BQ Prime's special research section collates quality and in-depth equity and economy research reports from across India's top brokerages, asset managers and research agencies. These reports offer BQ Prime's subscribers an opportunity to expand their understanding of companies, sectors and the economy.
Systematix Research Report
India's current account deficit widened significantly to $9.2 billion in Q1 FY24 from $1.4 billion in Q4 FY23 on account of higher merchandise trade deficit ($566 billion in Q1 FY24) and shrinkage in net services exports and transfers (totalling $474 billion in Q1). However, the rise in capital account surplus, which spurted to $344 billion in Q1 FY24 on the back of asset sales by banks abroad, supported the overall Balance of Payments.
However, the durable portion of capital flows at $7.5 billion in Q1 FY24, excluding foreign portfolio investment flows, and the sporadic banking capital has contracted by 56% YoY. Two points are imminently discernable:
decline in foreign direct investment corroborates declining private capex and
external deficit (excluding transfers) at 2.3% of gross domestic product is higher for the modest recovery in domestic demand.
Going forward, the rebound in global crude prices and tightening financial conditions are likely to bring to the fore the underlying external imbalances. Strong USD, rising global yields, and widening deficits will likely keep Indian rupee/USD under pressure (our target of 85-86); Reserve Bank of India's currency interventions to translate into tighter liquidity and higher short-term rates, thereby diminishing rate easing expectations.
We therefore expect RBI to hold rates unchanged in the upcoming October 6 statement, but its hawkish message may keep the windows open for an additional rate hike.
Click on the attachment to read the full report:
DISCLAIMER
This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
