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Mint
09-06-2025
- Business
- Mint
India bond investors favour short-end after central banks policy surprise
MUMBAI, June 9 (Reuters) - Indian investors are opting for shorter-duration government bonds and swaps after the central bank cut rates by a surprise 50 basis points and lowered the cash reserve ratio (CRR) for lenders last Friday. The policy support will steepen the yield curve, with short-term rates falling and longer-term rates stabilising or rising, four investors told Reuters on Monday. "We continue to see front-end of the yield curve to be well supported," said A. Prasanna, head of research at ICICI Securities Primary Dealership. Prasanna, however, sees limited scope for a rally in longer-duration bonds as the CRR cut would limit the need for more debt purchases by the Reserve Bank of India (RBI), a tool that would have otherwise lowered long-term yields. Expectations of a steeper curve are being reflected in markets as yields on up to three-year bonds have declined 4-5 bps since Friday, while the 10-year benchmark yield has risen nearly 18 bps from the low hit on that day. The outsized rate cut and surplus liquidity are also pushing shorter-tenor swap rates lower. The one-year OIS swap rate was around 5.45%, while the five-year rate rose to 5.70%, more-than-doubling the spread between the two. "With more liquidity and lower overnight rate fixings, there is still some room for receiving in one-year swap, but long-end should see some paying," said VRC Reddy, treasury head at Karur Vysya Bank. Reflecting the shift in sentiment, most investors now expect the 10-year bond yield to stabilise or rise. Citibank, which held a long position on the 10-year bond, said its conviction level on this trade has reduced due to limited scope for more rate cuts. Dhawal Dalal, president & CIO - fixed income - at Edelweiss MF, has turned "neutral" from "accommodative" on bonds and expects the 10-year yield in the 6.15%-6.25% band. ($1 = 85.6210 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Sonia Cheema)
Yahoo
02-06-2025
- Business
- Yahoo
Rural consumption to drive India's GDP growth this fiscal year, economists say
MUMBAI (Reuters) - Rural consumption is poised to remain a bright spot in the Indian economy, supporting growth in the ongoing fiscal year, economists said after fourth-quarter GDP growth beat estimates. India's economic growth rose to a one-year high of 7.4% in the January-to-March quarter, higher than forecast, data showed on Friday. Personal consumption grew 6% during the three months after an 8.1% rise in the previous quarter. For the fiscal year ending March, inflation-adjusted consumption growth of 7.1% outpaced broader economic expansion of 6.5%, reflecting a rural consumption recovery, Citibank said in a note on Friday. "High frequency data indicates rural demand is faring better even as urban demand is patchy," said A. Prasanna, head of research at ICICI Securities Primary Dealership. "Given rural consumption is a bigger part of overall consumption pie compared to urban consumption and was generally hurting from Covid shock in last few years, it is likely consumption growth will stay resilient." Above-average monsoon rains this year and the resultant rise in farm incomes are likely to boost rural demand as will easing inflation, economists said. Tractor and two-wheeler sales, the bellwether of demand in rural India, have been rising in recent quarters while sales of fast-moving consumer goods have been robust. Rural wage growth, adjusted for inflation, is at its highest in four years, data from ICICI Securities Primary Dealership showed, with demand for jobs under a rural jobs scheme has fallen in recent months, as per a recent JP Morgan report. Over the last two fiscal years, consumption growth in India has risen while investment growth has eased, and the trend may continue, Dhiraj Nim, an economist at ANZ, told Trading India on Monday. "For consumption, to be honest, rural demand can be a source of hope... I think consumption growth can beat GDP growth, but not by a large gap." India's central bank sees economic growth at 6.5% this fiscal year. GROWTH RISKS Even as the rural economy hums along, global uncertainties could hold back wider momentum at a time when trade wars and geopolitical tensions threaten global growth and financial flows. "While India is a domestically-oriented economy, it will not be entirely insulated from a global growth slowdown," said Aastha Gudwani, chief India economist at Barclays. "Given the Indian economy's domestic orientation, where private consumption accounts for more than 55% of GDP, domestic demand is indeed the key driver," she said. India's corporate capex is likely to remain tentative amid heightened uncertainty created by U.S. tariffs and the uncertainty on urban consumption outlook, Gaura Sen Gupta, chief economist at IDFC First Bank, said. Good monsoon rains, along with a pickup in government spending and rate cuts by the central bank could offset some of this hit to growth, economists said. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Economic Times
02-06-2025
- Business
- Economic Times
Rural consumption to drive India's GDP growth this fiscal year, economists say
Rural consumption is poised to remain a bright spot in the Indian economy, supporting growth in the ongoing fiscal year, economists said after fourth-quarter GDP growth beat estimates. India's economic growth rose to a one-year high of 7.4% in the January-to-March quarter, higher than forecast, data showed on Friday. Personal consumption grew 6% during the three months after an 8.1% rise in the previous quarter. For the fiscal year ending March, inflation-adjusted consumption growth of 7.1% outpaced broader economic expansion of 6.5%, reflecting a rural consumption recovery, Citibank said in a note on Friday. "High frequency data indicates rural demand is faring better even as urban demand is patchy," said A. Prasanna, head of research at ICICI Securities Primary Dealership. "Given rural consumption is a bigger part of overall consumption pie compared to urban consumption and was generally hurting from Covid shock in last few years, it is likely consumption growth will stay resilient." Above-average monsoon rains this year and the resultant rise in farm incomes are likely to boost rural demand as will easing inflation, economists said. Tractor and two-wheeler sales, the bellwether of demand in rural India, have been rising in recent quarters while sales of fast-moving consumer goods have been robust. Rural wage growth, adjusted for inflation, is at its highest in four years, data from ICICI Securities Primary Dealership showed, with demand for jobs under a rural jobs scheme has fallen in recent months, as per a recent JP Morgan report. Over the last two fiscal years, consumption growth in India has risen while investment growth has eased, and the trend may continue, Dhiraj Nim, an economist at ANZ, told Trading India on Monday. "For consumption, to be honest, rural demand can be a source of hope... I think consumption growth can beat GDP growth, but not by a large gap." India's central bank sees economic growth at 6.5% this fiscal year. Even as the rural economy hums along, global uncertainties could hold back wider momentum at a time when trade wars and geopolitical tensions threaten global growth and financial flows. "While India is a domestically-oriented economy, it will not be entirely insulated from a global growth slowdown," said Aastha Gudwani, chief India economist at Barclays. "Given the Indian economy's domestic orientation, where private consumption accounts for more than 55% of GDP, domestic demand is indeed the key driver," she said. India's corporate capex is likely to remain tentative amid heightened uncertainty created by U.S. tariffs and the uncertainty on urban consumption outlook, Gaura Sen Gupta, chief economist at IDFC First Bank, said. Good monsoon rains, along with a pickup in government spending and rate cuts by the central bank could offset some of this hit to growth, economists said.
Time of India
02-06-2025
- Business
- Time of India
Rural consumption to drive India's GDP growth this fiscal year, economists say
Rural consumption is poised to remain a bright spot in the Indian economy, supporting growth in the ongoing fiscal year, economists said after fourth-quarter GDP growth beat estimates. India's economic growth rose to a one-year high of 7.4% in the January-to-March quarter, higher than forecast, data showed on Friday. Personal consumption grew 6% during the three months after an 8.1% rise in the previous quarter. For the fiscal year ending March, inflation-adjusted consumption growth of 7.1% outpaced broader economic expansion of 6.5%, reflecting a rural consumption recovery, Citibank said in a note on Friday. "High frequency data indicates rural demand is faring better even as urban demand is patchy," said A. Prasanna, head of research at ICICI Securities Primary Dealership. "Given rural consumption is a bigger part of overall consumption pie compared to urban consumption and was generally hurting from Covid shock in last few years, it is likely consumption growth will stay resilient." Live Events Above-average monsoon rains this year and the resultant rise in farm incomes are likely to boost rural demand as will easing inflation, economists said. Tractor and two-wheeler sales, the bellwether of demand in rural India, have been rising in recent quarters while sales of fast-moving consumer goods have been robust. Rural wage growth, adjusted for inflation, is at its highest in four years, data from ICICI Securities Primary Dealership showed, with demand for jobs under a rural jobs scheme has fallen in recent months, as per a recent JP Morgan report. Over the last two fiscal years, consumption growth in India has risen while investment growth has eased, and the trend may continue, Dhiraj Nim, an economist at ANZ, told Trading India on Monday. "For consumption, to be honest, rural demand can be a source of hope... I think consumption growth can beat GDP growth, but not by a large gap." India's central bank sees economic growth at 6.5% this fiscal year. Growth risks Even as the rural economy hums along, global uncertainties could hold back wider momentum at a time when trade wars and geopolitical tensions threaten global growth and financial flows. "While India is a domestically-oriented economy, it will not be entirely insulated from a global growth slowdown," said Aastha Gudwani, chief India economist at Barclays. "Given the Indian economy's domestic orientation, where private consumption accounts for more than 55% of GDP, domestic demand is indeed the key driver," she said. India's corporate capex is likely to remain tentative amid heightened uncertainty created by U.S. tariffs and the uncertainty on urban consumption outlook, Gaura Sen Gupta, chief economist at IDFC First Bank , said. Good monsoon rains, along with a pickup in government spending and rate cuts by the central bank could offset some of this hit to growth, economists said. Economic Times WhatsApp channel )
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Business Standard
15-05-2025
- Business
- Business Standard
RBI pushes lenders to revive funding market vital for monetary policy
A dwindling borrowing market used mainly by Indian banks is showing signs of life as authorities champion its usage to lenders, according to people familiar with the matter. Average daily volumes in the interbank call market have climbed to their highest in about five years this month, despite a plethora of often more attractive alternatives. Officials at the Reserve Bank of India have been asking dealers at banks to use the facility to keep its relevance to monetary policy alive, the people said, who asked not to be named, citing private discussions. While overall money-market turnover has risen to an average $70 billion a day, interbank trades account for just 2 per cent of that, down from 20 per cent a decade ago. That's as non-bank players like mutual funds and insurers use other venues for funding, contributing to the market's waning significance. The call money market is a vital component of India's financial plumbing, allowing the central bank to gauge how well its interest rate changes are being reflected in the broader economy. Shrinking volumes threaten to disrupt this process, weakening the link between policy rates and real-world borrowing costs, and by extension, the pricing of key financial derivatives. 'The weighted average call rate is the best operational target for monetary policy, despite dwindled share of call market volumes in overnight markets,' said Abhishek Upadhyay, an economist at ICICI Securities Primary Dealership. 'It represents the balance between demand and supply of bank reserves that is controlled by the RBI.' An email sent to the RBI seeking comment on the matter wasn't immediately answered. Daily average volumes in the call market are about Rs 16,490 crore ($1.9 billion) so far this month, Bloomberg-compiled data show. That's the highest in more than five years. Volumes reached 200 billion rupees on May 5, the highest since March 2020. To be sure, reviving the market comes at a cost: unsecured borrowing is typically more expensive and exposes lenders to credit risk. The trend away from the bank-to-bank call market isn't unique to India. Since the 2008 financial crisis and the stricter banking rules that followed, several countries embraced secured markets. For instance, the US replaced the scandal-hit Libor with the Secured Overnight Financing Rate. In India, the transition comes as players like mutual funds and insurers — whose assets have ballooned since the pandemic — are borrowing in the secured funding markets such as repo. The waning impact of the interbank rate has reduced the effectiveness of its link to the policy rate, making it harder to price loans and other financial products. This has spurred the central bank to push for a new benchmark — the Secured Overnight Rupee Rate (SORR) — which may eventually replace the Mumbai Interbank Outright Rate for pricing derivatives. The transition will depend on liquidity building up in the products tied to the new rate, according to the RBI. About 86 per cent of India's Rs 100 trillion outstanding in interest interest rate derivatives are overnight indexed swaps, tied to MIBOR, according to the central bank. The SORR, based on secured overnight repo trades that account for 98 per cent of activity, offers greater reliability and transparency.
