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Monthly India Treasury Update
Tuesday, 1 January 2013
 
"We will open the book. Its pages are blank. We are going to put words on them ourselves. The book is called Opportunity and its first chapter is New Year's Day."
― Edith Lovejoy Pierce
 
Domestic Markets
 
Rupee ended lower on risk off sentiment on the back of US fiscal cliff
Bullet December Closing Rate – 54.99/55.00 (previous month closing – 54.26/27).
Bullet Rupee further weakened against US Dollar in the month of December touching a high of 55.2800, as demand from importers and oil companies kept INR under pressure throughout the month. Risk off sentiment among investors on the back of looming fiscal cliff in US, kept pressure on risk assets including INR. However good inflows from FIIs gave some support to the falling INR.
 
Indian Equity Markets ended flat despite large primary issuances and good
FII inflows
Bullet BSE index Dec closing – 19,426.71 (Up 0.45% from Nov closing).
Bullet Indian Equity Markets traded broadly flat over the month amid global risk off sentiments on the back of concerns over fiscal cliff situation in US and the deadlock in the discussions over the same. However, Indian equities held their ground as a number of primary issuances in the market saw good interest and FIIs inflows helped provide support for the same.
Bullet FII Equity flows December: Net USD +4446.38 MIO investment.
 
Indian Bonds Market ended higher on Open Market Operations announcements from RBI, towards the month-end and expectations of more Open Market Operations in the near-term
Bullet 8.15 percent Government bond 2022 yield – 8.0500 percent (down 12.5 bps over previous month close of 8.1750 percent).
Bullet Indian Bonds ended higher for the month on multiple Open Market Operations conducted by RBI and expectations of more Open Market Operations to come in the near-term.
Bullet FII Debt flows December: Net USD 590.76 MIO investment.
 
Key Local Policy Initiatives and Government Actions
Bullet RBI left the policy rates unchanged at the monetary policy meeting this month.
Bullet Government pushed ahead with major reform measures announced in September, in the winter parliament session. FDI in retail, passed through both houses of parliament.
 
Snapshot from HSBC Global Economics
 
...and is expected to recover, only slowly
Bullet Agricultural output is expected to decline in annual terms in the months of October-December, due to the deficient monsoons.
Bullet Industrial production is projected to recover moderately during the second half of the fiscal year, on the back of global economic stabilisation and some progress on structural reforms.
Bullet Services sector growth is also projected to pick-up pace during the second half, led by
trade-related, financial and community-related services.
Source: HSBC Q1 2013 Global Economics Quarterly
 
Currency Forecast
  2012       2013      
Currency Q1 Q2 Q3 Q4f Q1f Q2f Q3f Q4f
USD/INR 50.90 55.50 52.90 54.00 53.00 52.00 51.00 50.00
EUR/USD 1.33 1.27 1.29 1.32 1.34 1.34 1.35 1.35
GBP/USD 1.6 1.57 1.61 1.61 1.60 1.56 1.53 1.52
Source: HSBC August 2012 Currency Outlook
 
Indicative Rates
Indian Rupee As of Dec. end As of Nov. end Change Asian Indices As of Dec. end As of Nov. end Change
USD/INR 55.00 54.26 1.36% BSE Sensex 19,427 19,340 0.45%
EUR/INR 72.38 70.57 2.56% US Treasuries        
JPY/INR 0.632 0.658 -3.95% 1 year 0.1433 0.168 -14.70%
GBP/INR 89.06 86.93 2.45% 5 years 0.7245 0.62 16.85%
CHF/INR 59.93 58.55 2.36% 10 years 1.7565 1.6164 8.67%
AUD/INR 57.00 56.62 0.67% Commodity         
Global Indices          Gold 1,674.34 1,714.4 -2.34%
Dow Jones Index 13,104 12,966 1.06% Silver 30.31 33.4 -9.25%
GOI Bonds          Crude Oil 111.11 111.23 -0.11%
1 year 7.96 8.029 -0.86% USD/INR  Forwards        
5 years 8.025 8.16 -1.65% 6 months (%) 6.43 6.23 3.21%
10 years 8.05 8.175 -1.53% 1 year (%) 5.74 5.92 -3.04%
6 Months LIBOR                 
USD 0.5083 0.526 -3.37%        
Source: Bloomberg/Reuters
 
Indian Macro-economic Indicators released (period 1 December 2012 to 30 December 2012)
Date Time Indicator Period Actual Forecast Prior
3-Dec-2012  10:30 India Nov HSBC Markit Manufacturing PMI NOV     53.70
5-Dec-2012  10:30 India Nov HSBC Markit
Services PMI		 NOV     52.10
11-Dec-2012  11:00 Exports Y-O-Y NOV -4.2%   -1.6%
11-Dec-2012  11:00 Imports Y-O-Y NOV 6.4%   7.4%
12-Dec-2012  11:00 Industrial Production Y-O-Y SEP 8.2% 5.1% -0.4%
12-Dec-2012  11:00 CPI Y-O-Y NOV 9.90%   9.75%
14-Dec- 2012  11:00 WPI Y-O-Y NOV 7.24% 7.60% 7.45%
18-Dec-2012  11:00 Repo Rate   8.00% 8.00% 8.00%
30-Dec-2012  13:49 Fiscal Deficit (INR Crore) NOV 45,006   31,016
Source: Bloomberg/Reuters
   
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