by admin | May 25, 2021 | Business, Large Enterprise
Chennai : (IANS) India’s central bank, the RBI on Wednesday said that the restrictions placed on the purchase of Kotak Mahindra Bank Ltd’s shares are withdrawn immediately.
The Reserve Bank of India (RBI), in a statement, said the aggregate share holdings by global depository receipts (GDR)/American depository receipts (ADR)/foreign direct investment (FDI)/foreign institutional investors (FIIs)/registered foreign portfolios investors (RFPIs)/NRIs/Persons of Indian Origin (PIOs) under portfolio investment scheme in Kotak Mahindra Bank Ltd. has gone below the prescribed limit.
The Reserve Bank has notified this under the Foreign Exchange Management Act (FEMA).
by admin | May 25, 2021 | Corporate, Corporate finance, News
Mumbai:(IANS) Ahead of the federal budget for the next fiscal, India’s central bank on Tuesday kept its key lending rates unchanged in line with stake-holders’ expectations.
The Reserve Bank of India (RBI) kept the repo and reverse repo rates unchanged during its sixth and the fiscal’s final bi-monthly monetary policy review.
Ignoring the clamour for an easing of monetary policy, as an instrument to boost the fledgling economic growth, India’s central bank maintained its short-term lending rates.
The repurchase rate, or the short-term lending rate of the central bank, remains unchanged at 6.75 percent and so does the cash reserve ratio (CRR), or the liquid money banks have to compulsorily hold, at 4.00 percent.
Accordingly, the reverse repo rate, or the central bank’s short-term borrowing rate, remains at 5.75 percent.
The Indian equity markets dipped immediately after the RBI came out with its final policy review for the fiscal. The barometer– sensitive index (Sensex) of the Bombay Stock Exchange (BSE) plunged by 55 points.
The S&P BSE Sensex, which opened at 24,868.21 points, was trading at 24,770.26 points (11.10 a.m.) — down 55 points or 0.22 percent from the previous day’s close at 24,824.83 points.
Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) was trading in the red. It inched down by 20 points, or 0.26 percent, at 7,536.30 points.
by admin | May 25, 2021 | Banking, Corporate, News
Mumbai:(IANS) With the RBI’s last monetary policy review of this fiscal coming up on Tuesday, analysts expect the central bank to keep interest rates unchanged, citing inflation trending upwards, current nstability in markets and insufficient transmission as basis for their projection.
“Considering the near-term risks on CPI (consumer price index) inflation and the uncertainties around FY17 Budget, we expect the RBI to leave rates unchanged until the budget on February 29,” Citigroup said in a note.
India’s CPI, or retail, inflation has been rising. As per data released earlier this month, annual retail inflation moved up further to 5.61 percent in December, from 5.41 percent during the month before.
With food items, notably pulses and onions, continuing to remain dear, India’s annual wholesale inflation rate moved up for the fourth straight month to minus 0.73 percent for December, against minus 1.99 percent for the month before.
“The current instability in markets and insufficient transmission are further reasons why the RBI may not rush to cut the rate on February 2,” HSBC said in a report.
The central bank last cut its short term lending rate in September by 50 basis points to 6.75 percent. In 2015, RBI reduced its repo rate cumulatively by 1.25 percent.
While announcing the fifth bi-monthly monetary policy review in December, RBI Governor Raghuram Rajan sought once again to nudge the commercial banks to cut interest rates.
He said since January last year, when the RBI started cutting its lending rates and easing its monetary policy stance, less than half of the cumulative policy repo rate reduction of 125 basis points has been passed on to borrowers by commercial banks.
“The median base lending rate has declined only by 60 basis points,” Rajan said.
Investors in India’s equity markets were seen to be cautious on Monday, ahead of the policy review.
The S&P BSE Sensex, which opened at 24,982.22 points, closed at 24,824.83 points — down 45.86 points or 0.18 percent from the previous day’s close at 24,870.69 points.
“Caution over RBI’s monetary policy review and a weak rupee subdued investors’ risk-taking appetite. Negative Asian markets and flat-to-negative European indices, too, dented sentiments,” Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.
Vaibhav Agarwal, vice president and research head at Angel Broking, elaborated that markets ended in the red after trading in the positive territory for most part of the day.
“We expect RBI to maintain status quo in tomorrow’s bi-monthly monetary policy. Although CPI has inched up, it remains within the RBI targets,” he noted.
“Also, despite a weak IIP (Index of Industrial Production) data, we believe the RBI would follow a wait and watch approach and seek more clarity from the upcoming union budget, before taking a call.”
Meanwhile, official data on India’s infratsructure sector showed on Monday that growth of eight core sectors slowed down to 0.9 percent in December 2015 from 3.2 percent in the same month of the previous year, pulled down by lower production of crude oil, natural gas and steel.
The other core industries are coal, refinery products, fertilisers, cement and electricity.
The December production figures are, however, an improvement over November, which saw the worst performance in seven months with output of the eight core sectors falling by 1.3 percent.
by admin | May 25, 2021 | Interviews
Shankar Sharma, Vice Chairman & Joint Managing Director of First Global, (Photo Credit;livemint.com)
By Vatsal Srivastava
Indian equities have been hammered over the last couple of months amidst global volatility arising out of the confusion around the US Fed hike, China recession fears as well as disappointment over domestic economic data.
Vatsal Srivastava from IANS spoke to Shankar Sharma, vice chairman and joint managing director of First Global, for his expectations from the upcoming RBI monetary policy announcement and the impact of the Bihar elections on the markets – as also to get his thoughts on the current global macro trends. Sharma is one of Dalal Street’s most respected voices and, more importantly, a man who has proved very accurate in calling major turns and inflection points in the markets over the years.
Q: We last spoke shortly prior to the budget session. You expected a short-term correction but were bullish on India for one reason alone: a sharp fall in interest rates. Do you think (RBI Governor) Raghuram Rajan has done enough in terms of monetary easing? What are your expectations for September 29 RBI meet?
A: My position remains the same: the sole reason to buy India is a view that rates will come down dramatically over the next two years. If that’s not your bet, then you should not be looking at India. If you are coming to India to buy growth, then it’s going to be a long wait. So India is a pure cost of capital trade. And I expect RBI to cut rates in the September 29 meet.
Q: How are you reading the domestic inflation dynamics currently? Do you attribute the fall in prices to the government’s policies or it is totally function of collapsing oil prices?
A: It’s in part due to oil. But it’s also due to not raising minimum support prices (MSPs). I don’t think monetary policy has contributed much, if anything at all, to lower inflation. However, bear in mind that not raising MSP has had a major negative fallout by increasing rural misery massively.
Q: Which structural reform undertaken by the Modi government can help revive a cyclical recovery in India’s investment cycle?
A: If they start spending big time on infrastructure building, that will propel a cyclical recovery. However, that eventually may lead to over investment, as has happened elsewhere in the world. And that leads to a sharp increase in the debt/GDP (ratio), which the previous government managed to bring down substantially to 67 percent of GDP from 87 percent in 2004.
Q: Do you think the upcoming Bihar elections can set the tone for the Nifty? Does a clear BJP mandate in Bihar lead to a big rally?
A: If at all there is a rally, it won’t be worth buying. Think about it: whoever bought the May 14 (2014 general) election outcome rally, is still repenting. So why get so excited about a state verdict if it’s positive for the BJP.
Q: What are your thoughts on China? Can the dragon lead the world economy into a recession as many fear or do you still have faith in a potential bazooka Beijing stimulus?
A: China has no real bullets left to use to stimulate its economy. They spent it foolishly in 2008-9 in trying to keep up with the Joneses. That was the stupidest economic decision I have seen from any government in a long time. And everybody still kept saying the Chinese leadership had a plan! We now know better. The only bullet left is a bigger devaluation of the yuan, which I think will happen over the next year.
Q: The US Fed maintained status quo at its September meet. You think this decision was only a function of problems arising out of China and EMs or is the US Fed having a domestic growth scare as well?
A: The Fed is confused. I see no sign of inflation in the western world, so they were trying to be too cute in talking about a rate hike. I think markets will keep a gun to their head, and the Fed listens primary to the market.
Q: If US monetary normalisation works, we will be fine. But suppose it falters what next? What’s the next policy action by global central banks? Negative interest rates? Helicopter drops? More fiscal stimulus? What’s your best guess?
Yeah, more of the same. It’s almost comical how easy it is to predict what the Fed will do. Always has been, save for the surprise hike in 1994. Wall Street is Main Street as far as the Fed is concerned.
Q: Do you believe in the decoupling theory? Can India decouple?
A: Why do we Indians believe India belongs to some other planet? We are just another market. And just another country. We are looking good right now because of a conservative policy stand by our policy makers. Period. But to expect India to decouple and run up while the rest of the world struggles is to expect the near impossible. That said, India will outperform the global bear market, but by falling less.
(Vatsal Srivastava is consulting editor with IANS. The views expressed are personal. He can be reached at vatsal.sriv@gmail.com)
by admin | May 25, 2021 | Opinions
By Vatsal Srivastava
At 9,120, nobody could have called the top on the Nifty after a surprise rate cut by the RBI. Upside momentum was too strong and global equities were also trading near or at record highs.
Similarly, after breaching and trading well below the crucial psychological and technical level of 7,800, it is difficult to ignore further downside and call a bottom, especially taking into account the global volatility in the financial markets arising out of China and the potential US Fed rate hike. We may test 7,500 or even worse, this selling climax may drag the Nifty to 7,200.
The Indian retail investor has largely been on the sidelines after the nightmare of the 2008-09 crash. At each new high the market made, it was largely the institutional money enjoying the party.
The question the retail investor should ask is: Is this a good time to accumulate stocks? Further, should he or she be buying on every major price decline from now as valuations become more reasonable and tend towards the cheaper side? The answer is a compelling and a screaming yes!
It is in these times of panic that retail investors should be looking to build a long term portfolio. With a longer term time frame it is a prudent strategy to start and keep accumulating quality stocks given the current downtrend. Many blue-chips are now trading at attractive long term valuations.
This column has long called for further reduction in policy rates. Indian earnings have remained stuck in single digit growth territory for the past three years. Weak revenues are ostensibly to blame, though a closer look indicates top-down issues led by high real interest rates and a negative WPI culminating in lackluster IIP growth are the real culprits according to Barclays.
RBI Governor Raghuram Rajan has been singing his own lonely hawkish song for many months now but surely rate cuts are coming very soon. Real rates are at a two decade high. India is under a serious threat from disinflation as Arvind Subramanian pointed out recently and the investment cycle will only turn with a substantial fall in the cost of capital. Time is running out. Expect 75-100 basis points of easing in the next twelve months.
Stalled projects were at Rs 2,586 billion at the end of the December 2013 quarter. By June 2015, the value of stalled projects was down 70 percent to Rs 793 billion. Government capex has taken off. The new investment projects for the past four quarters have totalled Rs 10,566 billion, almost double the number at the end of March 2014 (Rs 5,807 billion). Listening beyond the perma bears and Modi bashers, optimism is still sky high.
Sentiment is crucial to investment decisions and the current leadership has been quite successful in boosting the outlook for the future which is also a critical ingredient to growth. It is visible in FDI flows as well as in stock market multiples which even after this steep fall are right in the middle of historical ranges. Gross FDI inflows rose to $46.6 billion (at all time highs) in the 12 months ended May 2015 (up 24 percent year on year), according to Morgan Stanley.
Regarding government spending, National Highway Authority of India (NHAI) road awards for the first three months of FY16 are exhibiting strong momentum and overall government capex for the fiscal year to date is the highest in the past five years according to Barclays.
Barclays estimates suggest the cumulative consumer spend (both retail and corporate) will decline by Rs 666 bn (0.5 percent of GDP) in FY16 (assuming petrol and diesel demand growth at nine percent and six percent respectively), if crude averages $60/bbl this fiscal year. These drivers are likely to spur consumption demand growth.
On the global front, the European Central Bank revised its inflation forecasts downwards last week and many are expecting another round of quantitative easing in Europe. This will surely support equities in Europe. A US Fed hike certainly seems unlikely this month even after a solid jobs data release last Friday.
But even if US Federal Reserve head Janet Yellen hikes rates, it is very unlikely the US markets will witness the kind of capitulation they did a couple of weeks ago. Yellen will be undertaking the loosest monetary tightening in the history of monetary policy and there is absolutely no reason or evidence that a September hike will be followed by another in December.
China is still a big risk but the past few weeks have given markets enough time to factor in the implications of the Yuan devaluation. Further volatility in China may not be as painful going ahead.
It is true that India’s macro fundamentals are relatively solid as compared to much of the developed and emerging markets. However, the key point to remember is that while economies like India can decouple and sail through troubled waters as the global economy faces headwinds, global markets cannot do so easily.
Serious money has always been made being long. Stay optimistic and believe in the India story. Keep faith and patience in the 15 month old NDA government.
It’s time to Buy in India.
(Vatsal Srivastava is consulting editor with IANS. The views expressed are personal. He can be reached at vatsal.sriv@gmail.com)
