The Indian government bonds were largely unchanged on Tuesday as investors await first quarter Gross Domestic Product (GDP) figure. Also, traders were inactive ahead of Reserve Bank of India's open market purchase (OMOs) of notes later today. The yield on the benchmark 10-year bonds hovered at 7.460 percent by 06:40 GMT.
India’s first quarter gross domestic product, due to be released on Tuesday, is expected to strengthen, following solid support from higher net taxes. Despite a challenging global backdrop, the country is seen to perform relatively well, after it stabilized at the start of the calendar year. The growth figures, due today is likely to witness gross-value added (GVA) growth at 7.1 percent y/y, steady from a quarter ago. A seasonal hand from higher net taxes will lift real GDP to 7.5 percent on year compared to 7.3 percent in 4Q15, DBS reported.
While, private capital investments are expected to stay calm, urban consumption is likely to move up. However, public spending is likely to have moderated towards the end of the fiscal year to meet targets and mandatory expenditure ceilings. Net exports are likely to stay flat-to-negative in this quarter.
“The services sector is expected to pick most of the slack for the quarter, lifted by public capex spending,” DBS stated in a recent report.
On the supply side, services sector is expected to compensate for the sub-par industry growth and weak farm output. Agricultural output is likely to decline 0.5 percent on year in 1Q16 from -1.0 percent in 4Q15, due to sub-par rains and warmer than usual heat.
Meanwhile, industrial sector is likely to gain impetus from electricity generation but mining and manufacturing may limit the upside. Diverging from high-frequency prints, GDP manufacturing output jumped 12.6 percent y/y in 4Q15, pointing to some potential revisions, the report added.
According to Reuters, India’s central bank will purchase up to 150 billion rupees worth of government securities under open market operations on May 31, it said in a statement late on Friday. This will be the fifth such auction in the current financial year and so far the RBI has bought 550.14 billion rupees worth of government notes through four Open Market Operations (OMOs), as it gradually moves to neutral banking system liquidity from the current liquidity deficit.
In additions, markets will look forward to cues on arrival and distribution of annual monsoon rainfall. Meanwhile, the Sensex fell 0.22 percent or 59 points to 26,666.60 and Nifty-50 futures down 0.01 percent or 0.75 points to 8,187 by 06:40 GMT.
The material has been provided by InstaForex Company – www.instaforex.com