India Inc is borrowing from global firms as interest rates sky rocket in India.
The deficit data was the latest in a run of positive signs for the sluggish domestic economy and could put India in a better position should the Fed start tapering, than in the summer when the rupee hit a record low.
RBI likely to cut rate early next year.
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The rupee has avoided the heavy losses suffered by some emerging Asian currencies such as the Philippine peso this year because of its efforts to narrow the current account deficit, and strong foreign investor inflows.
The S&P BSE Sensex plunged 461 points to end at 25,603.
There are already some signs of stress in this market.
Shaktikanta Das is a master of the finest balancing act who listens to all but takes his own decisions, discovers Tamal Bandyopadhyay.
Equity investors became poorer by over Rs 6.71 lakh crore on Thursday as domestic benchmark indices tumbled amid a global market meltdown. The 30-share BSE benchmark Sensex tanked 1,416.30 points or 2.61 per cent to settle at 52,792.23, tracking weak global markets and persistent foreign fund outflows. In line with the weak market trend, the market capitalisation of BSE-listed firms tumbled by Rs 6,71,051.73 crore to stand at Rs 2,49,06,394.08 crore.
Foreign portfolio investors (FPIs) infused Rs 11,630 crore in the Indian equity markets in April on the reasonable valuation of stocks and appreciation in the rupee. This came after FPIs infused a net sum of Rs 7,936 crore in equities in March, mainly driven by bulk investment in the Adani Group companies by the US-based GQG Partners. However, if one adjusts for the investments of GQG in Adani Group, the net flow was negative.
The rupee ended higher for the second consecutive week.
Tech Mahindra was the top gainer in the Sensex pack, rising around 2 per cent, followed by Bharti Airtel, Maruti, ICICI Bank, SBI, HDFC Bank, Asian Paints and Reliance Industries.
Foreign investors pumped in Rs 11,119 crore in the Indian equities in December, making it the second consecutive monthly inflow, despite increasing concerns over the re-emergence of Covid-19 cases in some parts of the world. However, foreign portfolio investors (FPIs) have turned cautious in recent days. The inflow in December was much lower compared to Rs 36,239 crore invested by FPIs in the month of November, data with the depositories showed.
The Union government will soon make amendments to the foreign trade policy (FTP) to enable exporters to claim export benefits for settling trade in rupees. These benefits are, so far, available for export payments received in foreign currencies. After the Reserve Bank of India (RBI) unveiled a mechanism to settle international trade transactions in the local currency on Monday, exporters have been demanding that the Ministry of Commerce and Industry come up with a clarification on the matter.
The US Fed on May 24 hinted at withdrawing its third round of quantitative easing, or bond buying programme, worth $85 billion each month, which began in the wake of the worst credit crisis in September 2008.
The demand for gold is expected to take a hit if the price of the yellow metal - which has been hovering around Rs 60,000, a level never seen before - remains elevated. Due to a sharp increase in price in a very short time and the flow of smuggled gold continuing, gold price in Mumbai is quoted at around Rs 59,000 per 10 gram. Typically, overall demand in the January-March and July-September quarters is moderate-to-dull, which is the case in the ongoing period.
As Indians scrambled to exchange the banned notes for new currency, Paytm, Sharma's digital payments startup, went on a promotional spree, inviting Indians to start using Paytm's digital wallet to pay for everyday goods and services.
Both the government as well as the RBI took a series of steps to curb imports of gold and other non-essential items in addition to increase foreign exchange inflows.
On Monday, Reserve Bank hiked the lending rates to banks by 2 per cent to 10.25 per cent.
Equity markets will look for directions from global trends, ongoing quarterly earnings and investment patterns of foreign institutional investors (FIIs) in a holiday-shortened week ahead and may encounter volatility amid the scheduled monthly derivatives expiry, according to analysts. Equity markets will remain closed on Wednesday on account of 'Republic Day'. "This week is a holiday-shortened one and it's going to be critical due to the list of events and data that are lined up.
Federation of Indian Chambers of Commerce and Industry said the Reserve Bank's step may make availability of funds through external commercial borrowing route more expensive.
The staff of public sector banks had gone on a nationwide strike for two days beginning February 10 after discussions with the IBA failed.
After a volatile session, Sensex closed the day 563 points lower
Monday saw the Sensex post its weakest closing since July 11 when it settled at 36,265.93. In the previous four sessions the index had lost 1,249.04 points.
The Enforcement Directorate on Monday seized three offices in a prime location in Mumbai, valued more than Rs 41 crore, as part of a foreign exchange violation probe against a businessman whose name figured in the Panama Papers.
The 50-stock NSE barometer Nifty finished 14.75 points, or 0.14 per cent, down at 10,382.70 after shuttling between 10,340.65 and 10,393.15.
The currency market won't care for our moans, groans, cries and sighs. The rupee will find its own level, explains Tamal Bandyopadhyay.
'If rate cuts happen, bond yields will come down and investors will make mark-to-market capital gains on them.'
The rupee ended almost flat against the dollar.
Reserve Bank of India (RBI) Governor D Subbarao, often criticised for being "behind the curve", took market players and his critics by surprise.
The local currency had gained 7 paise to close at 66.57 in Monday's trade.
Forex dealers said besides a lower opening in the domestic equity market on fears of a rate hike by the Reserve Bank, higher demand for the American currency from importers put pressure on the rupee but dollar's weakness against other currencies overseas, capped the fall.
If the CBDCs don't offer interest, why will people shift from cash to CBDCs?, asks Tamal Bandyopadhyay.
RBI Governor flayed easy monetary policy of central banks in advanced economies saying it is "more cause than medicine".
RBI will take a cue from the Fed policy statement.
"I think the Fed is out of control. I think what they're doing is wrong. Under the Obama administration, you had a lot of help because they had very little interest," Trump told reporters at the White House Thursday while responding to questions on the down sliding of the stock market for a second consecutive day.
Equity benchmarks Sensex and Nifty halted their five-day rally on Tuesday and settled deep in the red, mirroring weak global markets, with decline in index heavyweights Reliance Industries, Infosys and HDFC Bank. Despite opening with gains of over 200 points, the 30-share Sensex turned highly volatile and tumbled 709.17 points or 1.26 per cent to close at 55,776.85. During the day, the benchmark index plunged 1,067.07 points or 1.88 per cent to 55,418.95. The broader NSE Nifty also declined 208.30 points or 1.23 per cent to close at 16,663.
In India, it is not easy to fight it out with the large banks which are nimble-footed and technology-savvy and are continuously innovating on the retail turf with newer products for customer acquisition.
HDFC Bank, the country's second-largest private sector bank, has cut its base rate by 15 basis points (bps) to 9.70 per cent.
Despite markets turning volatile, share sale activity at India Inc has surged to its highest level in five months. So far in March, promoters, strategic investors and other large shareholders have been able to offload shares worth more than Rs 33,000 crore-the most since November-defying uncertain market conditions. Both the Sensex and the Nifty are on course to post their fourth straight monthly loss amid headwinds, such as interest rate tightening by the US Federal Reserve and the global banking crisis.
Silver also recovered Rs 600 to Rs 45,200 per kg on increased offtake by industrial units and coin makers.
