4. 4
– While divergent monetary policies shall short term Dollar
price sentiments, flattening of the yield curve in US point to
long term uncertainties
– US yield curve has flattened so much that the spread has
fallen to the lowest since 2007. The slope of the yield curve
has fallen to 2005 levels.
– However, the yield curve is yet to invert
-0.005
0.000
0.005
0.010
0.015
0.020
0.025
0.030
0.035 Slope of the US yield curve
0.0
0.5
1.0
1.5
2.0
2.5
3.0 US treasury yield curve spread
10yr - 3m 10yr - 2yr
0.0
0.5
1.0
1.5
2.0
2.5 Euro Zone treasury yield curve spread
10y-3m 10y-2y
5. 5
EURUSD prices are likely to hold below USD 1.20 on initial price recovery and resume it’s prevailing downtrend towards
USD 1.13 in the coming 5 to 6 months ahead of any significant recovery.
7. 7
– Strong demand growth expected in 2019
supported by improving economic activity in US
and EU along with stable growth in non-OECD
demand majorly driven by India.
– Demand growth outpacing supply growth is likely
to keep market tight in coming year remaining
supportive to crude oil prices in the long term.
96.40 96.70
97.38
98.59
99.25
94.74
96.07
97.33
98.85
99.701.66
0.64
0.05
-0.26
-0.45
2015 2016 2017 2018e 2019p
Global oil supply-demand balance
Total supply (MBpd) Total demand (MBpd) Supply-Demand gap
Source: IEA, TransGraph
estimates
97.1 97.7 97.9 98.3 98.3 98.8 99.0
97.1 98.0 98.0 98.3 98.0 99.2 99.9
-0.01
-0.27
-0.16
0.00
0.33
-0.44
-0.93
AMJ 2017 JAS 2017 OND2017 JFM 2018 AMJ 2018e JAS 2018p OND2018p
World oil Supply-Demand Balance Quarterly
Worldoil supply (MBpd) World oil demand (MBpd)
S-DBalance
Source: IEA, TG Estimates
0.30
1.32
0.68
1.26
1.21
1.52
0.66
0.85
Change in Supply Change in Demand
Y-o-Y Change in oil supply and demand (MBpd)
2016 2017 2018e 2019pSource: IEA, TransGraph estimates
8. 8
– US sanctions against Iran after pulling out of the
nuclear deal likely to impact the production in the
long term.
– Slump in Venezuela’s crude oil output amid
economic constraints and US sanctions.
– Concerns in the market over the drop in Venezuela
crude oil production as well as potential decline in
Iran, led to decision by Russia, Saudi Arabia and UAE
to increase crude oil production gradually by about 1
MBpd, signaling end of production cuts.
– OPEC group meeting on June 22nd likely to provide
road map for increase in output
– US crude oil production, buoyed by flourishing Shale
oil production amid firm trend in prices, likely to
continue the growth trend in coming year.
0.35 0.31
0.00
-0.51-0.49
-0.26
-0.49
-0.09
0.16
-0.39
0.03
0.21
-0.55
0.50
1.35
0.70
-1.0
-0.5
0.0
0.5
1.0
1.5
2016 2017 2018 2019
Crude oil productionincremental change (MBpd)
Iran Venezuela Saudi Arabia US
2.94 3.96 4.58 4.23 4.70 5.70 6.404.52 4.79 4.83 4.62 4.65 5.00 5.00
7.46
8.75
9.41
8.86
9.35
10.70
11.40
2013 2014 2015 2016 2017 2018e 2019p
UScrude oil production overview
Shale oil prod. (MBpd) Conventional prod (MBpd) Total prod (MBpd)
10. 10
– FII outflows mainly from debt markets in the
recent days, on account of higher US treasury
yields, weighed on Rupee.
– Equity and Debt markets witnessed outflows of
USD 1.5 billion and USD 2.9 billion respectively
during May month in addition to a combined
outflow of USD 2.357 billion in April month (of
which USD 1.5 billion was from debt).
– This shall keep the overall FPI in the Bop negative
for the AMJ quarter even as the June month is
likely to see some FII inflows.
– Meanwhile, FDI demand moderated in the recent
months augmenting the weak capital account
scenario. Moving ahead, however, FDI is expected
to improve brought about by normalization of the
structural reforms that were implemented earlier.
1.2 1.4 1.3
4.7
6.0 6.3
4.2 4.5
2.0
4.1
1.0 0.6
1.8
3.8
1.6
4.0
8.6
0.6
1.6
-1.3
4.3
1.8
3.8
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
India net FDI flows (USD bln)
2016-17
2017-18
1.2
0.6 0.8
-2.0 -1.8
0.5
3.0
0.5
2.2
-1.4
1.8
-0.8
-1.5
3.0
4.0
2.9
2.4
0.2
2.6
0.1 0.4
1.3
0.0
-1.4 -1.5
-2.9
India FII flows (USD bln)
Equity Debt
11. 11
– RBI had raised the interest rates by 25bp during June monetary policy meeting.
– The recent uptick in inflation to above 4.5% levels, core inflation at 5.6%, and heavy FII outflows from
debt markets has resulted in this tightening monetary policy stance from RBI ahead of their intended
timeline. Overall monetary policy stance remains ‘neutral’.
– RBI forecasted H1 2018-19 growths at 7.5% to 7.6%. Upbeat growth forecasts and the rate hike shall
attract FIIs, mainly into debt, and support the Rupee price sentiments.
0%
1%
2%
3%
4%
5%
6%
7%
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Consumer Price Inflation(YoY)
Inflation (%)
Core Inflation (%) 5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5 Indian treasury yields
364-Day t bill
10-Year g sec
12. 12
*Note: Others include net commercial borrowings, short term loans, banking capital,
Rupee debt service and other capitals
India Balance of Payments (USD Bn)
Item 2016-17 2017-18 2018-19p
Current Account
Merchandise -112.44 -160.04 -170.00
Invisibles 97.15 111.32 118.00
Total Current Account -15.29 -48.72 -52.00
GDP 2275 2599 2900
CAD as % GDP -0.7% -1.9% -1.8%
Capital Account
FDI 35.61 30.29 40.00
FPI 7.61 22.11 10.00
Others* -6.73 38.99 13.50
Total Capital Account 36.49 91.39 63.50
Balance of Payments 21.55 43.57 11.50
Primary Balance (CAD+FDI) 20.32 -18.43 -12.00
Current Account
– Indian basket Crude oil price up by 18% last
fiscal (56.4 vs 47.6)
– CAD to remain widened at about USD 52
billion during 2018-19
Capital Account
– FDI inflows have moderated in FY 18 but were
more than offset by the FPIs
– FII inflows to moderate but remain at USD 10
billion (currently USD -7 billion)
– Forex reserves at USD 415 billion and positive
BoP to remain supportive for Rupee for the
long term
13. 13
Sector
2017-18
RE
2017-18
Actuals
2018-19
BE
April 17 April 18
April 18
as % of BE
Revenue Receipts 15.05 14.25 17.26 0.35 0.71 4.1%
Non-debt Capital Receipts 1.17 1.16 0.92 0.01 0.01 0.9%
Total Receipts 16.23 15.51 18.18 0.37 0.71 3.9%
Revenue Expenditure 19.45 18.79 21.42 2.13 1.77 8.2%
Capital Expenditure 2.73 2.63 3.00 0.29 0.47 15.6%
Total Expenditure 22.18 21.43 24.42 2.42 2.23 9.1%
Fiscal Deficit 5.95 5.92 6.24 -2.06 -1.52 24.3%
Source: CGA, All units in lakh crore unless mentioned otherwise. BE= Budget Estimate, RE= Revises Estimate
– The government managed to meet its revised fiscal deficit target for 2017-18. In February, the government’s fiscal deficit was
running at 120% of the revised target.
– RBI Boost To Non-Tax Revenue (Non-tax revenue in the April-March period was at 97% of the RE whereas until Feb, it was at
60%) and expenditure Savings (Capital expenditure, which had been front-loaded to support growth, settled lower at 96.7% at
the end of March compared to 108.9% in February) have aided in bringing the deficit down.
– Expenditure savings had materialized through the railways, which has managed to meet some of its expenses through other
sources, and reclassification of the INR 50 thousand crore allocation to the FCI which had been earlier classified as capital
expenditure but was later converted to a ‘ways and means advance’ that needs to be returned within a financial year.
14. 14
– Total subsidy expenditure by central government is budgeted to be increased by 15% to INR 2.64 lakh
crore for 2018 – 19 despite petrol and diesel deregulation
– Subsidy expenditure constitutes to 10.8% of the overall central government expenditure of 24.42 lakh
crore for 2018 – 19 (both revenue and capital)
– 10.3% in 2016 – 17 and 10.4% in 2017 – 18
– Of the total subsidy expenditure, 21% increase is coming from food subsidy
– Food subsidy 1.4 lakh crore to 1.69 lakh crore | Fertilizer subsidy 0.65 to 0.7 | Petroleum subsidy
0.24 to 0.25
2.04
2.30
2.64
10.3% 10.4%
10.8%
2016-17 2017-18 RE 2018-19BE
India central govt subsidy expenditure
Susidy expenditure (lakh crore) % Share in total expenditure
0.66 0.65 0.70
1.10
1.40
1.69
0.28
0.24
0.25
2016-17 2017-18 RE 2018-19BE
India central govt subsidy expenditure (lakh crore)
Fertiliser Food Petroleum
15. 15
Monsoon seasonal rainfall is likely to be 97% of the Long Period Average (LPA). The LPA of the season
rainfall over the country as a whole for the period 1951-2000 is 89 cm. Forecast also suggests maximum
probability for normal monsoon rainfall (96-104% of LPA) and low probability for deficient rainfall during
the season.
Actual monsoon being projected to be closer to a normal one (LPA), agri growth is likely to remain
buoyant as was seen in the case of last two years and 2013.
IMD will issue the update in early June, 2018 as a part of the second stage forecast. Along with the
updated forecast, separate forecasts for the monthly (July and August) rainfall over the country as a whole
and seasonal (June-September) rainfall over the four geographical regions of India will also be issued.
99% 98% 95% 93%
106%
96% 97%93%
106%
88% 86%
97% 95%
2012 2013 2014 2015 2016 2017 2018
Monsoon trends
April forecast Actual
1%
7%
-3% -2%
8%
4%
7%
-6%
12%
14%
3%
5%
2012 2013 2014 2015 2016 2017
OND Agri growth (%) vs Rainfall departure (normal -
actual)
OND GDP growth Railfall departure
16. 16
USDINR prices are likely to hold below INR 69.25 on further depreciation and appreciate towards INR 66 in the coming 3
to 4 months ahead of resuming the depreciation phase in the subsequent months.
18. 18
India Rapeseed Balance sheet 2017-18 2018-19
Beginning Stock 1.1 3.4
Production 68.55 65.5
Marketable Surplus 63.55 60.5
Import 0 0
Total Supply 64.65 63.6
Crush 61.25 61.6
Exports 0 0
Total Demand 61.25 61.6
End Stock 3.4 2.3
All figures in Lakh tons (MY – Mar-Feb)
• Mustard crop production for 2018-19 (Mar-Feb) is estimated at 65.5 LT vs.
last year’s 68.55 LT – down 4.5% Y-o-Y.
• All India acreage down 5% Y-o-Y – Acreage of largest producing state
(Rajasthan) down 25% – Lower acreages compensated by better yield Y-o-Y.
19. 19
• Despite a slow start for the season, arrivals and crushing for 2018-19 have managed to out pace
last year levels till June.
13.8
25.8
33.8
38.0
41.2
45.2
49.4
53.6
56.8 58.9 60.3 61.4
12.2
23.0
32.0
38.3
Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
Mustard Arrivals (Lakh Ton)
2017-18 2018-19
11.0
20.0
27.1
32.6
36.8
41.4
46.4
50.8
54.4
57.8 59.4 61.2
10.8
19.8
28.8
36.3
Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
Mustard Crushing (Lakh Ton)
2017-18 2018-19
20. 20
• Monthly average crush margin for Khachi Ghani and
Expeller oil were noted highest in two years, as
mustard seed prices this year have remained
moderately weak as compared to past 1-2 years.
• Export demand for meal and restrictions to
import of veg-oils can also be noted as factors
boosting the mustard crushing this season.
-1500
-1000
-500
0
500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Crush Margin for Khachi Ghani (INR/T)
2016 2017 2018
-2500
-2000
-1500
-1000
-500
0
500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Crush Margin for Expeller (INR/T)
2016 2017 2018
33.0
38.0
43.0
48.0
53.0
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Thousands
Average Monthly Mustard Seed Price
@ Jaipur (INR/T)
21. 21
-100.0
-80.0
-60.0
-40.0
-20.0
0.0
200.00
220.00
240.00
260.00
280.00
300.00
Rapeseed Meal Competition at SE Asia
India vs. Canada (Monthly average price in $/T)
FOB Vancouver FAS Kandla Ind-Can (RHS)
• Mustard exports during 2017-18 (Apr-Mar) were
157% up Y-o-Y.
• Exports in AMJ’18 are highest since 2014-15
• Indian mustard extract prices continue to remain
competitive with Canadian prices at South East
Asian destinations, which would continue to boost
exports ahead.
277
12 3 20 0
168
4 12 15 1
263
130
92
19 27
South Korea Thailand Vietnam Taiwan Bangladesh
Annual Exports To SE Asia Destination (KT)
2015-16
2016-17
2017-18
160.7
118.6
32.8
19.1
60.9
76.7
38.3 43.0
150.9 149.8
161.3
100.6
188.7 (E)
AMJ JAS OND JFM
Mustard Meal Exports (1000'T)
2015-16 2016-17 2017-18 2018-19
22. 22
670.0
690.0
710.0
730.0
750.0
770.0
790.0
810.0
Blend prices (INR/10kg)
Mustard oil Mustard+SBO Blend
Mustard + Olien Blend Mustard + RBO Blend
-10.0
0.0
10.0
20.0
30.0
40.0
Mustard 80:20 Blend Margins (INR/10kg)
SBO Blend Olien Blend RBO Blend
• Blending of mustard oil with RBO, Palm Olien and
Soybean oil at 80:20 ratio yielded healthy margins
till Q3 of 2017.
• Margins shrink noted between Nov’17 to Apr’18
when import duty on veg-oils was hiked.
• Rise in Mustard oil prices at Jaipur and drop in
prices of other veg-oils during May-Jun’18 period
has allowed margins to recover recent few weeks.
23. 23
Rapeseed Cake + Meal Balances (Mar-Feb) – In Lakh tons
Particulars 2016-17 2017-18 2018-19
Beginning Stock 0.27 0.09 0.51
Production 29.58 38.10 36.96
Imports 0.00 0.00 0.00
Total Supply 29.85 38.19 37.47
Exports 2.14 4.38 5.50
Consumption
Domestic
27.62 33.30 31.80
Total Demand 29.76 37.68 37.30
End Stock 0.09 0.51 0.17
Rapeseed Oil Balances (Mar-Feb) – In Lakh tons
Particulars 2016-17 2017-18 2018-19
Beginning Stock 0.18 0.13 1.18
Production 19.23 24.77 24.02
Solvent Exracted Oil 1.5 1.8 1.68
Imports 4.24 2.80 3.55
Total Supply 25.15 29.49 30.44
Exports 0.00 0.00 0.00
Consumption edible 24.80 28.00 29.40
Consumption Industrial 0.22 0.31 0.27
Total Demand 25.02 28.31 29.67
End Stock 0.13 1.18 0.77
• Edible oil stocks are projected to stay tight for 2018-19,
despite higher imports, as production is lower Y-o-Y.
Limited production and rising consumption leave mainly two options to suffice the supply side
– Blending and Imports.
24. 24
6.5
8.0 7.8 8.5
14.9 15.1 14.9
16.1
21.3
22.4 22.9 23.9
2015-16 2016-17 2017-18 (E) 2018-19 (P)
India Edible-Oil Position (in Million tons)
Production Imports Consumption
7.7
9.1 8.7 9.1
8.2 8.6
1.8
2.8
4.3
3.4 3.6 3.9
1.5 1.5 1.4
2.1 2.7 3.1
11.4
14.0
14.9 15.1 14.9
16.1
2013-14 2014-15 2015-16 2016-17 2017-18 (E) 2018-19 (P)
Annual Edible-oil Imports (Million tons)
Palm Oil Soy Oil Sun Oil Total
• For 2018-19, India edible oil consumption is projected up 4% Y-o-Y around 23.9 Million tons.
• With domestic production of around 8.5 Million tons (up near 10% Y-o-Y), imports are needed to rise by
around 8% from last year to around 16.1 Million tons.
26. 26
BMD CPO 3M Futures prices are likely to extend its weakness towards MYR 2180/2130 in the near term ahead of a
recovery towards MYR 2500 in the coming 4 to 6 months.
27. 27
CME Soy oil 1M futures prices are likely to extend its weakness towards USc 28 in the near term and witness a recovery
towards USc 31.50 in the coming 4 to 6 months.
28. 28
Argentina Soy Oil 1M FOB prices are likely to weaken further towards USD 665/655 in the near term and witness a
steady recovery towards USD 740/750 in the coming 4-6 months.
29. 29
NCDEX Soybean oil Futures prices are prices are likely to test the support of INR 725/720 in the coming 1 to 2 months
ahead of a recovery towards INR 800 in the coming 4-6 months.
30. 30
NCDEX Soybean futures prices are likely to test INR 3250 on initial 3 to 4 months weakness and recover towards INR
3750 in the subsequent 2months.
31. 31
Soymeal Indore spot prices are likely to hold below INR 31000 on any gains and trade weak towards INR 26000 ahead of
a recovery towards INR 31000 in the coming 4 to 6 months.
32. 32
NCDEX Rapeseed futures prices are likely to hold above INR 3869 on any weakness and extend gains towards INR
4400/4500 in the coming 4 to 5 months ahead of turning weak.
33. 33
Mustard Oil Jaipur, prices are likely to hold above INR 800 on any weakness and trade higher towards INR 870 in the
coming 4 to 5 months ahead of turning weak in the subsequent months.
34. 34
Rapeseed Extract Jaipur, prices are likely to consolidate and form base around INR 13000 ahead of gradually inching
higher towards INR 17000 in the coming 4 to 5months and turn weak subsequently.
35. 35
Rapeseed Meal Lowerrhine 1M Fwd, prices are likely to hold above EUR 200/195 on further weakness ahead of
gradually inching higher towards EUR 225 in the coming 5 to 6 months.
36. 36
Rapeseed Oil Rotterdam 1M Fwd, prices are likely to stay above EUR 700 on any weakness and trade higher towards EUR
800/820 in the coming 5 to 6 months.
