Financial conditions in India remained favourable in February, as a slimmer budget deficit helped boost investor confidence, foreign investors stepped up buying government securities, and bank credit growth stayed buoyant
CRISIL’s Financial Conditions Index (FCI) summarises the state of financial conditions by collating key parameters across the domestic markets. The gauge stood at 0.6 in February, slightly better than January’s 0.5. A positive reading indicates conditions are easier compared with the average since 2010
The Interim Budget for next fiscal buoyed the markets in February, specifically the government’s aim to cut the fiscal deficit to 5.1% of GDP next fiscal from 5.8% this year and lower borrowings. Bond yields fell sharply after the announcement
While liquidity has been tight, its impact has so far been limited to the money markets. Broader bank lending rates rose mildly, while credit growth accelerated. Liquidity conditions have started to ease in March, which could take some pressure off money market rates
Foreign portfolio investors (FPIs) continued to pour money into India despite rising US treasury yields and crude oil prices. Indian bonds have been drawing global investor interest ahead of their inclusion in the global bond indices. FPIs have been net-buyers in March so far in both the equity and debt segments
