced the amendments to the mineral conservation and development rules, which will not only strengthen mine planning procedures, security and safety in mines, but will also assure better oversight of mining activities. The guidelines cover mineral conservation, systematic and scientific mining, mineral development in the country and environmental preservation.
Global News/Economy
According to preliminary data from the University of Michigan, U.S. Consumer Sentiment Index declined to 66.8 in Nov 2021 and 71.7 in Oct 2021. U.S. Current Conditions Index fell to 73.2 in Nov from 77.7 in Oct and the Consumer Expectations Index declined to 62.8 in Nov from 70.5 in Oct.
According to the Labor Department, U.S. Consumer Price Index rose 0.9% MoM in Oct 2021 after rising 0.4% in Sep 2021. On a yearly basis, U.S. consumer prices rose 6.2% YoY in Oct from 5.4% in Sep.
According to the Office for National Statistics, U.K's GDP rose 1.3% sequentially in the third quarter as against 5.5% expansion seen in the previous quarter. On a monthly basis, GDP growth rose 0.6% from the revised 0.2% in Aug.
According to the survey data from the Cabinet Office, Japan's Economy Watcher's Survey, which measures the current situation of the economy, increased to 55.5 in Oct 2021 from 42.1 in Sep 2021. The outlook index that signals future activity rose to 57.5 in Oct from 56.6 in Sep.
Global Equity Markets
U.S.
U.S. equity markets declined during the week on concerns about inflation after consumer prices increased by more than expected in Oct 2021 and the annual growth rate reached the highest level in over thirty years.
The fall was cushioned by value buying on recent beaten-down stocks.
Europe
The European markets went up in hopes that China will take steps to ease the cash crunch for embattled developers. However, market participants ignored persisting concerns over rising inflation.
Asia
Asian stock markets witnessed a mixed trend with rising inflation fears weighing on market sentiments. Meanwhile, investors took positive cues from reports of the embattled Chinese property giant making its bond payments on time.
Global Debt (U.S.)
Yields on the 10-year U.S. Treasury rose 12 bps to close at 1.57%, from the previous week's close of 1.45%.
U.S. Treasury prices fell after Congress passed a $1 trillion infrastructure bill.
However, losses retreated as market participants hedged against the possibility of rising consumer prices.
Treasury prices fell again as U.S. saw its biggest annual gain in consumer prices in 31 years. Moreover, weak 30-year bond auction further increased losses.
Commodities Market
Gold
Gold prices rose during the week, bolstered by deepening fears of inflation and reassurances from key central banks that interest rates would remain low for the time being. The prospect of a slowdown in both the U.S. and Chinese economies also fueled demand for gold as a safe-haven asset.
Brent Crude
Brent crude oil prices rose following increased bets on the recovery of oil demand after the U.S. lifted travel restrictions to several countries. However, OPEC cut its world oil demand forecast for the fourth quarter by 3,30,000 barrels per day (bpd) from last month's forecast.
Baltic Dry Index
The index rose during the week following improved Capesize and Panamax activities.
Currencies Market
Rupee
The Indian Rupee was little changed against the U.S. dollar as gains in the domestic equity market due to foreign fund inflows set off on dollar demand from importers and elevated global crude oil prices.
Euro
The euro weakened against the U.S. dollar after U.S. consumer prices surged to their highest annual gain since 1990.
Pound
The Pound Sterling fell against the U.S. dollar as Britain and the European Union were unable to find a post-Brexit agreement over Northern Ireland and after a surge in U.S. inflation.
Yen
The Yen weakened against the U.S. dollar after U.S. consumer prices surged to their highest rate since 1990.
The Week That Was...(08th Nov to 12th Nov 2021)
The Week Ahead...(15th Nov to 19th Nov 2021)
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Disclaimer: The information herein is meant only for general reading purposes and contains all factual and statistical information pertaining to Industry and markets which have been obtained from independent third-party sources and which are deemed to be reliable. The information provided cannot be considered as guidelines, recommendations or as a professional guide for the readers.