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A glimpse of the Financial Markets last week

News Impact

• Central bank tightened bank borrowing by setting a daily limit on borrowing by individual banks

• Liquidity will squeeze in the system• Short term cost of borrowing will

increase• G-sec yield will increase.• Lower liquidity will hurt economic

growth

• CRISIL lowers India’s GDP forecast to 5.5 percent

• FII inflow may reduce• Investment cycle will be delayed


SENSEX fell by 401 points (-1.99%) and closed to 19748 at end of the week

(FIIs) were net sellers in equity segment and debt segment with outflow of Rs. 151.70 and 1490.00 Crore respectively



Price Performance of Different Asset Class No decisive

direction was seen in international

markets



A preview of Financial Markets next weekRBI’s monetary policy review will be held on July 30, 2013

US Federal Reserve’s meeting will be held on July 31,2013

HSBC India Manufacturing PMI for the month of July will be released on 1st August, 2013


Hot Topic of the Week

Bond Market `escue today, `eap tomorrow.


Bond MarketSince last two weeks, the bond market has witnessed a high volatility and uncertainty after RBI’s action

On Tuesday, 23rd July’13, RBI took new initiatives to save the rupee


Bond Market

As of now, the RBI is more likely to fiercely guard the rupee, which is apparently its top most agenda

Because of these actions, the bond market has become volatile and it will adversely affect the banking industry


Rupee Movement v/s US Bond

After FED chairman’s

speech in May, US Bond yield appreciated

sharply.

FIIs started withdrawing money from Indian bond

markets.


India 10 year G-Sec. yield

Sharp increase

after RBI’s

actions


10 year G-sec yieldOther Markets v/s India

BOND YIELDS

Country Close on 24th July,13

Diff. fromIndia's Bond

yieldsJAPAN 0.78 7.62EUROPE 1.64 6.76GERMANY 1.64 6.76FRANCE 2.27 6.13U.K. 2.40 6.00CANADA 2.47 5.93U.S. 2.57 5.83CHINA 3.85 4.55ITALY 4.38 4.02SPAIN 4.67 3.73

INDIA 8.4

India’s yields

reached an attractive

level.


Conclusion

Narrowed bond yield spread between India and USA was the major reason for FII’s outflows

After RBI’s actions, G-sec yield has reached to October 2012 level and spread has increased to sub 6% level v/s 4.8% in May 2013

Such spreads are attractive for Indian debt market, as a result of this FII flow will start


Research DeskOffice: 0265 -2324600,6629800Email: [email protected]: www.valueplusinv.com

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Knowledge plus 270713

Economy & Finance

Transcript of Knowledge plus 270713