RBI Policy dated 09.10.2020

Key Developments:

 ·        The RBI maintained status quo on expected lines while retaining its accommodative stance that could continue for as long as necessary through the next financial year. The RBI forecasts GDP to contract by 9.5% YoY in FY2021. Several other measures were announced to enhance liquidity and support the recovery process.

·        The World Bank said that India’s GDP is expected to contract by 9.6% YoY this fiscal which is reflective of the national lockdown and the income shock experienced by households and firms due to the COVID-19 pandemic.

·        The White House shifted tack on Thursday, signaling that the administration is again leaning toward a large-scale stimulus bill after House Speaker Nancy Pelosi pushed back on the idea of individual measures for parts of the economy hit by the Covid-19 crisis.

·        The ECB minutes for the policy that was held from 9-10-September-2020 policy meeting was released. The minutes showed that were concerned about the currency movements were having on the price outlook with specific concerns about the pace of appreciation rather than the level of the exchange rate. Besides, concerns continued to get expressed about the state of the recovery and the adverse effects of COVID-19.

·        China is participating in a World Health Organization-backed vaccine effort, stepping in to fill a void in global health leadership created by the Trump administration. Beijing on Thursday joined the $18 billion Covax initiative that aspires to give lower-income countries the same access to vaccines as wealthier nations, the Chinese Foreign Ministry said. Details of China’s commitment, including its amount of funding, weren’t immediately disclosed.

·        The US President Donald Trump pulled out of an Oct. 15 debate with Democratic rival Joe Biden after it was changed to a virtual event and saying he may hold a rally in Florida on Saturday.

·        Federal Reserve officials kept up pressure for Washington to renew fiscal support for the virus-ravaged economy even as hopes of a deal between Democrats and Republicans continued to look dim. 

Global Market Developments:

·        CA: Housing starts in Canada fell by 20.1% MoM to 208K units in September, missing market expectations of 240K units, according to Canada Mortgage and Housing Corporation (CMHC).

·        US: The number of people filling for unemployment benefits rose by 840K in the week ended October 3rd, compared to an upwardly revised 849K in the previous period and above market expectations of 820K.

CH: Caixin China PMI services rose to 54.8 in September from 54 in August, better than 54.2 expected. 

·        US stock markets ended higher in the previous trading. The Dow Jones (0.43%) and S&P 500 (0.80%) ended in the green.

·        Asian stock markets are trading broadly higher this morning. Kospi (0.21%), Australia ASX-200 (0.07%), Shanghai Composite index (1.89%) and Hang Seng (0.10%) are trading in the green while Nikkei (-0.26%) are trading in the red.

·        US Treasuries are trading higher this morning. The 10-year treasury yield is trading at 0.77% level that was slightly lower than the 0.78% level recorded in the closing of the previous session. 

 Domestic market developments:

·        The Indian Rupee is currently trading higher at the 73.11 level in today’s trading session compared to a previous close of 73.24.

·        The Indian bond markets are trading stronger today with the yield on the 5.77% benchmark 10-year sovereign bond at the 5.93%.