MUMBAI: In signs that the Indian economy is on a road to recovery, the ICICI securities Financial Conditions Index (FCI) improved to its highest score since May 2020. Financial Conditions Score improved to 10.94 in November 2020 from 9.61 in October 2020.
Significant improvement in money market and stock market drove the overall improvement in financial conditions, it said.
Increase in interbank liquidity, subsequent fall in money market rates below reverse repo and robust stock market performance on the back of positive Covid-19 vaccine development news drove the improvement in overall financial conditions, ICICI securities said in a note.
As per the estimation of the brokerage house, non-food bank credit growth during November 2020 came in at 5.9 per cent year-on-year, the highest since July 2020. Non-food bank credit growth during the June and the September quarter was 6.4 per cent and 5.5 per cent respectively.
The improvement in money market conditions was driven by sharp increase in interbank liquidity and commensurate fall in money market rates, ICICI securities said.
Average daily absorption in interbank market increased to Rs 6.37 trillion during November 2020 sharply up from Rs 5.27 trillion in the preceding month. Consequently, interbank call money rate stood at 3.06 per cent during November 2020, broadly unchanged from 3.05 per cent during the preceding month.
The sharp improvement in liquidity is due to the RBI’s dollar buying to rein in the rupee to keep exports competitive. In the December 2020 monetary policy, the Monetary Policy Committee also vowed to keep the stance accommodative at least in FY21 and FY22. Hence, money market conditions to remain benign in the near future, the brokerage house said.
The equity markets continued to watch news on Covid-19 vaccine development keenly. Hopes of breakthrough on the vaccine front and good performance by high frequency indicator led to Nifty index averaging 12602 in November 2020 up from 11790 in October 2020. India VIX fell moderately to 21.01 in November from 21.58 in October.
On the bond market front, ample liquidity and expectations that RBI will take measures to keep financial conditions benign led to sharp fall in bond yields especially at the short end of the curve, the brokerage house said.
India 1-year bond yield fell 12 basis points in November 2020 to average 3.4 per cent while 5-year bond yield fell 9 basis points to 5.12 per cent. 1-year and 5-year AAA yields also fell 20bps and 18bps respectively during the month.
Significant improvement in money market and stock market drove the overall improvement in financial conditions, it said.
Increase in interbank liquidity, subsequent fall in money market rates below reverse repo and robust stock market performance on the back of positive Covid-19 vaccine development news drove the improvement in overall financial conditions, ICICI securities said in a note.
As per the estimation of the brokerage house, non-food bank credit growth during November 2020 came in at 5.9 per cent year-on-year, the highest since July 2020. Non-food bank credit growth during the June and the September quarter was 6.4 per cent and 5.5 per cent respectively.
The improvement in money market conditions was driven by sharp increase in interbank liquidity and commensurate fall in money market rates, ICICI securities said.
Average daily absorption in interbank market increased to Rs 6.37 trillion during November 2020 sharply up from Rs 5.27 trillion in the preceding month. Consequently, interbank call money rate stood at 3.06 per cent during November 2020, broadly unchanged from 3.05 per cent during the preceding month.
The sharp improvement in liquidity is due to the RBI’s dollar buying to rein in the rupee to keep exports competitive. In the December 2020 monetary policy, the Monetary Policy Committee also vowed to keep the stance accommodative at least in FY21 and FY22. Hence, money market conditions to remain benign in the near future, the brokerage house said.
The equity markets continued to watch news on Covid-19 vaccine development keenly. Hopes of breakthrough on the vaccine front and good performance by high frequency indicator led to Nifty index averaging 12602 in November 2020 up from 11790 in October 2020. India VIX fell moderately to 21.01 in November from 21.58 in October.
On the bond market front, ample liquidity and expectations that RBI will take measures to keep financial conditions benign led to sharp fall in bond yields especially at the short end of the curve, the brokerage house said.
India 1-year bond yield fell 12 basis points in November 2020 to average 3.4 per cent while 5-year bond yield fell 9 basis points to 5.12 per cent. 1-year and 5-year AAA yields also fell 20bps and 18bps respectively during the month.
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