Financial Market And Economy Update
- World Bank Chief Economist Kaushik Basu said India's economy could expand by around 6 per cent in 2013.
- The HSBC Purchasing Managers' Index for service sector rose to 55.6 in December from November's 52.1. India's services sector grew at its strongest pace in three months, as company order books filled at the quickest rate since last February.
- SEBI proposed wide‐ranging overhaul of corporate governance norms for listed companies, through measures like checks against unjustifiable CEO pay, greater powers to minority shareholders, an orderly succession planning and hefty penalties for non‐compliance.
- As per government data, India's fiscal deficit during the April‐ September period rose to USD63bn, or 65.6% of the full fiscal year 2012‐13 target. During the same period in the previous fiscal year, the deficit was 68% of the budget target. The net tax receipts during the April‐September period stood at USD55bn and the total expenditure was about USD129bn.
- C Rangarajan, a key economic advisor to Prime Minister Manmohan Singh, has said that the government could consider imposing a marginal tax rate higher than the current 30% on those with "substantially higher income".
Debt Market Update
- Bond yields fell on rising expectations of a rate cut in January, while the reduced debt sales this month spurred hopes that the government was containing its fiscal deficit.
- The benchmark 10‐year bond yield ended at 7.93%, 4bps lower compared to the previous close of 7.97%.
- The central bank successfully conducted its bond buyback through Open Market Operations on Friday. It bought bonds worth USD1430mn, slightly lower than the notified amount of USD1459mn, which is a good sign for market.
- The net average borrowing by banks under the Reserve Bank of India (RBI) liquidity adjustment facility stood at USD10932mn, slightly lower compared to the previous day’s figure of USD17296mn.
- RBI announced the auction of 91‐days and 182‐days treasury bills cumulatively worth USD1823mn on January 9, 2013.
- The RBI announced the auction of SDLs of 9‐state governments for an aggregate amount of USd1077mn on January 8, 2013.
- India's foreign exchange reserves stood at USD296.58bn as of December 28, 2012 slightly higher compared to the previous week’s figure of USD296.53bn.
Debt Market Outlook
Liquidity has eased due to government spending and is expected to remain so, reducing the expectations for further OMOs from the central bank. The benchmark 10 year bond is expected to trade in the range of 7.85-7.95 with further direction provided by the inflation number which will release next week.
Currency Market Update
- The Indian rupee weakened against the dollar, on the back of dollar demand from oil and defence firms, as well as other companies. At the same time the global risk aversion prompted short‐covering of dollar positions. The Indian rupee closed at 55.07/08 per dollar, against its previous close 54.49/50 per dollar.
- The euro hit a three‐week low against the dollar, as minutes from the U.S. Federal Reserve indicated growing unease about the impact of further stimulus. However, the euro traded marginally low against the dollar at USD1.3042 vis‐à‐vis the previous close of USD1.3046.
This document is not intended as a recommendation or for the purpose of soliciting any action in relation to any investments, or to be otherwise relied upon for any purpose.
Distribution of this document is strictly restricted by applicable laws and regulatory requirements of all countries in which it is made available and is intended only for the use of persons to whom it may legally be made available under local qualification criteria, such as certain types of investment professionals, accredited investors, wholesale investors and financial institutions. This document is not intended to be accessed by retail investors.
Investments in India are subject to a number of risks including, but not limited to, risk of losing some or all of the capital invested, high market volatility, variable market liquidity, geopolitical risks (including political instability), exchange rate fluctuations, changes in tax regime and restrictions on investment activities of foreign investors. Past investment performance should not be viewed as a guide to, or indicator of, future performance and the value of investments and the income derived from them can go down as well as up. Investments in India should be considered only as part of a diversified overall portfolio of assets.
The content of this document is based upon sources of information believed to be reliable. However, no representation, undertaking or warranty (express or implied) is given as to its accuracy or completeness, and the content may change without notice. No liability is owed to any persons with respect to the information contained in this document.
This document is communicated by the following, whose prior written consent must be obtained before onward distribution or communication to any other person:
- Kotak Mahindra (UK) Ltd (which is authorised and regulated by the Financial Services Authority), 155-157 Minories, London EC3N 1LS. Phone:+44 207 977 6900
- Kotak Mahindra (UK) Ltd (Dubai Branch), (which is regulated by the Dubai Financial Services Authority), Office 105, Level 1, Al Fattan Currency House, Office Tower 2, Dubai International Financial Centre, Dubai, UAE
- Kotak Mahindra (UK) Ltd (Singapore Branch), (which is regulated by the Monetary Authority of Singapore), 16 Raffles Quay #35-02/03, Hong Leong Building, Singapore. Phone: +65 6290 5590
- Kotak Mahindra Inc (which is a member of FINRA), 50 Main Street, Suite 890, White Plains, New York 10606, USA. Phone: +1 914 997 6120