State Debt Sale In Focus

Markets look ahead to an INR 360bn state debt sale and sovereign bill sales today for clues as to demand at sovereign auctions later this week, the RBI monpol meeting will begin today which could keep some participants on the sidelines.

• Data yesterday showed manufacturing PMI fell to 50.8 in May from 55.5 previously, the outlook being clouded by the pandemic but activity still staying in expansionary territory. Commenting on the latest survey results, Pollyanna De Lima, Economics Associate Director at IHS Markit, said: "The Indian manufacturing sector is showing increasing signs of strain as the COVID-19 crisis intensifies. Key gauges of current sales, production and input buying weakened noticeably in May and pointed to the slowest rates of increase in ten months. In fact, all indices were down from April."
• INR is expected to strengthen slightly after closing the session weaker on Tuesday. INR rose 2% in May, the biggest monthly gain in over two years, boosted by signs that the latest wave of the pandemic in India could be easing. Data would appear to show that the RBI was comfortable with the currencies rise as reserves rose at a slower pace, with some speculating a stronger currency could help put the brakes on inflation.