The domestic stock market may face volatility amid the monthly derivatives expiry scheduled this week, while investors would mainly await the outcome of RBI's interest rate decision on Friday, said analysts. Global market movement would also continue to drive sentiment amid a bearish trend recently following rate hikes by the US Federal Reserve and other central banks. The Reserve Bank of India (RBI) may take cues from its global counterparts to raise interest rate for the fourth time in a row to control inflation.
The government on Monday ruled out making public the RBI report detailing the reasons why the central bank could not keep inflation within the targeted 6 per cent upper limit for the three consecutive quarters. "Yes sir, RBI has furnished a report to the central government, as mandated under Section 45ZN of the RBI Act, 1934 and Regulation 7 of RBI Monetary Policy Committee and Monetary Policy process Regulations, 2016," minister of state for finance Pankaj Chaudhary said in a written reply. The said provisions of the RBI Act, 1934, and regulations therein does not provide for making the report public, he said.
For now, the concerns over bad loans have taken a back seat; a bigger challenge for the banking community is credit growth, explains Tamal Bandyopadhyay.
After hiking the repo rate by 0.50 per cent, RBI Governor Shaktikanta Das on Wednesday said future policy actions by the central bank will be guided by the evolving conditions. Addressing a press conference, the governor said the RBI has changed the policy stance to drop the phrase "remains accommodative", and instead opted for "withdrawal of accommodation" for guiding its future moves. The central bank did not hike the cash reserve ratio contrary to speculation, he said, adding that the liquidity withdrawal will be calibrated and measured.
Concerned over inflationary pressures in the economy, the Reserve Bank of India (RBI) is bringing down surplus liquidity in the system rapidly. It has fallen to pre-Covid levels and almost 2 per cent of banks' net demand and time liabilities (NDTL). NDTL shows the difference between the sum of demand and time liabilities (deposits) of a bank (with the public or the other bank) and the deposits in the form of assets held by the other bank.
In a double delight, retail inflation eased to a one-year low of 5.72 per cent - staying below the upper tolerance limit for two months in a row, while factory output rose sharply to 7.2 per cent on the back of healthy growth in manufacturing. The retail inflation numbers based on Consumer Price Index (CPI) will provide some room for the Reserve Bank to further moderate the quantum of hike in key interest rate or even press a pause button. The RBI has been on a rate hiking spree since May 2022 in its bid to tame inflation, having raised the repo rate by a cumulative 225 basis points (bps).
The government on Thursday kept interest rates unchanged on small savings schemes, including NSC and PPF, for the second quarter of 2022-23 amid high inflation and rising interest rate. The interest rate on small savings schemes has not been revised since the first quarter of 2020-21. Public Provident Fund (PPF) and National Savings Certificate (NSC) will continue to have an annual interest rate of 7.1 per cent and 6.8 per cent, respectively, in the second quarter of this fiscal.
Avoid discontinuing your SIPs. Persist for at least 7-10 years.
Demonetisation of the high value currency notes of Rs 500 and Rs 1,000 did not have any discernible impact on currency in circulation (CIC) in the country, which has soared by almost 83 per cent since its announcement on November 8, 2016. The Supreme Court on Monday upheld the decision of the government on demonetisation. On November 8, 2016 Prime Minister Narendra Modi had announced demonetisation of old Rs 1,000 and Rs 500 banknotes and one of the key objectives of the unprecedented decision was to promote digital payments and curb black money flows.
Inflation to peak in the current quarter within tolerance band, moderating in the second half of next fiscal, says central bank.
The criticism that the Reserve Bank of India was behind the curve in hiking interest rate to tame rising inflation is unfair, former RBI Governor D Subbarao said on Wednesday and asserted that it is difficult for any central bank to anticipate the future more accurately. Earlier this month, Monetary Policy Committee (MPC), the central bank's rate-setting panel, surprised the markets with a 40 basis points hike in repo rate in an off-cycle policy meeting. It was also the first rate hike after August 2018, amid spiralling inflation.
Uncertainty is emerging as the only certainty, said RBI Governor Shaktikanta Das as he emphasised on continued policy support at the December MPC meet during which members expressed concerns over spread of the Omicron variant of coronavirus, as per the minutes of the rate-setting panel released on Wednesday. After three days of deliberations, the six members of the Monetary Policy Committee (MPC) on December 8 unanimously voted for status quo on policy rates for the ninth consecutive time. At the meeting, the RBI Governor said risks stalking the global economy have amplified with rapid spread of the virus mutations, including the Omicron variant, leading to countries scrambling for restrictions.
'There are some high-frequency indicators where uptick is visible and some where it is not'
The Indian services sector activity fell to a six-month low in September, as new business inflows rose at the slowest rates since March, amid inflationary pressures and competitive conditions, a monthly survey said. The seasonally adjusted S&P Global India Services PMI Business Activity Index fell to 54.3 in September, from 57.2 in August, highlighting the weakest rate of expansion since March. For the fourteenth straight month, the services sector witnessed an expansion in output. In Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.
The difference between what the banks play in the US and India is not that of soccer and football but rugby and football. SVB also has a unique character. But when risks are mispriced, the fallout could be very similar, points out Tamal Bandyopadhyay.
Benchmark indices failed to hold on to early gains and closed in the red for the seventh straight session on Thursday, with participants remaining in wait-and-watch mode ahead of the RBI's interest rate decision. Unabated selling by foreign funds added to the pressure, though a modest recovery in the rupee cushioned the fall, traders said. After rallying in early trade, the 30-share BSE Sensex came under selling pressure in the afternoon session and closed 188.32 points or 0.33 per cent lower at 56,409.96.
The wholesale price-based inflation rose to a four-month high of 14.55 per cent in March, mainly due to hardening of crude oil and commodity prices, even though vegetables witnessed easing of price pressures. As per the government data released on Monday, WPI inflation has remained in double digits for the 12th consecutive month beginning April 2021. The last time such a level of WPI was recorded was in November 2021, when inflation was 14.87 per cent.
India's residential market is expected to sustain demand momentum despite rise in mortgage and property rates as sales this year across the top 7 cities are likely to breach pre-pandemic level of 2.62 lakh units, industry players said. After braving four back-to-back disruptions in form of demonetisation, RERA, GST and COVID-19 in the last 6 years, industry experts feel the housing market is going through a lot of structural changes and is now at the start of a long-term upcycle. Homebuyers body FPCE gives credit to the Real Estate Regulatory Authority (RERA) under the Real Estate (Regulation & Development) Act, 2016 for this improved buying sentiment.
Retail inflation hit an eight-month high of 6.07 per cent in February, remaining above the RBI's comfort level for the second month in a row, while wholesale price-based inflation soared to 13.11 per cent on account of hardening of crude oil and non-food item prices, government data showed on Monday. The previous high for retail inflation was 6.26 per cent in June 2021. The consumer price index (CPI) based retail inflation, which is taken into account by the Reserve Bank of India (RBI) while deciding its monetary policy, rose mainly because of costlier food items, as per the data released by the National Statistical Office (NSO).
'Once the lockdown is lifted, we will see some pickup in demand.' 'And my sense is that it will be a long walk this time given that we have lost three months of economic activity.'
The Reserve Bank of India on Friday raised the retail inflation target for the current financial year to 5.7 per cent on the back of rising global prices amidst the ongoing geo-political tensions, even as it expected the prices of cereals and pulses to soften on prospects of good winter crop harvest. "Global food prices along with metal prices have hardened significantly. "Economy is grappling with a sharp rise in inflation... Inflation is now projected at 5.7 per cent in 2022-23 with Q1 at 6.3 per cent; Q2 at 5 per cent; Q3 at 5.4 per cent and Q4 at 5.1 per cent," RBI Governor Shaktikanta Das said while unveiling the first monetary policy review for the current fiscal year.
Liquidity in the banking system has slipped into a deficit for the first time in three weeks, prompting banks to borrow the largest quantum of funds from the Reserve Bank of India (RBI) in around a month and a half. The key catalyst for the sudden tightening in liquidity was due to outflows on account of advance tax payments, which occur towards the end of a quarter. Analysts also cited other factors such as a currency leakage and possible interventions by the RBI in the foreign exchange market, which contributed to the tighter liquidity conditions.
Flush with liquidity, banks are eager to lend. And, therein lies the problem, warns Tamal Bandyopadhyay.
Investors not comfortable investing directly may take the mutual fund route, where they get exposure to a diversified portfolio of bonds.
The government should not go in for an 'aggressive fiscal consolidation' in the upcoming Budget as global risks have not abated, RBI Monetary Policy Committee (MPC) Member Ashima Goyal said on Wednesday. Goyal further said subsidies are expected to come down as food and energy inflation moderates. WPI inflation in food articles in November was 1.07 per cent against 8.33 per cent in the previous month.
The disruptions caused by COVID-19 have more severely impacted small and mid-sized corporates, including NBFCs and MFIs, in terms of access to liquidity.
The wholesale price-based inflation eased for the second consecutive month in January at 12.96 per cent, even though food prices hardened, the government said on Monday. WPI inflation has remained in double digits for the tenth consecutive month beginning April 2021. Inflation in December 2021 was 13.56 per cent, while in January 2021, it was 2.51 per cent.
Equity indices made an emphatic comeback on Friday after falling for seven straight sessions after the RBI hiked interest rates by 50 basis points on expected lines and projected inflation coming under control from January next year. A strong recovery in the rupee added to the momentum, traders said. Overcoming a wobbly start, the 30-share BSE Sensex soared 1,016.96 points or 1.80 per cent to settle at 57,426.92. During the day, it rallied 1,312.67 points or 2.32 per cent to 57,722.63.
India's economic growth is now 'extremely fragile' and needs all the support that it can get, as private consumption and capital investment are yet to pick up, RBI Monetary Policy Committee (MPC) member Jayanth R Varma said on Friday. Varma further said out of the four engines of growth for the economy, exports and government spending supported the Indian economy through the pandemic, but other engines need to pick up the baton now. " I like to think in terms of the four engines of growth for the economy: exports, government spending, capital investment and private consumption. "...while exports cannot be the main driver of growth because of the global slowdown, government spending is necessarily limited by fiscal constraints," he told PTI.
Retail inflation softened to 6.71 per cent in July due to moderation in food prices but remained above the Reserve Bank's comfort level of 6 per cent for the seventh consecutive month. With retail inflation continuing to remain high despite a fall in prices of vegetables and edible oils, among other commodities in July, the Reserve Bank of India (RBI) might go for another rate hike in September. The Consumer Price Index (CPI) based retail inflation was at 7.01 per cent in June and 5.59 per cent in July 2021. It was above 7 per cent from April to June this fiscal.
Commemorating 75 years of India's independence, SBI has launched a 75-day Utsav Deposit Scheme, offering 6.10 per cent for fixed deposits. Senior citizens will get an additional 0.50 per cent and the offer is on until October 30, SBI said.
These are the highlights of the seventh bi-monthly monetary policy statement for 2019-20 by the RBI amid COVID-19 pandemic:
State Bank announced a 15 basis points reduction in its lending rates, effective August 10 across all tenors.
India's demand for petroleum products like petrol and diesel will grow by 7.73 per cent in 2022, the fastest pace in the world, an OPEC report said. India's demand for oil products is projected to rise from 4.77 million barrels per day (bpd) in 2021 to 5.14 million bpd in 2022, OPEC said in its monthly oil report. The growth in demand is the fastest in the world ahead of 1.23 per cent of China, 3.39 per cent of the US and 4.62 per cent of Europe.
Banks looking to raise capital via bond sales to fund decade-high credit growth were compelled to put some of these debt issuances on hold amid a sharp rise in yields since late September, sources told Business Standard. A major private lender, Axis Bank, has not yet followed through with a planned issuance of infrastructure bonds worth around Rs 3,000 crore. This is because volatility in the bond market in late September led to investors seeking higher yields, sources said.
'Indices will remain range bound in 2022 as earnings catch up with the current multiples.'
The economic growth may have slowed to 3.5 per cent in fourth quarter of 2021-22 from 5.4 per cent in the previous three-month period due to the impact of higher commodity prices on margins, decline in wheat yields and on higher base, Icra Ratings said on Monday. The agency said the hiccups in the recovery of the contact-intensive services attributable to the third wave of Covid-19 in the country may have also affected the economic growth in the quarter. Even the gross value added (GVA) at basic prices (at constant 2011-12 prices) in Q4 FY2022 seems to have eased to 2.7 per cent from 4.7 per cent in Q3 FY2022, it said.
If the interest rate on bank deposits is linked to any external benchmark, it would jeopardise the banks' fund-raising ability. Interest rates on small savings schemes are likely to be reduced very shortly, to maintain parity. All these steps would indeed affect retired people, and particularly those dependent on interest income, says Arindam Gupta.
The one-time restructuring of loans will help every firm and prevent cost-cutting measures such as lay-offs.
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