Eye on the Market.
Citi
Eye on the Market.
Dear Investor,
India's trade deficit in January hit a 1-year low at ~USD17.75bn, as both merchandise exports and imports contracted for the second consecutive month.
US Producer Price Index (PPI) eased to 6.0%YY in Jan-23 from 6.5%YY in Dec-22. Although decelerating, producers continue to see stubborn inflation, which supports an expected 25bp rate hike from the US Fed Reserve next month.
A Quick Overview:
India's headline inflation as measured by CPI rose unexpectedly to a three month of high of 6.52%YY in Jan-23 from 5.72%YY in Dec-22 on account of larger than expected rebound in food inflation. Core CPI inflation remained unchanged at 6.1%YY. Citi analysts have revised their average CPI forecast upwards to 6.2% (+60bps) for 4QFY23 and 5.1%YY for FY24 (+20bps). They expect another 25bp rate hike at the April MPC meet.
India's Merchandise exports contracted 6.5%YY in Jan-23, following a slowdown in demand from key developed economies. Imports also contracted 3.6%YY during the same period due to a sharp fall in Gold imports which fell by 70.7%YY. The contraction in both merchandise exports and imports led to the overall trade deficit hitting its lowest in a year at ~ USD 17.75bn.
India's foreign exchange reserves fell by ~USD 8.3bn to ~USD 566.95bn posting its biggest fall in 10 months on account of a fall in the foreign currency assets.
US Headline CPI Inflation rose by 0.5%MM in Jan-23 following a 0.1%MM increase in Dec-22. The CPI was up 6.4%YY from the same period in CY22 exceeding consensus expectations. As per Citi analysts, getting broad price increases down to 2%YY on a sustained basis will take longer than 2023. They expect headline CPI will end CY23 at 3.5% with another rate hike of 25bp expected in March Fed policy meeting.
The final Eurozone 4Q-22 real GDP growth moderated but remained in positive territory, rising by 0.1%QQ in 4QCY22 (1.9% YY in 4QCY22). Despite slowing growth, Euro-Area preliminary employment data continued to surprise more than expected with employment growth rising by 1.5%YY in 4QCY22. Citi analysts expect three more rate hikes in the deposit facility rate implying a possible terminal rate of 3.5%.
UK headline CPI inflation eased from 10.5% YY in Dec-22 to 10.1% YY in Jan-23 on account of larger than expected reductions in transport and a decline in fuel prices, while food inflation continued to rise. The Core CPI also fell from 6.3% YY in Dec-22 to 5.8% YY in Jan-23. Citi analysts expect a final rate hike of 25bp to a terminal Bank Rate of 4.25% at the March monetary policy meeting.
Equity: NIFTY continues to trade at high valuations both on an absolute and relative basis with 1yr fwd. P/E at 20x (premium to EM/DM and vs bond yields >1sd above LTA). Subject to their appetite for risk, clients may retain their SIPs and STPs and adopt a "buy on dips" approach.
Fixed Income: Citi analysts expect 10y G-sec yields likely to be capped around 7.40-7.45% and gradually drift to 7% over the coming months.. Fixed-income investors should consider their investment horizon by creating buckets while reviewing risk and reward in their portfolios. Investors with up to a one-year horizon may prefer liquid, ultra-short and low-duration funds. Investors with a 5-year horizon may consider Short-term, corporate bond, Medium duration, and Target maturity funds while remaining diversified and preferring quality.
To read more detailed views and daily newsletter, please visit our Citi Wealth Insights page.
Citi
Investments Disclaimer: Citibank, N.A. provides investment services as a distributor of third party investment products (shortly referred to as 'investment products'). Citibank, N.A. does NOT provide investment advisory services in any manner or form.
To read the complete disclaimer, please click here.
This product/service is offered by branches of Citibank, N.A. in India.
Citi will never ask for your personal details.
Never provide the One-Time PIN that is sent to your mobile phone to anyone.
Always check SMS and email alerts from Citibank relating to your account and report any unauthorised transactions to Citibank immediately.
DOWNLOAD CITI MOBILE
App Store Google Play
CONNECT WITH US ONLINE
Facebook LinkedIn Instagram Citi
GET IPIN
(INTERNET PASSWORD)
Contact Us | Unsubscribe | Online Security | Terms and Conditions | Disclaimers
Copyright ©2023 Citigroup Inc.