In the Sensex pack, M&M was the biggest loser, tumbling by 6.66 per cent, followed by TCS dropping 4.14 per cent.
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.
Rajan tells RBI colleagues he will be returning to academics
The Index of Industrial Production (IIP) grew by 1.4 per cent in November as most components like manufacturing, electricity, mining, primary goods, and consumer durables witnessed a slowdown, according to data released by the National Statistical Office (NSO) on Wednesday. This is on the base of a decline of 1.7 per cent in November 2020 and before the new Covid variant started impacting economic activity. IIP growth was lower than the 4 per cent expansion recorded in the previous month but was better than a 1.6 per cent contraction seen in November 2020. Separately, rising prices of kitchen staples pushed retail inflation, or rate of price increase, to 5.59 per cent in December 2021, bringing it close to the upper band of Reserve Bank's comfort zone.
Bond markets, global as well as domestic, are likely headed towards hard times over the next three to six months, as higher vegetable prices, rising fuel costs, and improved wages may keep inflation hot, believe analysts, who expect the yields to hit 7.5 per cent in the near-term from the current 7.234 per cent. In this backdrop, they suggest investors can put in money in funds/instruments with residual maturity of 4 to 6 years, while longer-term investors can allocate cautiously to the longer end in the range beyond 7 years.
The banking sector is set to move at a fast pace from hereon.
'If rate cuts happen, bond yields will come down and investors will make mark-to-market capital gains on them.'
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.
The report, however, said it remains watchful of the upside risks to inflation emanating from pass-through of minimum support prices (MSPs), adverse movement in crude oil prices, volatility in global financial markets, lagged impact of the rupee weakness on input prices, adverse implications from fiscal slippage and staggered impact of HRA increases by states and its second-round impact.
In case the repo rate keeps trending downwards, borrowers can expect a downward revision of their MCLR-linked loans.
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.
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.
The S&P BSE Midcap and the S&P BSE Smallcap indices added 0.5% and 0.7%, respectively
Crisil Research expects retail inflation to rise 60 basis points to 4 per cent this fiscal from 3.4 per cent in 2018-19.
They have also called for giving cash to the poor, so that demand is generated in the economy.
India's services sector growth eased to a three-month low in June but service providers continued to signal positive demand trends, which resulted in a stronger increase in new business volumes and further job creation, a monthly survey said on Wednesday. The seasonally adjusted S&P Global India Services PMI Business Activity Index fell from 61.2 in May to 58.5 in June. Despite falling from May, the latest figure was consistent with a sharp pace of growth.
Expressing serious concern over contraction in industrial output in November, India Inc called for immediate policy interventions, including a rate cut by RBI, to prevent job losses and boost demand.
One incident should not be used to generalise the health of all cooperative banks, says RBI governor Shaktikanta Das.
Inflation in food articles during May stood at 1.13 per cent, as against 2.55 per cent in April.
The economy is gaining traction with gradual pick up in manufacturing activity and moderation in contraction of services, spurred by comfortable liquidity conditions, an RBI article on Tuesday said. Observing that the retreat of the second wave of coronavirus pandemic has been slow, the RBI in an article on the 'State of Economy' said, the aggregate demand conditions are buoyed by the release of pent-up demand post unlock, while the supply situation is improving with the monsoon catching up to its normal levels and sowing activity gaining pace. "Reaffirming the traction that the economy is gaining, the manufacturing activity is gradually turning around, while contraction in services has moderated.
RBI Governor Shaktikanta Das said the central bank saw economic growth slowdown in February, prompting it to cut rates ahead of the curve and wondered why markets were surprised with the decision to pause rate reduction. Noting that there is a need for an "informed and objective discussion" on the country's economy, Das said the RBI would do "whatever is necessary" to address growth slowdown, spikes in inflation as well to ensure good health of banks and non-bank lenders. The apex bank went for five consecutive rate cuts starting in February this year, making it a cumulative reduction of 1.35 per cent.
RBI said at the current juncture, the all-out effort is to maintain and sustain, with the hope that when life is secure, resources, energy and time can be marshalled to rebuild and revive.
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.
Firm Asian cues and a higher opening of European markets reflecting a rally on Wall Street, where all three US indices hit new records following strong economic data, bolstered trading sentiments here
Banks seems to be upset over RBI's move over rate cut.
FY22 will be the year to rebuild with the IMF projecting output growth at 11.5 per cent, economic survey at 11.0 per cent and the RBI's Monetary Policy Committee at 10.5 per cent.
As inflation rate is near the upper limit of the comfort zone, experts rule out rate cuts anytime soon
Economists and investors want RBI to retain independence in setting rates
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 rupee plunged 58 paise to close at an all-time low of 81.67 (provisional) against the US dollar on Monday as the strengthening of the American currency overseas and risk-averse sentiment among investors weighed on the local unit. Moreover, escalation of geopolitical risks due to conflict in Ukraine, a negative trend in domestic equities and significant foreign fund outflows sapped investor appetite, forex traders said. At the interbank foreign exchange market, the local currency opened at 81.47, then fell further to close at an all-time low of 81.67 against the American currency, registering a decline of 58 paise over its previous close.
Reserve Bank of India (RBI) Governor Raghuram Rajan's decision to cut rates last week surprised even top officials.
Stressed MSME borrowers would be eligible for restructuring of debt, if their accounts were classified standard.
This is the 14th consecutive month that the manufacturing PMI remained above the 50-point mark. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.
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.
Urjit Patel's reappointment will raise market hopes that Rajan, will also be offered an extension when his tenure ends in September.
Slowdown in industrial production notwithstanding, a marginal increase in inflation raised the clamour for another round of rate cut by the Reserve Bank on April 4 to boost economic activity.
India's macroeconomic situation is improving fast and the country's GDP growth will turn positive in the third and fourth quarters of the current financial year, eminent economist Ashima Goyal said on Sunday. Goyal in an interview to PTI said the management of the COVID-19 pandemic and gradual unlocks announced by the government have helped in avoiding multiple COVID-19 peaks. The growth estimates by different agencies are being continuously revised, she said.
investors will look to the new governor to continue the banking sector clean-up with the same urgency as Mr Rajan, who was targeting fully cleaned-up and provisioned balance sheets by March 2017
The career bureaucrat-turned-central banker walked into the 19th floor corner room of the Reserve Bank on December 12, 2018. Since February 2019, the Das-led RBI has cut the repo rate by a whopping 135 basis points to support the sagging growth, including an unprecedented 35 bps reduction in August. As he completes one year at the helm, woes in the NBFC sector, overall health of the banking sector and steeply falling economic growth are among the major challenges that needs to be tackled sooner than later.
The government hopes the latest action will lead to banks also lowering the cost of borrowing for corporate and individual borrowers.
