Daily Newsletter

18 DECEMBER 2018

  • Indian equity indices ended higher on Monday led by gains in FMCG, financial, auto, oil and gas, and metal stocks.
  • The rupee’s appreciation against the US dollar also enhanced sentiment for equities.
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RBI Policy – A PAUSE, IT IS.

05 December 2018

The Fifth Bi-Monthly Monetary Policy Statement for FY 2018-2019 was released by the Reserve Bank of India (RBI) today. Following were the highlights.

1. Repo Rate has been kept unchanged at 6.50%.

2. Retained stance of “Calibrated Tightening”

3. SLR will be cut by 25bps every quarter starting from Jan-Mar till it reaches 18% of NDTL

Consequently, the reverse repo rate and the marginal standing facility (MSF) rate / Bank rate also remain unchanged and stand at 6.25% and 6.75% respectively.

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RBI Policy – Sticks to its inflation mandate

BY GAURAV KULSHRESHTHA | 05 October 2018

The Fourth Bi-Monthly Monetary Policy Statement for FY 2018-2019 was released by Reserve Bank of India (RBI) today. Following were the highlights.

1. Repo Rate has been kept unchanged at 6.50%.

2. However, the stance was changed to “Calibrated Tightening” from earlier “Neutral” stance.

Consequently, the reverse repo rate and the marginal standing facility (MSF) rate / Bank rate also remain unchanged and stand at 6.25% and 6.75% respectively.

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Bracing for equity volatility

BY GAURAV KULSHRESHTHA | 03 October 2018

Citi analysts believe that Indian equities may continue to be volatile in the near term given that the valuations are still high despite a sharp correction in September.

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RBI Policy – Successive hikes, stance stays neutral

BY GAURAV KULSHRESHTHA | 01 AUGUST 2018

The Third Bi-Monthly Monetary Policy Statement for FY 2018-2019 was released by Reserve Bank of India (RBI) today. Following were the highlights.

1. Repo Rate has been increased by 25 bps and now stands at 6.50%.

2. However, the “Neutral” stance was retained.

Consequently, the reverse repo rate and the marginal standing facility (MSF) rate / Bank rate also increased by 25 bps and now stand at 6.25% and 6.75% respectively.

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Narrowing Global Bull Market – are Indian markets toeing the line?

BY GAURAV KULSHRESHTHA | 25 July 2018

Citi analysts believe that the global bull market has entered the final stage of an equity bull market. This phase is characterized by narrowing equity market leadership into growth and momentum trades, expensive stocks getting more expensive and has typically produced bubbles in the past.

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2018 Mid Year Outlook: Capitalizing on Volatility

04 JULY 2018

Citi believes global growth will continue in 2018 as global GDP is projected to grow 3.4% this year and corporate earnings remain strong. However, Citi analysts have not dismissed trade war fears and political risks that have contributed to market volatility in the first half of 2018. How can investors successfully navigate the second half of the year and capitalize on market volatility?

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RBI POLICY – HIKE IT IS

BY GAURAV KULSHRESHTHA | 06 JUNE 2018

The Second Bi-Monthly Monetary Policy Statement for FY 2018-2019 was released by RBI today. Following were the highlights.

1. Repo Rate has been increased by 25 bps and now stands at 6.25%.

2. However, the “Neutral” stance was retained.

Consequently, the reverse repo rate and the marginal standing facility (MSF) rate / Bank rate also increased by 25 bps and now stand at 6.00% and 6.50% respectively.

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Recent Volatility in Equity Markets – Is it a short term correction or the start of a more prolonged downtrend?

05 JUNE 2018

After posting record gains for investors in 2017, Indian equity markets turned volatile. How deep will this correction be and what should investors expect for the year ahead? Click to view what Chief Investment Officers of ICICI Prudential Mutual Fund & L&T Mutual Fund think.

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Indian Investors’ Home Bias – A Case for Global Diversification

04 JUNE 2018

Traditionally, Indian investors have invested most of their assets in domestic equity and bond markets. Are there opportunities for Indians to invest abroad? Chief Investment Officers of ICICI Prudential Mutual Fund & L&T Mutual Fund discuss.

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Outlook on Indian Bond Markets – What lies in store in 2018

01 JUNE 2018

Yields on domestic bonds have been rising steadily, due to multiple macroeconomic factors. Top Funds Managers from ICICI Prudential Mutual Fund and L&T Mutual Fund discuss with Paul Hodes of Citibank the outlook and opportunities in the bond markets in 2018.

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Q4 FY18 earnings update

BY GAURAV KULSHRESHTHA | 21 MAY 2018

For the 45 companies out of BSE 100 that have reported their Q4 earnings till early last week, Citi analysts believe that ex of corporate banks, earnings are off to a decent start. While the aggregate earnings are down 2% YoY against an expected growth of 2% due to the drag from corporate banks, however ex of corporate banks, earnings are up 7% YoY.

Revenue growth is at 13.5% YoY and EBITDA growth is at 11% YoY largely in-line with expectations.

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RBI SURPRISES WITH OMO PURCHASE ANNOUNCEMENT

BY GAURAV KULSHRESHTHA | 08 MAY 2018

RBI’s announcement to conduct Open Market Operations (OMO) bond purchase to the tune of INR 10,000 crores (to be held on the 17th of May) and inject durable liquidity into the banking system surprised many market participants.

Citi economists believe that this OMO purchase announcement should be viewed as merely replenishing the durable liquidity that got drained and not as a signal on yields in response to recent bond market volatility.

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RBI POLICY – FIXED INCOME PARTY CONTINUES, FOR NOW

BY GAURAV KULSHRESHTHA | 05 APRIL 2018

The First Bi-Monthly Monetary Policy Statement for FY 2018-2019 was released by RBI today. Following were the highlights.

1. Repo Rate left unchanged at 6.00%.

2. The “neutral” stance continues.

Consequently, reverse repo rate remains unchanged at 5.75% and the marginal standing facility (MSF) rate and Bank rate also remains unchanged at 6.25%.

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Trade War risks and impact on India

BY GAURAV KULSHRESHTHA | 27 MARCH 2018

In a significant announcement last week, US president Donald Trump instructed his U.S. Trade Representative (USTR) to levy fresh tariffs (25% duties) on goods amounting to $50 billion worth imports from China.

India’s economic exposure to US (Exports to US) and stock market (Listed companies) sales exposure to US is relatively quite low, and hence the impact of the already announced measures is likely to be negligible. However, if this situation escalates further it could hurt Indian markets given the relatively higher valuations.

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GDP growth back on track, Inflation in line with RBI projection

BY GAURAV KULSHRESHTHA | 06 MARCH 2018

After hitting a low of 5.7% in 1Q of 2017-18 due to the demonetization and GST implementation related disruptions, the 3Q real GDP growth rebounded to 7.2% as per data released by ministry of statistics and programme implementation. This was in line with Citi economist’s expectation of 7.1% for the given period.

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3Q earnings largely in line

BY GAURAV KULSHRESHTHA | 27 FEBRUARY 2018

The 3rd quarter earnings season just got over. Though the earnings growth at an aggregate level was decent, but it was largely in line with expectations. BSE 100 earnings grew by ~20% YoY against an expectation of ~21% and NIFTY 50 earnings grew by ~16% YoY against an expectation of ~22%.

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How Deep Can this Correction Go?

BY FLORENCE TAN | 09 FEBRUARY 2018

US stocks fell 3.8% on Thursday amid a continuation of recent volatile market moves. With the S&P 500 down 10% from its January high, how deep can this correction go?

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Eye on the Market: Equity markets turn volatile

BY GAURAV KULSHRESHTHA | 07 FEBRUARY 2018

Post the Annual Budget announcement on Thursday, 1st Feb, Indian markets corrected by ~2.3% on Friday, 2nd Feb partly attributed to the proposed LTCG tax. Central Board of Direct Taxes issued clarifications in the form of FAQ, to quell any confusion and help soothe nerves.

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RBI Policy – rates on hold

By Gaurav Kulshreshtha | 07 FEBRUARY 2018

The Sixth Bi-Monthly Monetary Policy Statement for FY 2017-2018 was released by RBI today. Following were the highlights.

1. Repo Rate left unchanged at 6.00%.

2. The “neutral” stance continues.

Consequently, reverse repo rate remains unchanged at 5.75% and the marginal standing facility (MSF) rate and Bank rate also remains unchanged at 6.25%.

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Budget FY2019: An Overview

BY GAURAV KULSHRESHTHA | 01 FEB 2018

Indian Finance Minister Arun Jaitley presented the Modi governments last full Budget for fiscal year 2018-19 today. This pre-election budget aims at alleviating farm distress and creating a New India by focusing on agriculture, rural development, healthcare, education, employment, MSME and infrastructure sectors of the economy.

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2018 Annual Outlook (Video)

BY CITIBANK ASIA PACIFIC & EMEA WEALTH MANAGEMENT | 05 JANUARY 2018

A rebound in machinery and equipment spending is expected to extend the business cycle, support global growth and lift commodities as well as risk assets in 2018. At the same time, valuations are becoming more stretched, central banks are tightening and political risks remain elevated. How can investors navigate this maturing bull market?

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2018 Annual Outlook

05 JANUARY 2018

Citi analysts expect global growth to pick up from 3.2% in 2017 to 3.4% in 2018, the highest since 2010. A rebound in machinery and equipment spending is expected to extend the business cycle, support global growth and lift commodities as well as risk assets in 2018. At the same time, valuations are becoming more stretched, central banks are tightening and political risks remain elevated. How can investors navigate this maturing bull market?

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Fiscal slippage fears come true – bonds react, equities hopeful.

By Gaurav Kulshreshtha | 03 JANUARY 2018

Last week finance ministry announced the decision to increase its market borrowings program for the current fiscal by an additional INR 500bn (0.3% of GDP) over and above the budgeted net borrowing of INR 3482bn, through dated government securities.

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US
Fed Signals Three More Rate Hikes for 2018

By Florence Tan | 14 DECEMBER 2017

The most important takeaway from yesterday’s meeting was that the Fed continued to signal only three more rate hikes in 2018 despite revising up growth forecasts to include the impact of fiscal stimulus from the proposed tax cuts currently being discussed in Congress.

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RBI POLICY – ENSNARED BY INFLATION & GROWTH CONUNDRUM

By Gaurav Kulshreshtha | 06 DECEMBER 2017

The Fifth Bi-Monthly Monetary Policy Statement for FY 2017-2018 was released by RBI today. Following were the highlights.

1. Repo Rate left unchanged at 6.00%.

2. The "neutral" stance continues.

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Government stimulus and resilient flows eclipse weak earnings

By Gaurav Kulshreshtha | 06 NOVEMBER 2017

In a bid to accelerate growth, Govt. has made significant policy announcements over the last couple of weeks (big bang PSU Bank recapitalization, Mega road capex plan and MSP hikes).

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RBI POLICY – LOWER GROWTH, HIGHER INFLATION

By Gaurav Kulshreshtha | 04 OCTOBER 2017

The Fourth Bi-Monthly Monetary Policy Statement for FY 2017-2018 was released by RBI today. Following were the highlights.

1. Repo Rate left unchanged at 6.00%.

2. The “neutral” stance continues.

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Mixed Macro – Convoluted Monetary Policy options

By Gaurav Kulshreshtha | 22 SEPTEMBER 2017

The 1Q FY2018 GDP growth was reported at 5.7%YoY. This was even weaker than the estimates of Citi economists (Citi: 6.3%, Cons: 6.5%). This was a significant deviation from the 7.7%YoY GDP growth reported in 1H FY2017, before the demonetization shock kicked in.

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US
Higher Probability of Rate Hike in December

By Lim Xiou Ann | 21 SEPTEMBER 2017

The Federal Open Market Committee’s (FOMC) 19-20 September 2017 meeting has left short-term interest rates unchanged, increasing probability of a December rate hike. As expected, Fed Chair Janet Yellen has also announced that the Fed will begin unwinding its balance sheet.

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Weak 1QFY18 earnings + Strong flows = Stay Cautious

BY GAURAV KULSHRESHTHA | 21 AUGUST 2017

Indian equities have delivered a very strong performance, with S&P NIFTY rising ~20% YTD backed by strong flows (FII ~$9bn and DMF ~13bn till July YTD). But NIFTY companies have reported an aggregate earnings decline of ~11.5% YoY in 1QFY18.

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Can tomatoes impact your bond portfolio?

BY GAURAV KULSHRESHTHA | 21 AUGUST 2017

The July Consumer Price Inflation(CPI) climbed to 2.36% YoY following a record low of 1.54% YoY in June. This jump in CPI is almost entirely attributable to the tomato price shock, that rose by 138% MoM due to heavy monsoon rainfall and abating supply.

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RBI Gratifies The Market

BY GAURAV KULSHRESHTHA | 02 AUGUST 2017

The Third Bi-Monthly Monetary Policy Statement for FY 2017-2018 was released by RBI today. Following were the highlights.

1. Repo Rate reduced by 25bps to 6.00%.

2. The "neutral" stance remains unchanged.

Consequently, reverse repo stands adjusted to 5.75% and the marginal standing facility (MSF) rate and Bank rate to 6.25%.

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Indian Mid-Cap's – priciest in 10 years.

BY GAURAV KULSHRESHTHA | 24 July 2017

The strong outperformance of mid-caps over their large-cap pears that has been conspicuous since the past two years and continues to sustain in CY2017 as well, has pushed mid-cap valuations to their multi year highs.

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Will RBI oblige with a rate cut in August?

BY GAURAV KULSHRESHTHA | 24 July 2017

The June Consumer Price Inflation(CPI) slipped to 1.5% YoY from 2.2% in May. With this, the headline CPI inflation has fallen below the lower bound of RBI inflation target range of 4% +/- 2% for the first time.

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Herald the GST Era, Stage set for a larger formal economy

BY GAURAV KULSHRESHTHA | 03 July 2017

At the stroke of the midnight hour of June 30th–July 1st, as India stood at the cusp of a new era of "One Nation One Tax", the stage seems to be set for a more formal economy.

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Farm Loan Waiver (FLW) – will the domino effect continue?

BY GAURAV KULSHRESHTHA | 03 July 2017

UP, Maharashtra, Punjab and Karnataka have recently announced FLW packages for small farmers, totaling around INR 1.02tn. This has raised concerns around fiscal deterioration at the state level, and has kept both Bond & Equity investors occupied with questions surrounding the reasons for the current FLW demands, which other states can follow suit and the overall impact of a large scale FLW on financial markets.

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RBI slashes its CPI forecast; Opens up room for a likely 50bps cut in FY18

BY GAURAV KULSHRESHTHA | 07 June 2017

The Second Bi-Monthly Monetary Policy Statement for FY 2017-2018 was released by RBI today. Following were the highlights.

1. Repo Rate kept unchanged at 6.25%

2. CRR kept unchanged at 4.0%

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RBI maintains an Anti-inflation stance

BY GAURAV KULSHRESHTHA | 06 APR 2017

The first bi-monthly Monetary Policy statement for the year 2017-18 was released today by Reserve Bank of India. Following were the highlights.

The MPC decided to keep the policy rate unchanged (Repo Rate-6.25%) while persevering with the neutral stance (in line with expectations). All 6 members voted in favor of the decision.

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CPI Inflation at 2 yr. low

BY GAURAV KULSHRESHTHA | 20 FEB 2017

The conspicuous divergence between the Headline and Core CPI trajectory continued in January. The headline CPI fell to a record low of 3.17 YoY, down from 3.4% in December led by a sharp consecutive decline in vegetables and pulses.

In contrast, the core CPI and fuel inflation was flat to up. Fuel inflation (including transportation) firmed up to 4.5% YoY from 3.9% in December and core CPI ex-transportation was flat at 5%.

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RBI Changes stance to "Neutral"

BY GAURAV KULSHRESHTHA | 08 FEB 2017

KEY HIGHLIGHTS OF THE POLICY STATEMENT WERE:

All 6 members of the Monetary Policy Committee (MPC) voted to keep the policy repo rate unchanged @ 6.25%.

Consequently, the reverse repo rate remains unchanged @ 5.75% and the marginal standing facility (MSF) rate and the bank rate @ 6.75%.

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Budget FY2018: An Overview

BY GAURAV KULSHRESHTHA | 01 FEB 2017

India Finance Minister Arun Jaitley presented the Union Budget 2017-18 with a clear focus on rural and farm spending that would be increased by 24%, as part of a plan to double the farmer's income in the next five years.

This Budget has been presented against a challenging backdrop of heightened global political and economic uncertainties.

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