Economy's 20% Growth Revives Markets Across Sectors
Overall expenditure is broadly steady at Rs 10 trillion vs 10.5 trillion in FYTD21 and Rs 9.5 trillion in FYTD20
India’s economy reported a sharp rebound at 20.1 per cent in Q1 FY22 over a low base of (-) 24.4 per cent last year. Exports and investment demand led to the uptick. Consumption is recovering at a slower pace and is likely to do so in the near term as well. Construction and manufacturing are the GVA growth drivers and will continue to do well in the near term. Contact intensive trade, hotels category is expected to rebound with a lag.
Centre’s fiscal deficit (per cent of GDP) eased sharply to 6.1 per cent in July 2021 (12MMA basis) from 6.7 per cent in June 2021, owing to improvement in revenue collections and steady expenditure growth. In FYTD22 (Apr-Jul), centre’s net revenue has jumped to Rs 6.7 trillion versus Rs 2.3 trillion in FYTD21 and Rs 3.8 trillion in FYTD20. The increase is led by both direct (Rs 3 trillion in FYTD22 versus Rs 2.2 trillion in FY20) and indirect tax collections (Rs 3.9 trillion versus Rs 3.2 trillion). Overall expenditure is broadly steady at Rs 10 trillion versus 10.5 trillion in FYTD21 and Rs 9.5 trillion in FYTD20.
US Conference Board consumer confidence index dropped to 113.8 in August 2021 (est.: 123) from 125.1 in July 2021. The 6-month low reading was driven by a surge in Covid-19 cases and rising prices of food and fuel. As consumers became less certain about future job prospects and income, the expectations index also fell to a 7-month low of 91.4 from 103.8 in July 2021. Consumers indicated that they were less likely to spend on homes, autos, and major appliances in the near term.
Bonds: Global yields closed mixed. UK's (14bps) and Germany’s (6bps) 10Y yield jumped the most as higher than expected inflation print of the Eurozone (3per cent in August 2021 versus Central Bank’s target of 2 per cent) impacted sentiments. US 10Y yield rose by 3bps to 1.31 per cent. Brent fell by 0.6 per cent to US dollars 73/bbl. As a result, India’s 10Y yield closed 1bps lower at 6.22 per cent. It is trading higher at 6.23 per cent today.
Currency: Barring GBP (flat) and JPY (lower), other global currencies closed higher against the dollar. DXY closed flat awaiting US jobs report. The rupee appreciated by 0.4 per cent as Brent dropped by 0.6 per cent. This was followed by AUD (0.3 per cent) and EUR (0.1 per cent). The rupee is trading lower today in line with other Asian currencies.
Equity: Global indices ended mixed led by subdued data print (Euro area’s inflation and China’s PMI print). While European indices ended in red, Sensex (1.2 per cent) ended at an all-time high. Technology and consumer durable stocks advanced the most. It is trading higher today signalling confidence over the ongoing economic recovery. However, Asian stocks are trading mixed.