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Equity Market
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Indian stocks ended lower for the third consecutive session today amidst weak cues from Asian peers. Profit-booking by investors in rate-sensitive shares weighed on the benchmark indices. Meanwhile, on the earnings front, index major L&T's Q4 profit after tax fell short of analysts' estimates. The Sensex closed lower at 20,062.24 (-0.25%) and Nifty closed at 6094.50 (-0.32%).
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The BSE Bankex ended lower at 14,875.96 (-0.44%). SBI ended higher at INR 2364.30 (+0.14%) while ICICI Bank ended flat at INR 1210.
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Asian stocks ended mixed today amidst caution ahead of the Fed's FOMC minutes due later today, which would provide further cues regarding the duration of the Fed's asset purchase programme. Nikkei ended higher by 1.60% as the BoJ today maintained its pledge of increasing the monetary base at an annual pace of JPY 60-70 tn. Kospi also ended higher by 0.64%, led by gains in automobile stocks. Shanghai Composite ended lower by 0.11% on the back of profit booking, while Hang Seng ended down by 0.45% amidst low trading volumes in a session that was cut short owing to rainstorm warnings. Australia's ASX closed down by 0.28%.
Debt Market
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Indian Government bonds opened lower in the absence of any announcement of open market operation by the RBI so far this week. The auction of dated securities worth INR 150 bn scheduled on Friday also weighed on the gilts. However, bonds pared some losses in later trade on reported heavy buying by state owned banks. The old benchmark 8.15% 2022 bond yield closed at 7.36%, a tad higher than yesterday's close of 7.35% while the new 7.16% 2023 ended the day at 7.17%, as against yesterday's close of 7.16%.
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India's call rate closed at 7.30%, lower than previous close of 7.25%. The RBI injected INR 1031.65 bn (gross) into the banking system today, as against INR 995.85 bn (gross) yesterday.
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US Treasuries are trading little changed today as market awaits further cues from Fed Chairman Bernanke's testimony to the Congress and minutes of the last FOMC policy review due later in the day. Treasuries received some support as comments from two Fed voting members since yesterday - Dudley and Bulllard - led to paring of bets over scaling back of asset purchases by the Central Bank.
Federal Reserve Bank of St. Louis President Bullard said that the Central Bank should continue its asset purchases program as it is the best option available to support growth while Federal Reserve Bank of New York President Dudley said that it is "too soon" to decide on adjusting asset purchases. The 10-year yield is currently trading at 1.93% unchanged from the prior close. (17:30 IST)
Forex Market
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The Indian Rupee opened marginally higher on the back of Dollar weakness this morning. However, the currency gave up its early gains amidst strong Dollar demand by its importers. The Rupee further extended declined and hit 55.64 in intraday trade, the lowest level in 2013, weighed down by Dollar purchases by custodian banks.
Losses in domestic equities further weighed on the currency. Despite reported Dollar sale by PSU banks, the Rupee failed to come off from the lows and ended the day near six month lows. USD/INR closed at 55.46, compared to yesterday's close of 55.41.
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The 6 and 12-month forward premia closed at 6.31% and 6.13% respectively as against 6.32% and 6.13% yesterday.
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The Euro traded higher as Eurozone current account surplus widened to EUR 25.9 bn from prior EUR 14.6 bn thereby aiding optimism over external sector recovery. Dollar is trading little changed as markets await Bernanke's speech today for further clarity on the quantum and timeline of the Central Bank's asset purchases.
The Pound depreciated by over 0.4% as UK retail sales plunged by 1.4% MoM in April as against an expected rise. The currency also came under pressure as the minutes of the BoE May policy meeting showed that three members voted in favor of expanding the current pace of GBP 375 bn of bond purchases including governor Mervyn King.
The Yen traded lower as the BoJ maintained its pledge to increase the monetary base at an annual pace of JPY 60-70 tn. Dollar index is trading around 83.87 flat around the previous close. EUR/USD is trading around 1.2933, as against previous close of 1.2906; GBP/USD is trading around 1.5092 as against previous close of 1.5154. USD/JPY is trading around 102.93 compared to previous close of 102.50. (17:30 IST)
Commodities Market
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Global crude oil prices are trading marginally lower compared to yesterday's close. Prices remained under pressure after the API yesterday reported a rise in US crude oil stockpiles by 0.53 mn barrels last week- the fourth consecutive weekly rise. Markets will now look forward to the US Energy Department's weekly report on US crude oil inventories, due later today, for further cues.
The front-month WTI future is currently trading at USD 95.63/bbl compared to yesterday's close of USD 96.18/bbl while Brent is trading at USD 103.31/bbl, compared to yesterday's close of USD 103.91/bbl (17:30 IST).
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Gold prices snapped their losing streak and are currently trading higher amidst speculation that the Fed may signal the need to continue with its current pace of asset purchases, ahead of the FOMC minutes due later today. The upside, however, was capped by weak investor demand, as total holdings in gold-backed ETFs declined to 2,177 tonnes yesterday- the lowest since July 2011. Spot gold is currently trading at USD 1388/oz compared to prior close of USD 1376/oz (17:30 IST).
Please find attached herewith a file containing the detailed version of the above news analysis.
Regards,
ICICI Bank : Treasury Research
Contact:
Rupali Sarkar: +91 22 2653-1414 (extn: 2023)
Pooja Sriram: +91 22 2653-1414 (extn: 2023)
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