Latest news with #SamiranChakraborty
Reuters
3 days ago
- Business
- Reuters
RBI's inflation, growth outlook may mean end of easing cycle, some analysts say
MUMBAI, Aug 6 (Reuters) - The Reserve Bank of India's inflation and growth outlook suggest the current policy rate may mark the end of the easing cycle, six analysts said on Wednesday, after the central bank held rates steady and kept its growth forecast unchanged. The RBI has trimmed its key policy rate by 100 basis points since February. While a Reuters poll had predicted one more 25 basis points cut this cycle, some analysts are now reassessing that view. "Given the characterisation of monetary policy in the August meeting and the growth and inflation forecasts, we do not find much scope for an immediate rate cut," said Samiran Chakraborty, chief economist at Citi. The bank, which had earlier expected a 25 basis points cut in August, now sees the repo rate holding at 5.50% this cycle, up from its previous forecast of 5.25%. The RBI retained its Jan–March inflation outlook at 4.4% and projects a rise to 4.9% in April–June 2026. India's retail inflation fell to a more than six-year low of 2.1% in June and is expected to hit a record low in July. Data is due to be released on August 12. However, RBI Governor Sanjay Malhotra said the sharp fall in headline inflation was driven by volatile food prices and is likely to pick up toward year-end. "One year ahead, factoring in the April–June inflation forecast at 4.9% and the repo rate at 5.5%, the real rate buffer will narrow significantly. The terminal rate is likely to stay at 5.5% this year," said Radhika Rao, senior economist at DBS Bank. Analysts at Capital Economics, Bank of Baroda, Kotak Securities and Edelweiss Mutual Fund also said the central bank may have ended its easing cycle. "There is little in today's policy announcement to change our view that the easing cycle has come to an end," said Shilan Shah, deputy chief emerging markets economist at Capital Economics.
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Business Standard
6 days ago
- Business
- Business Standard
Trump's tariff shock likely to deepen rupee's slide, hurt recovery further
India's rupee is poised to remain one of Asia's worst performers in the second half of the year, with US tariffs adding pressure to an already fragile economic recovery, analysts say. Analysts at Deutsche Bank AG and Barclays Plc expect the currency to drop to new record lows by the year-end amid muted foreign inflows and headwinds from US tariffs. Meanwhile, the Chinese yuan, Indonesian rupiah, Malaysian ringgit and Philippine peso are projected to gain, according to estimates compiled by Bloomberg. While most Asian nations reach US trade deals, India faces a 25 per cent tariff rate as talks stall. The nation's markets have already seen $11 billion in equity outflows as economic growth slows, while interest-rate cuts by the central bank eroded support for the currency. Further depreciation would amplify concerns over imported inflation. The rupee is likely to 'remain an underperformer in Asia,' said Dhiraj Nim, an economist and forex strategist at Australia & New Zealand Banking Group Ltd. in Mumbai. 'I don't think much inflow can be expected, especially with growth risk in the picture due to tariffs.' Higher tariffs may shave off about 30 basis points from the gross domestic product growth, according to Barclays. Markets will now look to the Reserve Bank of India's policy meeting on Aug. 6 for its rate moves and cues for the rupee. The RBI delivered a surprise 50-basis-point rate cut in its last meeting and signaled a higher threshold for future easing. While the near-record foreign-exchange reserves give the RBI room to intervene, any action to curb rupee losses is likely to be measured, as 'tariff uncertainty limits the RBI's motivation to aggressively push' rupee higher against the dollar, Citigroup economists led by Samiran Chakraborty wrote in a note. The rupee fell 1.2 per cent last week to 87.5275 per dollar on Friday, marking its biggest weekly drop since December 2022. Still, not all analysts are bearish. Hopes linger that a delayed trade deal with Washington may still materialize, with India reportedly weighing concessions, including boosting imports from the US, while holding off on retaliatory measures. 'The key for markets and our rupee forecast is whether a trade deal is delayed but not denied,' said Michael Wan, senior currency analyst at MUFG Bank Ltd. He sees the rupee at 87 per dollar by end-December, compared with his earlier forecast of 84.50. For now, headwinds for the rupee from sluggish foreign inflows remain. 'The bond market may not see significant inflows, as the RBI has indicated little room for further cuts,' said Chandresh Jain, EM Asia rates and FX markets strategist at BNP Paribas SA. Equities also look stretched, with high valuations and slowing economic growth, he said.
Mint
6 days ago
- Business
- Mint
Rupee may remain among Asia's worst-performing currencies following Trump's tariff blow
(Bloomberg) -- India's rupee is poised to remain one of Asia's worst performers in the second half of the year, with US tariffs adding pressure to an already fragile economic recovery, analysts say. Analysts at Deutsche Bank AG and Barclays Plc expect the currency to drop to new record lows by the year-end amid muted foreign inflows and headwinds from US tariffs. Meanwhile, the Chinese yuan, Indonesian rupiah, Malaysian ringgit and Philippine peso are projected to gain, according to estimates compiled by Bloomberg. While most Asian nations reach US trade deals, India faces a 25% tariff rate as talks stall. The nation's markets have already seen $11 billion in equity outflows as economic growth slows, while interest-rate cuts by the central bank eroded support for the currency. Further depreciation would amplify concerns over imported inflation. The rupee is likely to 'remain an underperformer in Asia,' said Dhiraj Nim, an economist and forex strategist at Australia & New Zealand Banking Group Ltd. in Mumbai. 'I don't think much inflow can be expected, especially with growth risk in the picture due to tariffs.' Higher tariffs may shave off about 30 basis points from the gross domestic product growth, according to Barclays. Markets will now look to the Reserve Bank of India's policy meeting on Aug. 6 for its rate moves and cues for the rupee. The RBI delivered a surprise 50-basis-point rate cut in its last meeting and signaled a higher threshold for future easing. While the near-record foreign-exchange reserves give the RBI room to intervene, any action to curb rupee losses is likely to be measured, as 'tariff uncertainty limits the RBI's motivation to aggressively push' rupee higher against the dollar, Citigroup economists led by Samiran Chakraborty wrote in a note. The rupee fell 1.2% last week to 87.5275 per dollar on Friday, marking its biggest weekly drop since December 2022. Still, not all analysts are bearish. Hopes linger that a delayed trade deal with Washington may still materialize, with India reportedly weighing concessions, including boosting imports from the US, while holding off on retaliatory measures. 'The key for markets and our rupee forecast is whether a trade deal is delayed but not denied,' said Michael Wan, senior currency analyst at MUFG Bank Ltd. He sees the rupee at 87 per dollar by end-December, compared with his earlier forecast of 84.50. For now, headwinds for the rupee from sluggish foreign inflows remain. 'The bond market may not see significant inflows, as the RBI has indicated little room for further cuts,' said Chandresh Jain, EM Asia rates and FX markets strategist at BNP Paribas SA. Equities also look stretched, with high valuations and slowing economic growth, he said. This week's main economic events: Monday, Aug. 4: Melbourne Institute inflation Tuesday, Aug. 5: Indonesia 2Q GDP, Philippines CPI, South Korea CPI, Australia household spending, BOJ June meeting minutes, Singapore retail sales, Services PMI across Asia Wednesday, Aug. 6: RBI rate decision, New Zealand 2Q employment change, Thailand CPI, Japan labour cash earnings, Taiwan CPI and PPI Thursday, Aug. 7: Philippines 2Q GDP, China trade balance, Australia trade balance, New Zealand 2-yr inflation expectations, South Korea BoP current account balance, Malaysia industrial production Friday, Aug. 8: BOJ summary of opinions July meeting, Japan BoP current account balance, Taiwan trade balance.
Economic Times
08-05-2025
- Business
- Economic Times
Macros are good but where is the market headed based on earnings, liquidity & PE multiples? Here's the Citi view
Samiran Chakraborty, Chief Economist India and Surendra Goyal, Head of India Research, Citi, in conversation with ET Now. Goyal says market growth in fiscal year 2025 will be in single digits. Earnings are expected to recover going forward. FY25 presented earnings challenges, expecting mid-single-digit growth. Large private banks and downstream energy companies are showing strength, offsetting consumption weakness. Tax slab changes and macroprudential norms should aid long-term growth, targeting historical 11-12% earnings growth. Positive domestic flows and stabilizing FII trends support a constructive medium-term market outlook, despite limited near-term upside. ADVERTISEMENT On the macro front everything is looking good? Samiran Chakraborty: Yes, India is getting a lot of tailwinds. To start with, there is a huge boost from lower oil prices. India is likely to be one of the first countries to strike a deal with the US on the tariff front also. We have already done a trade deal with the UK which could be the template for it. On top of it, monetary policy is extremely supportive. We have already seen significant rate cuts and liquidity infusion, going ahead we could get even more. And to some extent, in a very uncertain global world, India could be a relative beneficiary and even from that perspective we could see capital finding its way into India. 'Sell in May and go away' or stay put in the market? Pankaj Pandey answers Last but not the least, currency pressure not being there definitely helps with this kind of environment of dollar weakness. Policymakers will have one less headache to worry about. All these things are positive, but we have to do our own things as well. We have to keep on doing the kind of reforms that are needed to attract this capital into the country and boost our manufacturing prowess. That is the part where more work probably needs to be done still. If I take the clock back before we move it forward, when Indian markets were in a disarray, as a house you came up with quite a constructive report which talked about a year-end target of about 24,000 plus. We have reached there because of liquidity as well as macros. We have reached there perhaps because of earnings recovery also. Where are we headed next given that your price targets for the full year are already there on the ticker? Surendra Goyal: To answer that, let me take a step back first. In February, we turned overweight on India in our EM strategy and it was driven by a combination of things. We had seen a lot of action by the central bank. We had seen the tax slab change being announced by the government. The valuations had corrected a fair bit at that point of time – both in absolute terms as well as relative terms. All of those things had happened and to that extent valuations were starting to look more attractive. So that is where we had turned overweight and we had an index target of around 25,000 at that point of time. The current Nifty target for December is 26,000 which as of today is around 7% upside from here. So, where we sit today, I would say there is still some upside and it starts with the point of macro looking pretty decent. So that is the first point. For earnings, FY25 was a challenging year, and FY 26-27 should be better. We are expecting a 26-27 aggregate return to the long-term trajectory that India has had. In FY25, the growth will end up in single digit, which is well below what India normally has on a longer-term basis. But we expect earnings to recover as we go forward. So, at this point of time I would say yes, we have seen a nice rally of around 10-11% from February end, in dollar terms the returns are even better. So, some of that upside is captured in and to that extent, there is a moderate upsides and any dips will be an additional chance to add. ADVERTISEMENT Let us get your view on the three important moving parts -- earnings, liquidity, and then PE multiples. Where are markets headed based on that? Surendra Goyal: On earnings, the point I make is FY25 was a very challenging year. We will end up in mid-single digits. The way the current quarter is shaping up, the trends are broadly mixed. But within that, two large sectors from an earnings perspective, which are delivering better numbers are the large private banks as well as the oil and gas, especially the energy companies downstream. So, because of that the reported numbers will look better, but overall trends are quite mixed because on the consumption side we have seen weakness in select we go forward, whatever changes have happened in terms of tax slabs, in terms of liquidity, in terms of change in macroprudential norms, should start helping and we should go back to a more longer-term growth in India. On a 15-year basis, earnings have grown at 11-12% in large indices in India. So, that is what we expect, that is the view on the earnings side. ADVERTISEMENT The second point is on the PE multiple. Samiran mentioned that the macro looks pretty decent. India is looking relatively quite good within the EM construct, a lot of things really going in favour at this point of time and which is why we believe that the PE multiple is on the higher side, but it could still be supportive. In fact, if you look at our index target, it is at an earnings of around 19-20 times, which is not very different from where we are currently. The third point is liquidity. One of the things we saw which took the market down around 15% between October, November last year and February was the FII outflows and which happened because there was a bit of a cyclical slowdown in growth, the dollar strengthened. So all of those things resulted in that. But from the last couple of months, it has turned positive, again a small positive but positive. Domestic flows have continued to be pretty resilient and that has gradually taken the market up higher. ADVERTISEMENT So, on all the three factors, things are kind of stable to decent and that makes us constructive on the market medium-term, admitting that the market has bounced back quite nicely and to that extent near time upsides might be limited. If we were having this chat a month ago, the conversation would have centred around tariff. Now it appears that there would be a lot of negotiations, some reconciliations, and some logic when it comes to the tariff interplay. So, while talking about macros, are you accounting in the tariff which would be at play after that 90-day window gets over and what kind of assumptions are you making at a global level when tariff windows would be open. Samiran Chakraborty: Obviously, this is a very fluid situation where every country is doing their negotiations on the tariff side and from India perspective, it is a story of absolute versus relative. In an absolute sense, at least whatever the current tariffs are, we might be impacted to some extent, but in a relative sense India will probably be impacted much less. The second thing is that if India at least on the manufacturing side uses the template that we have done with the UK which is that on the manufacturing side, we are offering almost zero for zero tariff, then it could actually turn out to be better. The third is that if there is a relative tariff divergence between India and China, then in the initial days, we will benefit from some sort of trade diversification where more and more orders will come to Indian companies and over the medium-term we can even benefit from supply chain diversification where these companies will be putting up their production hubs in India as well. ADVERTISEMENT These are the positives that can come out of this tariff scenario in some sense for India. The negative is that we can also get impacted by somewhat cheaper Chinese imports coming in if this tariff differential persists. For our calculation perspective, we had taken about a 30 basis point cut in our GDP growth forecast from 6.6% to 6.3% as an initial take on how things could be. But we also wrote that if for some reason this tariff shock through its secondary effects on global growth slowdown and generic uncertainty around leads to a much deeper growth slowdown below 6%, then India is in a position to activate a lot of additional policy measures, not just on the monetary policy side but also on the fiscal policy side. So, for us, 6% growth is a red line where the policy impetus will become stronger and probably push growth somewhat higher into that 6-6.5% range. There are two factors which in a sense are still moving parts. One, when would the government spending which had slowed down because of election and other compulsions in FY25, normalise and if it will normalise? Second, when will we see the real recovery in rural India because for almost three years, we have not seen meaningful contribution from there. Samiran Chakraborty: So, we have our own way of estimating the government spending data on a more high frequency basis and it appears to us that in the month of April, the government has spent a lot of money. Their cash balance at the end of March has almost been entirely drawn down in April which is a sign that this spending has happened, but that is very near-term. Over the more medium term, the big debate is not about the total quantum of government spending, but more about the composition of the spending between the revenue spending side versus the capex spending side. Our sense is that the capex spending will still grow, at least the nominal GDP growth rate, which is in excess of 10%, but we are not going to see that 20% plus capex that we had seen for a couple of years. That is probably behind us. But more and more, we will also have to see this capex being done at the state level and at the third tier government level as well. So, diversification of capex will become important from the government side, but total expenditure, at least in the near term, has picked up well. The open question is if for some reason, the growth headwinds are stronger, then how does the government stimulate the economy on where it can spend more? Those are still very open questions.
Reuters
07-04-2025
- Business
- Reuters
India swap markets signal RBI could do more than just a 25-bp rate cut this week
MUMBAI, April 7 (Reuters) - India's overnight indexed swap (OIS) rates have fallen in the last three sessions, signaling that besides just a quarter-point rate cut this week, the central bank could also change its stance or opt for a bigger reduction. OIS rates, the closest gauge of interest rate expectations, have dropped by 11-12 basis points (bps) in three trading sessions since the U.S. slapped duties on India last Wednesday as part of an expansive tariff plan. The one-year OIS rate stands around 5.88%, its lowest level since May 2022, while the five-year rate is around 5.71%, its lowest since February 2022. While a 25-bp rate cut is already priced in at the Reserve Bank of India's (RBI) monetary policy decision on Wednesday, traders are seeking some additional policy support after the tariff announcement stoked fears of a growth slowdown. "A 25-basis point rate cut with a change in policy stance to "accommodative" (from "neutral") has now become a higher possibility, while a rate easing of 25 bps with no change in stance is now a low possibility event," said Alok Sharma, head of treasury at foreign bank ICBC. DBS also expects a change in stance to "accommodative", along with a 25-bp reduction. The RBI started its rate cut cycle for the first time in nearly five years in February. Indian officials expect their growth projection of 6.3-6.8% to hold, but economists see a 20-50-bp hit to growth in the ongoing financial year that started on April 1. Citigroup, which expects a 50-bp hit to growth, said it assigns "a very small probability of a 50-bps cut in the April meeting." The immediate focus should be on creating the right preconditions for better transmission of monetary easing, Citi's India chief economist, Samiran Chakraborty, said in a note. The RBI could also signal a dovish tilt by giving greater assurance to the market regarding comfortable liquidity conditions, according to traders and economists. Ahead of the policy review, bankers have sought comfort on the availability of overnight liquidity up to a certain percentage of deposits. Meanwhile, surplus banking liquidity conditions over the last few days have already pushed overnight interbank call money rates towards the lower end of the monetary policy corridor, delivering a stealth rate cut. The weighted average call rate has moved closer towards the Standing Deposit Facility rate, which is at 6.00%, after remaining above the repo rate in March, while money market rates have plunged.
