Volatility indicators show signs of cooling down

Markets update

• India VIX has continued to cool off and dropped to 42.5925 on Friday. It has dropped 32.3% over the last 1 month
• Benchmark indices ended the week with modest gains. Nifty 50 closed up 1.7% at 9266.75 and Sensex closed at 31588.72, up 1.38%. Nifty 500 also gained 2.32% during this period
• On Friday, the RBI cut the reverse repo rate by 25 basis points to 3.75% to discourage banks from parking their excess liquidity with the central bank
• RBI also announced that it would be injecting ₹50,000 Cr via targeted long-term repo operations, so that banks provide more liquidity, specifically to small and mid-sized NBFCs and micro-finance institutions. Another ₹50,000 Cr special finance facility will be provided to financial institutions such as Nabard, Sidbi, NHB
• CPI fell to a four-month low of 5.91% year-on-year in March 2020 from 6.58% in the previous month
• WPI was 1.0% year-on-year in March 2020 below market expectations of a 2.0% rise

Other updates

• Last week, PM Modi extended the pandemic related lockdown till May 3rd. He stated that while India had performed better in countering Covid-19 than other advanced and more prosperous countries, an extension of the lockdown was necessary
• The Government has allowed business activities in a restricted manner. Industries operating in villages, industrial estates, Special Economic Zones and Export Oriented Units have been allowed to operate subject to certain restrictions
• Commercial activities in agricultural and allied industries, essential sectors and IT / ITES sectors have been permitted
• According to India Metrological Department, India’s southwest monsoon this year is expected to be ‘normal’ at 100% of the long period average which is a positive development for the farm sector and a good harvest is expected to push up India’s agriculture growth rate in 2020-21

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