Higher for longer' may be the narrative in the developed markets, but interest rates might not stay high for very long in India, with a section of the market expecting rate cuts to begin this year. The six-member Monetary Policy Committee of Reserve Bank of India (RBI) decided to keep interest rates unchanged at 6.5 per cent in the April review - after hiking the policy repo rate in six previous meetings. RBI Governor Shaktikanta Das emphasised that the pause was only for the April policy and that the central bank was ready to act if the situation demanded.
The growth in the contact-intensive portion of the economy trailed our expectation, highlighting how imperative it is for confidence to improve, either through accelerated vaccinations or otherwise, to drive a sustainable recovery in these sectors, asserts Aditi Nayar.
Market breadth depicted gains with 1,476 advances over 1,403 declines on the BSE. 140 stocks remained unchanged.
For July-September, it pegged CPI-based retail inflation at 4.2 per cent which it saw firming up to 4.8 per cent in the second half of the current fiscal.
RBI is expected to discuss about the impact of GST in its monetary policy.
In the current fiscal so far, retail inflation stabilised around 5 per cent, while wholesale price-based inflation averaged around 2.9 per cent during April-December.
The finance ministry on Thursday raised concerns over the possible impact of El Nio conditions on India this year, saying if recent forecasts came true, the country could see lower agricultural output and higher inflation. "Some meteorological agencies predict the return of El Nio conditions in India this year. "If these predictions are accurate, then monsoon rains could be deficient, leading to lower agricultural output and higher prices," the ministry said in its monthly economic review.
Priorities include the amendments of the Companies Act and the Motor Vehicle Act
The broader 50-issue NSE Nifty too slipped from its record high, shedding 10.30 points or 0.09 per cent to end at 11,346.20.
Among the Sensex firms, Bajaj Finance emerged as the biggest gainer by climbing 2.95 per cent. Tata Motors, Bajaj Finserv, IndusInd Bank, Sun Pharma, Mahindra & Mahindra, State Bank of India, Larsen & Toubro, HDFC, HDFC Bank, Maruti, Reliance Industries and Bharti Airtel were the other major winners. HCL Technologies, Axis Bank, ICICI Bank, Tech Mahindra and Titan were among the laggards.
If imputed inflation for April and May is used, then you have inflation of over 6 per cent for two consecutive quarters, which is a worrying signal for the RBI.
The Reserve Bank on Friday retained the GDP forecast for the current financial year at 9.5 per cent and flagged global semiconductor shortages, elevated commodity prices and potential global financial market volatility as downside risks to economic growth. In his address after the three-day meeting of the rate-setting panel, RBI Governor Shaktikanta Das said recovery in aggregate demand gathered pace in August-September, and it is reflected in high-frequency indicators, like railway freight traffic; port cargo; cement production; electricity demand; e-way bills; GST and toll collections. "The ebbing of infections, together with improving consumer confidence, has been supporting private consumption," he said, and added the pent-up demand and the festival season should give further fillip to urban demand in the second half of the financial year.
The sector seems set for a rally that may be somewhat temporary.
What stood out in his 15-year journey as a member of the political executive at the Centre was his glowing record as India's most successful and effective finance minister. Both as prime minister and finance minister, he understood the importance of gradualism, except when the economy or the polity was in a crisis.
Kotak Bank was the biggest loser in the Sensex pack, falling 3.71 per cent, followed by RIL, HDFC Bank, Bajaj Finance, PowerGrid, IndusInd Bank, Asian Paints, HDFC and ITC.
This is contrary to the expectations of a majority of analysts predicting for another hike given the rise in inflation lately, including domestic ratings agency Icra
The Reserve Bank of India (RBI) will maintain the policy repo rate at 6.5 per cent during its upcoming June 8 announcement, considering the easing of retail inflation in April and the potential for further decline, indicating the effectiveness of previous policy rate actions, anticipate experts. Headed by Reserve Bank Governor Shaktikanta Das, a meeting of the six-member Monetary Policy Committee (MPC) is scheduled for June 6-8. The decision of the 43rd meeting of the MPC would be announced on Thursday, June 8.
The Reserve Bank may go for a final 25 basis points increase in the current rate hike cycle next week and a reduction would come in only by the end of third quarter of FY24, economists at Axis Bank said on Wednesday. As per media reports, RBI officials met economists on Tuesday, and the latter have suggested the central bank to go for a 25 basis points hike in key rates. Since May 2022, the RBI has hiked rates by 250 basis points, hurting borrowers and some are already concerned about loan tenors extending beyond their working lives as a result of the hikes.
The recovery in the Indian services sector was sustained in November as new work orders supported business activity growth and the first rise in employment in nine months, a monthly survey said on Thursday.
Announcement of macroeconmic data such as industrial production and inflation, the US Federal Reserve's interest rate decision along with trends in global equities would dictate movement in the stock market this week, analysts said. Besides, foreign fund trading activity would also guide the trends in equities. "All eyes are now on the US Fed policy outcome for cues, which is scheduled on June 14. In the following sessions, the European Central Bank (ECB) and Bank of Japan (BoJ) will also announce their policy decisions.
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.
Chief Economic Advisor V Anantha Nageswaran on Thursday expressed hope that the economy will maintain the trend growth rate of 6.5 per cent and above for the rest of the years in the current decade. The economy will close the current fiscal logging in a growth of 6.5-7 per cent, he said, citing the projections of private sector analysts, Reserve Bank of India (RBI) and international agencies like OECD and the IMF. "This appears to be reasonable at this point in time although we will get the data on the fiscal second quarter in a few days, which will give more clarity on these numbers.
The Reserve Bank may be hitting the end of its tolerance for high inflation and will most likely hike interest rates in the first half of 2022, analysts said on Friday. The central bank will also start rolling back its accommodative policies which have led to easy liquidity conditions, they said. The view from analysts came even as inflation cooled down to 5.6 per cent for July, after two months of breaching the upper end of the RBI's tolerance band of 6 per cent.
Crisil Research expects retail inflation to rise 60 basis points to 4 per cent this fiscal from 3.4 per cent in 2018-19.
Five of the six external members had suggested that the central bank should reduce the policy rate.
Ahead of the 2023-24 Union Budget, the thinking at the top level of the central government is clear: Gross domestic product (GDP) growth of 6-6.5 per cent is a comfortable enough target for FY24 and the focus should be on fiscal consolidation to ensure that the sovereign cost of borrowing does not become prohibitively expensive in a high-interest rate environment, according to people in the know. Those aware of deliberations between the Prime Minister's Office (PMO) and the Ministry of Finance said while the Budget would look to strike a balance between infrastructure investment and welfare schemes, it is unlikely to be populist, though it will be the last full-year Budget before the 2024 Lok Sabha election. Incidentally, 6-6.5 per cent GDP growth is what the upcoming 2022-23 Economic Survey is expected to project for FY24.
Analysts at Bank of America Merill Lynch said that fears of inflation getting "generalised" are overdone, as only two sub-categories of fuel and light and housing (accounting for 22 per cent of the basket) have seen a price-rise above the headline 5.2 per cent.
Reserve Bank of India Governor Urjit Patel on Saturday exhorted banks to reduce their lending rates to push credit demand in laggard segments, saying banks have benefited from influx of low-cost deposits and its previous repo rate cuts.
The stock markets, which had opened in the green on rate cut hopes, tumbled after the monetary policy announcement.
The MPC states that the 4 external members will have a tenure of four years each.
M V Subramanian says there is an imperative need for collective responsibility to tackle inflation, prices and availability of essential commodities, and not rely on inflation targeting alone.
The government's total liabilities rose to Rs 128.41 lakh crore in December quarter from Rs 125.71 lakh crore in the three months ended September 2021, according to the latest public debt management report. The increase reflects a quarter-on-quarter increase of 2.15 per cent in October-December 2021-22. In absolute terms, the total liabilities, including liabilities under the 'Public Account' of the government, jumped to Rs 1,28,41,996 crore at the end of December 2021.
On one hand, Operation Greens should help to smoothen volatility in the prices of vegetables, whereas the proposal to enhance and extend minimum support prices to augment farmer incomes, may emerge as an inflation risk.
The Governor said the MPC had voted to maintain its accommodative stance, implying more rate cuts in the future if the need arises.
Consumer goods firms and auto companies are witnessing an upturn in rural demand, which had been lagging for most of FY24. Expectations of a bumper rabi crop harvest have helped turn the tide. The Reserve Bank of India's (RBI's) Monetary Policy Committee kept the repo rate unchanged last week, noting that as rural demand catches up, consumption is expected to support economic growth in 2024-25.
India's services sector activity witnessed a sharp upturn in August on the back of stronger gains in new business, ongoing improvements in demand conditions and job creation, a monthly survey said on Monday. The seasonally adjusted S&P Global India Services PMI Business Activity Index rose from July's four-month low of 55.5 to 57.2 in August, amid a quicker upturn in business activity and the sharpest rise in employment for over 14 years. For the thirteenth straight month, the services sector witnessed an expansion in output.
Deficits could come under more pressure in coming years as states implement their own Pay Commissions.
Both the indices closed at five-month highs, led by financial services, IT and metal stocks, amid persistent foreign fund inflows.
Reversal in the declining economic growth trajectory is clearly the need of the hour and all steps should be taken to bring about this change.
The main reason was that CPI inflation would likely remain below 4 per cent till July.
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