The US Federal Reserve's interest rate decision, global market trends and trading activity of foreign investors are the major factors that would dictate terms in the equity markets in a holiday-shortened week ahead, analysts said. Equity markets will remain closed on Tuesday on account of Ganesh Chaturthi. From the global front, interest rate decisions from the Bank of England and Bank of Japan would also influence market trends.
The Reserve Bank of India on Wednesday retained the economic growth projection for the current financial year at 10.5 per cent, while cautioning that the recent surge in COVID-19 infections has created uncertainty over the economic growth recovery. In its last policy review, the RBI had projected a GDP growth rate of 10.5 pc for FY'22. Taking various factors into consideration, it said, "the projection of real GDP growth for 2021-22 is retained at 10.5 per cent consisting of 26.2 per cent in Q1, 8.3 per cent in Q2, 5.4 per cent in Q3 and 6.2 per cent in Q4."
He argued that if inflation is low, stable and moving towards the 4 per cent target, why has the RBI not revised downward the bank rate fixed in June 2023?
The rate of price rise in vegetables stood at 15.15 per cent in August as against 16.88 per cent in the previous month.
Retail inflation fell to a five-month low of 4.35 per cent in September from 7.27 per cent in the year-ago period as prices of vegetables and other items declined, according to government data released on Tuesday. The moderation in Consumer Price Index-based inflation is in line with the assessment of Reserve Bank Governor Shaktikanta Das who recently projected substantial softening of retail inflation. The CPI inflation was at 5.3 per cent in August and at 7.27 per cent in September 2020.
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.
The methodology will be announced later this week.
He has also said that the overall mood of the Indian consumer remains subdued
Wholesale price-based inflation rose to an eight-month high of 0.26 per cent in November, driven by a sharp jump in food prices, especially onion and vegetables. The WPI inflation was in the negative or deflationary zone for the past seven months since April and was at (-)0.52 per cent in October. The last positive WPI inflation was recorded in March at 1.41 per cent.
A likely easing in inflationary pressures in the forthcoming months will reopen the window for the RBI to once again prioritise growth and ease its interest rates.
With Raghuram Rajan not 'really there', the FinMin has decided to keep a watch on market developments this week with all key officials on the job.
Banks may reduce their interest rates.
The Reserve Bank will go for a "dovish pause" at Wednesday's policy review announcement amid developments such as a rise in inflation, government maintaining the inflation target band and a likely impact on growth due to local lockdowns on rising COVID-19 infections, analysts said on Monday. Economists at American brokerage Bofa Securities said price stability, growth and financial stability will become the prime focus areas for the central bank going forward. "The RBI MPC (Monetary Policy Committee) should deliver another dovish pause on Wednesday," it said. The policy announcement, the first for the fiscal, will come days after the government maintained the RBI's target to ensure inflation to be within 2-6 per cent band for five more years.
Credible fiscal consolidation has been a consistent pre-condition to easing the monetary policy stance as far as the RBI is concerned.
The supply-side driven inflationary pressures, from food or fuel prices, would be mitigated by a neutral stance and a prolonged pause on rates, says Gaurav Kapur.
In his book, former governor Subbarao says Chidambaram, Pranab were piqued by his tight rate policy.
The wholesale price-based inflation declined for the fourth consecutive month to 10.7 per cent in September on softening in prices of food, fuel and manufactured items. The Wholesale Price Index-based inflation was 12.41 per cent in August and 11.80 per cent in September last year. This year, the Wholesale Price Index (WPI) touched a record high of 15.88 per cent in May. September is the 18th consecutive month of double-digit WPI inflation.
After two surprising, successive rate cuts in January and February 2015, RBI governor Raghuram Rajan decided not to reduce them further in his first policy announcement in the new financial year. Is he playing spoilsport for consumers of homes and cars?
The industrial output for the third month in a row remained in the negative territory, contracting 1.5% in January
The American brokerage firm said it expects the rate cut to happen only in December if the monsoons normalise to cool down inflation or early 2015 in case prices rise prolongs.
The Reserve Bank of India on Friday decided to leave benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance as the economy faces heat of the second Covid wave.
Head of central banks from various countries get into a 'Basel huddle' every second month at Basel at the headquarters of the Bank for International Settlement.
The rupee plunged 90 paise to close at an all-time low of 80.86 (provisional) against the US dollar on Thursday after the US Federal Reserve's interest rate hike and its hawkish stance weighed on investor sentiments. Forex traders said the US Fed's rate hike and escalation of geopolitical risk in Ukraine sapped risk appetite. Moreover, the strength of the American currency in the overseas market, a muted trend in domestic equities, risk-off mood and firm crude oil prices weighed on the rupee.
Market breadth depicted gains with 1,476 advances over 1,403 declines on the BSE. 140 stocks remained unchanged.
SBI Chairperson Arundhati Bhattacharya said any rate cut by the bank would depend on a lot many factors.
Probably in August. We can argue whether RBI is dovishly neutral or neutrally dovish but the telltale signs of at least one more rate cut are strewn all over the policy statement, points out Tamal Bandyopadhyay.
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The Reserve Bank released a report on 'Banking Structure in India -- The Way Forward' in August 2013, which covered issues such as consolidation of large-sized banks with a view to have a few global-sized banks and the desirability and practicality of having small, localised banks as preferred vehicles for financial inclusion.
The RBI expects change, presumably commencing in the next Budget, but must hold its current view until this actually happens.
"The main risk stems from the uncertainty surrounding the outcome of the south west monsoon in view of the rising probability of an El Nio event around July-August, and its implications for food inflation," RBI said, as it kept the status quo on key interest rate for the third time in a row.
Scanty rain would have put extra pressure on food prices.
'Will President Dissanayake calibrate his foreign policy taking into account India's immediate security concerns? We need to watch.'
Balance is needed in selecting members for the proposed monetary policy committee, says Abheek Barua.
External Affairs Minister S Jaishankar on Sunday concluded a crucial visit to Male, assuring the country's top leadership that the Maldives remains an important partner of India in maintaining peace, stability and prosperity in the Indian Ocean region.
Fed keeps rates unchanged, sets up possible December hike
The industry urged the central bank to consider a rate even before the next monetary policy review on July 30.
GVA growth in the manufacturing, farm and construction sectors tumbled.
A host of factors including the reform measures taken by the government and decline in global oil and commodity prices have led to lower inflation, the Finance Ministry said on Wednesday.
The Reserve Bank of India kept its policy interest rate unchanged at a five-year low of 6.50 percent on Tuesday.
On the reduction in the SLR ratio, he said it was a signal from the point of view of long-term reforms.
RBI will take a cue from the Fed policy statement.
