Rise With Profit: Increasing US Bond Yield, RBI MPC Meeting Minutes, HUL Q2 Results

This is the daily morning update from NDTV Profit. Over the next few minutes, we’ll bring you up to speed with everything you need to know to start your day ahead of the curve. If you’d like to listen to this as a podcast, make sure you look for 'All You Need To Know' on any of the major podcast platforms.

We spoke about this yesterday—bond yields in the US have been rising over the past four weeks, as expectations of rate cuts reset. And yesterday, the yield on the 10-year Treasury rose to 4.25%—the highest since late July. Now that probably doesn’t tell you anything much, but a rise of close to 60 basis points barely a month after the Federal Reserve cut policy interest rates by 50 basis points is sure to have a bearing on capital flows. Bond traders are resetting expectations of rapid fire rate cuts by the central bank in the US, as the fight against inflation is not yet completely won and the economy is showing signs of resilience.

There’s also the matter of the US Presidential elections, where the battle for the White House seems to be neck and neck, just days ahead of voting. Safe haven demand for Treasury can’t be ruled out. In fact, gold prices are trading not too far from all-time highs, having gained close to 9% since the start of last month.

With treasuries looking that much more attractive, Wall Street saw selling. The Dow and the S&P 500 both lost close to a percent each and the Nasdaq Composite, with a higher exposure to tech stocks, fell 1.6%. Markets in the Asia Pacific region are currently bucking the trend with two of the three early risers starting marginally in the green.

Back home, equity markets continued to be volatile, with the benchmark Nifty 50 swinging between gains and losses and finally ending with cuts of about 0.1%. The broader markets ended in the green, with a break in the selling. Foreign investors continue to rush for the exits, though. They net sold equity worth Rs 5,684 crore—the eighteenth consecutive session they’ve sold. That brings the net selling in the month so far to just shy of Rs 1 lakh crore.

One of the other top news points I’m tracking this morning is the outcome of the bilateral meeting between Prime Minister Narendra Modi and Chinese President Xi Jinping. The two leaders, who represent more than a third of the world population, held their first structured bilateral talks in nearly five years on Wednesday, agreeing that India and China can foster a "peaceful and stable" relationship by demonstrating maturity and mutual respect. It’s a positive development and allows for the restoration of normalcy of ties between the two countries along the border.

Foreign Secretary Vikram Misri said that officials will now take the next steps to discuss enhancing strategic communication and stabilising bilateral relations by utilising official dialogue mechanisms.

In other news, the minutes of the last meeting of the Monetary Policy Committee of the RBI are out. Remember, this was the first meeting of the newly constituted committee, and the decision was to hold rates unchanged and to change the stance to neutral from withdrawal of accommodation. Essentially, they decided on a wait and watch approach.

The rationale for the decision was evident in the minutes, with RBI Deputy Governor Michael Patra saying it would be appropriate to undertake an appropriate recalibration of the monetary policy stance that "reflects an openness to reducing the degree of policy restraint", if inflation evolves along the trajectory set out in the baseline projection. At the same time, reducing restraint "too quickly may negate the progress made on disinflation".

Now speaking of inflation, there are a few things that are getting costlier for you. One of them is your cup of tea—Hindustan Unilever Ltd. and Tata Consumer Products Ltd. have announced price hikes effective across brands, effective this month. You can expect prices to rise 5-10% between October and December. The recent price hike is mainly triggered by unfavourable weather conditions, which has affected tea production in the country, increasing procurement costs for these companies.

HUL, by the way, met estimates on revenue and profit in the second quarter. The board also approved the separation of the company’s ice cream business, which doesn’t significantly add to profitability.  

The other thing that’s gotten costlier is ordering in—Swiggy has hiked its platform fee to Rs 10 from Rs 6 earlier, moving in lockstep with competitor Zomato Ltd.

And it’s going to be another busy day on the earnings front—we’ve got ITC Ltd., NTPC Ltd., IndusInd Bank Ltd. and JSW Energy Ltd. reporting earnings.