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August 16, 2025 gst reforms and alaska summit
August 16, 2025 gst reforms and alaska summit
RBI did not oblige with 25 bp cut in the August policy and the benchmark 10 year yields moved higher by almost 17-18 bp to touch 6.5 during the week. CPI print of 1.55 and S&P upgrading India Sovereign Rating to BBB brought back some buying interest resulting in about 10 bp rally yesterday. Looking at the most challenging Q1 for the corporate results in the recent history and headwinds ahead for some sectors because of the Trump tariffs, the expectations of a rate cut will get built in as we move towards the October policy. As a result, lower CPI levels and benign crude oil prices coupled with the demand related to the rating upgrade can trigger another 10-15 bp rally in the benchmark bond yields ahead of the October RBI policy meeting. A contrarian view as of now as most analysts / economists have taken the bets off on further rate cuts.
Trump Putin summit in Alaska seems to have progressed well today going by the way both of them - particularly President Putin - spoke at the press conference. Though there is no concrete deal as of today, its a relief that the summit has ended on a "to be continued" note rather than stalling the conciliation efforts completely. In short nothing negative for the markets from Alaska. While the other negative news (wars, tariffs, poor Q1 results, disappointment over RBI rate cut etc) is fully discounted in the current NIFTY and SENSEX levels, GST reforms promised by PM Modi during the Independence Day speech, start of the festival season with Janmashtami, impending rate cuts in the USA and the India rating upgrade by S&P has the potential to bring some cheer to the market in the next week. In about two months the Indian market has lost almost 7% in USD terms. Large enough for some smart FPIs to take a re-look!
August 5, 2025
August 5, 2025
Very important monetary policy meeting tomorrow. Though RBI has changed the stance to neutral in the June policy, they have admitted that the next course of action will be data dependent. And they can't ignore the following data points:
The growth challenges as observed from not so encouraging Q1 results so far
Trump tariffs likely to further drag the growth momentum down a bit
Inflation undershooting their forecast
With Oil prices remaining range-bound in $65-70 per barrel and US FED almost certainly going to cut the rates further from September, its a good opportunity for the RBI to give a strong message by cutting 25 bp tomorrow and communicate that they are not done yet. Expect the bonds to rally tomorrow as a result and 10 year to close under 6.25 again.
July 30, 2025
July 30, 2025
In the evening today President Trump announced 25% tariff on Indian exports to the US because India continues to buy oil and defence equipment from Russia. As a knee jerk reaction, the Gift NIFTY futures crashed about 170 points (0.7%). Expect the markets in India also to fall 1 to 1.5% tomorrow. But its important to analyse the relative size of the impacted revenues from the US trade. Indian exports to the US is about USD 80 bln per year which is roughly INR 6.9 trln. Gross revenue of top 500 companies in India is roughly INR 125 trln. While all this 6.9 trln is not contributed by top 500 companies (for example gems and jewellery) it is just about 5.5% of the gross revenue of top 500 companies. If we assume that this tariff will lower the profitability of these exports by 25%, the impact on total profits will probably be about 1.25%. And going by the earlier track record of President Trump's backtracking on the tariffs there is certainly a reasonable probability of these tariffs being re-negotiated as well. Having already corrected by about 3 % during the month, any further correction over 1% tomorrow is a level where one can start accumulating.
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