11/23/2018 Wealth Overview

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RBI and government signal tentative truce

Speak of the Week 1 day ago

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11/23/2018 Wealth Overview
RBI and government signal tentative truce

(https://www.icicibank.com/campaigns/mailers/2016-june/sotw-17-06-2016/voice125.html)

Indian Economic Update

According to a post-meeting release by the central bank, the board discussed the Basel
regulatory capital framework, a restructuring scheme for stressed Micro, Small and
Medium Enterprises (MSMEs), bank health under Prompt Corrective Action (PCA)
framework and the Economic Capital Framework (ECF) of RBI.
The Board decided to establish an expert committee to examine the ECF, the
membership and terms of reference of which will be jointly determined by the
government and the RBI.
It also advised that the RBI should consider a scheme for the restructuring of stressed
standard assets of MSME borrowers with aggregate credit facilities of up to INR 0.25
billion, subject to conditions of ensuring financial stability.

Global Update

According to the Organisation for Economic Co-operation and Development (OECD),

trade tensions and higher interest rates are slowing the global economy, though for now
there are no signs of a sharp downturn. Nevertheless, it lowered its outlook for next
year. OECD has forecasted that global growth would slow from 3.7% this year to 3.5%
in 2019 and 2020. It had previously projected 3.7% for 2019.
Federal Reserve Bank of New York President Mr John Williams said that the U.S.
Central Bank will stick with its campaign of gradual interest-rate increases to extend the
economic expansion and keep inflation low. President Mr Trump renewed his criticism
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11/23/2018 of the Federal Reserve, describing the Central Bank as a “problem” as he Overview
Wealth called for
lower interest rates.

Equity
Overall, equity benchmarks remained weak, in line with global markets. A global sell-off
mirrored in the Indian markets as well, while a recovery in crude oil prices weighed on
benchmarks.

During the week Sensex lost 0.79% to close at 34981.02 while Nifty declined 0.85% to close
at 10526.75.

Debt
Government bond prices remained steady. However, they remained off highs as Rupee pared
some gains. Optimism over increase in appetite of banks under lending restrictions coupled
with easing of norms under prompt corrective action plan supported bond prices.

The 10Y benchmark yield ended at 7.72% as compared to the previous week’s close of
7.76%.

Oil
Oil prices are trading lower today as a weakening economic outlook and a surge in U.S.
production outweighed expected supply cuts by the Organisation of the Petroleum Exporting
Countries (OPEC).

Gold
Gold prices edged lower as investors are watchful on U.S.-China Trade war. It is currently
trading at ~ USD 1,210 per ounce.
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11/23/2018 Wealth Overview
Currency
Indian Rupee gained strength against the dollar, on the back of decline in crude prices.
The dollar index is now trading on a soft note at ~ 96.75 level. However, the sentiment in the
risk-associated sphere remains quite fragile in light of the omnipresent uncertainty around
Brexit and the persistent frothiness in Italian politics.
EUR/USD is currently trading higher at 1.1391 level, buoyed by reports that Italy may be open
to reviewing its draft budget for 2019, potentially easing a confrontation with the European
Union.

Source: ICICI Bank Research, Private Banking Investment Strategy Team, Bloomberg and
CRISIL.

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