All eyes will be on the MPC meeting of the Reserve Bank of India which will determine the policy rate. Figures for manufacturing PMI, auto sales, mutual fund inflows, and subscription numbers for a real estate IPO will be other key metrics to track this week
In a world dominated by high-frequency data, some numbers still matter more than others. At the start of every week, Mint’s Plain Facts section will now feature five key data releases that you must keep an eye on—data that help you make sense of where the economy and markets are headed. From the announcement of policy rate of the Reserve Bank of India (RBI) to mutual fund (MF) flows, this week promises to be a data-rich one.
Repo rate is the interest rate at which RBI gives overnight loans to banks. It acts as the floor for short-term lending rates and shapes the economy’s yield curve. Starting 5 April, RBI’s monetary policy committee (MPC) will deliberate on what the right policy rate should be and pronounce its verdict on Wednesday morning.
The MPC meeting comes at a time when rising bond yields in the US have triggered outflows from emerging markets. India has been attracting equity inflows, but bond investors have been selling. Apart from the attraction of higher yields abroad, growing debt levels and the threat of inflation have made bond investors in India jittery. Inflation eats into the real (inflation-adjusted) returns of bond holders.
However, India is not the only country facing negative real rates. Most central banks have allowed real rates to dip into negative territory, with the aim of fuelling growth.
The manufacturing purchasing managers’ index (PMI) to be released by IHS Markit on 5 April is a weighted average of five indices: new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%), and stocks of purchases (10%), and is based on monthly surveys of businesses across the globe. Among the most widely tracked gauges of economic activity worldwide, a PMI reading above 50 indicates an expansion in manufacturing activity, whereas a reading below 50 indicates a contraction.
India’s manufacturing PMI has stayed well above the 50 mark since September last year, after having plummeted to 27.4 in April in the wake of covid-19 pandemic-induced lockdown. Among emerging markets, only Brazil was ahead of India on this count in February. The latest numbers will tell us whether the manufacturing momentum has continued despite the renewed surge in covid-19 cases in the country.
Data on automobile dispatches from factories will be released by the Society of Indian Automobile Manufacturers (SIAM) later this week. So far, the recovery has been uneven in the auto sector. Sales of passenger cars and three-wheelers have been lacklustre, while growth in sales of two-wheelers and tractors have been more promising.
In February, car sales were marginally below the year-ago levels even as two-wheeler sales rose 12% over the year-ago period. The pick-up in demand for cars is slow because consumers are still reluctant to purchase big-ticket items, such as houses and cars, survey data suggest. The latest numbers will tell us whether the two-speed recovery in the sector continues or whether car sales have begun recovering.
Since July last year, domestic equity funds have been seeing outflows. However, this has slowed down over the past few months. March figures are set to be released on 8 April by the Association of Mutual Funds in India (Amfi).
Indian equity indices have been resilient throughout the covid-19 pandemic despite the lack of MF inflows, partly because of foreign flows and partly because of direct buying by retail investors, who are increasingly seeking to invest in markets on their own. Domestic institutional investors, such as insurance and pension funds, have used the stock market boom as an opportunity to book profits, drying up another source of inflows into MF funds.
However, these trends may be changing. If outflows continue to taper and MFs start seeing net inflows, it will be a big relief for equity markets at a time when foreign investment flows have become uncertain.
IT has been raining initial public offerings (IPOs) over the past few months. IPOs allow private companies to offer their shares to public investors for the first time and get listed on bourses. A buoyant stock market has led to a boom in share sales.
Real estate firms, battered by the pandemic, have largely been missing in action. Of the 40 IPOs in the past six months, only two have been by real estate companies. This week, a third, Macrotech Developers Ltd (earlier Lodha Developers), is entering the fray.
Of the two other real estate firms to have listed in recent months, Veer Global received favourable response from investors, was oversubscribed several times, and saw a small bump on listing day.
In contrast, Brookfield India saw lower subscription and faced negative returns on listing. Which way will Lodha Developers go?