MACRO SHOCKS
Banks well capitalised to handle macro shocks
"Under the baseline scenario, the aggregate CRAR (capital to risk weighted asset ratio) of 46 major banks is projected to slip from 16.7% in March 2024 to 16.1% by March 2025," the RBI said in its June 2024 Financial Stability Report.
Growth momentum likely to stay in Q1FY25: FinMin
The finance ministry's April report predicts strong economic activity in FY25, with rising industrial activity and fixed investments. Positive macro-economic indicators include a bright manufacturing outlook and improved services sector, supported by increased capacity utilization and EPFO data.
Doing business in China is growing tougher, more uncertain, European business group says
A report by the European Union Chamber of Commerce in China urges China’s leaders to do more to address concerns that it says have “grown exponentially” in recent years.
RBI is playing ball by ball; this is the best macro set up we have seen in many years: Shaktikanta Das
Shaktikanta Das, the Governor of the Reserve Bank of India, highlights the need for durable inflation, discusses the positive macroeconomic factors contributing to India's stability and growth, and acknowledges the challenges posed by global debt while emphasizing India's preparedness to deal with them. Das says: "I say it with a reasonable amount of confidence based on our internal analysis and research that 7% next year is definitely very much on the table."
India's macro-fundamentals strengthened even after facing external shocks since 2020: Ashima Goyal
India's macro-fundamentals have strengthened despite severe external shocks since 2020, according to Reserve Bank Monetary Policy Committee member Ashima Goyal. The country's economic diversity, adequate buffers, and feasible reforms have enabled countercyclical policies. With more firms and consumers internalizing the inflation target, the economy is likely to approach the Reserve Bank of India's (RBI) inflation target of 4% this year.
ETMarkets Smart Talk: Budget 2024 - We believe government’s focus on infrastructure creation will continue: Abul Fateh
Abul Fateh says: "Exposure to fixed income should be raised, especially towards the longer end of the curve. MPC has taken note of the real rates being positive at this point. The markets have also responded, especially in the last few weeks of CY2023, with the ten-year yields shrinking by about 20 bps from their peak."
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Macro factors that investors should track in 2024
The 2023 global macro backdrop was less hostile for India than thought out at the start of the year. Global growth is tracking nearly 1% pt. higher than envisaged at the start of 2023.
No impact of Israel conflict on Indian economy via oil prices; taking steps to minimise effect of global shocks: Finmin
In a written reply in the Rajya Sabha, minister of state for finance Pankaj Chaudhary also said the government has been successfully adopting measures to mitigate global shocks on the domestic economy over the past three-four years.
Headline inflation remains vulnerable to recurring and overlapping shocks: RBI Guv
Reserve Bank of India (RBI) Governor Shaktikanta Das, speaking at FIBAC 2023, highlighted the vulnerability of headline inflation to both domestic and international factors. While household price rise expectations are stabilizing, headline inflation remains susceptible to recurring shocks. Das acknowledged the success of RBI's Monetary Policy Committee (MPC) actions in softening headline inflation and noted the moderation in core inflation.
Economic policymakers need a new playbook to tackle unexpected shocks
Economists and policymakers must recognise that the world is changing and reset the existing models that guide decisions. The notion of a shock is new to macroeconomics. However, there is an implicit assumption that these are infrequent and transmitted largely through financial channels.
Hiring outlook for Indian IT industry weakens on global macro woes, slow discretionary spends
The Indian IT industry is expected to reduce campus intake this year due to weak global cues and a cut in discretionary spending by clients. Infosys and HCL Tech's subdued hiring signals a tough road ahead for freshers. IT giants like TCS, Infosys, and HCL Technologies reported a decline in employee tally in Q2. Global growth concerns, inflation, interest rates, reduced investment, and geopolitical shocks have exacerbated worries.
US rates, Dollar & Crude: How a rare trinity could pose a significant macro challenge to India
In combination, the three macro-indicators could support already high inflation across many countries by making goods and fuel imports costlier, and disrupt capital flows across the globe, imposing more hardship on debt and current account-stressed countries.
Oil at $95 is changing trades across markets
Airline stocks, currencies of oil-importer nations and bond yields are just a handful of the asset classes already starting to reflect the reality of Brent at $95 a barrel. Meanwhile, strategists from Goldman Sachs Group Inc. and Barclays Plc have rolled out macro reports telling clients how to trade the energy price shock.
Microeconomics wins 'macro vs micro' conversation
Microeconomics has historically been more successful in predicting economic behavior than macroeconomics, due to its ability to conduct controlled experiments. Microeconomics and macroeconomics are inextricably bound, but microeconomics has historically been more successful in its predictions.
Public sector banks confident of withstanding macro shocks, says govt
The asset quality of India's state-run banks has improved with gross non-performing assets - the measure of a bank's bad loans - at 4.97% in March 2023, the ministry said in a statement released after a meeting between the finance minister and heads of various state-run banks.
Banks are well-capitalised, can absorb macro shocks
The Indian banking system is well capitalized to absorb macroeconomic shocks, according to a stress test conducted by the central bank. In a severe stress scenario, bad loan ratios may rise to 5.1%. However, under the baseline scenario, bad loan ratios are expected to improve to 3.6% by March 2024. The report also highlights that banks' asset quality has improved, with gross bad loan ratios reaching a 10-year low of 3.9% in March 2023. The central bank warns that high inflation and rising interest rates can impact borrowers' repayment capacity.
RBI asks banks to remain prepared for shocks, have strong capital back up
The Reserve Bank of India wants bank managements and their boards to be on their toes all the time even as they have strong capital back up and have shown ability to wither stress tests. “The recent events in the banking landscape of the US and Europe suggest that risks for an individual bank could crop up from segments of its balance sheet which might have been considered relatively safer,” Das said
City Union Bank is this week's stock pick: Three reasons why
The bank has maintained a growth CAGR of 15% in the past 10 years and is expanding its presence in the northern states by offering various innovative products.
India macro: Rare comfort from current account?
benefiting immensely from this larger digitization trend. The sharp growth in services exports from Global Capability Centers (GCCs) is the case in point. GCCs are the captive units of multinationals set up in India to render research, professional, engineering and tech services.
India Inc's strong debt profile key to economy's macro stability: Finance Ministry
"Tightening of financial conditions by central banks to tame inflation has raised concerns regarding the exacerbation of corporate debt vulnerabilities, with corporates being already highly leveraged," the ministry said, adding such concerns were limited for India.
Bank crisis abroad won't hit India's macro stability: DEA Secy Ajay Seth
The government is in regular talks with key regulators such as the Reserve Bank of India (RBI) and Securities and Exchange Board of India on all relevant financial sector matters, including potential spillover risks from this crisis, he said.
Shock of war hits a world economy at the crossroads
Economic sanctions on Moscow came as hurdles to world trade were mounting after an era of rapid globalisation. Russia's weaponisation of its gas and oil exports bolstered the case for an energy transition already made urgent by climate change.
Fiscal policy can accommodate any future shocks: Economists on FY24 Budget
The government met its FY23 fiscal deficit target of 6.4% of gross domestic product (GDP) as higher tax revenues and nominal GDP growth offset the surge in subsidy and other spending. For FY24, it set a fiscal deficit target of 5.9% of GDP.
Indian lenders strong enough to counter worst of macro stress: RBI
It may go down to 14.0% in the medium stress scenario and to 13.1% under the severe stress scenario by September 2023, but it will stay above the minimum capital requirement. None of the 46 banks would breach the regulatory minimum capital requirement of 9% in the next one year, even in a severely stressed situation, RBI tests show.
Banks and NBFCs in position to withstand the worst macro economic stress: RBI
The central bank’s stress test on the banking system indicates that in a baseline scenario the gross non-performing assets in the banking system will improve to 4.9% by September 2023. The total bad loan ratio of the banking system is steadily trending down to a seven-year low of 5.0% in September 2022, while net non-performing assets have dropped to ten-year low of 1.3% of total assets.
Growth slows, but macro resilient
In 2023, GDP growth in India is expected to slow to 5.9% year-on-year, from an estimated 6.9% growth in 2022. Growth is likely to be a tale of two halves, with a slowdown in the first half as the reopening boost fades and monetary tightening weighs on domestic demand.
Fed chair Powell is not done telling markets where rates will go
"It's a very difficult environment to try to give forward guidance 60, 90 days in advance," Powell said at a press conference after May's meeting. "There are just so many things that can happen in the economy and around the world. So, you know, we're leaving ourselves room to look at the data and make a decision as we get there."
Is India back to managing macro-stability?
The imposition of export duty on oil products is estimated to garner Rs 655 billion on an annual basis. But it comes as a detriment to corporate profits, just like the earlier move to impose a 15% export duty on steel has made steel exports uneconomical, thereby increasing inventory level and depressing price realization for steel players in the domestic markets.
Financial system capable of absorbing macro shocks with strong capital buffer
The Indian economy and the domestic financial system remain strong and resilient in a hostile international environment, supported by robust domestic macroeconomic fundamentals, RBI said. Financial markets, however, are witnessing heightened volatility because of global spillovers.
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