February 2016 | srei
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February 2016

Highlights of Union Budget 2016-17

  • Fiscal deficit in 2015-16 (Revised Estimate [RE]) and 2016-17 (Budget Estimate [BE]) retained at 3.9% and 3.5%.
  • Revenue deficit target lowered from 2.8% to 2.5% in RE 2015-16.
  • No changes to existing personal income tax slabs.
  • To bring in parity in between the National Pension System (NPS) and EPFO, the Budget has provided tax exemption up to 40% of the pension wealth received by an employee from either of the products.
  • Hike in securities transaction tax (STT) on sale of options in securities (where option is not exercised) to 0.05% from 0.017%; the revised tax rate is effective from June 1.
  • Additional exemption of Rs 50,000 for housing loans up to Rs 35 lakh, provided cost of house is below Rs 50 lakh.
  • Individuals in the higher income bracket (above Rs 1 crore annual income) will now be charged surcharge at 15% from 12% currently.
  • Dividend in excess of Rs 10 lakh per annum to be taxed at additional 10%.
  • Swacch Bharat Abhiyan allocated Rs 9,500 crores.
  • Government is launching an initiative to provide cooking gas to below poverty line (BPL) families with state support.
  • Rs 2.18 lakh crore to be spent on capital expenditure of roads and railways in 2016-17.
  • 100% FDI in marketing of food products produced and marketed in India.
  • Reforms in FDI policy for insurance and pension, asset reconstruction companies, stock exchanges.
  • Rs 25,000 crore allocated towards recapitalisation of public sector banks.


Highlights of Railway Budget 2016-17

  • The operating ratio for FY’17 is estimated at 92%; FY’16’s operating ratio estimate has been revised to 90%.
  • The planned outlay for FY’17 is estimated at Rs 1.21 lakh cr.
  • Gross traffic receipts and revenue for FY’17 are pegged at Rs 1.85 lakh cr and Rs 1.84 lakh cr respectively.
  • Railways to get Rs 40000 cr budgetary support from the government.
  • There will be no hike in passenger fares this year.
  • Quota for senior citizens for lower berths in each coach to be increased by 50% thereby adding nearly 120 lower berths per train for then.
  • 33% reservation to women in reserved quota in Railways will be introduced.
  • Wi-Fi to be installed in 100 stations this year and 400 stations next year, in partnership with Google.
  • IRCTC to manage catering service. Local cuisine of choice will be available for passengers.
  • Capacity of e-ticketing system to be enhanced from 2,000 tickets/min to 7,200/min.
  • Deen Dayal coaches to be added for long distance trains for unreserved passengers.
  • Ticket cancellation facility to be provided through helpline number 139.
  • 1,600 km of electrification this year and 2,000 km proposed for the next year.
  • More dedicated freight corridors to accommodate the increased demand in freight transport.
  • Three direct services - fully air-conditioned Humsafer to travel at 130-km per hour.
  • Aastha Circuit Trains to connect important Pilgrim Centers.
  • Overnight double-decker train Uday Express to be introduced on busiest routes, carrying capacity to be 40% more.
  • Northeast India, especially Mizoram and Manipur to be connected though broad gauge.
  • Special purpose vehicle for the Ahmedabad-Mumbai high speed corridor registered this month.


Indian Economy Review

Indian economic growth forecasts remain upbeat

Despite the uncertain global economic situation, India continues to be a bright spot among other nations, also reiterated by various domestic and international agencies. The Organisation for Economic Co-operation and Development (OECD) raised India’s growth forecast for 2016 by 0.1% to 7.4%. On the domestic front, Prime Minister Narendra Modi said India is the only economy which has not been affected by the global economic crisis, primarily due to policies implemented by the government. The Central Statistics Office (CSO) said the Indian economy is estimated to expand by 7.6% in fiscal year 2015-16, the highest in at least four years, compared with 7.2% in the previous fiscal. In the government’s economic survey, the country’s growth was expected in range around 7.0-7.75% in FY16 and FY17. ,. Meanwhile, Standard & Poor's retained its sovereign rating of ‘BBB-‘ on India, despite the government sticking to its fiscal deficit target; will await further improvement in public finances.

Domestic GDP Growth


Upward momentum in inflation persists in January

India’s consumer price index (CPI) based inflation rose to a 17-month high of 5.69% in January, from 5.61% in December, driven by higher food costs. The RBI raised its CPI inflation projection to about 5% for the year ending March 2017, higher than 4.8% estimated in December. The Economic Survey saw CPI inflation at around 4.5-5% in 2016-17. Meanwhile, the wholesale price index (WPI) based inflation fell for the 15th straight month in January, declining 0.90%, compared with a drop of 0.73% in December.

Government approves new policy to manage divestments

Government approved a new policy for managing investments in public sector enterprises, including disinvestment and strategic sale. It also fixed the disinvestment target for the next fiscal at Rs 56,500 crore, including Rs 20,500 crore from strategic sales; the disinvestment target for FY16 was Rs 69,500 crore, which has been revised to Rs 25,313 crore. The government is planning to dilute its stakes in a host of infrastructure financing institutions through the newly-created National Investment and Infrastructure Fund (NIIF). It also planning to raise about Rs 6,000 crore by getting Coal India to buy back a fourth of its paid-up share capital at a premium. Further, it is looking to auction its holdings in ITC and L&T to make up part of the shortfall in funds that it targeted to raise via disinvestment. The government raised about Rs 5,030 crore by selling its 5% stake in NTPC.

Among proposals cleared by the Cabinet

  • The Cabinet approved the Trade Facilitation Agreement (TFA) under the World Trade Organization (WTO), which aims to ease customs procedures to boost commerce.
  • It cleared several short-term (within a year) and medium-term (within two years) measures to be implemented for promoting digital and card-based payments in the country.
  • It approved a proposal for formation of joint venture companies between Indian Railways and state governments to mobilize resources for executing rail infrastructure projects in multiple states.
  • It also approved seven new railway projects worth Rs 10,700 crore.
  • It said long-term supply or linkages for coal to non-power sectors of steel, cement and aluminium will now be granted via e-auctions.

Among major developments in the month

Prime Minister Narendra Modi launched the Rurban Mission from Chhattisgarh; expects to attract Rs 5,000 crore investment in the next three years to give villages an urban look. Finance Minister Arun Jaitley said the Centre will have to make a provision of Rs 1.1 lakh crore to implement the pay commission recommendations and the One Rank, One Pension decision. The government reviewed project structure and regulations in the infrastructure sector, seeking more private investment worth $100-150 billion in ongoing projects. It is considering allowing 100% foreign direct investment (FDI) in the market place format of e-commerce retailing, with a view to attract more foreign investments.

Finance Ministry asked public sector companies to buy back shares about Rs 25,000 crore and pay higher dividends. It also clarified on implementation of Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards; said that all fixed deposits and auto sweep facilities in pre-existing savings bank accounts will not have to be reported. The government decided to infuse about Rs 5,000 crore capital in the public sector banks in the current fiscal to strengthen balance sheet. It also asked banks to work with local kirana and chemist shops as well as ex-servicemen as linkages for cash transfers in remote areas. The government is considering a proposal to set up a bank or a company to deal with the bad loans of state-owned banks. The Centre launched a Rs 10,000 crore development fund, specifically targeted at the semi-conductor industry. It also relaxed green norms for construction; projects spread over 20,000 sq metres will no longer need Centre's clearance.

Government unveiled the National Capital Goods Policy to give an impetus to the capital goods sector and a leg up to the Make in India initiative; decided to create a start-up centre for the capital goods industry and will also launch a technology development fund for the sector. Further, it said the interest rates on small saving schemes would be recalibrated quarterly instead of annually, from April 1, 2016 to align them with market rates of related government securities. The government allowed sharing of active telecom infrastructure. It also notified the definition of a `start-up' to ensure that only deserving companies draw the benefits of its `Start-up India Action Plan'. The Make in India event secured investment commitments worth Rs 15.2 lakh crore, with host state Maharashtra alone accounting for Rs 8 lakh crore.

The government unveiled a new scheme under which those with undisclosed income and assets located in India can come clean by paying a tax of 45%. It also decided to offer statutory backing to the Aadhaar Unique Identification scheme. The government banned the duty-free imports of capital goods for power generation and transmission projects, under the Export Promotion Capital Goods (EPCG) scheme.

The government asked the pension regulator PFRDA to ensure that the full range of investment products, including alternate investment funds (AIFs), are made available for Indians saving for their retirement. The government decided to impose a minimum import price (MIP) on steel products to protect the local market.

Regulatory developments in the month

RBI decided to ease regulations to allow start-ups to raise foreign venture capital through innovative instruments. It also decided to take steps to improve 'ease of doing business' in India and contribute to an ecosystem, that is conducive for growth of the start-up businesses. The RBI sought the finance ministry's approval to ease the sponsor holding limit for asset reconstruction companies (ARCs). The Supreme Court directed the RBI to furnish details of all defaulters, having more than Rs 500 crore in outstanding dues, within six weeks.

The Telecom Commission approved liberalisation of 800MHz spectrum in circles where a market-determined price is not available. Telecom Regulatory Authority of India (TRAI) barred differential pricing for internet services offered by telecom players. TRAI recommended public private partnership (PPP) model for rolling out broadband network in rural India, which has missed various deadlines of completion. Central Board of Direct Taxes directed the taxmen to mandatorily resolve rectification pleas from assessees within the set six-month deadline.

Major economic indicators released during the month:

India’s industrial output declined in December, contracting 1.3%, compared with a revised fall of 3.4% in November. Eight core industries' output grew 2.9% in January this year, compared with 2.3% a year ago. The country’s exports plunged 13.6% from a year earlier to $21.07 bn, while imports fell 11.01% to $28.71 bn, resulting in a trade deficit of $7.63 bn compared with $7.87 bn in the same month of the previous fiscal. Fiscal deficit was Rs 5.32 lakh crore during April-January, or 95.8% of the full-year target, as compared with the FY16 target of Rs 5.56 lakh crore.

Finance Ministry said that tax collections stood at Rs 10.66 lakh crore for the first eleven months of the current financial year, which was 73.5% of the Budget target of Rs 14.49 lakh crore. According to Department of Industrial Policy & Promotion (DIPP) data, the proposed investments in the industrial sector were Rs 3.11 lakh crore in 2015, down 23% from Rs 4.05 lakh crore in the previous year. FDI into India rose 40% to $29.44 bn during April-December in the current fiscal.

India’s Nikkei manufacturing purchasing managers’ index (PMI) rose to 51.1 points in January from 49.1 in December, while services PMI surged to 54.3 in January from 53.6 in December; the composite PMI output index climbed to an 11-month high of 53.3 in January from 51.6 in December.

Indicators Current Previous
Monthly WPI Inflation -0.90% (January 2016) -0.73% (December 2015)
Industrial Growth -1.3% (December 2015) 3.4% (November 2015)
Exports $217.68bn (April-January 2016) $264.32bn (April-January 2015)
Imports $324.53 bn (April-January 2016) $383.88 bn (April-January 2015)
Trade Balance -$106.85bn (April-January 2016) -$119.56 bn (April-January 2015)
Gross Tax Collections Rs1, 057,704cr (April-January 2016) Rs 872,084cr (April-January 2015)

IIP Growth

IIP Growth

  • India’s industrial output declined in December, contracting 1.3%, compared with a revised fall of 3.4% in November.

IIP-Core Sector Growth

Core IIP Growth

  • Eight core industries' output grew 2.9% in January this year, compared to 0.9% growth in December.

Fiscal Deficit

Fiscal Deficit

  • Fiscal deficit was Rs 5.32 lakh crore during April-January, or 95.8% of the full-year target, as compared with the FY16 target of Rs 5.56 lakh crore.

Global Economy Review

Global economic outlook remains gloomy

Economic recovery continued to languish on the global landscape and the outlook turned gloomier after the Organisation for Economic Cooperation and Development (OECD) trimmed its 2016 global growth forecast to 3%, from 3.3% forecasted in November. The International Monetary Fund (IMF) also signaled that the world economy is highly vulnerable and called for new mechanisms to protect the most susceptible economies.

US economy grows 1% in Q4 2015

The US is expected to adopt a wait-and-watch approach on subsequent rate hikes. Minutes of the latest meeting of the Federal Open Markets Committee (FOMC) showed concurrence from most members that it would be best to await additional information on strength of the economy, before hiking interest rates in 2016. The US economy expanded at an annualized pace of 1% in Q4 2015 – superseding the previous estimate of 0.7% and 2% growth reported in Q3. Meanwhile, the OECD slashed its 2016 growth forecast for US by 0.5% to 2%.

World GDP Growth

World GDP Growth

Major Indicators Current Previous Major Global Central Bank Latest Key Interest Rates
US GDP 1% Q4 2015 2% Q3 2015 US Fed Funds Rate 0.25-0.50%
US unemployment 4.9% February 2016 4.9% January 2016 Bank of England 0.50%
UK GDP 1.9% Q4 2015 2.1% Q3 2015 European Central Bank 0.05%
Euro Zone GDP 1.6% Q4 2015 1.6% Q3 2015 Japan Benchmark Rate 0-0.10%
Japan GDP -1.1% Q4 2015 1.4% Q3 2015    
China GDP 6.8% Q4 2015 6.9% Q3 2015    
Singapore’s GDP 6.2% Q4 2015 1.8% Q3 2015

Key economic indicators

  • The trade deficit widened to $43.4 bn in December, compared with $42.2 bn in November.
  • The consumer price index (CPI) inflation remained unchanged in January after slipping 0.1% in December.
  • Personal consumption rose 2.0% in Q4 2015, down from an initial print of 2.2%, and below 3% growth seen in Q3 2015.
  • Industrial output increased 0.9% in January after a downwardly revised 0.7% decline in December.
  • Retail sales advanced 0.2% in January, in line with revised growth of 0.2% in December.
  • US non-farm payrolls came in at 242,000 in February compared to a revised 172,000 in January; the unemployment rate remained steady at 4.9%.
  • In the housing sector, existing home sales rose 0.4% in January from the previous month to a seasonally adjusted annual rate of 5.47 mn, while new home sales dropped 9.2% to a seasonally adjusted annual rate of 494,000 units in January.


Eurozone may announce more stimulus measures amidst deflation

Despite the Eurozone economy expanding 1.6% annually in Q4 2015, compared with 1.6% growth in Q3, the fear of deflation loomed large. Inflation fell to -0.2% y-o-y in February after rising 0.3% in the previous month and far from the European Central Bank’s (ECB) target of nearly 2%. The fall in inflation has mounted pressure on the ECB to release more stimulus measures. The ECB Chief Mario Draghi said that lackluster growth in wages and growing concerns about weak inflation justify further easing in the monetary policy stance.

Key Eurozone economic indicators:

  • The trade surplus fell to $21 bn euros in December from $22.6 bn euros in November.
  • Industrial output declined 1% in December, compared with a 0.5% drop in November.
  • Retail sales grew 0.3% in December after a stable reading in November.
  • Unemployment dropped to 10.4% in December from 10.5% in November, its lowest rate since September 2011.

UK expands 1.9% in Q4 2015

The UK economy expanded 1.9% annually in Q4 2015, following 2.1% growth in Q3 2015. In an important development, the British Prime Minister David Cameron pledged to remain in the European Union. The Bank of England maintained the interest rate at 0.5% and the size of the asset purchase programme at 375 bn pounds.

Key UK economic indicators:

  • Trade deficit widened to 10.352 bn pounds in Q4 from 8.575 bn pounds in the previous quarter.
  • The public sector net borrowing was at a surplus of 11.2 bn pounds in January, versus 10.2 bn pounds a year ago.
  • Industrial output fell 1.1% in December, compared with 0.8% fall in November.
  • Retail sales rose 2.3% in January, from the prior -1.4% drop in December.
  • CPI inflation rose 0.3% year on year in January, compared with a 0.2% rise December.
  • The unemployment rate came in at 5.1% in December, the same as in three months to November.


China cuts reserve requirement ratio

Striving constantly to revive the slowing economy, the People’s Bank of China slashed the reserve requirement ratio - amount of cash the country's banks have to hold - by 0.5% to 17%. The central bank Chief Zhou Xiaochuan also signaled that Beijing is planning a fresh round of stimulus measures and reassured that there will be no adverse impact on the yuan. Meanwhile, the OECD retained its growth forecasts for China for next two years, yet expects growth to slow to 6.5% in 2016 and 6.2% in 2017.

Key Chinese economic indicators

  • Exports declined 11.2% in January from a year earlier, compared with a 1.4% fall in December, while imports plunged 18.8% compared with a 7.6% decline, thereby resulting in a record trade surplus of $63.3 bn in January, compared to a surplus of $60.09 bn in December.
  • CPI inflation rose 1.8% year-on-year in January, compared with 1.6% increase posted for December.
  • The official manufacturing purchasing managers’ index (PMI) fell to 49.4 in January from 49.7 in December, while non-manufacturing PMI fell to 53.5 in January from 54.4 in December.

Japan economy shrinks 1.1% in Q4 2015

Japan's economy contracted by an annualized 1.1% in Q4, following a revised 1.4% increase in the previous quarter due to weaker domestic demand and slower investment in housing. The rating agency Moody’s Investor Services, however, said that BOJ’s negative rates is unlikely to boost lending to business and household.

Key Japanese economic indicators:

  • Exports fell 12.9% y-o-y in January, while imports dipped 18%, leaving a trade deficit of 646 bn yen in January, compared with a surplus of 140.2 bn yen in December.
  • CPI inflation was unchanged in January from a year earlier, after inching up 0.1% in each of the previous two months.
  • Industrial output rose 3.7% month-on-month in January, compared with 1.7% fall in December.
  • Retail sales fell 0.1% in January from a year earlier, compared with 1.1% decrease in December.

Singapore GDP grows 2% in 2015

Singapore’s economy expanded at a slower pace of 2% in 2015, compared with 3.3% growth in 2014. However, the economy grew more than expected by a seasonally adjusted annual rate of 6.2% quarter-on-quarter in Q4 2015, up from the advance estimate of 5.9% and following 1.8% growth in Q3. Among key indicators, industrial production dropped 0.5% on year in January, much slower than the 11.9% plunge in December.

Domestic Fixed Income Review

Domestic G-sec Yield

6 Month LIBOR

Interbank call money rates remained below the repo rate of 6.75% for most parts of the month. Call rates remained on the lower side, amid comfortable cash conditions, buoyed by funds injected by the RBI via repo auctions, inflows from the government’s month-end spending and from RBI’s repurchase of dated securities. However, some spike in call rates was witnessed due to strong demand from banks to cover their reserve requirements and outflows pertaining to excise and service taxes, state development bonds and gilts payments. Meanwhile, in a notification, the RBI announced that it will inject adequate additional liquidity using a combination of appropriate instruments, while continuing with its normal Liquidity Adjustment Facility (LAF), anticipating liquidity to tighten towards the end of March 2016.

Government security prices (gilts) recouped most intra-month losses on the last session of the month as sentiment received a boost from positive announcements in the Union budget. Yield on the 10-year benchmark – the 7.59%, 2026 paper – ended at 7.62% on February 29, 2016, compared with 7.64% on January 29, 2016. Bonds prices surged sharply as the gilt market cheered the fact that the Centre had retained its fiscal deficit target of 3.9% of GDP for FY16 and 3.5% of GDP for FY17, boosting hopes of a rate cut. The market borrowing numbers announced by the Centre also aided gains - the gross borrowing for FY17 has been pegged at Rs 6 lakh crore, largely unchanged from FY16, and the net borrowing for FY17 is Rs 4.25 lakh crore, lower than the FY16 figure of Rs 4.56 lakh crore.

Earlier, bond prices were down as the RBI’s policy announcement disappointed market players. Though the RBI's stance remained accommodative, there was a possibility that inflation may receive "upward momentum" for one to two years when the Seventh Pay Commission's recommendations are implemented. Appetite also took a slight hit as the RBI’s notification regarding liquidity management led market players to believe that the possibility of further open market bond purchases by the apex bank has dimmed. Prices were pulled down further owing to the rupee’s sharp fall against the US dollar and as data showed a rise in consumer inflation for January. However, a sharp downside was prevented by the RBI’s periodic open market bond purchase auctions. The RBI’s clarification that bonds issued under the UDAY package will not hit the market also aided gains.

Among major developments

The Finance Minister said overall debt liabilities of the government are on a declining trajectory, with a low rollover risk owing to longer maturity profile of bonds. RBI said it is working on measures to make bond market attractive and less complicated. An RBI-appointed working group proposes to introduce plain-vanilla interest rate options in the market. RBI decided to conduct reverse repo auctions and marginal standing facility operations on all Mumbai holidays, when the RTGS is open. SEBI is mulling several proposals to strengthen the corporate and municipal bond markets. As per SEBI data, Indian companies raised nearly Rs 23,000 crore via non-convertible debentures (NCDs) in the ongoing fiscal to meet business requirements.

With regard to banking and non-banking finance companies (NBFCs), the RBI let banks use 10% of their bond purchases under the Statutory Liquidity Ratio (SLR) rule towards bond requirements under Liquidity Coverage Ratio (LCR), from 7% earlier. The central bank said it will inject adequate liquidity to ward off expected tightening in March, when advance tax payments are due. This would also provide banks flexibility on liquidity management towards the month-end.

RBI Governor Raghuram Rajan said efforts of the central bank and the government to clean up banks' balance sheets would be successful, and warns analysts against "scare-mongering" about the level of stressed assets. He also said the central bank will soon begin on-tap issuance of bank licenses. RBI Deputy Governor SS Mundra said the high numbers of non-performing assets (NPAs) being reflected in banks' results is because of the delayed recognition of stress by lenders. RBI shut out dissenting banks from a committee established to prevent new defaults, and mandated that promoters will have to bear the risk by bringing in their funds, in case of loan restructuring. It also announced changes in its strategic debt restructuring scheme, allowing banks more time to sell their holdings in companies they take control of. RBI to soon undertake incognito visits to bank branches to check culture towards customer complaints in banks; will also undertake a review of how banks have implemented Charter of Customer Rights. The central bank asked banks to submit proforma Ind AS financial statements starting from the half-year ended September 30, 2016. It also asked banks to file forms related to FDI only online on the e-biz portal, starting February 8. Further, it said it has included National Bank of Abu Dhabi PJSC (NBAD) in the Second Schedule to the RBI Act.


Fixed Income Indicators

Rates & Liquidity

  29-Feb-16 1 Week Ago 1 Month Ago
Repo 6.75 6.75 6.75
Reverse Repo 5.75 5.75 5.75
CRR 4.00 4.00 4.00
LAF o/s Repo (Rscr) 18769 15131 13214
LAF o/s Rev Repo (Rscr) 7054 3140 3718

Overnight                                         Rate(%)

  29-Feb-16 1 Week Ago 1 Month Ago
Mibor 6.96 6.93 7.00
Call 7.50 6.80 7.20
CBLO 6.84 6.79 7.01
OIS 1Y 6,84 6.99 6.86
OIS 5Y 6.70 6.83 6.71

CDs                                                             Yield(%)

  29-Feb-16 1 Week Ago 1 Month Ago
1-Month 7.08 7.23 7.33
3-Month 8.24 8.20 8.08
6-Month 8.20 8.17 8.00
1-Year 8.10 8.15 7.90

CPs                                                   Yield(%)

  29-Feb-16 1 Week Ago 1 Month Ago
1-Month 8.82 8.38 7.90
3-Month 9.25 9.20 9.27
6-Month 9.17 9.16 9.20
1-Year 9.15 9.11 9.13

Short Term Bonds                                        Yield(%)

  29-Feb-16 1 Week Ago 1 Month Ago
1 Y G-Sec 7.26 7.25 7.21
1 Y AAA 8.33 8.29 8.22
1 Y AA 8.85 8.81 8.74
2 Y G-Sec 7.41 7.42 7.25
2 Y AAA 8.35 8.31 8.10
2 Y AA 8.82 8.78 8.57

Long Term Bonds                          Yield(%)

  29-Feb-16 1 Week Ago 1 Month Ago
5 Y G-Sec 7.73 7,81 7.61
5 Y AAA 8.58 8.53 8.26
5 Y AA 9.23 9.18 8.91
10 Y G-Sec 7.62 7.77 7.64
10 Y AAA 8.60 8.60 8.40
10 Y AA 9.42 9.42 9.22

Top 5 Graded G Secs                                   Yield(%)

  29-Feb-16 1 Week Ago 1 Month Ago
07.88% GS 2030 7.62 7.78 7.64
07.59% GS 2029 7.64 7.90 7.58
07.59% GS 2026 8.02 8.20 7.96
08.27% CGL 2020 7.79 8.00 7.78
07.72% GS 2025 7.99 8.18 7.86


  29-Feb-16 1 Week Ago 1 Month Ago
USD/INR 68.43 68.60 67.78
EURO/INR 75.08 76.20 74.07
GBP/INR 95.20 97.84 97.76
100 JPY/INR 60.78 60.75 55.26
USD/EURO 0.92 0.91 0.92


10 Year G-sec movement


Corporate Bond Yield


Corporate AAA, AA Bond Spreads


Economic Events Calendar

March 11, 2016
  • US Treasury Budget, February
  • US Import Price Index, February
  • UK Visible Trade Balance, January
  • India’s Industrial Production, January
  March 28, 2016
  • US Dallas Fed Mfg Survey, March
  • US Flash Services PMI, March
  • US Personal Income and Outlays, February
  • US Pending Home Sales Index, February
  • UK Nationwide House Price Index, March
March 14, 2016
  • Eurozone Industrial Production, January
  • Bank of Japan Monetary Policy Announcement
  • India’s Wholesale Price Index Inflation, February
  • India’s Consumer Price Index Inflation, February
  March 29, 2016
  • US S&P Case-Shiller HPI, January
  • US Consumer Confidence, March
  • Japan’s Jobless Rate, February
March 15, 2016
  • US Empire State Mfg Survey, March
  • US Business Inventories, January
  • US NAHB Housing Market Index, March
  • US Producer Price Index, February
  • US Retail Sales, February
  • Japan’s Tertiary Index, January
  March 30, 2016
  • US ADP Employment Report, March
  • Eurozone Economic Sentiment, February
  • Japan’s Industrial Production, February
March 16, 2016
  • US Consumer Price Index, February
  • US Housing Starts & Building Permits, February
  •  US Manufacturing Production & Capacity Utilisation, February
  • UK Labour Market Report, February
  • UK ILO Unemployment Rate, January
  March 31, 2016
  • US Chicago PMI, March
  • Eurozone Consumer Price Index, March
  • UK GDP (Final), Q4 2015
March 17, 2016
  • US Federal Open Market Committee (FOMC) Meeting Announcement
  • US Philadelphia Fed Business Outlook Survey, March
  • Eurozone Consumer Price Index, February
  • Eurozone Trade Balance, January
  • Bank of England (BOE) Monetary Policy Announcement
  • BOE Asset Purchase Target
  • Japan’s Merchandise Trade, February
  April 1, 2016
  • US ISM Mfg Index, March
  • US University of Michigan Consumer Sentiment, March
  • US Construction Spending, February
  • US Employment Situation, March
  • US Manufacturing PMI, March
  • US Producer Price Index, March
  • Eurozone Manufacturing PMI, March
  • Eurozone Unemployment Rate, February
  • UK CIPS/PMI Manufacturing Index, March
  • China’s Manufacturing PMI, March
  • Japan’s Tankan Survey, Q1 2016
  • Japan’s Markit/JMMA Manufacturing PMI, March
March 18, 2016
  • University of Michigan of Consumer Sentiment, March
  • Bank of Japan Monetary Policy Minutes
  April 4, 2016
  • US Factory Orders, February
  • US Durable Goods Orders, February
  • Eurozone Producer Price Index, February
  • India’s Manufacturing PMI, March
  • US International Trade, January
February 19, 2016
  • US Consumer Price Index, January
  • Eurozone Consumer Confidence Flash, February
  • UK Retail Sales, January
  • Japan’s All Industry Activity Index, December
  March 7, 2016
  • US Consumer Credit, January
  • China’s Merchandise Trade Balance, February
March 21, 2016
  • US Chicago Fed National Activity Index, February
  • US Existing Home Sales, February
  • Eurozone Consumer Confidence Flash, March
  April 5, 2016
  • US Markit Services PMI, March
  • US Trade Balance, February
  • US ISM Non-Mfg Index, March
  • Eurozone Composite PMI, March
  • Eurozone Retail Sales, February
  • UK CIPS/PMI Services Index, March
  • India’s RBI First Bi-Monthly Monetary Policy Review 2016-17
March 22, 2016
  • Eurozone ZEW Survey Expectations, March
  • UK Consumer Price Index, February
  • UK Producer Price Index, February
  • Japan’s All Industry Index, January
  April 6, 2016
  • China’s Services PMI, March
  • Japan’s Composite PMI, March
  • India’s Nikkei Services PMI Index, March
March 23, 2016
  • US New Home Sales, February
  April 7, 2016
  • US FOMC Minutes
  • European Central Bank Minutes of Monetary Policy
March 24, 2016
  • US Durable Goods Orders, February
  •  UK Retail Sales, February
  •  Japan’s PMI Manufacturing Index Flash, March
  April 8, 2016
  • US Consumer Credit, February
  • US Wholesale Trade, February
  • K NIESR GDP Estimate, March
  • UK Industrial Production, February
  • UK Visible Trade Balance, February
  • Japan’s Eco Watchers Survey Current & Outlook, March
March 25, 2016
  • US GDP, Q4 2015 (Final)
  • Japan’s Consumer Price Index, February
  • Japan’s Producer Price Index, February

US Fixed Income Markets - Overview

US treasury prices ended off intra-month highs, with the yield of the 10-year benchmark bond settling at 1.74% on February 29 as against 1.93% on January 29. Treasury prices fell due to intermittent strength in domestic equities, encouraging corporate earnings announcements and positive macroeconomic indicators such as industrial output and consumer spending. Sentiment for bonds also weakened as crude oil prices posted periodic gains. . Bonds rose earlier after the Bank of Japan introduced negative interest rates suddenly. Concerns over global growth and expectations that subsequent rate hikes by the US Federal Reserve will be at a gradual pace also augured well. Prices rose further after the US Fed meeting minutes indicated that it would await additional signals on strength of the economy.

US 10 Year Govt. Bond Yield


Learning Centre– Foreign Currency Convertible Bonds

Companies can access several channels to funds their expansion plans. Over the years, more complex instruments have come to the fore and corporates today are no longer bound to domestic markets alone. The foreign currency convertible bond (FCCB) is a popular avenue for companies to tap overseas markets.

Concept of FCCB

FCCBs allow companies to issue bonds in an alternative currency, other than the local currency. Thus, if investors in the US subscribe to bonds issued by an Indian company, they will receive interest and principal in dollars, upon maturity. A key differentiator between FCCBs and plain vanilla bonds is the conversion feature that lets the investor convert the bond into a number of shares of the issuer, prior to maturity at a predetermined share price.


Long term FMPs with a tenure of three years or more are more tax-efficient than FDs as indexation benefits help reduce tax outflows for investors. However, there is one major drawback as it is difficult for investors to redeem their funds before the scheduled maturity of the scheme. Investors seeking redemption before maturity have to sell the units on the stock exchange. Even though, all FMP schemes are listed on the stock exchanges (as per the SEBI guidelines), liquidity is very low.

On the other hand, for investors, the FCCB promises steady interest payments plus, the option to convert the bond into shares once a certain trigger stock price is reached, is an additional dangler.


FCCBs do expose the issuer and investor to certain risks. Currency risk is a major drawback for FCCB issuers. As the instrument is issued for a tenor up to five-years, the issuer must know how exchange rates are likely to move, over this timeframe. For instance, if the local currency weakens versus the currency in which the FCCB is issued, the issuer may have to shell out higher-than-expected payments.

The bondholder is also not left behind on the risk trail. They purchase FCCBs, assuming the issuer’s stock price will rise – this is why FCCBs are more attractive to bondholders when sentiment for the company and market is bullish. However, if the stock price falls or does not appreciate to the pre-determined level, FCCBs are not converted into equity and are held until maturity. If the issuer’s financial health remains weak for a sustained period, the company could even turn a defaulter.


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