Also, RBI signaled a reverse repo hike in Dec, positive for banks as it will get more risk-free return on their excess deposit with the RBI (Central Bank). Banks were also upbeat amid signs of loan recovery/resolution under legacy NPA of large amounts, although after a significant haircut.
And India’s economic recovery is also gaining momentum as per high-frequency data; Q3FY22 GDP may be upbeat on robust consumer spending in the festival season amid clear signs of endemic; consumer/consumption stocks helped. Dalal Street was also boosted by the progress of disinvestment/deleveraging after Air India sold to Tata Sons.
The Indian PM Modi will formally inaugurate a huge package (Gati (NS:) Shakti: FY22-25) of national infra pipeline and manufacturing PLI covering transportation, communication and energy infra, electronics and defense manufacturing under a single-window concept (coordination of 16 Federal ministries).
On Tuesday, the Indian market was boosted by banks & financials, media, FMCG, metals (recovery in global iron ore/metal prices), automobiles (upbeat festive sales and fiscal stimulus despite chip shortages), realty, energy (higher oil), while dragged by techs/IT (concern of subdued report card).
On Tuesday, Indian MOSPI data shows that Indian CPI eased to +4.35% in September from +5.30% in August, just below the market expectation of +4.5% and just above the RBI target of +4.00% (y/y). The September CPI (Y/Y) is the lowest in 5-months mainly aided by a drastic fall in food inflation, especially vegetables due to seasonal distortion.
But overall, if we consider the CPI index between Jan-Sep’21, the average sequential rate is around +0.49%, translating an annualized CPI inflation rate around +5.90%, almost at RBI’s upper tolerance band of +6.00%. Thus RBI is bound to tighten in the coming days not only to control uncontrolled inflation (be it transitory or not) but also Indian 10Y bond yield, which is now hovering around +6.35%. RBI may announce a tapering of its QE (GSAP) and reverse repo rate hike in its Dec’21 meeting.
Technically, whatever may be the narrative, NF now eyeing 18300 levels; immediate sup: 17950-750; resistance 18100.