by admin | May 25, 2021 | Opinions
By Taponeel Mukherjee,
Innovation in the Indian capital markets is needed to both boost growth and resolve the balance sheet issues of banks. Besides improving the corporate bond market and lending standards, work needs to be done to create a covered bond market to assist better lending standards.
Covered bonds are bonds backed by both a pool of assets and by recourse to the borrower – providing dual recourse for the lender. Covered bonds have been a tool for credit across the world for centuries, and the outstanding amount in Europe, according to the 12th edition of the European Covered Bond Fact Book, was 2.5 trillion euros at the end of 2016. India needs to establish a covered bond market to provide a useful additional tool for credit flow in the economy.
Given its dual recourse feature, the covered bond market encourages more risk-averse investors such as pension funds and insurance companies, with large pools of capital, to participate in the market. Having dual recourse also allows investors to lend for a longer duration and at a lower interest rate. This helps bring down the cost of credit and allows institutions issuing covered bonds to match asset liability for longer periods of time.
For instance, if a financial institution makes housing loans for a 10-year period, access to a covered bond market will allow it to borrow for longer as opposed to the short-dated bank deposits on its balance sheet. This is particularly applicable to the India, since most banks fund long-dated assets using short-dated liabilities such as fixed deposits. This creates refinancing risk for banks, causing instability in the financial system. A well-developed covered bond market helps create a more stable financial system.
India faces some challenges in the credit markets, and innovation is the key to improving lending standards. To start with, the covered bond market must be applicable only to a few sectors that need a push. Housing can be one, since the lower cost of credit can make the sector a lot more affordable in India. It is important to start with one sector, or a few sectors at most, to help develop the covered bond market.
There are three important points to be kept in mind to ensure the success of a covered bond market. Firstly, the demarcation of assets in the asset pool must be carefully defined legally and executed operationally. India needs to create an independent central agency that will monitor the segregation of the assets in the pool. It will be tasked with ensuring that assets in the pool are not used as collateral for any other purpose.
Secondly, the agency will have to ensure that the pool of assets maintains its value and assets are added or removed from the pool by the borrower when required to maintain the agreed asset value. There can be no two ways about this condition.
Thirdly, strict limits must be ensured in terms of how much a particular financial institution can issue as covered bonds as a percentage of its balance sheet. This will ensure that not all assets of a financial institution are encumbered through a covered bond pool.
In summary, it is important for India to learn from how the covered bond market developed in Europe and helped in developing a robust credit system. Without doubt, a covered bond market is one of many different solutions that must be used to create a more robust capital market in the country. That said, a successful covered bond market is contingent upon a well-defined legal framework and its effective implementation.
(Taponeel Mukherjee heads Development Tracks, an infrastructure advisory firm. He can be contacted at taponeel.mukherjee@development-tracks.com or @taponeel on Twitter)
—IANS
by admin | May 25, 2021 | Economy, Markets, News
Mumbai : The equity markets turned bearish during the week on growing concerns over the country’s widening fiscal deficit as well as rising crude oil prices and persistant selling by foreign institutional investors (FIIs).
According to market observers, upbeat gross domestic product (GDP) growth data for the second quarter of 2017-18 failed to cheer the equity markets as investors remained cautious ahead of major events in the upcoming week.
The barometer 30-scrip Sensitive Index (Sensex) of the Bombay Stock Exchange (BSE) dropped 846.3 points, or 2.51 per cent, to close the week at 32,832.94 points.
The broader Nifty50 of the National Stock Exchange (NSE) declined by 267.9 points, or 2.58 per cent, to close at 10,121.80 points.
“Markets ended sharply lower this week after consolidating in a range for major part of the week. Selling emerged in the last two sessions of the week,” Deepak Jasani, Head – Retail Research, HDFC Securities, told IANS.
D.K. Aggarwal, Chairman and Managing Director of SMC Investments and Advisors, said the domestic market got spooked by fiscal deficit readings ahead of expiry of November contracts.
“To note, India’s fiscal deficit at the end of October hit 96.1 per cent of the budget estimate for the fiscal year ending in March 2018,” Aggarwal told IANS.
“In the week gone by, the Dow industrials pushed past the 24,000 mark for the first time on the back of tax-reform optimism amid the latest batch of economic data pointing to a pickup in global and domestic demand. In a recent meeting, OPEC (Organisation of the Petroleum Exporting Countries) members agreed to extend curbs on output to the end of next year,” he added.
Provisional figures from the stock exchanges showed that domestic institutional investors bought scrips worth Rs 1,614.89 crore.
FIIs continued to remain net sellers and sold stocks worth Rs 2,772.56 crore during the week.
“Widening fiscal deficit and rising crude oil prices concerns continued to hurt sentiment. Investors turned cautious ahead of major events in the month ahead — the Reserve Bank of India policy, Federal Open Market Committee meet and Gujarat assembly elections,” said Arpit Jain, AVP at Arihant Capital Markets.
Figures from the National Securities Depository (NSDL) revealed that foreign portfolio investors (FPIs) invested in equities worth Rs 3,273.34 crore, or $506.06 million, from November 27-30.
On the currency front, the rupee strengthened by 23 paise to close at 64.47 against the US dollar from its last week’s close at 64.70.
The currency market was closed on December 1 on the occasion of Id-e-Milad.
The top weekly Sensex gainers were: Maruti Suzuki (up 1.41 per cent at Rs 8,607.55); Coal India (up 0.42 per cent at Rs 272.25); and NTPC (up 0.42 per cent at Rs 181.15).
The losers were: Tata Motors (down 6.07 per cent at Rs 399.15); State Bank of India (down 5.93 per cent at Rs 312.55); Infosys (down 5.09 per cent at Rs 958.50); Tata Motors (DVR) (down 4.92 per cent at Rs 228.85); and Adani Ports (down 4.46 per cent at Rs 386.90).
—IANS
by admin | May 25, 2021 | Economy, Markets, News
By Porisma P. Gogoi,
Mumbai : GDP data for the second quarter of the 2017-18 fiscal, along with expiry of derivatives and the movement of foreign funds, are expected to be the main indicators to give direction to the key Indian equity indices in the upcoming week.
Apart from global cues, over the coming weeks, markets will seek direction from future events like the Reserve Bank of India policy meet during the first week of December and the Gujarat elections the following week.
“Focus in the coming week will be on the GDP numbers for the September quarter due to be released on November 30. Consumption growth is likely to be impacted by GST implementation during Q2FY18 and private sector capex continued to remain weak,” Teena Virmani, Vice President – PCG Research at Kotak Securities, told IANS.
“RBI policy in the first week of December and Gujarat elections in the second week are also being eyed closely. The rise in crude prices has left very little scope for RBI to cut rates in the upcoming meeting,” said Virmani.
Virmani pointed out that at the global level, the movement of oil prices will be closely watched as geo-political tensions in the Middle East are likely to remain supportive of oil prices in the run-up to the November OPEC (Organisation of the Petroleum Exporting Countries) meeting.
Other analysts have noted the November derivatives’ expiry and the direction of the flow of funds as the major triggers for the week starting November 27.
D.K. Aggarwal, Chairman and Managing Director of SMC Investments and Advisors, said: “The Indian markets may remain volatile as investors churn portfolios ahead of the monthly derivatives contract expiry on Thursday.”
“Also, the flow movement of foreign funds and domestic funds will play a critical role in giving direction to the market,” Aggarwal told IANS.
Provisional figures from the stock exchanges showed that domestic institutional investors (DIIs) bought scrips worth Rs 2,925.56 crore during last week. However, foreign institutional investors (FIIs) continued to remain net sellers, shedding stocks worth Rs 1,870.27 crore.
Figures from the National Securities Depository Ltd. (NSDL) revealed that foreign portfolio investors (FPIs) invested in equities worth Rs 2,106.45 crore, or $325.16 million, during November 20-24.
“Technically, with the Nifty rallying after two weeks of losses and also breaking out of the recent narrow trading range, the bulls seem to be in control. Further upsides are likely once the immediate resistance of 10462 is taken out,” Deepak Jasani, Head of Retail Research for HDFC Securities, told IANS.
Last week, the equity indices rode the bulls pursuing the optimism on a sovereign ratings upgrade of the Indian government’s bonds by US credit rating agency Moody’s a week before, supported by a further thrust given by continued buying by DIIs.
On a weekly basis, the barometer 30-scrip Sensitive Index (Sensex) of the Bombay Stock Exchange (BSE) closed higher from its previous week’s close by 336.44 points, or one per cent, at 33,679.24 points.
The broader Nifty50 of the National Stock Exchange (NSE) edged higher by 106.1 points, or 1.03 per cent, to close the week’s trade at 10,389.70 points.
(Porisma P. Gogoi can be contacted at porisma.g@ians.in)
—IANS
by admin | May 25, 2021 | Economy, Markets, News
Mumbai : Samvat 2074, marking the start of the Hindu New Year on Thursday, saw both key indices of the Indian equities markets recede as rise in geo-political tensions in the Korean peninsula along with fears of higher non-performing asset (NPA) levels of the domestic banking sector eroded investors’ risk-taking appetite.
The hour-long session is held every year on Diwali to mark the start of the Hindu New Year.
According to market observers, the special session to mark Samvat 2074, witnessed heavy selling pressure in the banking, metals, auto and oil and gas stocks.
The Nifty 50 of the National Stock Exchange (NSE) receded by 74.95 points or 0.73 per cent to 10,135.90 points.
Similarly, the 30-scrip sensitive index (Sensex) of the BSE plunged during the intra-session trade.
The S&P BSE Sensex, which opened at 32,656.75 points, traded at 32,373.98 points (at 7.15 p.m) — down 210.37 points or 0.65 per cent from Wednesday’s close at 32,584.35 points.
The Sensex touched a high of 32,663.06 points and a low of 32,341.10 points during the intra-session trade.
In Samvat 2073, the barometer index (BSE Sensex) had gained 4,654 points or 16.6 per cent whereas the NSE Nifty 50 had risen by 1,585 points or 18.4 per cent.
“In line with the festive mood the key indices opened higher but soon pared their gains,” Deepak Jasani, Head – Retail Research, HDFC Securities, told IANS.
“Gains in telecom shares were offset by losses in banking sector stocks and metal stocks,” he said, adding that investors continued to be worried over an expected rise in the slippages and NPA levels.
“Samvat 2074 opened on a flat and then plunged into the red, following global trends, as tension have risen once again between North Korea and the US,” Dhruv Desai, Director and Chief Operating Officer of Tradebulls, told IANS.
On Wednesday, a massive sell-off in the banking sector stocks had pulled the key Indian equity indices lower. The 30-scrip Sensex had closed 24.81 points or 0.08 per cent lower and the Nifty 50 closed 23.60 points or 0.23 per cent down.
The special trading session held every year on Diwali is considered to be auspicious for stock market trading. It is believed that the “Muhurat” trading on this day brings wealth and prosperity throughout the year.
This ritual has been observed for ages by the trading community.
—IANS
by admin | May 25, 2021 | Corporate, Corporate Buzz
Bombay Stock Exchange
Mumbai:(IANS) Bargain hunting and unravelling of short positions by investors propelled a barometer index of the Indian equities markets into making gains during the mid-afternoon trading session on Thursday.
The barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) made gains after six consecutive days of losses. It was higher by 167 points or 0.67 percent during the mid-afternoon trade session.
Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) was higher during the session under review. It rose by 46 points or 0.60 percent at 7,658.05 points.
The Sensex of the S&P Bombay Stock Exchange (BSE), which opened at 25,136.71 points, was trading at 25,203 points (at 2.20 p.m.) — up 167 points or 0.67 percent from the previous day’s close at 25,036.05 points.
The Sensex so far touched a high of 25,259.06 points and a low of 25,034.14 points during the intra-day trade.
The barometer index had receded by 1,134.23 points during the last six consecutive sessions, whereas the NSE Nifty declined by 343 points.
Market observers said short coverings of position by investors led the relief rally after six consecutive days of losses.
“Markets are trading in the green after six straight sessions of losses led by covering of short positions by traders,” Vaibhav Agarwal, vice president and research head at Angel Broking, told IANS.
Agarwal pointed out that markets positive trajectory might be short-lived due to the logjam in parliament and absence of fresh triggers.
“We do not expect any meaningful upside from current levels in the absence of any major trigger,” Agarwal elaborated.
“Investors will watch out for inflation and industrial production data over the next couple of days, for further direction. We also expect volatility to spike next week ahead of the US FOMC (Federal Open Market Committee) meet.”
Lately investors confidence was eroded due to the logjam in parliament which has dimmed the prospects of the Goods and Services Tax (GST) bill getting passed during the winter session.
Should the bill not secure clearance in this session, it will miss its intended roll-out date of April 1 next year.
Moreover, the continued selling of equities by the foreign investors ahead of a likely US rate hike and the upcoming domestic macro-economic data points, slated to be released on Friday, spooked investors.
