The News That Matters...(15th Nov to 19th Nov 2021)
The Wholesale Price Index (WPI) based inflation rose to 12.54% YoY in Oct 2021 from 10.66% in Sep 2021 and 11.64% in Aug 2021. WPI based rate of inflation in the same period of the previous year stood at 1.31%. The growth of WPI Food Index stood at 3.06% in Oct 2021 as against 1.14% in Sep 2021 and 3.76% in Aug 2021. WPI based rate of inflation (YoY) for primary articles stood at 5.20% in Oct 2021 as compared to 4.33% in the same period of the previous year. WPI based rate of inflation (YoY) for fuel and power stood at 37.18% in Oct 2021 as compared to -11.14% in the same period of the previous year. WPI based rate of inflation (YoY) for manufactured products stood at 12.04% in Oct 2021 as compared to 2.21% in the same period of the previous year.
India's merchandise trade deficit widened to $19.73 billion in Oct 2021 from $9.15 billion in Oct 2020. The trade deficit thus widened by 115.50%. Merchandise exports grew 43.05% YoY to $35.65 billion in Oct 2021 from $ 24.92 billion in Oct 2020. Merchandise imports grew 62.51% YoY to $55.37 billion in Oct 2021 from $34.07 billion in Oct 2020. Oil imports in Oct 2021 stood at $14.43 billion which was higher by 140.47% in dollar terms compared to $6.00 billion in Oct 2020.
According to a statement by the labour ministry, retail inflation based on consumer price indices for farm and rural workers eased marginally in Oct 2021 against Sep 2021. Point to point rate of inflation based on the CPI-AL (Consumer Price Index-Agricultural Labour) and CPI-RL (rural labour) stood at 2.76% and 3.12% in Oct 2021 as against 2.89% and 3.16%, respectively, in Sep 2021.
Indian Equity Market
Indian equity ended the holiday truncated week in the negative territory. Initial buying interest triggered by upbeat earning numbers took a back seat after RBI reported in the latest monthly bulletin that domestic equity markets seem to be overvalued.
The wholesale price index inflation accelerated to a five-month high, which also capped the sentiments of the investors. Fears of an economic slowdown amid a surge of fresh COVID-19 cases worldwide too contributed to the downside of the benchmark indices.
Markets also witnessed unceasing selling through FII which is also indicating towards interest rate hike by the Federal Reserve sooner than expected.
On the BSE sectoral front, the majority of the indices closed in the red. S&P Metal was the major loser, down 5.84%, followed by S&P BSE Realty and S&P BSE Oil & Gas which slipped 4.09% and 3.21% respectively.
The metal sector remained under pressure with investors monitoring the domestic steel prices, which remained low compared to international markets. It is a deregulated sector and market dynamics has an influence on it. S&P BSE Auto, S&P BSE Power and S&P BSE Healthcare were the only gainers, up 0.55%,0.14% and 0.11%, respectively.
Indian Derivatives Market Review
Nifty Nov 2021 Futures stood at 17,792.90, a premium of 28.10 points above the spot closing of 17,764.80. The total turnover on NSE's Futures and Options segment for the week stood at Rs. 310.48 lakh crore as against Rs. 326.08 lakh crore for the week to Nov 12.
The Nifty Put-Call ratio stood at 0.78 compared with the previous week's close of 1.16.
Domestic Debt Market
Bond yields eased after the outcome of the weekly debt auction came better than market expectations. Fall in global crude oil prices even though the same continued to remain at elevated levels also boosted sentiments.
The yield on the 10-year benchmark paper (6.10%GS 2031) fell by 2 bps to close the week at 6.35% compared to the previous close of 6.37%.
RBI on Nov 18, 2021, conducted the auction of three government securities namely 6.10% GS 2031 GOI FRB (Floating Rate Bonds) 2034 and New GS 2061 for a notified amount of Rs. 24,000 crores, for which the entire amount was accepted. The cut-off price / implicit yield at the cut-off for stood at Rs. 98.25/6.3441%, Rs. 99.25/4.8827% and 6.9500% respectively.
Domestic Debt Market (Spread Analysis)
Yields on the gilt securities fell across the maturities in the range of 2 to 35 bps. The maximum decline was witnessed on the 2-year paper.
Corporate bond yields rose across the maturities in the range of 2 bps to 8 bps barring 1 and 15-year paper which fell 2 and 20 bps respectively while 2 and 10-year closed steady.
The difference in the spread between AAA corporate bond and gilt securities expanded across the maturities in the range of 2 bps to 35 bps barring 15-year paper which fell 6 bps.
Regulatory Updates in India
The Prime Minister of India announced the repeal of the three farm laws, assuring farmer groups that the legislative procedure for repeal would be finished in the forthcoming Winter Session of Parliament. The Prime Minister also announced the formation of a committee with representatives from both the federal and state governments to look into issues relating to agriculture, such as zero-budget farming, fertiliser, crop patterns and transparency in setting Minimum Support Prices, among other things.
The Central Board of Indirect Taxes and Customs notified the hike in Goods and Service Tax (GST) rate from 5% to 12% on fabrics, apparel and footwear with effect from 01, Jan 2022. The proposed increase is intended to address the problem of Inverted Duty Structure that a tiny sector of the textile value chain is experiencing, as mentioned at the GST Council's 45th meeting.
According to the Reserve Bank of India (RBI), its 'state of the economy' report, the economy's aggregate demand is recovering and overall monetary and credit conditions are favourable for a long term recovery to take hold, while the quality of government spending has improved in the second half. The Indian economy, bolstered by decadal low-interest rates, softening inflation and a tiny current account surplus is poised to reclaim ground lost to the pandemic and reemerge as one of the world's fastest rising economies.
According to the Governor of the Reserve Bank of India, numerous macro indicators imply that the economy is beginning to recover after the pandemic's toll, but private capital investment must restart for growth to be sustainable and reach its full potential.
SEBI has issued an investor charter for investors in the securities market, with the goal of safeguarding investor's interests. The charter outlines investors rights and duties, as well as dos and don'ts when it comes to investing in the securities market. The investor charter's objective is to protect investor's interests by enabling them to understand the risks involved, invest in a fair, transparent and secure market and receive fast and efficient services.
SEBI has proposed that market makers be introduced into the corporate bond market. Market makers give buyers and sellers with ongoing two-way markets. The great majority of bonds are traded over the counter (OTC) rather than on stock exchanges in worldwide markets, including India. SEBI has proposed that stockbrokers and merchant bankers act as market makers in the corporate bond market.
SEBI has extended the deadline for comments on new disclosure standards for mutual fund schemes with an ESG (environment, sustainability and governance) focus until Dec 01, 2021. The proposed regulations are intended to ensure that ESG focused mutual fund schemes stay faithful to their labels.
According to a report by the Commerce Department, U.S. retail sales rose 1.7% in Oct 2021 after climbing by an upwardly revised 0.8% in Sep 2021.
According to the Office for National Statistics, the U.K. unemployment rate fell 0.5% points on the quarter to 4.3% in the third quarter of 2021. At the same time, the employment rate increased 0.4% points to 75.4% in the third quarter of 2021.
According to flash estimate from Eurostat, the eurozone's gross domestic product rose 2.2% in the third quarter of 2021 as against 2.1% in the second quarter of 2021. On a yearly basis, economic growth slowed to 3.7% from 14.2% in the preceding period.
According to data from the Office for National Statistics, U.K. consumer price inflation rose 4.2% in Oct 2021 from 3.1% in Sep 2021. Core inflation rose to 3.4% in Oct from 2.9% in Sep.
According to the National Bureau of Statistics, China's annual growth in retail sales rose to 4.9% in Oct 2021 from 4.4% in Sep 2021. China's retail sales growth accelerated despite the rising number of COVID cases. However, property investment growth has slowed creating concerns about future development activity.
According to the preliminary report of the Cabinet Office, Japan's gross domestic product contracted an annualised 3% YoY in the third quarter of 2021 following the downwardly revised 1.5% increase in the three months prior (originally 1.9%).
Global Equity Markets
U.S. equity markets rose on a slew of upbeat economic data like retail sales industrial production in Oct 2021 while U.S. homebuilder confidence improved in Nov 2021, which boosted investor's sentiments.
Nonetheless, concerns over a resurgence of COVID-19 weighed on global markets, thereby restricting gains.
The European markets largely closed in the red, weighed down by renewed concerns over the COVID-19 pandemic. During the week, Austria announced that it would re-enter a full national lockdown due to a spike in COVID cases. Germany also unveiled more restrictions for unvaccinated people, as a fourth wave sent daily cases to a record high.
The majority of the Asian stock markets went up, following the mostly positive cues from Wall Street, with support from crude oil prices and technology stocks. However, gains were capped by news of resurgence in coronavirus cases in Europe.
Global Debt (U.S.)
Yields on the 10-year U.S. Treasury fell 2 bps to close at 1.55%, from the previous week's close of 1.57%.
U.S. Treasury prices fell as companies sold bonds before liquidity likely worsens during the holiday season and ahead of a U.S. government sale of new 20-year bonds on Wednesday. Prices rose further after upbeat U.S. retail sales data in Oct 2021.
However, losses retreated as investors bought bonds after a tepid response for 20-year bonds auction.
The trend reversed and treasury prices gained as concerns about new lockdowns related to the spreading of COVID-19 in Europe increased demand for safe-haven bonds.
Gold prices fell following stronger dollar and expectations that central banks may hike interest rates that kept bullion under pressure. Meanwhile, reports of rising cases of COVID and lockdowns in Europe were dimming the appetite for risk-taking and support interest in gold.
Brent crude oil prices fell as a fresh surge in COVID-19 cases in Europe threatened to slow the economic recovery. Investors also weighed a potential release of crude reserves by major economies to cool energy prices.
Baltic Dry Index
The index fell during the week following sluggish Capesize and Panamax activities.
The Indian Rupee rose against the U.S. dollar on greenback sales from foreign banks and custodial inflows.
The euro fell against the safe-haven U.S. dollar on a surge in COVID-19 cases in Europe with Austria to re-impose a full lockdown and Germany said it could follow suit.
The Pound Sterling rose against the U.S. dollar after data showed U.K. inflation surged to a 10-year high in Oct 2021, firming expectations of a rise in interest rate much earlier.
The Yen was little changed against the U.S. dollar fueled by diverging central bank tightening expectations amid surging inflation around the globe.
The Week That Was...(15th Nov to 19th Nov 2021)
The Week Ahead...(22nd Nov to 26th Nov 2021)
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.