1. India : Macro update
Core Combined CPI
Retail inflation, which is now closely contemplated, remains above
the comfort of policymakers in Mumbai. Last CPI number was
seen at 10.1% courtesy to high food/vegetable prices.
11.20%
10.70%
Industrial production’s three month moving average deciphers
some uptrend however the same may not improve final output
substantially.
10.20%
9.70%
INR moved up considerably after RBI’s steps taken in early
September. Continuous dollar inflow and tight measures to tame
inflation supplemented the measures announced by new
Governor.
9.20%
8.70%
8.20%
All eyes will now be over Fed’s meeting in Mid December followed
by RBI’s policy.
7.70%
RBI is expected to announce its Mid-Quarter review on December
18, 2013.
November Inflation numbers and anecdotal fiscal update will drive
the domestic market.
IIP General
3MMA
IDR
BRL
INR
104.5
10.00%
8.00%
99.5
6.00%
4.00%
2.00%
94.5
0.00%
-2.00%
89.5
-4.00%
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
-6.00%
84.5
7/26/2013
8/26/2013
9/26/2013
10/26/2013
11/26/2013
2. India : Fiscal Deficit
2012
Fiscal worries continue to mount as anecdotal data adds not respite.
Apr-Oct Fiscal deficit for current year was seen at ~84.4% of BE
compared to ~72% in previous year.
2013
50%
45%
Cum. Total Receipts w.r.t. BE
40%
As budget estimate was drawn considering a GDP growth of 6%+,
substantial fall in the same is only escalating fiscal fears.
35%
30%
On the revenue side government is seen working hard however there
is no considerable movement to counter incremental expenses.
25%
20%
Recent media reports suggest that government is contemplating to cut
its plan expenditure by ~800bn. Last year plan expenditure was
reduced by ~900bn. As per latest release(Apr-Oct) government had
spend ~48% of plan expenditure. Among plan expenditure rural
ministry will take a heavy hit if government go with planned austerity.
Government finally may resort to faulty accounting practices to limit
the deficit figure at 4.8%. Remember FM have been promising
domestic and foreign investors to keep the macroeconomic situation
in control.
15%
10%
5%
0%
Apr
May
June
July
2012
Aug
2013
Sep
Oct
90%
In addition to shifting current year’s expenditure to next year
government is also taking its own time to refund tax. Chidambaram
quite ago said that this year refunds have totaled Rs 57,000 crore till
mid-December against last year’s Rs 70,000 crore..
80%
Cum. Fiscal Deficit w.r.t. BE
70%
60%
Department/Ministry
BE FY14
Spending w.r.t. BE (AprOct)
Finance
507116
47%
Defence
253345
60%
30%
Food
91091
87%
20%
Fertilizers
66183
75%
Petroluem
65145
84%
50%
40%
10%
0%
Source : CGA
Apr
May
June
July
Aug
Sep
Oct
3. Indian Debt Market
Yield on 7.16%GS2023 rose by ~35bps in the previous month on the
back of high inflation and announcement of a new benchmark.
Participants expected RBI to come out with new paper in the next
calendar year.
G-sec
Change in bps
Yield (RHS)
50
Conventionally RBI boosts reserve money in the second half of the
fiscal by buying Gsec however this time RBI refrained from announcing
back to back OMOs and preferred to buy dollars subsequently
supporting liquidity.
45
Spread at the long end of the corporate bond curve narrowed primarily
due to new gilt benchmark. Low supply with decent demand from
regular buyers(PF, Insurers & Retirement funds) supplemented spread
narrowing.
9.4
30
PDs and Asset managers were top sellers in the Gsec market. PDs
preferred remaining light as sentiment continues to remain weak.
Dynamic/Income reduced exposure to duration heavy gilt by the reason
of low OMO hopes and lack of liquid papers.
9.2
40
9.0
35
8.8
25
8.6
20
15
8.4
10
8.2
5
Upcoming Inflation number and fiscal talks will drive bond yields. We
believe 50% of rate hike is already priced in at current juncture. RBI’s
action and guidance will remain key for the market.
0
Net Buy/Sell in Crs. (1-29Nov)
Entities
Gsec
T-bills
8.0
1Y
3Y
5Y
10Y
14Y
24Y
30Y
Corporate Bond Spread (Bps) as on Nov'13 end
SDLs
Total
Foreign Banks
-10664
-1152
-988
-12804
Public Sector Banks
19792
2818
2960
25570
Private Sector Banks
3701
-174
456
3983
Mutual Funds
-7183
7793
-1567
7836
2457
1635
11928
-13641
-11742
-2496
-27879
AAA
Month
Ago
AA+
Month
Ago
AA
Month
Ago
AA-
Month
Ago
1
84
86
96
99
110
111
127
127
3
97
91
109
106
121
119
137
135
5
77
76
88
90
101
104
118
120
10
30
65
43
79
56
95
74
111
-957
Others
Tenor
Primary Dealers
