Market Roundup. Chart M1: Sectro-wise Growth Rate (%) in Production Steel. Petroleum. Fertilizers. Products

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1 Market Roundup Macro-Economic Overview Domestic Macroeconomic Development In a major move towards addressing the non-performing assets (NPA) problem in the banking system, the Government of India announced a 2.11 trillion INR recapitalization initiative, aimed towards the public sector banks in the economy. This financial support would be extended over a period of two financial years; 1.35 trillion INR is to be financed through recapitalization bonds issued by the Government to these banks, and the remaining through budgetary support and market borrowing. The latest private estimate puts the size of India's NPA pile at 10.5 trillion INR. While the initiative may not be the panacea for the industry, it is a start, and has to be followed up with robust reform measures, particularly by reigniting stalled projects in the infrastructure sector, which form a bulk of such bad loans. Riding on the restocking wave by retailers after the GST implementation, core industries registered a growth of 5.19% over previous year in September. Aggregate growth in the core industries was 5.30% in the previous year. The spurt in growth was led by refinery products (8.1% in Sep vs 2.4% in Aug'17), natural gas (6.3% vs 4.2%) and steel (3.7% vs 2.2%). Coal production registered double digit growth (10.6%) for the second consecutive month, but decelerated from previous month (15.3%). Production of fertilizers declined the most in September from the previous month (-7.7% vs -0.7%), while cement (0.1% vs 0.7%) and electricity (5.2% vs 8.3%) experienced deceleration in growth. Chart M1: Sectro-wise Growth Rate in Production Coal Crude Oil However, the recovery appears to be short-lived as the manufacturing sector signaled a deceleration in October, as depicted by the Nikkei India Manufacturing PMI, produced by Markit Inc. The benchmark index slid to 50.3 in October, from 51.2 in September Though a single month reading is hardly a cause for worry, the fact that it comes in the middle of the festive season indicates the lack of demand from private consumption. The silver lining within the subdued reading was that firms continued to hire at a record pace in response to backlogs in orders Natural Gas Petroleum Products Fertilizers Steel Cement Electricity Overall Sep-17 Aug-17 Sep-16 29

2 Macro-Economic Overview Growth in industrial production (IIP) was surprisingly subdued in the month of September, despite a robust growth in the core industries, which form over 40% by weight in the aggregate production index. IIP growth for September 2017 was at 3.81%, down from 4.46% in August Corresponding growth for the index in the previous year was 4.97%. Mining growth remained robust at 7.87%, though marginally lower than 9.21% achieved in Aug 2017, while manufacturing remained stable at 3.39% (3.43% in Aug). Electricity, surprisingly decelerated significantly (3.37% vs 8.29%), despite sturdy growth in mining, and in particular, coal industry, as corroborated by the core industries growth published earlier in the month. In the use-based segment, growth of 7.37% in capital goods (vs 5.17% earlier) augurs well for the manufacturing industry, while consumer non-durables went from strength to strength (10.01% vs 7.34%). Lack of pickup in the consumer durables (-4.80% vs 3.42%) and in infrastructure & construction (0.48% vs 2.72%) is worrisome, as both the sectors are key indicators of economic health in the country. Table M1: Sector-wise Production in Core Industries Growth (Y/Y) Rate Period Mining MFG Electricity IIP Primary Capital Intermediate Growth (Y/Y) Rate on Use-Based (Goods) Classification Infrastructure/ Construction Consumer Durables Consumer Sep-17 prices 7.87 in 3.39 India continued to rise 6.56 under pressure 7.37 from 1.90 food and international 0.48 commodity prices Consumer price index, or CPI inflation for the month of October, rose to 3.58%, the highest since March 2017, up from 3.28% in September. CPI inflation was 4.20% in the corresponding period in Key categories which influenced the upward movement in the headline index included vegetables (7.47% vs 3.92% in Aug 2017), Housing (6.68% vs 6.1%) and Fuel & Light (6.36% vs 5.56%). The aggregate food basket, represented by the consumer food price index (CFPI), grew by 1.90% (1.25% earlier). Among the categories showing reverse movement to that of CPI were Pulses (-23.13% vs %), Recreation & amusement (3.89% vs 4.07%) and Transport & Communication (3.89% vs 4.07%). In this context, it should be pointed out that Vegetable prices have started abating and as such, the phenomenon was a short term seasonal spike. However, international crude prices have hardened steadily since the end of August, rising by 24.4% till date. The recent political crisis in Saudi Arabia has influenced the upward movement in global crude prices. Consumer Non-Durables Apr May Jun Jul Aug

3 Macro-Economic Overview Chart M2: Trajectory of WPI & CPI (Combined) Inflation Y-o-Y growth CPI (C) WPI -9.0 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Mirroring the movement of the CPI, the wholesale price index (WPI) inflation also posted a six month high growth of 3.59% in October Fuel prices registered double digit inflation (10.52%) for the first time since May 2017, as against a deflation of (-1.17%) in the previous year. Food inflation more than doubled to 4.30%, from 2.04% in the previous month, primarily on account of rise in vegetable prices (36.61% inflation). Onion (127.04% inflation), drumstick (148.74%) and cabbage (185.90%) were the noteworthy contributors in the upward movement in vegetable inflation. Core inflation though, remained stable at 2.84%, from 2.85% in the previous month, indicating that the entire movement in the prices, both wholesale and retail, is being influenced through food and fuel categories. Though fluctuation in the vegetable prices is Table M2: Indian Inflation Environment: Inflation (Y-o-Y) Rate Type WPI Inflation Rate (New Series) CPI Inflation Rate Items Oct'17: P Sep'17: R/F 3 Months Ago: R 6 Months Ago: R Source: Office of the Economic Advisor & MOSPI, CFPI (C): Consumer Food Price Index (Combined), * P: Provisional; R: Revised for WPI; F: Final for CPI; 1 Year Ago: R Primary Fuel&Power Manufacturing WPI FOOD CPI-Rural CPI-Urban CPI-Combined CFPI (C)

4 Macro-Economic Overview at most a seasonal factor, the continuous rise in international crude prices could prove to be a headache for the Monetary Policy Committee, leaving very little leeway in terms of a rate cut, with the Rupee too coming under a downward pressure of late. India's foreign trade deficit recorded the highest level since November 2014, as sluggish exports put paid to the hope of sustained turnaround in the beleaguered external sector. Total exports for the month of October 2017 declined by 1%, to US$23.1 billion, after a 26% growth recorded in the previous month. Plastic & Linoleum (24.46% growth over previous year), Organic & Inorganic Chemicals (22.29%) and Petroleum Products (14.74%) were the major commodities experiencing positive growth for the reported month. Total imports declined marginally from previous month to US$37.1 billion in October, growing by 8% over previous year. Within imports, Coal, Coke & Briquettes (66.28% growth), Organic & Inorganic Chemicals (30.49%), and Petroleum, Crude & Products (27.89%) experienced high positive growth. Total Oil Imports during October 2017 was valued at US$9.29 billion, growing at 28% annually; while non-oil imports for the same period was valued at US$27.83 billion (2% over previous year). Services-related exports, as reported by the RBI at a one month lag, was valued at US$13.73 billion (annual growth of 0.23%) for the month of September 2017, while imports for the segment was valued at US$8.45 billion, declining by 2.4% over previous year. Trade balance for services was estimated at US$5.28 billion for September 2017, wider than US$5.04 billion estimated in the previous month. Taking merchandise and services together, India's overall trade balance for the cumulative period between April-October 2017 is estimated at US$52.6 billion, as compared to US$22.13 billion during April-October Table 3: India's Trade (Merchandise & Services) Profile ($ Million) Merchandise Trade Services Trade* Period Exports Oil Imports Imports Non-Oil Imports Total Trade Balance Exports Imports Balance Growth Apr-Oct' Apr-Oct' Growth Source: Controller General of Accounts (CGA) BE: Budget Estimate, RE: Revised Estimate, PR: Provisional Estimate 32

5 Macro-Economic Overview Chart M3: India's Trade Balance ($ Mn) & Exchange Rate (INR/USD) US$ Mn Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct INR/USD Merchandise Trade Balance Services Trade Balance Ex. Rate 63.0 Cumulative fiscal deficit for the financial year reached 91.3% of the budgeted amount of Rs 5,46,532 crores in the month of September 2017, according to the data release by the Government of India. Although, there was an actual fiscal surplus for the reported month (Rs -26, 107 crores), front loading of capital expenditure by the Government at the beginning of the fiscal year, has resulted the fiscal deficit to touch almost the budgeted limit set by the Finance Minister in his budget speech, back in February Capital expenditure for the month of September 2017 was reported to be Rs 36, 741 crores, the highest in the fiscal year so far. On the receipt side, higher corporate tax collections boosted the revenue receipts of the Government to grow by 79.5% in September 2017, over the previous month. Tax revenues grew by 143.9% over August 2017, to Rs 2,01,746 crores in the reported month. Cumulative receipts during April-October 2107, including revenue and non-debt capital receipts, reached Rs 6,50, 249 crores, which is 40.6% of the budgeted estimate. Going forward, the primary focus of the Government would be to iron out the deficiencies in the GST system, causing confusion nationwide, to enable a more transparent and wider net of tax collection. Since the GST Council in a recent meeting, has decided to prune the number of items under the highest tax slab umbrella of 28%, to just 62, from 227 earlier, initial revenue receipts might take a hit in the short term. However, should this encourage more inclusive revenue reporting as envisaged, the former should be offset quite quickly in the medium run. 33

6 Macro-Economic Overview Global Economic Development Global economy continued to make progress, according to the JP Morgan Global All-Industry Output Index (also known as the IHS Markit Global Composite Index), jointly produced by JP Morgan and IHS Markit, which registered a figure of 54.0 in October, up from 53.9 in September. Growth in the service sector outpaced that in the manufacturing sector, within which business services performed much better than the consumer goods escort, indicating that the consumer demand is still fragile. The JP Morgan Global Services Business Activity Index, jointly produced by JP Morgan and IHS Markit, registered a figure of 54.1 in the reported month, up from 53.8 in September. Among the large economies, the Eurozone continued to outperform other regions in term of growth, followed by the US, UK, Japan and India, while growth slowed in China and Russia. Table M4: Table: Central Government's Income - Expenditure Details : PR : BE Growth Source: Controller General of Accounts (CGA) BE: Budget Estimate, RE: Revised Estimate, PR: Provisional Estimate Sep-17 Apr- Sep'17 ( ` Crore) Cumulative Actuals / BE Total Receipts % Revenue Receipts % Non-Debt Capital Receipts % Total Expenditure % Revenue Expenditure % Capital Expenditure % Fiscal Deficit % Revenue Deficit % Primary Deficit Industrial production in the United States grew by 2.90% in October 2017, a record high since January 2015, and up from 2.1% observed in September. Mining (6.4%), Manufacturing (2.5%) and Utilities (0.9%) were the prime categories experiencing positive growth within the industry. The Manufacturing PMI for the month of October, as published by Markit, also was raised to 54.6 from 54.5 in the previous month, on stronger growth and new output orders. Consumer prices rose by 2% in the US in October 2017, down from 2.2% registered in the previous month, as gasoline prices eased slightly following disruptions caused by successive hurricanes on the Gulf Coast. Energy prices rose by 6.4% in October, as against 10.1% in September 2017, led by gasoline (10.8% vs.19.3%) and fuel oil (11.7% vs. 15.6%). However, core inflation inched up to a six-month high of 1.80%, as prices rose for transportation services (4.2% vs. 3.9%), medical care services (1.9% vs. 1.7%) and food (1.3% vs. 1.2%). 34

7 Macro-Economic Overview Table M5: Major Global Macroeconomic Indicators Economy GDP Growth Inflation IIP Growth 10-Y Sovereign Bond Yield (Q3:2017) Oct'17 Sep'17 M-END: Oct'17 Eurozone US UK Japan 1.70 * China India (FY17Q4) Russia Brazil South Africa 1.10 * Source: Respective Country Official Data Source, IMF, World Bank, OECD, M-END: Month End *At One month lag The European Central Bank (ECB) in its monthly policy meeting, decided to keep the interest rates unchanged for the main refinancing operations (0.00%), marginal lending facility (0.25%) and the deposit facility (-0.40%) respectively. The Governing Council of the ECB, which is responsible for the monetary policy decision, expects the interest rates to remain at their present levels, even beyond the asset purchase programme of the ECB. The net asset purchases, currently at 60 billion euros on a monthly basis, are scheduled to be reduced to 30 billion euros per month, from January According to the ECB President, Dr. Mario Draghi, the recalibration of the magnitude of asset purchases proves the increasing confidence of the ECB on the sustainability of economic recovery of the monetary union. Though inflation is expected to rise and gradually meet the target rate of 2%, the present price pressures are muted and requires support from the monetary policy. Rising employment has given boost to private consumption, while favorable financing options provide the necessary prop to private business expansion. Downside risks include global factors, particularly in the form of volatility in the foreign exchange markets. Industrial production (IP) in the Euro Area grew by 3.3% in September 2017 over previous year, down from 3.9% revised growth recorded in August Intermediate goods (4.6% vs. 5.3% in Aug), capital goods (4.5% vs. 5.1%) and non-durable consumer goods (1.5% vs. 2.5%) proved to be a drag on the benchmark index, while durable consumer goods (6.9% vs 3%) grew faster than previous month. Amongst member states, Latvia registered the highest growth in industrial production (12.9%), followed by Slovenia (8.6%) and Hungary (8.0%). Amongst the large economies, Germany registered a 3.2% growth in IP, followed by France (3.2%) and Italy (2.4%), while growth declined in Ireland (-3.1%). Consumer prices in the Euro area increased 1.4% in October 2017, over previous year, down from 1.5% in September. A deceleration in prices was observed for energy (3.0% vs. 3.9% earlier) and services (1.2% vs 1.5%), while prices grew faster for food, alcohol and tobacco (2.3% vs 1.9%). Core inflation, excluding energy, food, alcohol and tobacco, slid down to 0.9% from 1.1% in September. 35

8 Macro-Economic Overview Consumer prices in Japan rose at the same rate as in the previous month (0.7% annually). Within categories, food prices increased marginally to 1% in September, from 0.9% in August 2017, while fresh food (1.2% vs 0.8%), fish and seafood (5.6% vs 4.2%) and fresh fruits (3.6% vs 3.4%) were the other categories experiencing a positive movement in price levels. Cost of housing, dairy products and eggs experienced deflationary pressures, on the other hand. The Bank of Japan held its policy rate steady at -0.1% in its policy meeting for October while reducing its inflation forecast slightly, to 0.8% for the current financial year, from 1.1% earlier. While the central bank expects continued recovery would gradually push consumer price inflation towards the 2% operating target level, firms' cautiousness about prices and wage setting prompted the decision-making. The Chinese economy grew 6.8% annually for the quarter ending September 2017 as manufacturing (8.1% in September), and electricity, gas and water production (7.8%) posted strong growth, compensating for the decline in mining (-3.8%). In the external sector, exports increased by 8.1% (from 5.5% in the earlier month), while imports rose 18.7% (from 13.3% earlier). Consumer prices in China rose by 1.9% annually in October, up from 1.6% in the previous month. Services inflation rose by 3.2% (3.3% in Sep), followed by non-food costs rose 2.4% (same as earlier), and consumer goods (1.1% from 0.7%), while food prices declined by 0.4% (-1.4% in Sep). Industrial production for the month of October rose by 6.2%, down marginally from 6.6% observed in the previous month. Output growth slowed for manufacturing (6.7% vs 8.1% in September), while continuing to decline for mining (- 1.3% vs -3.8%). Output of gas, electricity and water production went up by 9.2%, following a 7.8% rise in September. Chart M4: Markit's PMI (Composite): A Measure of Economic Activity Dotted Line No Change in Economic Activity Global Economy US Eurozone JAPAN China India Russia Brazil South Africa Sep-17 Oct-17 Neutral Line 36

9 Market Overview Money Market Review RBI's efforts to keep surplus liquidity under check and maintain it close to neutrality has resulted in steady short term rates in the money market. Weighted average rates in the Call, Repo and CBLO markets remained near % - unchanged from their respective levels previous month. Average amount traded in the Call and Repo markets witnessed marginal decline of 7% and 6% respectively over the previous month. CBLO segment, on the contrary, observed average trading amounts improving by 6% in October vis-à-vis September. Subsequent tables exhibit the comparative weighted average rates over a period of time and the comparative statistics of volume and rates across the various sub-groups of the money market. Table M6: Comparative Weighted Average Money Market Rates Oct-17 Sep-17 3 Months ago 6 Months ago Year ago CALL REPO CBLO Table M7: Comparative Money Market Volumes and Rates Gross Daily Average Std Minimum Maximum Market Share Volumes (` Cr) Volumes (` Cr) Dev Rate Rate Oct-17 Sep-17 Oct-17 Sep-17 Oct-17 Sep-17 Oct-17 Sep-17 Oct-17 Sep-17 Oct-17 Sep-17 CALL 281, , , , REPO 996, ,166, , , CBLO 2,270, ,367, , , Liquidity Adjustment Facility Liquidity tightness in the banking system, probably on account of higher cash demand in the festive season and investment towards number of Initial Public Offerings by Indian companies led average cash injection by the RBI to increase by 34% in October to `5,917 crore from `4,405 crore in September. Average lending by banks through LAF Reverse Repo auctions moderated to `13,454 crore - 17% lower than the average lending previous month. After rising sharply during September because of the payments towards advance tax, amount borrowed by banks using MSF dropped by 49% to `1,344 crore in October from `2,615 crore in the month ago. Liquidity support by the RBI through various LAF variable rate Repo auctions is increasing sequentially since three months. In the month of October, RBI injected `38,355 crore into the system - rising by 55% over the previous month's tally of `24,795 crore. On the contrary, excess money 37

10 Market Overview Table M8: Volume under LAF Reverse Repo and Repo auctions as well as the MSF Amount ` Crore LAF Reverse Repo Vol LAF Repo Vol MSF Vol Oct-17 Sep-17 Oct-17 Sep-17 Oct-17 Sep-17 Total Vol Average Vol absorbed by the RBI via LAF variable rate Reverse Repo auctions has been declining over the months under review. During October, amount lent by banks stood at `404,379 crore which was 28% lower than `561,636 lent in September. Government Securities Market Primary Market RBI re-issued 11 government securities amounting to `44,000 crore, auctioned 34 SDLs worth `34,520 crore and issued treasury bills for `73,992 crore. During the G-sec auctions held on October 06, RBI didn't accept any bids of 6.57% G.S. 2033, while it exercised green shoe option to auction an additional `1,000 crore for 6.68% G.S RBI conducted OMO sales twice during the month (on October 12 and 26) totaling `20,000 crore. Following tables give the details of the auctions of G-Secs, sale of securities under OMOs, SDLs and treasury bills along with the average cut-off yields. Date of Issue/ Auction Security Table M 9: Details of the Auctions of the G-Secs Amount (` Crore) Cut-off Price (`) Yield Devolvement on PDs (` Crore) ACU Commission Cut-off rate (paise per ` 100) 06-Oct % G.S , Oct % G.S , Oct % G.S , Oct % G.S , Oct-17 FRB , Oct % G.S , Oct % G.S , Oct % G.S , Oct % G.S , Oct % G.S , Oct % G.S , Oct % G.S ,

11 Market Overview Date of Sale Table M10: Details of securities sold under OMOs Security Amount Sold (` Crore) Cut-off Price (`) Cut-off Yield 12-Oct % G.S Oct % G.S , Oct % G.S , Oct % G.S , Oct % GS , Oct % G.S , Oct % G.S , Oct % G.S , Oct % G.S , Date of Issue/ Auction Table M11: Details of SDL Auctions/re-issues Security Amount (` Crore) Cut-off Price (`) Yield Under-subscription 03-Oct % Punjab SDL , Oct % Karnataka SDL , Oct % Tamil Nadu SDL , Oct % Goa SDL Oct % Uttarakhand SDL Oct % Madhya Pradesh SDL , Oct % Rajasthan SDL Oct % Sikkim SDL Oct % Jammu & Kashmir SDL Oct % Uttar Pradesh SDL , Oct % Punjab SDL Oct % Jharkhand SDL , Oct % Maharashtra SDL Oct % Maharashtra SDL , Oct % Karnataka SDL , Oct % Tamil Nadu SDL , Oct % Haryana SDL Oct % Uttarakhand SDL Oct % Uttar Pradesh SDL , Oct % Assam SDL Oct % Punjab SDL Oct % Puducherry SDL Contd... 39

12 Market Overview Table M11: Details of SDL Auctions/re-issues Contd... Date of Issue/ Auction Security Amount (` Crore) Cut-off Price (`) Yield Under-subscription 24-Oct % Telangana SDL , Oct % West Bengal SDL , Oct % Maharashtra SDL , Oct % Gujarat SDL , Oct % Karnataka SDL , Oct % Haryana SDL Oct % Rajasthan SDL , Oct % Madhya Pradesh SDL , Oct % Punjab SDL Oct % Uttarakhand SDL Oct % West Bengal SDL , Oct % Jharkhand SDL Date Amt (` Cr) Table M12: Details of T-Bills Auctions 91 day T-Bill 182 day T-Bill 364 day T-Bill Price (`) YTM Amt (` Cr) Price (`) YTM Table M13: Average T-Bills Cut-Off Yields Amt (` Cr) 04-Oct-17 13, , , Oct-17 9, , , Oct-17 8, , , Oct-17 26, , , Total Price (`) Oct-17 Sep-17 3 Months ago 6 Months ago Year ago 91-day T-Bill day T-Bill day T-Bill YTM 40

13 Market Overview Secondary Market Trading activity in October moderated significantly with total number of trades in the secondary outright market declining by 29% to 59,851 from 83,788 in September. Volume traded stood at `735,796 crore vis-à-vis `1,139,005 crore during the previous month. Average settlement amount in the outright market dropped by 24% from `52,848 crore to `40,024 crore. Yield Movement Average 10-year yields continued to harden - this time at a faster rate of 18 bps to 6.76% from 6.58%. During the first week of October, benchmark yields further rose by 11 bps to 6.76% reacting mainly to higher inflation forecast by the RBI for the second half of FY17-18 and concern over slippage in fiscal discipline. Hawkish tone of MPC members seemingly shattered the expectations of any further decline in the key policy rate in near future. Comments by the Prime Minister's Economic Advisory Council regarding adherence to fiscal consolidation path, calmed nervous bond market which stabilized the 10-year benchmark rate near 6.75% till October 18. Yields started inching upwards towards the close of the month to reach 6.87% as traders were uncertain about the features and supply of the proposed public sector banks' recapitalisation bonds and their implication on the market which government announced to improve the financial health of banks and to stimulate the flow of credit to spur private investment. Announcement of OMO sale, the rise in US bond yield and higher oil price in global market aided the yield increase. The yields of different tenors on the last working day of the month and the spread analysis of various tenors over a period of time are provided in the following tables. Table M14: Yield Movements * Tenor Oct-17 Sep-17 3 Months ago 6 Months ago Year ago O/N month month year year year year * on the last working day of the month Table M15: Spread Analysis G-Sec Spread (bps) Period Oct-17 Sep-17 3 Months 6 Months 1 Year 1-5 Years Years Years Years

14 Market Overview Foreign Exchange Market During the previous month, the Rupee saw one of its worst performances in recent past against the major international currencies. But, October witnessed the rupee gaining momentum smartly against the Euro, GBP, Japanese Yen and the USD by 1.76%, 1.46%, 1.21% and 1.19% respectively. Till October 16, rupee strengthened against the USD by 79 paise to touch a month high of level driven mainly by dollar weakness in the global market. Speculation that the US President might go for a less-hawkish candidate to succeed Yellen as Federal Reserve Chairperson and minutes of last month's Federal Reserve meeting showing several policy makers cautious about raising interest rates again this year, dragged dollar index down. Upbeat export data back home, softening inflation and record rally in domestic equities supported rupee gain. After weakening for a short duration to 65.14/dollar (October 25) on reports that US President Donald Trump may appoint Stanford University economist John Taylor, perceived as a hawkish candidate, as next chief of the central bank, rupee closed the month at Tables given below show the analysis of the rupee movement and the exchange rate prevailing on the last working day of the month over a period of time. Table M16: Exchange Rate Movement ` / Euro ` / Pound ` / 100 yen ` / Dollar Movement Average Rate Stdev Max Min Table M17: Exchange Rate Movement Exchange Rate Oct-17 Sep-17 3 Months ago 6 Months ago Year ago ` / Euro ` / Pound ` / 100 yen ` / Dollar Average 1-month, 3-month and 6-month forward premia reversed the trend to increase by 6 to 19 bps during October. Table M18: Movement of Forward Premia over a Period of Time (Monthly Average) (Percent) Oct-17 Sep-17 3 Months ago 6 Months ago Year ago 1-month month month

15 FIIs returned to Indian markets after a dull participation in the previous two months. FIIs, who remained net sellers of equities for the months of August and September, bought stocks worth $0.47 billion. Debt market that has remained their preferred investment venue since the beginning of 2017, attracted funds worth $2.46 billion - $2.25 billion higher than the previous month. Taking both the markets under consideration, FIIs were net buyers of Indian assets for $2.93 billion as compared to net selling of $1.53 billion during September. It is widely expected that the increased investment limits in central and state government securities by FPI announced by the RBI last month and a $32 billion rescue for state-owned banks weighed down by bad loans may start drawing back foreigners. Table M19: Movement of FII Flows (USD Million) Quarter Net Investment in Equity Net Investment in Debt Total Q Q Oct Accumulation to India's foreign exchange reserves, which was on a rising spree since January 2017, saw its first decline of $0.92 billion over the previous month. Reserves which re-gained $400 billion mark during the week ended October 13 from $ billion at the close of September, depleted continuously to $ billion for the week ending November 03, amid concerns that tightening of global financial markets may prompt foreign investors pull out their investments from local equities and debt in the coming months. CHART M5: FOREIGN EXCHANGE RESERVES USD Million 405, , , , , , , , , , , , ,000 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 15,000 10,000 5, ,000-10,000-15,000 USD Million Change in Reserves Foreign Exchange 43

16 Market Overview Banking Sector Indian banks' deposit growth, which had surged after demonetisation last November, has been moderating to pre-demonetisation levels, while credit growth has gained traction. A cyclical recovery and higher commodity prices should boost working capital needs, while the availability of growth capital after the recently announced recapitalisation plan should also enable public sector banks to extend additional loans. At the end of October, Indian banks' deposits stood at ` lakh crores, while non-food credit was `78.54 lakh crore - clocking yearly growth of 9% and 7% respectively. Table M20: Trends in Scheduled Commercial Banks' Business ( ` Cr.) Oct-17 Sep-17 3 Months ago 6 Months ago Year ago Money Stock Aggregate Deposits Non-food Credit Investment in G-Secs Table M21: Key Banking Rates and Ratios Oct-17 Sep-17 Credit-Deposit Ratio Investment-Deposit Ratio Base Rate MCLR (Overnight) Term Deposit Rate >1 Year Savings Deposit Rate