MArket Roundup

Macro-Economic Overview

Market Roundup
Domestic Economy

Keeping its cyclic trend, Indian merchandise trade activity grew with a rise of 15.14% (M/M) in exports to
$29.578 billion in the last month of FY 2013-14 and 18.53% (M/M) growth in imports to $40.086 billion.
However on Y/Y basis, both exports and imports stood 3.15% and 2.11% lower than $30.541 billion and
$40.948 billion in March'13 respectively. Relatively higher M/M basis rise in imports than exports led to
noticeable rise in trade deficit to $10.507 billion in March'14 compared to $8.130 billion in the previous
month and $10.406 billion a year ago.
Table M1: Trend in Exports and Imports (Amt. in USD Million)

Year/Month Export Growth (%) Import Growth (%) Trade Balance

2012-13 300401 -1.82 490737 0.29 -190336
2013-14 (Prov.) 312355 3.98 450949 -8.11 -138594
Apr-13 24164 1.68 41952 10.96 -17787
May-13 24506 -1.11 44649 6.99 -20144
Jun-13 23786 -4.56 36035 -0.37 -12249
Jul-13 25834 11.64 38103 -6.20 -12268
Aug-13 26136 12.97 37054 -0.68 -10918
Sep-13 27679 11.15 34440 -18.10 -6760
Oct-13 27271 13.47 37827 -14.50 -10556
Nov-13 24613 5.86 33833 -16.37 -9220
Dec-13 26346 3.49 36486 -15.25 -10140
Jan-14 26752 3.79 36666 -18.07 -9914
Feb-14 25689 -3.67 33819 -17.09 -8130
Mar-14 29578 -3.15 40086 -2.11 -10507
Source: Ministry of Commerce / Trade Statistics

On cumulative basis, exports grew at 4.0% to $312.36 billion in 2013-14 (against revised exports' target of
Monthly Newsletter May 2014

$325 billion) - mainly on account of export of transport equipments (16.47%) and machinery & instruments
(5.93%) and petroleum products (3.0%). Imports during the same period contracted by 8.0% to $450.95
billion (against $489.93 billion) - mainly due to sharp decline in gold imports (-46.32%) and machinery
except electrical & electronic (-14.32%). The opposite dynamics of exports' growth and imports' decline led to
substantial fall in trade deficit by $52.57 billion to $138.594 billion in the same period.
CCIL

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 MArket Roundup

Macro-Economic Overview

Chart M1: Monthly Trade Deficit

0
Mar-1 3

May-1 3

Jun- 13

Jul- 13

F eb-1 4

Mar -14
Apr -13

Aug -13

Sep-13

Oct-13

Nov- 13

Dec- 13

Jan-14
-3000
Amount (USD Million)

-6000
-9000
-12000
-15000
-18000
-21000
-24000

Reversing their falling trend for four months in a row, both wholesale price index (WPI) and consumer price
index (CPI) inflation grew noticeably in March'14 - confirming the RBI's view of upward inflationary pressure
for holding policy rates unchanged against industry's demand of rate cut. WPI inflation rose to 5.70% in
March'14 from 4.68% a month ago - mainly on account of upsurge in fuel prices (11.22% against 8.75%) and
primary article prices (7.66% from 6.33%). The food prices also went up to 9.90% from 8.12% in the same
period mainly on rise in vegetable prices. The manufacturing inflation amplified to 3.23% from 2.76% in the
same period. The final WPI inflation for January'14 was revised upward to 5.17% against provisional estimate
of 5.05%. The average WPI inflation for 2013-14 stood at 5.93% against 7.36% in 2012-13.

The retail consumer price inflation Chart M2: Monthly WPI Inflation Rate (%)
(measured by new CPI - Combined) 9.00
rose to 8.31% (provisional) in 8.50
March'14 from 8.03% (Final) in the 8.00
previous month - which was mainly 7.50
driven by price rise in food, beverage 7.00 Monthly Newsletter May 2014
and tobacco (FB&T) items (9.06% 6.50
against 8.63% a month ago) and in fuel 6.00
& light prices (6.29% against 6.13%). 5.50
The rural CPI inflation grew up to 5.00
8.89% compared to 8.43% mainly due 4.50
to price rise in FB&T (9.85% against 4.00
May-12
Jul-12
Sep-12

May-13

Sep-13
Jun-12
Aug-12
Oct-12
Nov-12
Dec-12
Feb-13
Apr-13
Jun-13
Jul-13
Aug-13
Oct-13
Nov-13
Dec-13
Feb-14
Jan-13
Mar-13

Jan-14
Mar-14

9.25%), though urban CPI inflation

CCIL

moderated to 7.51% from 7.55% in the

same period.
Revised Provisional

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Macro-Economic Overview
Table M2: Indian Inflation Environment: Inflation (Y-o-Y) Rate (%)
March'14 February'14 3 Months 6 Months 1 Year
Type Items
:P :R Ago : R Ago :R Ago : R
Primary 7.66 6.33 10.82 14.03 7.36
WPI Inflation

Food Articles 9.90 8.12 13.73 18.68 8.63

Rate

Fuel 11.22 8.75 10.87 11.72 7.76

Manufacturing 3.23 2.76 3.04 2.36 4.28

WPI 5.70 4.68 6.40 7.05 5.65

CPI Inflation

CPI-Rural 8.89 8.43 10.49 9.71 10.41

Rate

CPI-Urban 7.51 7.55 9.11 9.93 10.38

CPI-Combined 8.31 8.03 9.87 9.84 10.39

Industrial production productivity again entered into negative territory of contraction at 1.93% (Y/Y) in
February'14 against marginal growth of 0.77% in the previous month. The noticeable contraction in
industrial production was mainly driven by a 28-month sharpest fall of 3.72% in manufacturing production.
During the same month, mining output registered a slowdown in growth pace at 1.36% (against 1.92%).
However electricity generation rose exponentially to 11.53% against 6.47%. In Used-based classification, the
production of capital goods (which indicates investment pattern) fell by 17.37% (a 20-month highest
contraction pace) against 4.11% in the previous month. The accelerating growth pace in basic goods (3.93%
against 2.46% in January'14) and intermediate goods (4.23% against 4.23%) signaled some sort of recovery in
their production activity. However, the contraction in consumer goods at an intensified rate of 4.53% in the
fifth-month in a row continued to indicate deteriorating domestic demand - especially in consumer durable
goods (-9.32%) in the same month.

Table M3: Growth of Industrial Production (%)

Category Feb-14 Jan-14 3 Months Ago 6 Months Ago 1 Year Ago
Sectoral
General -1.93 0.77 -1.33 0.43 0.57
Monthly Newsletter May 2014

Mining 1.36 1.92 1.64 -0.87 -7.70

Manufacturing -3.72 0.00 -2.61 -0.23 2.14
Electricity 11.53 6.47 6.30 7.16 -3.17
Use-Based Classification
Basic Goods 3.93 2.46 2.67 0.94 -1.77
Capital Goods -17.37 -4.11 0.08 -2.00 9.05
Intermediate Goods 4.23 3.56 3.73 3.83 -0.76
Consumer Goods -4.53 -0.48 -8.90 -0.92 0.75
Consumer Durables -9.32 -8.34 -21.69 -8.30 -2.62
CCIL

Consumer Non-Durables -1.21 4.60 2.18 5.43 3.25

Source: Ministry of Statistics and Programme Implementation (MOSPI)

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Macro-Economic Overview

However, the eight core industries continued to grow but at decelerated pace of 2.53% in March'14 against
4.47% in the previous month and also stood significantly lower than 6.98% in March'13. The sharp decline in
the production of core industries was mainly driven by intensified contraction in production of crude oil (-
1.61% against growth of 1.93% in February'13), natural gas production (-9.32% against -4.38%) and
Fertilizers (-6.06% against -0.68%). The slowdown in production of petroleum products (2.83% against
3.23%), cement (0.04% against 2.27%) and electricity generation (5.36% against 10.45%) also contributed
significantly in the overall performance of the core industries. The average growth in the core industries'
production stood at 2.61% during 2013-14, lower than 5.73% in 2012-13.

Global Economic Development

According to the IMF's World Economic Outlook (WEO), April 2014, global activity has broadly
strengthened and is expected to improve further in 2014/15 - mainly on account of impetus for growth
coming from advanced economies. However, lower-than expected inflation poses risks for advanced
economies and may increase financial volatility in emerging market economies through rise in the cost of
capital which may dampen investment in EMEs and weigh of their growth trajectory. The outlook advocates
that advanced economy policymakers need to avoid a premature withdrawal of monetary accommodation
and EMEs policymakers must adopt measures to changing fundamentals, facilitate external adjustments,
further monetary policy tightening and carry out structural reforms.

According to Global Financial Stability Report (GFSR) April'2014, the global financial system is currently
undergoing on the path to greater stability. North American economies will grow at accelerated pace in
2014/15. Canadian economy is projected to grow at 2.3% in 2014 (against 2.0% in 2013), while Mexican
economy at 3.0% (against 1.1%) and the US economy at 2.8% (against 3.0%) in the same period. In 2015, all
three North American economies - Canada, Mexico and the US are projected to grow at 2.4%, 3.5% and 3.0%
respectively. However Latin American economic growth will remain subdued at 2.5% in 2014 and is expected
to pick up to 3% in 2015. Though the recovery in the United States and other advanced economies may
bolster exports' growth from Latin America, but lower world commodity prices and rising global funding
costs are likely to weigh on economic activity across the region.

Monthly Newsletter May 2014

Though economic developments in Asia remained uneven, the region will continue its growth momentum at
accelerating pace. The outlook for Asia projects steady growth of 5.5% in 2014-15 and thus Asia is well
positioned to remain the most dynamic region of the global economy on account of improving external
demand - particularly from advanced economies, and robust labor markets and strong credit growth. The
report also sees a robust growth in sub-Saharan Africa at accelerated pace of 5.5% in 2014 (against 5.0% in
2013) mainly on account of large investments in infrastructure and mining, maturing investments in
transport and telecommunications, and a rebound in agricultural output. The outlook for the Middle East,
North Africa, Afghanistan and Pakistan (MENAP) is positive at 3.25% in 2014 (against 2.4% in 2013) which
CCIL

may further strengthen to 4.4% in 2015.

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Macro-Economic Overview

The report views that the phasing out of unconventional monetary policies in advanced economies could
result in effectively higher borrowing costs and financial vulnerabilities, especially among emerging markets
and frontier economies. In several economies, actions taken by policy makers to address vulnerabilities in the
aftermath of the “tapering tantrum” in 2013 have also bolstered resilience. Indeed, emerging Asian
economies have adjusted well to the latest bouts of volatility in the global financial markets, but the recent
episodes of global volatility have shown that policy trade-offs can worsen relatively quickly. However
progressing phasing out of unconventional monetary policies would pose considerable financial strains in
EMEs including renewed pressures on exchange rate and domestic prices.

According to Asian Development Outlook 2014, developing Asia is expected to grow at 6.2% in 2014 from
6.1% in 2013 and further will strengthen to 6.4% in in 2015. The report sees a moderating growth in China to
7.5% in 2014 and 7.4% in 2015 as its economic policy promotes more equitable, sustainable and balanced
growth. India's economy growth is expected to pick up to 4.9% in FY 2013, but the economy is still operating
below its potential. The outlook projects better growth estimate for India to 5.5% in 2014-15 and further to
6.0% in 2015-16 on account of reform prospects to resolve impediments to investment under new
government. The report says that major industrial economies the US, euro area members, and Japan grew by
a collective 1.05% in 2013. The momentum is expected to quicken to 1.9% in 2014 and 2.2% in 2015. The
ADB outlook sees eased and more manageable risks in the global economy. Though monetary policy shift in
the US may invite some volatility ahead in financial markets, accommodative monetary policy in Japan and
the Euro area will mitigate its impact to some extent.

Global inflation witnessed a mixed trend of rise and moderation across major economies in March'14. The
consumer price inflation in the US and Japan rose significantly to 1.50% (against 1.10% a month ago) and
1.60% (against 1.40% a month ago) respectively especially on account of rise in the shelter and food prices.
However, the CPI inflation in the UK, Germany and Euro area moderated to 1.60% (against 1.70%), 1.00%
(against 1.24%) and 0.50% (against 0.70%) respectively. Emerging market economies registered strong surge
in consumer prices in the same month except South Africa - which recorded marginal rise in CPI to 6.0% in
March'14 against 5.90% in the previous month. The surge is CPI inflation was strong in China (2.4% against
2.0%), Brazil (6.15% from 5.68%) and Russia (6.9% against 6.2%) in the same period.
Monthly Newsletter May 2014

Table M4: GDP Growth (on Quarter-on-Quarter basis) Rate (%)

Country 2012:Q4 2013:Q1:R 2013:Q2:R 2013:Q3 2013:Q4:R 2014:Q1:P
US 0.10 1.10 2.50 4.10 2.60 0.10
EURO 16 -0.60 -0.30 0.30 0.10 0.20 -
Japan 0.30 1.00 0.60 0.30 0.20 -
UK -0.20 0.30 0.70 0.80 0.70 0.80
Australia 0.70 0.60 0.60 0.60 0.80 -
CCIL

China (On Y-o-Y basis) 7.90 7.70 7.50 7.80 7.70 7.40
Source: National Central Banks
Source: National Central Banks

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Macro-Economic Overview

Treasury yields across most of advanced economies at end-April 2014 softened marginally. The US 10-year
benchmark yield closed down 7 bps to 2.65% against 2.72% in the previous month. The UK 10-year yield
closed 8 bps lower on M/M basis to 2.66%, while German and Australian benchmark yield closed 10 bps and
13 bps lower to 1.47% and 3.95% respectively. Japanese 10-year yield fell by 1 bps to 0.63%. However, on Y/Y
basis, treasury yields across all major advanced economies stood higher - for the US (98 bps), the UK (97 bps),
Australia (86 bps), Germany (25 bps), and Japan (2 bps) in the same month.

Table M5: International 10-year Yield Movements (% p.a.) (Month-End)

Country Apr-14 Mar-14 3 Months Ago 6 Months Ago 1 Year Ago
US 2.65 2.72 2.64 2.55 1.67
UK 2.66 2.74 2.71 2.62 1.69
Japan 0.63 0.64 0.62 0.60 0.61
Germany 1.47 1.57 1.66 1.67 1.22
Australia 3.95 4.08 4.00 4.02 3.09
Source: Bloomberg

Money Market Review
Comfortable cash position at the beginning of the
new financial year eased weighted average rates in
all the segments of the money market. Though
average rates in the Repo and the CBLO markets
remained steady as compared to the previous
month, the Call market witnessed lower weighted
rates by 14 bps. Barring reporting Fridays when the
CBLO rates had fallen to 7.00%-7.50%, short term
rates showed less volatility.
TABLE M6: Comparative Weighted Average Money Market Rates (%)
Apr-14 Mar-14
CALL 8.35 8.49
As far as trading volumes are concerned, only the
Repo segment clocked positive growth m-o-m
(5.61%). The CBLO market observed 29% dip in
the trading volume, trailed by the Call market
(10.36%).
The subsequent tables provide the comparative
weighted average rates over a period of time and the
comparative statistics of volume and rates across
the various sub-groups of the money market.
3 Months ago 6 Months ago Year ago
8.20 9.03 7.54

Monthly Newsletter May 2014

REPO 8.41 8.44 8.23 9.07 7.50
CBLO 8.29 8.34 8.12 8.88 7.28

Table M7: Comparative Money Market Volumes and Rates

Gross Daily Average Std Minimum Maximum Market Share
Volumes (` Cr) Volumes (`Cr) Dev Rate (%) Rate (%) (%)

Apr-14 Mar-14 Apr-14 Mar-14 Apr-14 Mar-14 Apr-14 Mar-14 Apr-14 Mar-14 Apr-14 Mar-14

CALL 363,061.95 405,043.14 21,356.59 21,318.06 0.30 0.89 7.78 7.73 8.80 11.71 18.39 16.97
CCIL

REPO 605,906.34 573,730.90 35,641.55 30,196.36 0.31 0.65 8.03 7.72 8.96 10.50 30.70 24.04
CBLO 1,004,897.80 1,407,413.30 59,111.64 74,074.38 0.51 0.90 6.94 6.96 8.97 11.28 50.91 58.98

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 MArket Roundup

Liquidity Adjustment Facility
RBI's efforts to infuse liquidity in the system
through overnight/term Repo auctions and MSF has
eased cash crunch to a greater extent. Even though
liquidity absorption by the RBI through LAF
Reverse Repo auctions declined over the previous
month, the cash injection via LAF Repo auctions
decreased at a much sharper rate.
Total as well as average LAF Reverse Repo amount
stood at `98,756 crore and `5,809 crore during April
2014 24% and 15% lower than the March figures of
`129,160 crore and `6,798 crore respectively. Total
and average volume borrowed by the banks using
LAF Repo window depleted by 47% and 41%
respectively to `304,786 crore and `17,929 crore
during April'14.
Ever since RBI shifted its focus from overnight
liquidity management through LAF to the term
Repo auctions, RBI auctioned 13-day Repo worth
`60,002 crore with cut off yield of 8.22% on April 4
and 15-day Repo for `61,005 crore having cut off
Market Overview
yield of 8.05% on April 17.
Easy liquidity condition was also mirrored by a
sharp 70% drop in total MSF volume to `50,650
crore during April 2014. Average MSF too fell by
63% to `2,979 crore as against `8,063 crore in March
2014.
Government Securities Market
Primary Market
During April 2014, RBI re-issued 16 government
securities worth `68,000 crore (successfully
auctioned `20,000 crore worth of bonds on April 17
in its biggest auction ever under the Centre's market
borrowing plan), issued 18 SDLs for `14,301 crore
and treasury bills worth `99,445 crore. There wasn't
any auction of CMBs or purchase under OMOs.
The succeeding tables give the details of the re-issues
of government securities, auctions of SDLs and
treasury bills along with its average cut-off yields
over a period of time.

Table M8: Details of the Auction of the G-Sec

Date of Issue/ Amount Cut-off Devolvement on PDs
Paper Yield (%)
Auction (`Crore) Price (`) (` Crore)
04-Apr-14 8.35% G.S. 2022 4,000.00 94.78 9.2778 0.00
04-Apr-14 8.28% G.S. 2027 7,000.00 91.50 9.4055 0.00
04-Apr-14 9.20% G.S. 2030 2,000.00 98.92 9.3291 0.00
04-Apr-14 9.23% G.S. 2043 3,000.00 98.09 9.4198 864.16
11-Apr-14 7.80% G.S. 2020 3,000.00 93.67 9.1853 0.00
Monthly Newsletter May 2014

11-Apr-14 8.83% G.S. 2023 8,000.00 98.76 9.0230 0.00

11-Apr-14 8.32% G.S. 2032 3,000.00 91.20 9.3291 0.00
11-Apr-14 8.30% G.S. 2042 2,000.00 89.85 9.3182 0.00
17-Apr-14 8.35% G.S. 2022 5,000.00 95.45 9.1584 0.00
17-Apr-14 8.24% G.S. 2027 9,000.00 92.05 9.3122 0.00
17-Apr-14 9.20% G.S. 2030 3,000.00 99.50 9.2585 0.00
17-Apr-14 9.23% G.S. 2043 3,000.00 99.27 9.3004 0.00
25-Apr-14 7.80% G.S. 2020 4,000.00 94.80 8.9359 0.00
CCIL

25-Apr-14 8.83% G.S. 2023 7,000.00 99.92 8.8406 0.00

25-Apr-14 8.32% G.S. 2032 2,000.00 93.19 9.0884 0.00
25-Apr-14 8.30% G.S. 2042 3,000.00 91.69 9.1195 0.00

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Market Overview

TABLE M9: DETAILS OF SDL AUCTIONS/ISSUE

Date of Issue/ Amount Cut-off Yield Under-
Paper
Auction (` Crore) Price (`) (%) subscription
09-Apr-14 9.63% Himachal Pradesh SDL 2024 550.00 - 9.63 0.00
09-Apr-14 9.63% Punjab SDL 2024 1,200.00 - 9.63 0.00
09-Apr-14 9.63% Rajasthan SDL 2024 500.00 - 9.63 0.00
09-Apr-14 9.63% Tamil Nadu SDL 2024 1,000.00 - 9.63 0.00
09-Apr-14 9.64% Kerala SDL 2024 1,000.00 - 9.64 0.00
09-Apr-14 9.65% Nagaland SDL 2024 135.00 - 9.65 0.00
09-Apr-14 9.66% Uttar Pradesh SDL 2024 1,000.00 - 9.66 0.00
22-Apr-14 9.37% Kerala SDL 2024 1,000.00 - 9.37 0.00
22-Apr-14 9.37% Tamil Nadu SDL 2024 1,000.00 - 9.37 0.00
22-Apr-14 9.38% Goa SDL 2024 100.00 - 9.38 0.00
22-Apr-14 9.38% Maharashtra SDL 2024 1,100.00 - 9.38 0.00
22-Apr-14 9.38% Rajasthan SDL 2024 500.00 - 9.38 0.00
22-Apr-14 9.39% Arunachal Pradesh SDL 2024 96.00 - 9.39 0.00
22-Apr-14 9.40% Andhra Pradesh SDL 2024 2,000.00 - 9.40 0.00
22-Apr-14 9.40% Jammu & Kashmir SDL 2024 300.00 - 9.40 0.00
22-Apr-14 9.40% Uttar Pradesh SDL 2024 1,000.00 - 9.40 0.00
22-Apr-14 9.40% West Bengal SDL 2024 1,800.00 - 9.40 0.00
22-Apr-14 9.41% Mizoram SDL 2024 20.00 - 9.41 0.00

TABLE M10: DETAILS OF T-BILLS AUCTIONS

91 day T-Bill 182 day T-Bill 364 day T-Bill
Date Amt Price YTM Amt Price YTM Amt Price YTM
(` Cr) (`) (%) (` Cr) (`) (%) (` Cr) (`) (%)
02-Apr-14 12,839 97.82 8.9388 - - - 6,049 91.75 9.0165

Monthly Newsletter May 2014

09-Apr-14 14,100 97.83 8.8969 6,000 95.72 8.9673 - - -
16-Apr-14 9,000 97.84 8.8550 - - - 6,002 91.80 8.9570
23-Apr-14 20,650 97.84 8.8550 6,000 95.75 8.9017 - - -
30-Apr-14 12,805 97.84 8.8550 - - - 6,000 91.83 8.9213
Total 69394.43 12000.00 18050.50
CCIL

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 MArket Roundup
Market Overview
TABLE M11: Average T-Bills Cut-Off Yields (%)
Apr-14 Mar-14
91-day T-Bill 8.8801 9.1276
182-day T-Bill 8.9345 8.9893
364-day T-Bill 8.9649 8.9571
Secondary Market
Trading activity in the secondary market for
government securities picked up smartly during
April 2014. Number of trades and trading volume
improved by 37% and 47% to 60,451 and `622,795
crore respectively.
Security settlement through CCIL, too, recovered
during the month under review. Total volume
settled stood at `602,075 crore (April 2014) vis-à-vis
`436,567 crore during March 2014 with an
increase of 38%. On an average, security settlement
stood at `35,416 crore as compared to `22,977 crore
during the previous month, a growth of 54%.
The month witnessed good amount of trading
activity in the When Issued market especially in
terms of different securities traded. 1 trade of `10
crore each of “7.80% G.S. 2020”, “8.32% G.S. 2032”
and “9.23% G.S. 2043”, 48 trades of “8.35% G.S.
2022” worth `450 crore, 241 trades of “8.83% G.S.
2023” for `2,350 crore, 117 trades of `1,025 crore of
“8.24% G.S. 2027”, 62 trades worth `390 crore of
Monthly Newsletter May 2014
“8.28% G.S.2027”, 2 trades of `35 crore of “9.20%
G.S. 2030” and 2 trades of “8.30% G.S. 2042” worth
`10 crore were transacted in the When Issued
market.
CCIL
36
3 Months ago 6 Months ago Year ago
8.7545 8.9391 7.7185
8.8070 8.7269 7.7163
8.7077 8.7355 7.6018
Yield Movement
The average 10-year G-Sec yield hardened by 14 bps
to 8.93% over the previous month. It oscillated
between 8.82% and 9.09%. Benchmark yield
escalated to 9.09% (April' 09) an increase of 15 bps
in merely 5 working days of the month on account
of the RBI governor's hawkish policy statement
which meant the Bank will not cut policy rates any
time soon, anticipation regarding lower demand
for the existing government securities before a debt
auction and the RBI not bailing out investors in
managing yields. In view of the Urjit Patel
Committee report, the RBI is unlikely to resist
rising yields with OMO buybacks.
However, higher liquidity in the system due to term
repo auctions and redemption of 7.37% G.S. 2014
(worth `40,751 crore) led to softening of the 10-
year G-Sec yields to a month low of 8.82% on the
close of April 2014.
The yields of different tenors prevalent on the last
working day of the month and the spread analysis
of various tenors over a period of time are
illustrated in the following tables.
 MArket Roundup

Market Overview
TABLE M12: YIELD MOVEMENTS (%)*
Tenor Apr-14 Mar-14 3 Months ago 6 Months ago Year ago
O/N 8.6985 13.7901 8.1284 8.7370 7.6148
3 month 8.8007 8.5817 8.6316 8.4709 7.5641
6 month 8.8328 8.6010 8.8329 8.4522 7.5642
1 year 8.8477 8.6329 8.8714 8.3892 7.5623
2 year 8.8513 8.6879 8.8983 8.4004 7.5567
5 year 8.8362 8.8646 8.9661 8.5344 7.5650
10 year 8.8240 8.8171 8.8223 8.5504 7.7396
* on the last working day of the month

TABLE M13: SPREAD ANALYSIS

G-Sec Spread (bps)
Period
Apr-14 Mar-14 3 Months 6 Months 1 Year
1 - 5 Years -1 23 9 15 0
1 - 10 Years 14 41 19 37 14
5 - 10 Years 15 18 10 22 14
10 - 30 Years 12 5 15 25 20

Foreign Exchange Market
Contrary to last month's impressive performance,
Indian rupee weakened against all the major
currencies during April 2014. It depreciated by 67
paise to `60.32 per dollar (April '04) from `59.65
per dollar (April '02) on speculation that the
central bank will curb currency appreciation to
protect exporters. After hovering around `60.20
per dollar level till April 16, India currency fell to a
month low of `61.12 a dollar by April 25 on dollar
demand from importers, FII pull out from
domestic markets and worries over tensions in
Ukraine. Rupee ended the month on a positive
note by rising 78 paise in just last three trading days
of April to `60.34 a dollar on large dollar sales from
exporters.
The ensuing tables provide analysis of rupee
movement against major currencies and the
exchange rate prevailing on the last working day of
the month over a period of time.

Monthly Newsletter May 2014

TABLE M14: EXCHANGE RATE MOVEMENT
` / Euro ` / Pound ` / 100 yen ` / Dollar
Movement (%) -1.11 -2.26 -2.52 -1.16
Average Rate 83.35 101.08 58.86 60.36
Stdev 0.66 1.03 0.61 0.36
Max 84.52 102.77 59.73 61.12
Min 82.15 99.21 57.48 59.65
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Market Overview

TABLE M15: EXCHANGE RATE MOVEMENT

Exchange Rate Apr-14 Mar-14 3 Months ago 6 Months ago Year ago
`/Euro 83.31 82.58 84.60 84.12 70.98
`/Pound 101.45 99.85 102.95 98.29 84.00
`/100 yen 58.93 58.83 60.96 62.44 55.47
`/Dollar 60.34 60.10 62.48 61.41 54.22

The movement of 1-month, 3-month and 6-month forward premia over a period of time is exhibited on the
forthcoming table.

TABLE M16: MOVEMENT OF FORWARD PREMIA OVER A PERIOD OF TIME (MONTHLY AVERAGE)
Apr-14 Mar-14 3 Months ago 6 Months ago Year ago
1-month 8.37 9.75 8.20 9.13 7.43
3-month 8.36 9.06 8.54 8.88 7.41
6-month 8.30 8.58 8.19 8.42 7.08

FIIs seem to find Indian bonds less attractive these days having turned net sellers in April '14 - defying the
magnificent rally observed in past four months. FIIs have pulled out $1.52 billion from the domestic debt
market in a month as oppose to net purchase of $1.88 billion during March 2014 - a drop of 181% m-o-m. FIIs
were the net buyers of $1.59 billion worth of Indian equities during April '14 which is 52% lower than the
previous month's net purchase of $3.30 billion. In totality, FIIs' activity in the Indian market remained dormant
at $0.08 billion vis-à-vis $5.17 billion in March 2014. One of the reasons for such a muted activity could be the
anxiety related to the General Elections results round the corner.

TABLE M17: MOVEMENT OF FII FLOWS Amount USD Mn.

Quarter Net Investment in Equity Net Investment in Debt Total (USD Mn.)
2008-09 -11826.40 470.10 -11356.30
2009-10 22780.66 7470.89 30251.55
2010-11 24294.73 7931.30 32226.03
Monthly Newsletter May 2014

2011-12 9011.66 8451.76 17463.42

2012-13 25832.61 5214.43 31047.04
2013-14 13441.79 -4565.98 8875.81
Apr-14 1594.56 -1518.67 75.89
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Corporate India's plans to dollarize its rupee debt and repay local loans by raising funds through external
commercial borrowing (ECB) from foreign branches of Indian banks could be fruitless, with the RBI restricting
the route from April 22. The policy change is bound to create more pressure on the already stressed Indian
banking system; it will bring out more cases of irregular or delinquent accounts in the short run. The RBI has
put restrictions on credit facilities Indian banks can extend to foreign entities of domestic companies. Now,
banks cannot extend loans or guarantees to be used to roll over borrowers' existing rupee loans.

India's foreign exchange reserves swelled by nearly $6 billion within a month as the RBI continued to buy US
dollars brought in by overseas portfolio investors into the market. Reserves shot up to $309.91 billion in the
week leading up to April 25 - at a 30-month high - as compared to $303.67 billion during the week ended March
28.

CHART M3: FOREIGN EXCHANGE RESERVES

325,000 19,500
14,500
300,000
9,500
USD Mill io n

4,500

USD Mil lion

275,000
-500
250,000 -5,500
-10,500
225,000 -15,500
-20,500
200,000
-25,500
-30,500
175,000
-35,500
150,000 -40,500
9

3
7

4
7

3
8

3
c- 0

c- 1

c- 1
g -0

g -1
r-0

c- 0
r-0

c -0
r-0

r-1

r-1

c- 1

c- 1
r-1

r-1
g -0

g -0

g -1

g -1

g -1
r-1
De

De

De
Ap

Ap

Ap

Ap
Ap

Ap

Ap

Ap
De

De

De

De
Au

Au

Au

Au

Au

Au

Au

Change in Forex Reserves Forex Reserves

Monthly Newsletter May 2014

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Market Overview

Banking Sector

Non-food credit stood at `59,43,390 crore as on April 18, up 14% from a year ago. Meanwhile, deposits
continued to outpace credit and grew at 15% y-o-y to `78,69,970 crore. Demand deposits rose 15% from a year
ago to `7,26,590 crore, while time deposits stood at `71,43,372 crore, up 15.3% from last year. The slower
demand for funds could be because of a sluggish economy in which companies are not looking to expand their
businesses.

TABLE M18: TRENDS IN SCHEDULED COMMERCIAL BANKS' BUSINESS (` Cr.)

Apr-14 Mar-14 3 Months ago 6 Months ago Year ago
Money Stock 9683370 9513050 9293620 8949240 8467410
Aggregate Deposits 7869970 7739390 7552580 7305820 6838490
Non-food Credit 5943390 5914610 5681050 5522380 5193680
Investment in G-Secs 2270610 2219760 2215950 2179890 2017910

TABLE M19: KEY BANKING RATES AND RATIOS (%)

Apr-14 Mar-14
Credit-Deposit Ratio 76.70 77.69
Investment-Deposit Ratio 28.88 28.71
Base Rate 10.00 - 10.25 10.00 - 10.25
Term Deposit Rate >1 Year 8.00 - 9.25 8.00 - 9.25
Savings Deposit Rate 4.00 4.00
Monthly Newsletter May 2014
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