INDIA: Week Ahead: The Macro, Valuation, Sentiment & Technical Lens
Macro: The key data last week was the August Final PMI Manufacturing and at +59.3 and Services at +62.9 and are hitting all time highs. The focus on India by US tariffs appears to be having limited impact at present. The key data release this week will be August CPI. The market expects a bounce from the July lows of +1.55% followed by Wholesale prices for August and trade data at the end of the week. The export release is critical to watch given US sanctions being ramped up.
Fig 1: India CPI to July vs RBI Bands
Valuations: The NIFTY 50 over the last 3 months is the only index of its major peers that is negative, though at 21.96x P/E it remains towards the top end of the last 5-Years year end result. The full year estimate is modestly higher from current and 2026 forecasts for a modest decline. Of it's major regional peers, the Rupee is the worst performer over the last 3 months, down over -2.7%.
Fig 2: USDINR Over the Last 12 Months
source: Bloomberg Finance LP / MNI
Sentiment: As per discussion on valuation, the equity market performance as indicator for sentiment, remains weak and when compared to the positive returns of regional peers over the last month, is one of the few that has declined. The imposition of further US tariffs for buying Russian oil and the subsequent move closer to China and Russia suggests this trend could continue.
Technicals: The NIFTY 50 is trading between some key technical levels, looking for impetus to break out. At 24,741 it currently sits between the 20-day EMA of 24,734 and the 50-day EMA of 24,788. Issuance this week by the government is focused on the very short end.
09/10 : India to Sell 50 Billion Rupees 364-Day Bills on Sept. 10
09/10 : India to Sell 60 Billion Rupees 182-Day Bills on Sept. 10
09/10 : India to Sell 100 Billion Rupees 91-Day Bills on Sept. 10
Fig 3: NIFTY 50 vs the 20, 50, 100 and 200 day EMA
source: Bloomberg Finance LP / MNI
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AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
