23rd Aug to 27th Aug
Indian Economy
The finance secretary announced modifications to public sector bank pension distributions. The adjustments are expected to improve bank employee's pension payouts, with all of them receiving an even 30 percent of their earnings. The Centre has also requested that banks boost the employer contribution to the pension corpus from 10% to 14%.
As per media reports, the Finance Minister has asked banks to collaborate with state governments in order to advance the "one district, one product" strategy. Banks have also been asked to communicate with export promotion organisations, chambers of commerce and industry to better understand and respond to the needs of exporters. The Finance Minister also announced that public sector banks (PSB) will implement a nationwide credit outreach initiative in 2021.
According to a major state-run bank, India's GDP is expected to grow at around 18.5% with an upward bias in the first quarter of FY 22. This forecast is lower than the Reserve Bank of India's 21.4% GDP growth forecast for the same quarter. The higher growth in Q1 FY22 is primarily due to a low base.
According to a report by a major rating agency, the roots of the economic recovery deepened in July 2021 as governments eased COVID-19 related limitations. According to the research, in Jul 2021, the country's unlocking revealed itself in improved performance across a variety of high frequency industrial and service sector metrics, mobility and toll collections.
Indian Equity Market
Indian equity markets ended the week on a positive note. Initial buying interest was seen strong after one of the leading credit rating agencies revised the credit quality outlook of India Inc for FY 2022 to positive from cautiously optimistic earlier.
Strong global cues also supported the bourses following COVID-19 vaccine approval in the U.S. and in anticipation of a dovish comment by the Fed Chair in the upcoming meeting (Jackson Hole).
Back home, investor's risk appetite boosted following reports of the government announcing the National Monetisation Pipeline (NMP) wherein infra-assets worth Rs. 6 lakh crore will be monetised across the rail, road and power sectors over 4 years.
On the BSE sectoral front, most of the major sectors closed in the green. S&P BSE Oil & Gas was the top gainer, up 5.17%, followed by S&P BSE power and S&P BSE Capital Goods, which went up 5.09% and 3.92%, respectively.
The oil & gas sector gained investor's attention after one of the industry majors announced its foray into hydrogen generation and take the acquisition route to scale up its renewable energy portfolio as it pivots business beyond natural gas to align with the energy transition being witnessed across the globe.
Indian Derivatives Market Review
Nifty Sep 2021 Futures stood at 16,718.15, a premium of 12.95 points above the spot closing of 16,705.20. The total turnover on NSE's Futures and Options segment for the week stood at Rs. 285.76 lakh crore as against Rs. 244.94 lakh crore for the week to Aug 20.
The Nifty Put-Call ratio stood at 1.40 compared with the previous week's close of 1.21.
Domestic Debt Market
Bond yield rose as commentary on inflation by members of the Monetary Policy Committee (MPC) and an increase in global crude oil prices hurt investor appetite. Yields rose further as the Reserve Bank of India (RBI) purchased a lower than anticipated amount of liquid paper at the auction under the G-SAP 2.0 program.
However, losses were limited on remarks by the Reserve Bank of India (RBI) governor. Governor said, the Central Bank has initiated the process of liquidity normalisation but it is waiting for growth signals to become more sustainable.
The yield on the 10-year benchmark paper (6.10% GS 2031) rose 2 bps to close the week at 6.25% from the previous week's closing of 6.23% after moving in a range of 6.23% to 6.28%. (One bps(Basis Points) is one-hundredth of a percentage)
Yields on gilt securities fell by up to 13 bps across the maturities, barring 2, 3 and 10-year papers that rose 1,2 and 6bps.
Corporate bond yields fell in the range of 3 to 11 bps across the curve. The yield fell the most on 2-year papers and the least on 6 to 10 and 15-year papers.
Spead between AAA corporate bond and gilt contracted by up to 13 bps across segments, except 6 and 7-year paper that expanded 4 and 3 bps, respectively. Spread fell the most on 3-year paper.
Regulatory Updates in India
The RBI Governor said that capacity utilisation is "nowhere near per pandemic levels" and that there is "slack in the economy". He mentioned that it may show signs of "durability and sustainability, but it would be calibrated so as not to startle the market.
The Union Finance Minister launched the EASE 4.0 or Enhanced Access and Service Excellence - a common reform agenda for PSBs aimed at institutionalising clean and smart banking. The minister also conducted a review of the PSBs annual performance.
The Union Finance Minister launched the National Monetisation Pipeline. The NMP is a four-year pipeline of brownfield infrastructure assets owned by the government. The government put a lot of focus on asset monetisation as a way to obtain innovative and alternative financing for infrastructure in the Union Budget 2021-22, which featured a number of major announcements.
Union Minister has invited companies from the Association of Southeast Asian Nations (ASEAN) region to invest in India, particularly in the 13 sectors covered by the production-linked incentive scheme. According to the Minister of State for Commerce and Industry, with a combined economy of approximately USD 5.8 trillion, India and ASEAN have a lot of room to grow their trade and investment relationships.
The Securities and Exchange Board of India (SEBI) has asked depositories to use distributed ledger technology, also known as blockchain technology, to record and monitor credit ratings of non-convertible debentures (NCDs) and creation of charges on these securities pledges, among others to make the record-keeping process related to securities traded in the market more secure.
Global News/ Economy
At the annual Jackson Hole symposium, U.S. Federal Reserve Chairman said the central bank is likely to begin tapering some of its easy-money policies before the end of the year. However, he added that there's "much ground to cover" before increasing rates.
According to the Commerce Department, U.S. durable goods orders fell marginally 0.1% in July 2021 following a 0.8% increase in June 2021.
According to the U.S. Commerce Department, U.S. Real Gross Domestic Product (GDP) expanded at an annual rate of 6.6% in the second quarter as against the initial estimate of 6.5%.
According to the U.S. Consumer Department, U.S. Consumer consumption increased by 0.3% in July 2021, while income rose 1.1%. In the face of Delta variation uncertainty, decreased spending growth means the economy has stalled.
According to flash survey results from IHS Markit, the eurozone's flash composite output index fell to 59.5 in August 2021 from a 15-year high of 60.2 in July 2021.
According to the latest data from Destatis, Germany's Gross Domestic Product grew 1.6% (QoQ) in the second quarter of 2021 as against a 2% decline in the first quarter. In the second quarter of 2020, GDP fell 10% amid the peak of the Covid-19 pandemic.
According to data from the Cabinet Office, Japan's leading index, measuring the future economic activity, rose to 104.1 in Jun 2021 from 102.6 in May 2021. The coincident index rose to 94.5 in June from 92.1 in May.
Global Equity Markets
U.S.
U.S. markets went up, led by optimism that the approval of the Pfizer/BioNTech COVID-19 vaccines could improve vaccination rates in the U.S. and boost economic growth.
Buying interest also found support from expectations that the U.S. Federal Reserve might not begin tapering its bond-buying program anytime soon also contributed to the upside.
Europe
Europe markets rose after U.S. Fed Chairman said that the central bank will start reducing its bond purchases before the end of the year, but added that the bank is unlikely to hike interest rates anytime soon.
Asia
Most of the Asian market rose, tracking positive cues from U.S. and European markets. Nonetheless, gains were largely restricted as investors fretted over developments in Afghanistan and watched for any potential shift in U.S. Federal Reserve policy.
Commodities Market
Gold
Gold prices rose after the U.S. Fed Chief's speech on the last trading day of the week at the Jackson Hole symposium. Concerns over uneven economic recovery and geopolitical tensions in Afghanistan boosted the safe-haven appeal of the precious metal.
Brent Crude
Brent crude prices surged on worries about supply disruptions as energy companies began shutting production in the Gulf of Mexico ahead of a possible hurricane forecast to hit on the weekend.
Baltic Dry Index
The index rose on a WoW basis due to improved Capesize and Panamax activities.
Currency Markets
Rupee
The Indian rupee rose against the U.S. dollar as the RBI's absence from the market prompted sporadic culling of long positions on the greenback.
Euro
Euro rose against the U.S. dollar after the U.S. Fed Chairman's speech indicated that the U.S. central bank could start tapering its massive support to the economy by year's end, which was not as fast as many had assumed.
Yen
The yen was steady against the U.S. dollar as safe-haven appeal dampened following rise in riskier currencies.
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