Making Sense

One of my favorite poem is by Kahlil Gibran and thought I'd share a couple of lines with you all...  Do not live half a life  and do not die a half death If you accept, then express it bluntly,  Do not mask it If you refuse then be clear about it for an ambiguous refusal is but a weak acceptance Do not accept half a solution,  Do not believe half truths,  Do not dream half a dream,  Do not fantasize about half hopes To reach and not arrive, Work and not work The half is a mere moment of inability, but you are able for you are not half a being You are a whole that exists to live a life not half a life” On that note, quick weekly roundup for the US markets below: The Fed Fund Futures are pricing in 88% probability of a rate cut by September Policy.  The Atlanta FED GDPNow Estimates for Q3 growth readings are running at 2.8%. The Cleveland Fed estimates for Core CPI and Core PCE are running at 0.27% and 0.22% respectively mom.  In the last blog piece...

 Asia markets are seeing a rebound on risk sentiment after US equities fell with Dow leading losses of 1.89%. ECB kept the rates unchanged and stayed away from calling a peak in rates and focused on a data dependent approach.  Initial Jobless claims (IJC) rose 10K rom the prior week for the w/e 20 Oct to 210K while Continuing Jobless Claims (CJC) rose 63K to 1790K. CJC are seen rising since start of September and are at levels last seen in April end. Strong beat on U.S Durable goods orders, for the month of Sep, orders rose 4.70% yoy following a revised reading of -0.10% in the previous month. Pending home sales rose 1.10% mom following a 7.1% contraction in the previous month. US GDP beat expectations with Q3 growth seen at 4.9% following a 2.1% expansion in the previous quarter. The street took comfort from the core PCE deflator which came in below street estimates of 2.40% and the narrative that Q3 marks a peak in growth. A Research house reported that the PCE deflator impl...

“…inexhaustible perseverance and patience… knows no defeat.”  RBI announced the MPC decision today. Key Highlights: Repo Rate stands unchanged at 6.50% (unanimous decision) SDF Rate 6.25% and MSF at 6.75% Stance continues to be "withdrawal of accommodation" (Vote 5 to 1) Inflation projected moved 10 bps lower for full FY 24 to 5.2% from 5.30% on crude oil price assumption of $ 85 per barrel ( last policy $ 95) and a normal monsoon.  Inflation Outlook - The risk to inflation trajectory are evenly balanced with upside risk emanating from adverse climatic conditions, higher and likely to stay elevated milk prices into the summer, rising uncertainty in Intl Financial markets and imported cost pressures GDP is projected to grow marginally higher at 6.50% with 10 bps upward revision in both Q3 and Q4 FY 24.  GDP Outlook - The risks to domestic growth are evenly balanced. High Rabi production, steady growth in services sector, GoI's focus on capital expenditure, higher capacity ...

 "The difference between try and triumph is just a little umph!" Q3FY23 Real GDP grew 4.40% yoy lower than consensus estimates of 4.60% following an upward revision of 80 bps to FY 21 to -5.80% (previous est -6.60%) and 40 bps to FY 22 to 9.10% (previous est 8.70%). India's GDP during 2022-23 is estimated to grow at 7.0 %. RBI had projected the real GDP growth for 2022-23 at 6.8 %, with the third quarter and fourth quarter growth at 4.4 % and 4.2 %, respectively. S&P Global Manufacturing PMI expanded for the 20 th straight month with the February reading coming in at 55.3. Input cost inflation accelerated to a four-month high but there was a softer upturn in selling charges. Recent data shows waning momentum after the Dec peak of 57.20. The Conference Board Consumer Confidence Index decreased in February for the second consecutive month to 102.9 down from 106.0 in January. The Present Situation Index—based on consumers’ assessment of current business and labor ...

"The best way to finish an unpleasant task is to get started." If forecasts of El Nino conditions develop then inflation and growth could turn for the worse.The finance ministry on Thursday raised concerns over the possible impact of El Niño conditions on India this year, saying if recent forecasts came true, the country could see lower agricultural output and higher inflation. Yesterday, we had the external MPC member Shashikant Bhide interview published in Business Standard . In his interview, he emphasises the need to see inflation within the tolerance band in 2023-24. Despite the decline in global commodity prices, pass through of decline is not clear. The areas of concern are core inflation and to some extent the fuel and light inflation, which is in double digits. Real GDP increased 2.7% in Q4 (adv est 2.9%) of 2022 following a third quarter real GDP rise of 3.2%. The updated estimates primarily reflected a downward revision to consumer spending that was partly offset b...

GoI announced the Union Budget on Feb 1, 2023. The Budget has been applauded by participants for sticking to the fiscal glide path, increasing the allocation for capital expenditure to Inr 10 trn, no populist measures ahead of the Elections, continuity of tax regime and credible forward projections. Key Highlights: Fiscal Deficit target of 6.40% for FY 2023 and 5.90% for FY 2024 FY Gross Market borrowings of Inr 15.43 trn and net market borrowings of Inr 11.80 trn in dated securities and Inr 50000 cr in T-bills. The number was lower than market expectations of Inr 16 trn in gross borrowings. Total expenditure of GoI increased inr 242,000 crore which was financed by increase in revenue receipts of Inr 144,000 cr and higher borrowings of Inr 98000 cr. The rise in expenditure, to the extent of inr 200,000 crs was primarily on account of food and fertiliser subsidy.  For FY 24, the budget assumes nominal GDP Growth of 10.50%. The tax revenue is estimated to grow at 12%. While growth in...

""Objective analysis should be made of the reaction to the event rather than the formation of the Opinion" US Q4 GDP grew 2.90% vs consensus expectations of a 2.60% growth and Q3 growth at 3.20%. The US Markets rallied on the economic news with S&P 500 closing the session at 4060.  GDP = C + I + G + NX Though the headline print is strong, the internals paint a mixed picture.  Consumer spending +2.1% vs +2.3% prior Net trade added 0.56% to GDP vs adding 2.86% in Q3 Inventories added 1.46% vs a cut of 1.19% in Q3 Govt added 0.64% vs +0.65% in Q3 Within residential fixed investment, the leading contributors to the decrease were new single-family construction as well as brokers' commissions.  Hopes of a soft landing increased as the headline number is strong but the activity is slowing and the growth in inventories in the context of the current global macro environment is not construed as a positive. Instead of a hard landing, the market narrative has been increasing...

We booked profits on our USDINR short position and stand neutral. The move lower in USDINR came alongside a surge in volume.  After the long consolidation between 82.60 - 82.90, reckon buyers got trapped and then the sharp move lower along with surge in volume suggests big unwinding of positions / initiation of fresh shorts. Yesterday, intraday volume data shows buying interests between the 82.50 - 82.60 zone. We are neutral on the pair ahead of the  CPI Data . Market is positioned for a peak in the CPI inflation numbers and the same can be seen in the lower US yields with 2Y back to price resistance at 4.20% yield and 5Y back to price resistance at 3.52% yield. Taking cues from offshore markets, India Gsec yields are also trading lower and OIS is also tad bit lower. 1Y OIS continues to be rangebound b/w 6.55% - 6.75% and 5Y OIS has seen multiple rejections at the 6.50% level with support coming in at 6.20%. We are neutral on forwards and OIS at the current levels. In another ...