PM Narendra Modi’s maiden Independence Day speech did well to excite Indian citizens with prospects of wonderful days ahead and enthuse investors to pour money into the Indian markets.
One thing is for sure, India is no longer business as usual. Things are changing, albeit at a slower pace than some expected, but it is changing. More and more projects are been given green light – without losing the focus on environmental issues, societal changes have been signaled without ruffling the opposition’s feathers and efforts are been made to drastically cut down the red tape and make India one of the world’s favored business destination (WB ranks us at 134 out of 189 economies ranked).
Modi also send the last reminiscent of India’s attempt of mimicking Soviet’s command economy – Planning Commission packing. With Planning Commission gone, the focus turns back to decentralization of Indian economy with states getting even more financing powers and autonomy going forward.
Sensex ended this week up by 1.2% while Nifty was up by 1.6% and Midcap up by 3.6%
Monday - Sensex up by 1.1%, Nifty up by 1.1%, Midcap up by 1.7%
Investors cheered as PM Narendra Modi delivered his maiden Independence Day speech where he vowed to make radical changes in the way country is run especially the bureaucratic setup. The news of declining WPI to five- month low and easing of tensions over Ukraine also boosted the positive sentiment.
Tuesday - Sensex up by 0.1%, Nifty up by 0.3%, Midcap up by 1.0%
Both Sensex and Nifty continued their journey upwards as oil retailers surged after Brent hit its 14-month low. FII sentiment is buoyed by positive noises made by Modi govt. on reforms and strong trust on RBI governor Raghuram Rajan’s ability to tackle exchange rate crises and inflation. Falling crude prices have also added to the bullish sentiment as India’s import burden eased.
Wednesday - Sensex down by 0.4%, Nifty down by 0.3%, Midcap up by 0.3%
Benchmark indices corrected after rallying continuously for six days as investors booked profits ahead of scheduled US Fed meeting on Thursday.
Thursday - Sensex up by 0.2%, Nifty up by 0.2%, Midcap up by 0.4%
Both Sensex and Nifty edged higher as FIIs continued to pour money in Indian markets, especially in blue-chips reflecting continued optimism about corporate earnings and a recovery in the domestic economy. Slipping in crude oil prices as China reported slowdown in its huge factory sector also helped the sentiment.
Friday - Sensex up by 0.2%, Nifty up by 0.3%, Midcap up by 0.2%
Nifty closed at its all-time high of 7,913.20 points led by IT stocks - which rallied on the news of improving prospects of US economy, and banks rose as RBI looks into reviewing lending caps to align them with global standards set by Basel committee.
Sunday, August 24, 2014
Saturday, August 16, 2014
Weekly Market Commentary - Aug 11, 2014 - Aug 15, 2014
A very good week for the markets. Sensex went up by more than 770 points in the span of four trading days. Nomura raised BSE Sensex target to 30,310 by August 2015 citing the cyclical pick-up in growth. UBS maintained its 12-month Nifty target of 8,000 putting a premium on growth potential of the Indian economy especially when it comes out of ruts.
Narendra Modi's decision to do away with Planning Commission has unshackled the Indian states economy from the clutches of last remaining Soviet style institution. I couldn't think of a better way to say Happy Independence Day.
Sensex ended this week up by 3.1% while Nifty was up by 2.9% and Midcap up by 1.6%
Monday - Sensex up by 0.8%, Nifty up by 0.8%, Midcap up by 0.9%
Sensex and Nifty snapped their losing streak and rose nearly 1% on good numbers from stocks such as Mahindra & Mahindra and cooling-off in tensions between Russia and Ukraine. Realty stocks gained after SEBI put its stamp on FM’s decision of setting up of REITs, a widely acclaimed move that will offer a new source of financing to India's cash-strapped property developers and new investment vehicle to the nation.
Tuesday - Sensex up by 1.4%, Nifty up by 1.3%, Midcap up by 0.7%
Investors cheered the Tata Motors results – the firm tripled its quarterly net profit on back of strong JLR sales. Analysts are also upbeat about the overall health of the economy and expect July CPI to rise marginally to 7.40% from 7.31% in June, as per a Reuters’ poll. Also, a poll of 27 economists expects factory output in June to rise by 5.4% y-o-y in comparison with the 4.7% growth in May.
Wednesday - Sensex up by 0.1%, Nifty up by 0.2%, Midcap down by 1.1%
Sensex and Nifty ended the day marginally higher as gains in IT stocks due to weak rupee were offset by decline in capital goods stocks as BHEL’s earnings disappointed the street. Gains were also capped as lenders fell after govt. released July CPI data at 7.96% vs. 7.46% in June.
Thursday - Sensex up by 0.7%, Nifty up by 0.7%, Midcap up by 1.0%
Benchmark indices went up as WPI inflation dropped to five-month low level due to moderation in fuel costs and investors prepare for maiden Independence Day speech of PM Narendra Modi. Investors are expecting some key reform related announcements on Friday.
Friday – Exchanges closed on account of Independence Day
Narendra Modi's decision to do away with Planning Commission has unshackled the Indian states economy from the clutches of last remaining Soviet style institution. I couldn't think of a better way to say Happy Independence Day.
Sensex ended this week up by 3.1% while Nifty was up by 2.9% and Midcap up by 1.6%
Monday - Sensex up by 0.8%, Nifty up by 0.8%, Midcap up by 0.9%
Sensex and Nifty snapped their losing streak and rose nearly 1% on good numbers from stocks such as Mahindra & Mahindra and cooling-off in tensions between Russia and Ukraine. Realty stocks gained after SEBI put its stamp on FM’s decision of setting up of REITs, a widely acclaimed move that will offer a new source of financing to India's cash-strapped property developers and new investment vehicle to the nation.
Tuesday - Sensex up by 1.4%, Nifty up by 1.3%, Midcap up by 0.7%
Investors cheered the Tata Motors results – the firm tripled its quarterly net profit on back of strong JLR sales. Analysts are also upbeat about the overall health of the economy and expect July CPI to rise marginally to 7.40% from 7.31% in June, as per a Reuters’ poll. Also, a poll of 27 economists expects factory output in June to rise by 5.4% y-o-y in comparison with the 4.7% growth in May.
Wednesday - Sensex up by 0.1%, Nifty up by 0.2%, Midcap down by 1.1%
Sensex and Nifty ended the day marginally higher as gains in IT stocks due to weak rupee were offset by decline in capital goods stocks as BHEL’s earnings disappointed the street. Gains were also capped as lenders fell after govt. released July CPI data at 7.96% vs. 7.46% in June.
Thursday - Sensex up by 0.7%, Nifty up by 0.7%, Midcap up by 1.0%
Benchmark indices went up as WPI inflation dropped to five-month low level due to moderation in fuel costs and investors prepare for maiden Independence Day speech of PM Narendra Modi. Investors are expecting some key reform related announcements on Friday.
Friday – Exchanges closed on account of Independence Day
Sunday, June 22, 2014
Weekly Market Commentary - June 16, 2014 - June 20, 2014
According to the Ministry of Oil and Natural Gas, India imported about 13% of its crude oil requirements from Iraq last year and this year was planning to take that figure to 20%. Iraq is the second largest crude producer in the OPEC group. With only half of the supplies covered so far, India has to rush to other players to secure oil – likely at higher prices now. According to one govt. estimate, oil price can rise to $120 per barrel for several months and may hit the govt. budget by atleast $3.3bn.
Sensex ended this week down by 0.5% while Nifty was down by 0.4% and Midcap down by 0.7%
Monday - Sensex down by 0.1%, Nifty down by 0.1%, Midcap up by 0.4%
Sensex and Nifty continue to trade lower as Iraq crisis weigh on investor’s mind. Brent rose to $113 per barrel, a nine-month high as ISIS strengthens its position in Iraq. Rise in crude prices coupled with weak monsoon can spell trouble for India. WPI for May came in about 6% - five month high due to higher food and fuel costs.
Tuesday - Sensex up by 1.3%, Nifty up by 1.3%, Midcap up by 1.3%
While rising oil prices has put Indian finance ministry in a difficult position, such is not the case with oil and gas companies. Indian upstream sector gained as investors lapped up shares on expectations of margin expansion. Sentiment on the street remained positive with investors buying in every decline.
Wednesday - Sensex down by 1.1%, Nifty down by 1.0%, Midcap down by 0.9%
Rising crude prices seems to make everybody apart from upstream companies very nervous. Sensex and Nifty slumped again as rising crude prices raised concerns about higher inflation and govt.’s finances. Rising crude prices have also hushed the chatter about interest rate cuts.
Thursday - Sensex down by 0.2%, Nifty down by 0.2%, Midcap down by 0.7%
Oil and Gas stocks slumped on concerns that India may allow higher gas prices only for incremental output from existing fields. Brent crude also hit a further high of $115 per barrel as fighting intensifies in Iraq.
Friday - Sensex down by 0.4%, Nifty down by 0.4%, Midcap down by 0.7%
Sensex and Nifty continued to trade lower as investors continued to focus on Iraq issue in short term. Market is expecting major reforms in the first budget of Modi govt. but situation in Iraq has made things little difficult with rising crude prices feeding into higher inflation and deficits.
Sensex ended this week down by 0.5% while Nifty was down by 0.4% and Midcap down by 0.7%
Monday - Sensex down by 0.1%, Nifty down by 0.1%, Midcap up by 0.4%
Sensex and Nifty continue to trade lower as Iraq crisis weigh on investor’s mind. Brent rose to $113 per barrel, a nine-month high as ISIS strengthens its position in Iraq. Rise in crude prices coupled with weak monsoon can spell trouble for India. WPI for May came in about 6% - five month high due to higher food and fuel costs.
Tuesday - Sensex up by 1.3%, Nifty up by 1.3%, Midcap up by 1.3%
While rising oil prices has put Indian finance ministry in a difficult position, such is not the case with oil and gas companies. Indian upstream sector gained as investors lapped up shares on expectations of margin expansion. Sentiment on the street remained positive with investors buying in every decline.
Wednesday - Sensex down by 1.1%, Nifty down by 1.0%, Midcap down by 0.9%
Rising crude prices seems to make everybody apart from upstream companies very nervous. Sensex and Nifty slumped again as rising crude prices raised concerns about higher inflation and govt.’s finances. Rising crude prices have also hushed the chatter about interest rate cuts.
Thursday - Sensex down by 0.2%, Nifty down by 0.2%, Midcap down by 0.7%
Oil and Gas stocks slumped on concerns that India may allow higher gas prices only for incremental output from existing fields. Brent crude also hit a further high of $115 per barrel as fighting intensifies in Iraq.
Friday - Sensex down by 0.4%, Nifty down by 0.4%, Midcap down by 0.7%
Sensex and Nifty continued to trade lower as investors continued to focus on Iraq issue in short term. Market is expecting major reforms in the first budget of Modi govt. but situation in Iraq has made things little difficult with rising crude prices feeding into higher inflation and deficits.
Saturday, April 19, 2014
Weekly Market Commentary - Apr 14, 2014 - Apr 18, 2014
Two steps back and one forward. That is pretty much how I will describe the action on Dalal Street this (short) week. IT stalwarts - Infosys and TCS reported better earnings but gave contrasting guidance, hence making sure the sector stayed volatile during the week. Throw in a bit of inflation and you have investors in every sector running for the corners. The thing about rallies built on hope and hype is that they don’t need much to fizzle. Remember, no matter how big the bubble is, you only need one small pin to burst it.
Sensex and Nifty ended the week at pretty much the same level as last week while Midcap down by meagre 0.2%
Monday – Markets closed on occasion of Baisakhi / Ambedkar Jayanti
Tuesday - Sensex down by 0.6%, Nifty down by 0.6%, Midcap down by 0.9%
Markets were down as inflation raised its head again and soared to three-month high figure of 5.7% in March - dashing hopes of any rate reprieve from central bank. Almost all interest rate sensitive stocks fell while IT stocks surged on the back of good earnings reported by Infosys.
Wednesday - Sensex down by 0.9%, Nifty down by 0.9%, Midcap down by 0.8%
BSE Sensex corrected another 200 points as fear of rising inflation was stoked by the predictions of below normal rainfall this year. IT stocks fell as Infosys guidance pointed to weak outlook for the sector. Retail inflation also rose in tandem with WPI to 8.31% in March, largely driven by higher food prices also made investors cautious.
Thursday - Sensex up by 1.6%, Nifty up by 1.6%, Midcap up by 1.5%
Benchmark indices roared back as banks surged on value buying and hopes of bond portfolio gain as RBI fully sold the Rs.200bn debt it had on offer. IT stocks also rose as TCS and HCL reported better than expected earnings with positive future revenue guidance.
Friday - Markets closed on occasion of Good Friday
Sensex and Nifty ended the week at pretty much the same level as last week while Midcap down by meagre 0.2%
Monday – Markets closed on occasion of Baisakhi / Ambedkar Jayanti
Tuesday - Sensex down by 0.6%, Nifty down by 0.6%, Midcap down by 0.9%
Markets were down as inflation raised its head again and soared to three-month high figure of 5.7% in March - dashing hopes of any rate reprieve from central bank. Almost all interest rate sensitive stocks fell while IT stocks surged on the back of good earnings reported by Infosys.
Wednesday - Sensex down by 0.9%, Nifty down by 0.9%, Midcap down by 0.8%
BSE Sensex corrected another 200 points as fear of rising inflation was stoked by the predictions of below normal rainfall this year. IT stocks fell as Infosys guidance pointed to weak outlook for the sector. Retail inflation also rose in tandem with WPI to 8.31% in March, largely driven by higher food prices also made investors cautious.
Thursday - Sensex up by 1.6%, Nifty up by 1.6%, Midcap up by 1.5%
Benchmark indices roared back as banks surged on value buying and hopes of bond portfolio gain as RBI fully sold the Rs.200bn debt it had on offer. IT stocks also rose as TCS and HCL reported better than expected earnings with positive future revenue guidance.
Friday - Markets closed on occasion of Good Friday
Sunday, March 23, 2014
Weekly Market Commentary - Mar 17, 2014 - Mar 21, 2014
Indian markets continued to have volatile sessions ahead of Indian elections due to lack of any other strong catalysts. US Federal Reserve attempts to increase short-term interest rates sooner than expected led to markets around the globe moving nervously. Any decline in interest spread between US and emerging markets may lead to decline in potential opportunities for yield-searching investments.
Sensex ended this week down 0.3%, Nifty was down by 0.2% while CNX Midcap was up by 1.3%.
Monday – Markets closed on occasion of Holi
Tuesday - Sensex up by 0.1%, Nifty up by 0.2%, Midcap up by 1.3%
Benchmark indices rose to their records highs but retreated later to settle almost flat. FIIs continue to put money in Indian blue chips ahead of Indian general elections. A small improvement in the industrial output and further lowering of inflation has also added to the positive mood on the street.
Wednesday - Sensex flat, Nifty up by 0.1%, Midcap up by 0.2%
Investor sentiment was subdued ahead of US Fed meeting later in the day. IT major TCS joined Infosys in flagging concerns about revenue growth in near term and indicated that growth could be weaker than previous quarters, which led to some profit booking in IT stocks.
Thursday - Sensex down by 0.4%, Nifty down by 0.6%, Midcap down by 0.8%
Stocks ended lower as Fed chairperson Janet Yellen hinted at raising interest rates sooner than expected and will affect the yield seeking investments. Indian capital goods, financial, auto and all other interest rate sensitive stocks ended the day lower.
Friday - Sensex up by 0.1%, Nifty up by 0.2%, Midcap up by 0.6%
Benchmark indices continued their positive momentum but ended the week only a tad higher on last day of the week.
Sensex ended this week down 0.3%, Nifty was down by 0.2% while CNX Midcap was up by 1.3%.
Monday – Markets closed on occasion of Holi
Tuesday - Sensex up by 0.1%, Nifty up by 0.2%, Midcap up by 1.3%
Benchmark indices rose to their records highs but retreated later to settle almost flat. FIIs continue to put money in Indian blue chips ahead of Indian general elections. A small improvement in the industrial output and further lowering of inflation has also added to the positive mood on the street.
Wednesday - Sensex flat, Nifty up by 0.1%, Midcap up by 0.2%
Investor sentiment was subdued ahead of US Fed meeting later in the day. IT major TCS joined Infosys in flagging concerns about revenue growth in near term and indicated that growth could be weaker than previous quarters, which led to some profit booking in IT stocks.
Thursday - Sensex down by 0.4%, Nifty down by 0.6%, Midcap down by 0.8%
Stocks ended lower as Fed chairperson Janet Yellen hinted at raising interest rates sooner than expected and will affect the yield seeking investments. Indian capital goods, financial, auto and all other interest rate sensitive stocks ended the day lower.
Friday - Sensex up by 0.1%, Nifty up by 0.2%, Midcap up by 0.6%
Benchmark indices continued their positive momentum but ended the week only a tad higher on last day of the week.
Sunday, March 16, 2014
Weekly Market Commentary - Mar 10, 2014 - Mar 14, 2014
Indian markets reported a weekly loss after ending three consecutive weeks in green. As expected, markets continued to stay volatile ahead of the elections, with somewhat positive momentum. It has been almost six months the key benchmark index, sensex trading above 20k level.
RBI review meeting on Apr 1 will be next key catalyst investors are focusing on. If RBI managed to cut rates, we may expect some more rally in cyclical especially banks and capital goods.
Sensex ended this week down 0.5%, Nifty was down by 0.3% while CNX Midcap was down by 0.9%.
Monday - Sensex up by 0.1%, Nifty up by 0.2%, Midcap up by 0.5%
Markets continued their positive momentum and sensex traded above 22,000 level for a while and closing at its new record high. Investors continued to show interest in cyclicals while defensives act as source of funds. Market is expected to stay volatile in days ahead of the election with a focus on economic data release on trade deficit, IIP, CPI and WPI in the near term.
Tuesday - Sensex down by 0.5%, Nifty down by 0.4%, Midcap down by 0.3%
Profit booking across the sector led to benchmark indices losing some ground. The fall in trade deficit failed to bring cheer to the market as the data showed decline in exports. The trade deficit lowered to $8.13bn in Feb, which is lowest in past five months.
Wednesday - Sensex up by 0.1%, Nifty up by 0.1%, Midcap down by 0.4%
Markets closed at almost flat as investors keenly await inflation data release. Inflation and industrial output data are key determinants of RBI interest rate policy that will be up for discussion on April 1.
Thursday - Sensex down by 0.4%, Nifty down by 0.4%, Midcap down by 0.7%
Benchmark indices climbed to their highs as govt releases inflation stats. Feb WPI inflation declined to 4.68% vs. 5.05% in Jan due to fall in vegetable and fuel prices. However, markets quickly gave up their gains as IT stocks declined after Infosys painted beak future of its business outlook. China’s missing of its industrial growth and retail sales target also add to the selling pressure in the markets.
Friday - Sensex up by 0.2%, Nifty up by 0.2%, Midcap flat
Indian markets traded weaker during most of the day like their asian and European counterparts on fears that China may be slowing down and standoff on Ukrain may continue or even escalate. But value buying in key sensex and nifty stocks during the end of the day led the benchmark indices closing in the green.
RBI review meeting on Apr 1 will be next key catalyst investors are focusing on. If RBI managed to cut rates, we may expect some more rally in cyclical especially banks and capital goods.
Sensex ended this week down 0.5%, Nifty was down by 0.3% while CNX Midcap was down by 0.9%.
Monday - Sensex up by 0.1%, Nifty up by 0.2%, Midcap up by 0.5%
Markets continued their positive momentum and sensex traded above 22,000 level for a while and closing at its new record high. Investors continued to show interest in cyclicals while defensives act as source of funds. Market is expected to stay volatile in days ahead of the election with a focus on economic data release on trade deficit, IIP, CPI and WPI in the near term.
Tuesday - Sensex down by 0.5%, Nifty down by 0.4%, Midcap down by 0.3%
Profit booking across the sector led to benchmark indices losing some ground. The fall in trade deficit failed to bring cheer to the market as the data showed decline in exports. The trade deficit lowered to $8.13bn in Feb, which is lowest in past five months.
Wednesday - Sensex up by 0.1%, Nifty up by 0.1%, Midcap down by 0.4%
Markets closed at almost flat as investors keenly await inflation data release. Inflation and industrial output data are key determinants of RBI interest rate policy that will be up for discussion on April 1.
Thursday - Sensex down by 0.4%, Nifty down by 0.4%, Midcap down by 0.7%
Benchmark indices climbed to their highs as govt releases inflation stats. Feb WPI inflation declined to 4.68% vs. 5.05% in Jan due to fall in vegetable and fuel prices. However, markets quickly gave up their gains as IT stocks declined after Infosys painted beak future of its business outlook. China’s missing of its industrial growth and retail sales target also add to the selling pressure in the markets.
Friday - Sensex up by 0.2%, Nifty up by 0.2%, Midcap flat
Indian markets traded weaker during most of the day like their asian and European counterparts on fears that China may be slowing down and standoff on Ukrain may continue or even escalate. But value buying in key sensex and nifty stocks during the end of the day led the benchmark indices closing in the green.
Sunday, February 16, 2014
Weekly Market Commentary - Feb 10, 2014 - Feb 14, 2014
Highlights of this week will be the growing contrast between US economy, which has shown some strong signs of recovery in their economy, and Indian story, whose biggest facilitator public sector banks have started crumbling under the weight of increasing NPAs. The chance of some bank going under or requiring state assistance or bail-out have become very strong since United Bank of India story went out. State Bank of India’s weak results is indicator of how deep the mess is.
It is India’s worst kept secret that our public sector banks (and their investors) are suffering under crony capitalism –which reached its zenith under UPA regime. It is a high time now when our banking regulator – RBI may take a leaf out of its Governor Raghuram Rajan’s widely read book “Saving Capitalism from the Capitalist”- rolls up its sleeve and gets our banks out of clutches of this govt-crony nexus.
Sensex ended this week flat, Nifty was slightly down by 0.2% while CNX Midcap was down by 1.3%.
Monday – Sensex down by 0.2%, Nifty down by 0.2%, Midcap down by 0.3%
Markets continued their lackadaisical performance as earnings season continues without any major surprise. Investors continued to book profits on IT and banking sectors. Beginning of two-day nationwide strike by public sector bank staff also affected the trading on banking counters.
Tuesday - Sensex up by 0.1%, Nifty up by 0.2%, Midcap up by 0.1%
Indices rose slightly led by two Tata group companies. Tata motors rose the most in two months after its quarterly profit tripled. Tata Steel Ltd gained to its highest level in three weeks before its earnings report. The gains in Sensex were offset by fall in RIL shares after Delhi Chief Minister Arvind Kejriwal filed an FIR against Mukesh Ambani.
Wednesday – Sensex up by 0.4%, Nifty up by 0.4%, Midcap flat
Markets rallied after US Congress agreed to advance legislation extending US borrowing authority. Also, newly appointed Fed Chairman Janet Yellen held off from making any changes to tapering schedule set the Asian shares soaring.
Thursday – Sensex down by 1.2%, Nifty down by 1.4%, Midcap down by 1.3%
Earnings disappointment in Cipla and Coal India stocks dragged the benchmark indices down. Also, govt released data indicated that industrial output contracted by 0.6% in December meaning all is still not well with the economy although retail inflation did ease to its two year low of 8.79%.
Friday – Sensex up by 0.9%, Nifty up by 0.8%, Midcap up by 0.3%
Sensex rose on last day of the week as some traders rushed to cover their shorts ahead of presentation of interim union budget next week. Meanwhile, January WPI numbers came at 5.05% vs. 6.2% in December, lower than ET-Now poll estimate of 5.5%.
It is India’s worst kept secret that our public sector banks (and their investors) are suffering under crony capitalism –which reached its zenith under UPA regime. It is a high time now when our banking regulator – RBI may take a leaf out of its Governor Raghuram Rajan’s widely read book “Saving Capitalism from the Capitalist”- rolls up its sleeve and gets our banks out of clutches of this govt-crony nexus.
Sensex ended this week flat, Nifty was slightly down by 0.2% while CNX Midcap was down by 1.3%.
Monday – Sensex down by 0.2%, Nifty down by 0.2%, Midcap down by 0.3%
Markets continued their lackadaisical performance as earnings season continues without any major surprise. Investors continued to book profits on IT and banking sectors. Beginning of two-day nationwide strike by public sector bank staff also affected the trading on banking counters.
Tuesday - Sensex up by 0.1%, Nifty up by 0.2%, Midcap up by 0.1%
Indices rose slightly led by two Tata group companies. Tata motors rose the most in two months after its quarterly profit tripled. Tata Steel Ltd gained to its highest level in three weeks before its earnings report. The gains in Sensex were offset by fall in RIL shares after Delhi Chief Minister Arvind Kejriwal filed an FIR against Mukesh Ambani.
Wednesday – Sensex up by 0.4%, Nifty up by 0.4%, Midcap flat
Markets rallied after US Congress agreed to advance legislation extending US borrowing authority. Also, newly appointed Fed Chairman Janet Yellen held off from making any changes to tapering schedule set the Asian shares soaring.
Thursday – Sensex down by 1.2%, Nifty down by 1.4%, Midcap down by 1.3%
Earnings disappointment in Cipla and Coal India stocks dragged the benchmark indices down. Also, govt released data indicated that industrial output contracted by 0.6% in December meaning all is still not well with the economy although retail inflation did ease to its two year low of 8.79%.
Friday – Sensex up by 0.9%, Nifty up by 0.8%, Midcap up by 0.3%
Sensex rose on last day of the week as some traders rushed to cover their shorts ahead of presentation of interim union budget next week. Meanwhile, January WPI numbers came at 5.05% vs. 6.2% in December, lower than ET-Now poll estimate of 5.5%.
Sunday, February 2, 2014
Weekly Market Commentary - Jan 27, 2014 - Jan 31, 2014
RBI governor threw in a surprise again this week. He maintained the RBI’s stance of treating inflation as its enemy no.1 while increasing the repo rate to 8%. Street was expecting no change in interest rates, some even calling for a cut now with food inflation especially vegetable inflation coming down from recent highs. Last week Urijit Patel committee made a recommendation to RBI to replace WPI by CPI as inflation benchmark for calibrating further policy actions. It is too early to say whether RBI has indeed taken up these recommendations. If that is the case, we’ll see more rate hikes in near future to contain CPI inflation and get it under RBI’s comfort zone.
Sensex and Nifty ended this week with losses of 2.9% and 2.8% respectively while CNX Midcap fell 1.6%.
Monday – Sensex down by 2.0%, Nifty down by 2.1%, Midcap down by 2.9%
Markets tumbled as investors pull out money across emerging markets before Fed tapering announcement. Fed is expected to make another cut in stimulus in Ben Bernanke’s last meeting as Fed chairman. Also, weak PMI data from China last week coupled with Argentina abandoning support of its currency peso on the open market, which led to its 15% slide, affected the investor sentiment.
Tuesday - Sensex down by 0.1%, Nifty down by 0.2%, Midcap down by 0.1%
After an onslaught on previous day, market’s attempts to recover, on the back of short coverings, was cut short by RBI’s decision to hike the repo rate by 25bps to 8%. RBI governor Raghuram Rajan defended his actions by claiming that growth cannot be had unless we have inflation totally under control. He pointed out that although CPI inflation excluding food and fuel has remained flat, WPI inflation excluding food and fuel has risen prompting a rate hike from RBI.
Wednesday – Sensex down by 0.2%, Nifty down by 0.1%, Midcap up by 0.5%
Investors stayed on the sidelines as Fed ends its two-day meeting on Wednesday with most economists expecting a further stimulus cut as US recovery shows signs of traction. The stimulus has led to FIIs pouring $20bn in India in 2013. Though Indian govt and central bank maintains that they are prepared to meet any challenge thrown in by Fed tapering, it would be highly likely that any tapering announcement will negatively affect all emerging markets including India.
Thursday – Sensex down by 0.7%, Nifty down by 0.8%, Midcap down by 1.4%
And Fed did it again. Fed tapers another $10bn, signaling confidence that the US economy can stand on its own. This move had an expected negative impact on all emerging markets. Fed has indicated that it will keep on cutting its stimulus as recovery gains strength. Fed bond purchases now stands at $65bn a month.
Friday – Sensex up by 0.1%, Nifty up by 0.3%, Midcap up by 2.3%
Markets ended flat to slightly positive as investors recover from actions of Indian and US central banks. Indian markets closed January with a monthly loss of 3%, worst since Aug 2013.
Sensex and Nifty ended this week with losses of 2.9% and 2.8% respectively while CNX Midcap fell 1.6%.
Monday – Sensex down by 2.0%, Nifty down by 2.1%, Midcap down by 2.9%
Markets tumbled as investors pull out money across emerging markets before Fed tapering announcement. Fed is expected to make another cut in stimulus in Ben Bernanke’s last meeting as Fed chairman. Also, weak PMI data from China last week coupled with Argentina abandoning support of its currency peso on the open market, which led to its 15% slide, affected the investor sentiment.
Tuesday - Sensex down by 0.1%, Nifty down by 0.2%, Midcap down by 0.1%
After an onslaught on previous day, market’s attempts to recover, on the back of short coverings, was cut short by RBI’s decision to hike the repo rate by 25bps to 8%. RBI governor Raghuram Rajan defended his actions by claiming that growth cannot be had unless we have inflation totally under control. He pointed out that although CPI inflation excluding food and fuel has remained flat, WPI inflation excluding food and fuel has risen prompting a rate hike from RBI.
Wednesday – Sensex down by 0.2%, Nifty down by 0.1%, Midcap up by 0.5%
Investors stayed on the sidelines as Fed ends its two-day meeting on Wednesday with most economists expecting a further stimulus cut as US recovery shows signs of traction. The stimulus has led to FIIs pouring $20bn in India in 2013. Though Indian govt and central bank maintains that they are prepared to meet any challenge thrown in by Fed tapering, it would be highly likely that any tapering announcement will negatively affect all emerging markets including India.
Thursday – Sensex down by 0.7%, Nifty down by 0.8%, Midcap down by 1.4%
And Fed did it again. Fed tapers another $10bn, signaling confidence that the US economy can stand on its own. This move had an expected negative impact on all emerging markets. Fed has indicated that it will keep on cutting its stimulus as recovery gains strength. Fed bond purchases now stands at $65bn a month.
Friday – Sensex up by 0.1%, Nifty up by 0.3%, Midcap up by 2.3%
Markets ended flat to slightly positive as investors recover from actions of Indian and US central banks. Indian markets closed January with a monthly loss of 3%, worst since Aug 2013.
Saturday, January 25, 2014
Weekly Market Commentary - Jan 20, 2014 - Jan 24, 2014
Investors were a cheerful lot for most of this week. So far, result season has been good, has been largely without any negative surprises. Dollar earning sectors seems to have picked up steam on hope of strengthening US recovery. Falling inflation levels have also brought back the rate cut clamour. Everything was good and normal until two important events happened. One, Urijit Patel tabled a report on strengthening monetary framework, which among other things recommended changing the inflation targeting benchmark to CPI from WPI. If this happens, it may lead to higher interest rates in near to medium term and may put a dampener on India’s growth plans (for short term). Two, RBI governor made statements to the effect of inflation fighting would be the main focus of RBI, which dashed hopes of rate cut in RBI review meeting on Jan 28.
Sensex and Nifty ended this week with small gains of 0.3% and 0.1% respectively while CNX Midcap fell 0.9%.
Monday – Sensex up by 0.7%, Nifty up by 0.7%, Midcap up by 1.0%
Market’s mood was cheerful as index heavyweights Reliance Industries and Wipro managed to beat consensus and post healthy results. Reliance fared better than street forecasts as its refinery earned $7.6 per barrel of crude refined, significantly better than Singapore GRMs (Gross Refining Margin) of $4.3. Shares went up initially but lost all its gains in the latter half of the day. Wipro ended the day up as its results showed that business continued to improve as signs of turnaround and margin expansions are growing.
Tuesday - Sensex up by 0.2%, Nifty up by 0.2%, Midcap up by 0.2%
Market continued its uptrend amid some profit booking seen on the bourses. Govt decision to sell stake in Hindustan Zinc to cover some of its fiscal deficit also helped to improve the sentiment.
Wednesday – Sensex up by 0.4%, Nifty up by 0.4%, Midcap up by 0.1%
Indices spurted to all time highs in latter half of the day as investors flocked to buy pharma, metal and banking stocks on expectations of strong corporate earnings and rate cut by the Reserve Bank.
Thursday – Sensex up by 0.2%, Nifty up by 0.1%, Midcap down by 0.4%
Markets continued their rally and closed at another record high as industry bellwether, L&T, which is widely considered the barometer of Indian economy, rose as much as 4% after reporting a 22% jump in standalone net profit for 3Q.
Friday – Sensex down by 1.1%, Nifty down by 1.2%, Midcap down by 1.8%
Indices snapped on last day of the week as RBI governor Raghuram Rajan calling inflation a “destructive disease” dashed hopes of investors expecting a rate cut in the review meeting. These comments bring RBI’s priorities to tackle inflation first before focusing on growth to the fore again. In another event, Ranbaxy’s stocks crashed 20% after US FSA banned the firm from shipping drugs from its Toansa plant. Weak global trend following poor economic data in the US and China dampened the market sentiment.
Sensex and Nifty ended this week with small gains of 0.3% and 0.1% respectively while CNX Midcap fell 0.9%.
Monday – Sensex up by 0.7%, Nifty up by 0.7%, Midcap up by 1.0%
Market’s mood was cheerful as index heavyweights Reliance Industries and Wipro managed to beat consensus and post healthy results. Reliance fared better than street forecasts as its refinery earned $7.6 per barrel of crude refined, significantly better than Singapore GRMs (Gross Refining Margin) of $4.3. Shares went up initially but lost all its gains in the latter half of the day. Wipro ended the day up as its results showed that business continued to improve as signs of turnaround and margin expansions are growing.
Tuesday - Sensex up by 0.2%, Nifty up by 0.2%, Midcap up by 0.2%
Market continued its uptrend amid some profit booking seen on the bourses. Govt decision to sell stake in Hindustan Zinc to cover some of its fiscal deficit also helped to improve the sentiment.
Wednesday – Sensex up by 0.4%, Nifty up by 0.4%, Midcap up by 0.1%
Indices spurted to all time highs in latter half of the day as investors flocked to buy pharma, metal and banking stocks on expectations of strong corporate earnings and rate cut by the Reserve Bank.
Thursday – Sensex up by 0.2%, Nifty up by 0.1%, Midcap down by 0.4%
Markets continued their rally and closed at another record high as industry bellwether, L&T, which is widely considered the barometer of Indian economy, rose as much as 4% after reporting a 22% jump in standalone net profit for 3Q.
Friday – Sensex down by 1.1%, Nifty down by 1.2%, Midcap down by 1.8%
Indices snapped on last day of the week as RBI governor Raghuram Rajan calling inflation a “destructive disease” dashed hopes of investors expecting a rate cut in the review meeting. These comments bring RBI’s priorities to tackle inflation first before focusing on growth to the fore again. In another event, Ranbaxy’s stocks crashed 20% after US FSA banned the firm from shipping drugs from its Toansa plant. Weak global trend following poor economic data in the US and China dampened the market sentiment.
Sunday, January 19, 2014
Weekly Market Commentary - Jan 13, 2014 - Jan 17, 2014
Low inflation numbers came as a respite to both Indian consumers and investors alike. In hindsight, the decision of RBI governor to not raise interest rates in last review meeting proved to be sound. He rightly pointed out in that meeting that RBI should avoid taking long term measures for tackling the short term problems or issues. If inflation continues to get leveled the chances of a rate cut becomes strong to revive Indian growth story. Let’s see how everything rolls out in coming days.
Sensex and Nifty gained 1.5% while CNX Midcap was down by 1.1% this week.
Monday – Sensex up by 1.8%, Nifty up by 1.6%, Midcap down by 0.2%
After a muted trading activity last week, markets saw a surge in interest in technology, energy and financial stocks. Infosys’ good results, improved dollar revenue guidance and expected positive news from other IT stocks also has raised hopes of the market. Govt’s move to notify the gas Rangarajan’s gas price formula led to improvement in energy stocks levels. In addition, weak US job data also eased the tapering concerns of investors around the globe that added to the buying momentum in the Indian markets.
Tuesday - Sensex down by 0.5%, Nifty down by 0.5%, Midcap flat
Markets pared gains it made previous day mostly because of profit booking. Lower retail inflation numbers released by the govt. on Monday evening failed to cheer up the markets as the decline was already factored in the market prices.
Wednesday – Sensex up by 1.2%, Nifty up by 1.3%, Midcap up by 0.6%
Although the retail inflation numbers were low but the fall in wholesale prices took the market by surprise. WPI increased by 6.16% far below the street estimates of 6.99%. This decline has finally set aside the speculation on rate hikes in RBI review meeting at the end of this month. Sensex touched its five-week high on the back of rise in interest rate sensitive sectors such as auto, banks and financials.
Thursday – Sensex and Nifty flat, Midcap down by 0.4%
Markets continue to trade range bound as increased hopes of no rates hikes in RBI meeting was countered by profit booking. The news that Reliance Jio is planning to bid for spectrum licenses also led to huge selling across the telecom sector stocks as re-entry of RIL may bring back the price wars and cut into profitability of the sector.
Friday – Sensex down by 0.9%, Nifty down by 0.9%, Midcap down by 1.1%
Markets slide as TCS posted lower margins and guided to no recovery until the general elections are over in the country and things stabilizes a bit. Profit booking also led to selling across all counters.
Sensex and Nifty gained 1.5% while CNX Midcap was down by 1.1% this week.
Monday – Sensex up by 1.8%, Nifty up by 1.6%, Midcap down by 0.2%
After a muted trading activity last week, markets saw a surge in interest in technology, energy and financial stocks. Infosys’ good results, improved dollar revenue guidance and expected positive news from other IT stocks also has raised hopes of the market. Govt’s move to notify the gas Rangarajan’s gas price formula led to improvement in energy stocks levels. In addition, weak US job data also eased the tapering concerns of investors around the globe that added to the buying momentum in the Indian markets.
Tuesday - Sensex down by 0.5%, Nifty down by 0.5%, Midcap flat
Markets pared gains it made previous day mostly because of profit booking. Lower retail inflation numbers released by the govt. on Monday evening failed to cheer up the markets as the decline was already factored in the market prices.
Wednesday – Sensex up by 1.2%, Nifty up by 1.3%, Midcap up by 0.6%
Although the retail inflation numbers were low but the fall in wholesale prices took the market by surprise. WPI increased by 6.16% far below the street estimates of 6.99%. This decline has finally set aside the speculation on rate hikes in RBI review meeting at the end of this month. Sensex touched its five-week high on the back of rise in interest rate sensitive sectors such as auto, banks and financials.
Thursday – Sensex and Nifty flat, Midcap down by 0.4%
Markets continue to trade range bound as increased hopes of no rates hikes in RBI meeting was countered by profit booking. The news that Reliance Jio is planning to bid for spectrum licenses also led to huge selling across the telecom sector stocks as re-entry of RIL may bring back the price wars and cut into profitability of the sector.
Friday – Sensex down by 0.9%, Nifty down by 0.9%, Midcap down by 1.1%
Markets slide as TCS posted lower margins and guided to no recovery until the general elections are over in the country and things stabilizes a bit. Profit booking also led to selling across all counters.
Sunday, January 12, 2014
Weekly Market Commentary - Jan 6, 2014 - Jan 10, 2014
Trading activity remained muted for most of the week only to be picked up at the end of the week with starting of 3Q earnings season. Apart from ongoing earnings season, markets will also see release of CPI and WPI data next week, on which RBI’s interest rate policy hinges. Govt is also expected to come up with stake sales of IOC and Engineers India this month and BHEL, HAL in next to meet its disinvestment target of Rs 40K crores.
Sensex fell by 0.4%, Nifty lost 0.6% while CNX Midcap was down by 1.9% this week.
Monday – Sensex down by 0.3%, Nifty down by 0.3%, Midcap up by 0.3%
Market activity remains muted in absence of any catalysts. Most Asian stocks traded lower, as an index of China's services industry declined last month, and did not rise even after Fed reiterated its stand of accommodative monetary policy.
Tuesday - Sensex down by 0.5%, Nifty down by 0.5%, Midcap down by 0.9%
Investors seems to sit out on sidelines as they wait for minutes of Fed meeting and starting of earnings season on Friday which street expects to be weak.
Wednesday – Sensex up by 0.2%, Nifty up by 0.2%, Midcap up by 0.5%
Indian markets recorded their first gain of 2014 as most Asian stocks traded higher after the IMF said it would raise its estimate for global economic growth. Also, the recovery seen in US as their trade deficit narrows augurs well for Indian export stories.
Thursday – Sensex down by 0.1%, Nifty down by 0.1%, Midcap down by 0.8%
Markets closed lower on a day ahead of 3Q earnings season commencement. Street expects results to be weak though slightly better than previous quarter.
Friday – Sensex up by 0.2%, Nifty up by 0.1%, Midcap down by 1.0%
Markets cheered Infosys’ better than expected results and set the IT stocks zooming. The company also raised its FY14 dollar revenue guidance as it sees improvement in US business environment and confidence.
Sensex fell by 0.4%, Nifty lost 0.6% while CNX Midcap was down by 1.9% this week.
Monday – Sensex down by 0.3%, Nifty down by 0.3%, Midcap up by 0.3%
Market activity remains muted in absence of any catalysts. Most Asian stocks traded lower, as an index of China's services industry declined last month, and did not rise even after Fed reiterated its stand of accommodative monetary policy.
Tuesday - Sensex down by 0.5%, Nifty down by 0.5%, Midcap down by 0.9%
Investors seems to sit out on sidelines as they wait for minutes of Fed meeting and starting of earnings season on Friday which street expects to be weak.
Wednesday – Sensex up by 0.2%, Nifty up by 0.2%, Midcap up by 0.5%
Indian markets recorded their first gain of 2014 as most Asian stocks traded higher after the IMF said it would raise its estimate for global economic growth. Also, the recovery seen in US as their trade deficit narrows augurs well for Indian export stories.
Thursday – Sensex down by 0.1%, Nifty down by 0.1%, Midcap down by 0.8%
Markets closed lower on a day ahead of 3Q earnings season commencement. Street expects results to be weak though slightly better than previous quarter.
Friday – Sensex up by 0.2%, Nifty up by 0.1%, Midcap down by 1.0%
Markets cheered Infosys’ better than expected results and set the IT stocks zooming. The company also raised its FY14 dollar revenue guidance as it sees improvement in US business environment and confidence.
Friday, December 20, 2013
Summary of RBI-Analyst Conference Call - Dec 18, 2013
Dr. Raghuram Rajan (RRR): Recent readings suggest that headline inflation, both retail and wholesale, have increased mainly, but not exclusively on account of food prices. There is, however, reason to wait before determining the course of monetary policy. There are indications that vegetable prices may be turning down sharply. RBI has decided to maintain the status quo.
Reserve Bank will be vigilant and will act if expected softening of food inflation does not materialize and it does not translate into a significant reduction in headline inflation in the next round of data releases, or if inflation excluding food and fuel does not fall.
Gautam Rajesh Kumar, Trust Financial Consultancy: Given the fact that stability in Forex market has returned, CAD has come down, liquidity in the banking system is relatively comfortable, what is the comfort level of inflation for RBI to act on policy rate?
RRR: At this point trying to specify a final target is probably premature, but we do want to see both headline and core inflation come down. So we are also interested in seeing headline inflation which includes the food and fuel component also stabilise and fall.
Srinivasa Varadarajan, Mount Nathan Capital Management: In 1QCY14, it is estimated that about $15 billion of the oil swap will mature and will increase the rupee liquidity in the system. Will the period be used to actually push through the government debt swap at that point in time.
RRR: Actually the net amount is less than $7 billion right now. So that is approximately what will have to be repaid overtime. As and when the time comes, we will take a view as to how that repayment happens and it could be settled through an exchange of rupee funds based on the settlement amount. It could also be, the swaps could be rolled over if necessary and of course if market conditions permit, it can also be repaid.
Namrata Narkar, IDBI Bank: WPI inflation forecast is being placed largely between 6% and 7% for March 2014. How much of deviation from this forecast is tolerable and if the deviation is above the tolerable level, would the composition of such a deviation then hold significant?
RRR: It depends on not just the WPI, but a whole set of other measures. On the WPI we have been very clear on bringing headline below 5 and core below 3.
Prasanna, ICICI Securities: You have mentioned the negative output gap as a key factor in helping to contain inflation. Does that mean you do not expect the output gap to narrow in coming quarters and therefore you expect FY15 growth to remain around levels observed in H1FY14?
RRR: My personal sense is that with growth at let us say around 5%, we have somewhere between 1.5%-2% output gap at this point. So with that kind of situation, I think it will take a year or two to get back to potential and therefore we have some room or some time in which the output gap will continue to be negative and exert downward pressure on inflation.
Badri Niwas, Citi Bank: Given you have the experience of July, would you give some guidance to the market on whether the RBI will again use monetary policy tools as a defence for the currency in event of disruption risk that you mentioned manifesting?
RRR: There are some people who argue the disruption this time will be more limited, partly because people have already reacted somewhat over the last 3-4 months. And from India’s perspective, we are in a better position because a) our CAD is much more contained, b) our reserves have grown and we have shown an ability to raise funding if necessary and c) We have lost a fair amount in short maturity bond funds which have the ability to leave more quickly and what remains are the longer term funds.
Anjali Verma, PhillipCapital: RBI is in favour of removing gold import restrictions. Is it the right time to the remove restrictions and what adverse impact it can have on CAD.
RRR: Gold restrictions are distortion and they are a necessary distortion at this point to restore balance to the CAD. But going forward we would not like this distortion to persist and we would like to remove it.
Ashish Kela, Birla Sun Life Asset Management: Dr. Rajan had highlighted the need to provide real returns to savers. What is the plan on this front? Will this play a role in the monetary policy?
RRR: The question of providing real returns to savers is very much on our minds. We do want to restore savings growth and move towards financial savings by households and I think we have to bring inflation down to make sure that these returns are positive. In the meantime there are stop gap arrangements that are part of a longer term strategy. One example of that is inflation indexed bonds in which real returns are fixed at1.5%.
Rajeev Malik, CLSA: Given widespread macro level demand supply imbalances, what is the efficacy of a blunt instrument such as interest rate in loading CPI core inflation in the supply constrained economy?
RRR: Some of the areas where we had high inflation- pulses and milk- some of that inflation has come down considerably which means there is a supply response that is kicking in and higher prices are a way to activate that supply response. More generally, even in a situation where there are supply constraints of one kind or the other, to the extent that demand exceeds supply, it creates inflationary pressures, some of it is a necessary price adjustment or relative price adjustment, but some of it feeds into more widespread wage inflation.
Aastha Gudwani, Birla Sun Life: Are we done with the rollback of exceptional measures taken in July, is the cap on LAF here to stay? If yes, then how do you intend to reinstate repo as the permanent operative rate?
RRR: We have ample liquidity and we are largely, with a little bit of volatility, near about the repo rate as being the operational rate. So in that sense I think we have gone back to normal monetary policy at this point.
Reserve Bank will be vigilant and will act if expected softening of food inflation does not materialize and it does not translate into a significant reduction in headline inflation in the next round of data releases, or if inflation excluding food and fuel does not fall.
Gautam Rajesh Kumar, Trust Financial Consultancy: Given the fact that stability in Forex market has returned, CAD has come down, liquidity in the banking system is relatively comfortable, what is the comfort level of inflation for RBI to act on policy rate?
RRR: At this point trying to specify a final target is probably premature, but we do want to see both headline and core inflation come down. So we are also interested in seeing headline inflation which includes the food and fuel component also stabilise and fall.
Srinivasa Varadarajan, Mount Nathan Capital Management: In 1QCY14, it is estimated that about $15 billion of the oil swap will mature and will increase the rupee liquidity in the system. Will the period be used to actually push through the government debt swap at that point in time.
RRR: Actually the net amount is less than $7 billion right now. So that is approximately what will have to be repaid overtime. As and when the time comes, we will take a view as to how that repayment happens and it could be settled through an exchange of rupee funds based on the settlement amount. It could also be, the swaps could be rolled over if necessary and of course if market conditions permit, it can also be repaid.
Namrata Narkar, IDBI Bank: WPI inflation forecast is being placed largely between 6% and 7% for March 2014. How much of deviation from this forecast is tolerable and if the deviation is above the tolerable level, would the composition of such a deviation then hold significant?
RRR: It depends on not just the WPI, but a whole set of other measures. On the WPI we have been very clear on bringing headline below 5 and core below 3.
Prasanna, ICICI Securities: You have mentioned the negative output gap as a key factor in helping to contain inflation. Does that mean you do not expect the output gap to narrow in coming quarters and therefore you expect FY15 growth to remain around levels observed in H1FY14?
RRR: My personal sense is that with growth at let us say around 5%, we have somewhere between 1.5%-2% output gap at this point. So with that kind of situation, I think it will take a year or two to get back to potential and therefore we have some room or some time in which the output gap will continue to be negative and exert downward pressure on inflation.
Badri Niwas, Citi Bank: Given you have the experience of July, would you give some guidance to the market on whether the RBI will again use monetary policy tools as a defence for the currency in event of disruption risk that you mentioned manifesting?
RRR: There are some people who argue the disruption this time will be more limited, partly because people have already reacted somewhat over the last 3-4 months. And from India’s perspective, we are in a better position because a) our CAD is much more contained, b) our reserves have grown and we have shown an ability to raise funding if necessary and c) We have lost a fair amount in short maturity bond funds which have the ability to leave more quickly and what remains are the longer term funds.
Anjali Verma, PhillipCapital: RBI is in favour of removing gold import restrictions. Is it the right time to the remove restrictions and what adverse impact it can have on CAD.
RRR: Gold restrictions are distortion and they are a necessary distortion at this point to restore balance to the CAD. But going forward we would not like this distortion to persist and we would like to remove it.
Ashish Kela, Birla Sun Life Asset Management: Dr. Rajan had highlighted the need to provide real returns to savers. What is the plan on this front? Will this play a role in the monetary policy?
RRR: The question of providing real returns to savers is very much on our minds. We do want to restore savings growth and move towards financial savings by households and I think we have to bring inflation down to make sure that these returns are positive. In the meantime there are stop gap arrangements that are part of a longer term strategy. One example of that is inflation indexed bonds in which real returns are fixed at1.5%.
Rajeev Malik, CLSA: Given widespread macro level demand supply imbalances, what is the efficacy of a blunt instrument such as interest rate in loading CPI core inflation in the supply constrained economy?
RRR: Some of the areas where we had high inflation- pulses and milk- some of that inflation has come down considerably which means there is a supply response that is kicking in and higher prices are a way to activate that supply response. More generally, even in a situation where there are supply constraints of one kind or the other, to the extent that demand exceeds supply, it creates inflationary pressures, some of it is a necessary price adjustment or relative price adjustment, but some of it feeds into more widespread wage inflation.
Aastha Gudwani, Birla Sun Life: Are we done with the rollback of exceptional measures taken in July, is the cap on LAF here to stay? If yes, then how do you intend to reinstate repo as the permanent operative rate?
RRR: We have ample liquidity and we are largely, with a little bit of volatility, near about the repo rate as being the operational rate. So in that sense I think we have gone back to normal monetary policy at this point.
Sunday, September 22, 2013
Weekly Market Commentary - Sept 16 - Sept 20, 2013
India, since Fed announced its tapering plans, got its act together and has done quite well in pushing some key reforms in parliament. RBI on its part took some controversial, but crucial steps to stem the decline in rupee that followed the Fed announcement. Now, when Fed has put a halt on its tapering plans, we all can just keep our fingers crossed and hope that Indian govt. does not become complacent and let go off this lifeline. We hope that reform momentum continues and we get our house in order before the next shitstorm hit us.
Sensex gained 2.7%, Nifty gained 2.8% and CNX Midcap was up by 1.3% this week.
Monday – Sensex flat at 0.0%, Nifty down by 0.2%, Midcap down by 0.5%
Investors were disappointed on Monday as RBI released its WPI inflation figures. RBI while formulating its policies uses WPI data along with CPI as an anchor. According to data released on Friday, retail inflation dropped in August. However unlike retail inflation, WPI rose to six month high to 6.1% in August (July – 5.79%). Market is anticipating that upturn in WPI will make it difficult for newly appointed RBI governor to cut rates.
Tuesday - Sensex up by 0.3%, Nifty up by 0.2%, Midcap down by 0.3%
Investors remain cautious ahead of two key events this week. On Sept 18, Fed will take decision on whether to continue to taper and by how much. Street is expecting tapering of $5-$10 billion every month. Anything above or below that range can cause sharp movements in the indices. Raghuram Rajan has decided to unveil its maiden policy on Sept 20 after getting a handle on Fed announcements. These two events together may hold key to future movements of Indian indices.
Wednesday - Sensex up by 0.8%, Nifty up by 0.8%, Midcap up by 0.5%
Expectations from Fed meeting continue to weigh on the markets. Markets closed higher as FIIs continue to build positions in the Indian markets.
Thursday – Sensex up by 3.4%, Nifty up by 3.7%, Midcap up by 2.9%
Fed surprised the market with announcement of deferring its tapering plans and instead decided to continue with its stimulus amid weak economic growth in US. I already highlighted in June that how the timing of tapering is suspicious as US economy, and with it global economy, continues to struggle. Markets celebrated the decision as day of reckoning for many of emerging economies like India, has deferred to some unknown date in the future.
Friday – Sensex down by 1.9%, Nifty down by 1.7%, Midcap down by 1.3%
In his maiden policy, Raghuram Rajan stumped the investors with a repo rate hike. Repo rate is now 7.25%. Rajan made it clear that fighting the inflation and exchange rate management is his top priority, so there is a need of liquidity tightening. RBI, in a bid to lower the cost of capital of banks, reduced the MSF by 75 bps from 10.25% to 9.5% and slashed the minimum daily CRR requirement from 99% to 95%.
Sensex gained 2.7%, Nifty gained 2.8% and CNX Midcap was up by 1.3% this week.
Monday – Sensex flat at 0.0%, Nifty down by 0.2%, Midcap down by 0.5%
Investors were disappointed on Monday as RBI released its WPI inflation figures. RBI while formulating its policies uses WPI data along with CPI as an anchor. According to data released on Friday, retail inflation dropped in August. However unlike retail inflation, WPI rose to six month high to 6.1% in August (July – 5.79%). Market is anticipating that upturn in WPI will make it difficult for newly appointed RBI governor to cut rates.
Tuesday - Sensex up by 0.3%, Nifty up by 0.2%, Midcap down by 0.3%
Investors remain cautious ahead of two key events this week. On Sept 18, Fed will take decision on whether to continue to taper and by how much. Street is expecting tapering of $5-$10 billion every month. Anything above or below that range can cause sharp movements in the indices. Raghuram Rajan has decided to unveil its maiden policy on Sept 20 after getting a handle on Fed announcements. These two events together may hold key to future movements of Indian indices.
Wednesday - Sensex up by 0.8%, Nifty up by 0.8%, Midcap up by 0.5%
Expectations from Fed meeting continue to weigh on the markets. Markets closed higher as FIIs continue to build positions in the Indian markets.
Thursday – Sensex up by 3.4%, Nifty up by 3.7%, Midcap up by 2.9%
Fed surprised the market with announcement of deferring its tapering plans and instead decided to continue with its stimulus amid weak economic growth in US. I already highlighted in June that how the timing of tapering is suspicious as US economy, and with it global economy, continues to struggle. Markets celebrated the decision as day of reckoning for many of emerging economies like India, has deferred to some unknown date in the future.
Friday – Sensex down by 1.9%, Nifty down by 1.7%, Midcap down by 1.3%
In his maiden policy, Raghuram Rajan stumped the investors with a repo rate hike. Repo rate is now 7.25%. Rajan made it clear that fighting the inflation and exchange rate management is his top priority, so there is a need of liquidity tightening. RBI, in a bid to lower the cost of capital of banks, reduced the MSF by 75 bps from 10.25% to 9.5% and slashed the minimum daily CRR requirement from 99% to 95%.
Sunday, September 15, 2013
Weekly Market Commentary - Sept 9 - Sept 13, 2013
Receding fears of war with Syria led to cooling of oil prices that in turn led to strengthening of rupee against the global currencies. Rupee also gained strength as FIIs continued to buy Indian shares after newly appointed RBI governor Raghuram Rajan charted out plans to get the country out of its current mess. Sensex gained 2.4%, Nifty gained 3.0% and CNX Midcap was up by 3.4% this week.
Monday – Markets closed on occasion of Ganesh Chaturthi
Tuesday - Sensex up by 3.8%, Nifty up by 3.8%, Midcap up by 1.8%
Markets remained buoyant from last week sentiment boost they received from Raghuram Rajan appointment and his maiden speech as RBI governor. Global markets also took respite from the news that Russia has persuaded Syria to put its chemical weapons under international inspection, which worked to shelve the fears of US strike on Syria and led to global rally in stocks.
Telecoms were the major gainers today as TRAI reduced the base price by 37%, from Rs. 2,379cr to Rs. 1,496cr per MHz of pan India spectrum. TRAI also recommended that a flat spectrum usage (SUC) of 3% of gross revenue from 2-8% earlier. Telecom companies are expected to save around 60-80,000cr over a 20-year period.
Wednesday - Sensex up by 0.0%, Nifty up by 0.3%, Midcap up by 1.6%
Markets opened lower as some investors rushed to book profits after previous day’s rally, which was biggest gain in Sensex in four years. Market recouped its losses as day progressed as tension over Syria eased leading to cooling of oil price momentum. Also, consistent recovery in rupee is helping boost the Indian investor sentiment.
Thursday – Sensex down by 1.1%, Nifty down by 1.1%, Midcap down by 0.7%
Investors turned a little cautious and booked profits ahead of IIP and CPI inflation data release expected on Friday.
Friday – Sensex down by 0.2%, Nifty down by 0.0%, Midcap up by 0.7%
Stocks tumbled after PM’s economic panel raised its doubt over Govt. achieving its fiscal deficit target of 4.8% of GDP in current year. Investors also continued to cut positions ahead of US Fed meeting and RBI first meeting under Rajan next week. Market is keenly awaiting Fed’s decision on tapering and RBI’s response to it.
Bulls did get some respite in form of better-than-expected July 2013 IIP data (+2.6% yoy) and fall in retail inflation to 9.52% in August from 9.64% in July. August WPI data, an anchor used by RBI to decide on its policy decisions, will release on Monday.
Monday – Markets closed on occasion of Ganesh Chaturthi
Tuesday - Sensex up by 3.8%, Nifty up by 3.8%, Midcap up by 1.8%
Markets remained buoyant from last week sentiment boost they received from Raghuram Rajan appointment and his maiden speech as RBI governor. Global markets also took respite from the news that Russia has persuaded Syria to put its chemical weapons under international inspection, which worked to shelve the fears of US strike on Syria and led to global rally in stocks.
Telecoms were the major gainers today as TRAI reduced the base price by 37%, from Rs. 2,379cr to Rs. 1,496cr per MHz of pan India spectrum. TRAI also recommended that a flat spectrum usage (SUC) of 3% of gross revenue from 2-8% earlier. Telecom companies are expected to save around 60-80,000cr over a 20-year period.
Wednesday - Sensex up by 0.0%, Nifty up by 0.3%, Midcap up by 1.6%
Markets opened lower as some investors rushed to book profits after previous day’s rally, which was biggest gain in Sensex in four years. Market recouped its losses as day progressed as tension over Syria eased leading to cooling of oil price momentum. Also, consistent recovery in rupee is helping boost the Indian investor sentiment.
Thursday – Sensex down by 1.1%, Nifty down by 1.1%, Midcap down by 0.7%
Investors turned a little cautious and booked profits ahead of IIP and CPI inflation data release expected on Friday.
Friday – Sensex down by 0.2%, Nifty down by 0.0%, Midcap up by 0.7%
Stocks tumbled after PM’s economic panel raised its doubt over Govt. achieving its fiscal deficit target of 4.8% of GDP in current year. Investors also continued to cut positions ahead of US Fed meeting and RBI first meeting under Rajan next week. Market is keenly awaiting Fed’s decision on tapering and RBI’s response to it.
Bulls did get some respite in form of better-than-expected July 2013 IIP data (+2.6% yoy) and fall in retail inflation to 9.52% in August from 9.64% in July. August WPI data, an anchor used by RBI to decide on its policy decisions, will release on Monday.
Sunday, August 18, 2013
Weekly Market Commentary - Aug 12 - Aug 16, 2013
This independence day, RBI took away some of the freedom from its citizens and corporate as it introduced measures to cap dollar movement outside the country. While RBI and govt did their best to allay the fears of capital control, it is everybody’s guess what other bad policy decision lies ahead for the market and for how long this drama will continue. Sensex and Nifty went down by 1% each, while CNX Midcap gained 0.4% this week.
Monday - Sensex up by 0.8%, Nifty up by 0.8%, Midcap up by 1.6%
Markets went up as investors bought stocks amid govt and RBI interventions to prop up rupee. Although the measure adopted by RBI has failed to curb any decline in the rupee value, trade date brought good news as exports grew by ~12% to $26bn in July. SBI’s latest quarterly release indicating worsening asset quality, which is putting a dent on its profitability, capped the investor confidence.
Tuesday - Sensex up by 1.5%, Nifty up by 1.5%, Midcap up by 1.5%
Markets rallied as investors rushed to cover their shorts after recent sharp corrections ignoring the poor IIP data. The index of industrial production (IIP) declined by 2.2% in June while industrial output was 1.1% lower y-o-y. Govt move to hike import duty on gold and silver to curb CAD also cheered the bulls.
Wednesday - Sensex up by 0.7%, Nifty up by 0.8%, Midcap up by 0.4%
Tata group companies saved the day as markets ignored the impact of rise in WPI to 5.79% in July from 4.86% in June. Tata Motors surged around 10% after its unit Jaguar Land Rover reported 21% higher sales in July globally. Tata Steel also beat the street expectations with consolidating net profit surging by 90%.
Thursday – Independence Day Holiday
Friday – Sensex down by 4.0%, Nifty down by 4.1%, Midcap down by 3.1%
RBI spooked the investors as they bring back capital controls and restricted the movement of USD outside the country. RBI on late Wednesday brought back controls on fund flows limiting the investment citizens and domestic companies can do abroad. It also banned the import of gold coins and medallions while introducing fresh measures to attract NRI money. Recent positive developments in US and other developed markets also instilled fresh fears of stimulus tapering from Fed, which added to the bearish sentiment.
Monday - Sensex up by 0.8%, Nifty up by 0.8%, Midcap up by 1.6%
Markets went up as investors bought stocks amid govt and RBI interventions to prop up rupee. Although the measure adopted by RBI has failed to curb any decline in the rupee value, trade date brought good news as exports grew by ~12% to $26bn in July. SBI’s latest quarterly release indicating worsening asset quality, which is putting a dent on its profitability, capped the investor confidence.
Tuesday - Sensex up by 1.5%, Nifty up by 1.5%, Midcap up by 1.5%
Markets rallied as investors rushed to cover their shorts after recent sharp corrections ignoring the poor IIP data. The index of industrial production (IIP) declined by 2.2% in June while industrial output was 1.1% lower y-o-y. Govt move to hike import duty on gold and silver to curb CAD also cheered the bulls.
Wednesday - Sensex up by 0.7%, Nifty up by 0.8%, Midcap up by 0.4%
Tata group companies saved the day as markets ignored the impact of rise in WPI to 5.79% in July from 4.86% in June. Tata Motors surged around 10% after its unit Jaguar Land Rover reported 21% higher sales in July globally. Tata Steel also beat the street expectations with consolidating net profit surging by 90%.
Thursday – Independence Day Holiday
Friday – Sensex down by 4.0%, Nifty down by 4.1%, Midcap down by 3.1%
RBI spooked the investors as they bring back capital controls and restricted the movement of USD outside the country. RBI on late Wednesday brought back controls on fund flows limiting the investment citizens and domestic companies can do abroad. It also banned the import of gold coins and medallions while introducing fresh measures to attract NRI money. Recent positive developments in US and other developed markets also instilled fresh fears of stimulus tapering from Fed, which added to the bearish sentiment.
Saturday, July 20, 2013
Weekly Market Commentary - Jul 15 - Jul 19, 2013
Markets were focusing on RBI actions, Fed comments on the macro front, while company's results and inflation numbers were eyed closely on the street. Sensex and Nifty ended this week up by 1.0% 0.3% respectively, while CNX Midcap was down by 0.7%.
Monday - Sensex up by 0.4%, Nifty up by 0.4%, Midcap up by 1.2%
Indian markets continued its upward movement for third consecutive day as inflation numbers released on Friday came within the markets’ expectation and comfort zone of RBI. WPI gain for June was 4.86%, slightly higher than May figure of 4.7%. CPI climbed to 9.87% in June from 9.31% in May.
This upward movement in inflation numbers has increased the problems for RBI, which is facing a dilemma of whether announcing a rate cut to stimulate investments, which may lead to more inflation, or go for a rate hike to help falling rupee, which will lower import cost and hence inflation. We will get to see what RBI does on July 30. My bet is small changes in the underlying rates, or there might be a cut in CRR.
Asian markets were up largely owing to release of Chinese GDP data that matched the forecast of 7.5%.
Tuesday - Sensex down by 0.9%, Nifty down by 1.3%, Midcap down by 1.3%
RBI went undercover (sort of) yesterday evening and increased the marginal borrowing rates for banks by 2% from 8.25% to 10.25% through Marginal Standing Facility (MSF). RBI, in its attempt to halt the declining rupee is trying every trick in trade available to it, led to sell off in the markets as borrowing became more expensive. RBI’s belief that excessive liquidity in the system is leading to rupee volatility also hurts the rate cut expectations.
Wednesday - Sensex up by 0.5%, Nifty up by 0.3%, Midcap down by 0.8%
Mixed day for markets as investors sentiment got a boost as govt gave a green signal to FDI in almost a dozen sector, including telecom and defence sector. Global sentiment was little cautious ahead of Fed meeting where all eyes were on Fed comments on timing of their plan of cutting down on bond purchases. Investors also focused on value picking the FMCG stocks while avoiding the banks and other interest rate sensitive space. Street was not very happy with HDFC Bank results, as its net profit grew by 30% y-o-y but gross NPA levels increased to 16% q-o-q indicating stress on their balance sheet. Stock went down 2.4%.
Thursday - Sensex up by 0.9%, Nifty up by 1.1%, Midcap up by 1.0%
Markets went up further after Fed comments on being flexible about the timing of cut in stimulus spending boosted the sentiments. Global markets went up largely as Fed suggests that it may not be too aggressive with tapering plans and will depend upon the performance of underlying economy.
Friday - Sensex up by 0.1%, Nifty down by 0.1%, Midcap down by 0.8%
The mood stayed positive for second consecutive day boosted by Fed comments. Bank stocks continued to face volatility as market is concerned about RBI current stance of monetary tightening. Street is worried that instead of rate cut may raise CRR. IT major TCS rallied by 5%, as it beat the street expectation of revenue growth while sustaining its margins, which reflect strong account management and execution capabilities.
Monday - Sensex up by 0.4%, Nifty up by 0.4%, Midcap up by 1.2%
Indian markets continued its upward movement for third consecutive day as inflation numbers released on Friday came within the markets’ expectation and comfort zone of RBI. WPI gain for June was 4.86%, slightly higher than May figure of 4.7%. CPI climbed to 9.87% in June from 9.31% in May.
This upward movement in inflation numbers has increased the problems for RBI, which is facing a dilemma of whether announcing a rate cut to stimulate investments, which may lead to more inflation, or go for a rate hike to help falling rupee, which will lower import cost and hence inflation. We will get to see what RBI does on July 30. My bet is small changes in the underlying rates, or there might be a cut in CRR.
Asian markets were up largely owing to release of Chinese GDP data that matched the forecast of 7.5%.
Tuesday - Sensex down by 0.9%, Nifty down by 1.3%, Midcap down by 1.3%
RBI went undercover (sort of) yesterday evening and increased the marginal borrowing rates for banks by 2% from 8.25% to 10.25% through Marginal Standing Facility (MSF). RBI, in its attempt to halt the declining rupee is trying every trick in trade available to it, led to sell off in the markets as borrowing became more expensive. RBI’s belief that excessive liquidity in the system is leading to rupee volatility also hurts the rate cut expectations.
Wednesday - Sensex up by 0.5%, Nifty up by 0.3%, Midcap down by 0.8%
Mixed day for markets as investors sentiment got a boost as govt gave a green signal to FDI in almost a dozen sector, including telecom and defence sector. Global sentiment was little cautious ahead of Fed meeting where all eyes were on Fed comments on timing of their plan of cutting down on bond purchases. Investors also focused on value picking the FMCG stocks while avoiding the banks and other interest rate sensitive space. Street was not very happy with HDFC Bank results, as its net profit grew by 30% y-o-y but gross NPA levels increased to 16% q-o-q indicating stress on their balance sheet. Stock went down 2.4%.
Thursday - Sensex up by 0.9%, Nifty up by 1.1%, Midcap up by 1.0%
Markets went up further after Fed comments on being flexible about the timing of cut in stimulus spending boosted the sentiments. Global markets went up largely as Fed suggests that it may not be too aggressive with tapering plans and will depend upon the performance of underlying economy.
Friday - Sensex up by 0.1%, Nifty down by 0.1%, Midcap down by 0.8%
The mood stayed positive for second consecutive day boosted by Fed comments. Bank stocks continued to face volatility as market is concerned about RBI current stance of monetary tightening. Street is worried that instead of rate cut may raise CRR. IT major TCS rallied by 5%, as it beat the street expectation of revenue growth while sustaining its margins, which reflect strong account management and execution capabilities.
Friday, June 14, 2013
Weekly Market Commentary - Jun 10 - Jun 14, 2013
Market movements this week were dominated by currency related headlines. Rupee has slumped lower versus dollar and has raised the fears of inflation making a comeback via expensive imports. The selling, which was till recently going on in large cap stocks has spread to midcap stocks as well. Sensex ended this week with a loss of 1.3%, while Nifty and CNX Midcap lost 1.2% and 4.0% respectively.
Monday - Sensex up by 0.1%, Nifty down by 0.1%, Midcap down by 1.3%
Market traded under the pressure of depreciating currency. Rupee touched a low of 58 versus dollar and stoked inflation fears among the investors. IT stocks went higher will most of the midcap stocks slumped as currency traded lower.
Tuesday - Sensex down by 1.5%, Nifty down by 1.5%, Midcap down by 1.9%
Markets sentiments continued to be weighed down by currency depreciation. Recent good news from RBI related to decline in inflation as shown by downward movement in WPI and CPI have been totally offset by fears of inflation strengthening again as rupee continues to slide against the dollar. FIIs continued to sell Indian bonds as yield difference with US bonds lessen.
Wednesday - Sensex down by 0.5%, Nifty down by 0.5%, Midcap down by 0.4%
Markets were volatile as the rupee found support in the Economic Affairs Ministry's comments that the fall is a temporary phase and news that RBI has intervened by selling dollars. There were also reports that govt may raise FDI limits to finance CAD.
India also released its IIP and CPI numbers. While IIP growth came lower at 2% in April vs 3.4% in March, May CPI came in at 9.31% vs 9.39% in April. Decline in IIP growth has raised concerns whether RBI will cut rates in an attempt to stimulate growth although RBI's hands will be tied as rupee continues its slump.
Thursday - Sensex down by 1.1%, Nifty down by 1.1%, Midcap down by 1.9%
Market traded lower as selling continued among no rate cut hopes, rising CAD and higher inflationary expectations.
Friday - Sensex up by 1.9%, Nifty up by 1.9%, Midcap up by 1.4%
Markets took a reprieve from continuous selling it was witnessing from past few sessions as investors hinged their hopes on rate cut from RBI next week after May WPI came lower at 4.7%.
Monday - Sensex up by 0.1%, Nifty down by 0.1%, Midcap down by 1.3%
Market traded under the pressure of depreciating currency. Rupee touched a low of 58 versus dollar and stoked inflation fears among the investors. IT stocks went higher will most of the midcap stocks slumped as currency traded lower.
Tuesday - Sensex down by 1.5%, Nifty down by 1.5%, Midcap down by 1.9%
Markets sentiments continued to be weighed down by currency depreciation. Recent good news from RBI related to decline in inflation as shown by downward movement in WPI and CPI have been totally offset by fears of inflation strengthening again as rupee continues to slide against the dollar. FIIs continued to sell Indian bonds as yield difference with US bonds lessen.
Wednesday - Sensex down by 0.5%, Nifty down by 0.5%, Midcap down by 0.4%
Markets were volatile as the rupee found support in the Economic Affairs Ministry's comments that the fall is a temporary phase and news that RBI has intervened by selling dollars. There were also reports that govt may raise FDI limits to finance CAD.
India also released its IIP and CPI numbers. While IIP growth came lower at 2% in April vs 3.4% in March, May CPI came in at 9.31% vs 9.39% in April. Decline in IIP growth has raised concerns whether RBI will cut rates in an attempt to stimulate growth although RBI's hands will be tied as rupee continues its slump.
Thursday - Sensex down by 1.1%, Nifty down by 1.1%, Midcap down by 1.9%
Market traded lower as selling continued among no rate cut hopes, rising CAD and higher inflationary expectations.
Friday - Sensex up by 1.9%, Nifty up by 1.9%, Midcap up by 1.4%
Markets took a reprieve from continuous selling it was witnessing from past few sessions as investors hinged their hopes on rate cut from RBI next week after May WPI came lower at 4.7%.
Wednesday, June 5, 2013
Inflation Indexed Bonds - Real risk of good intentions turning into bad economics?
Indian FM, in its current pursuit to contain fiscal deficits, have taken certain strong measures. One of the important steps taken is introduction of inflation linked bonds. FM is desperately trying to wean off Indian investors from their insatiable demand for gold which is widely considered a hedge against inflation and one of the main culprits behind rising deficits.
Govt earlier tried to discourage the gold demand by raising the import duty from 2% to 6% in beginning of this year but met with little success. Gold recently sent a shocker down the Govt spine when Apr statistics indicated a 138% jump in gold imports to $7.5 billion, taking the current account deficit to $17.8 billion from $10.3 billion in March.
Govt now is re-attempting to provide an alternative investment route in the form of inflation linked bonds to protect the investors against rising prices. In its earlier attempt in 1997, Govt offered protection to only principal payment. But this time, it went one step ahead and offered interest income to be also indexed to protect against inflation.
RBI's bond sale on Tuesday was a success as the corporates lapped up the product. Issue will open for retail investors in October this year.The main selling point is an offer of 1.44% real yield over the final WPI, with almost four months lag period, which means current offer is linked to January 2013 WPI rate.
There are two major issues with the current bond sale. First, the debt is indexed to WPI, which we know calculates the price changes in the trades among the corporates NOT consumers or retail investors. This essentially means, bond does not provides consumers protection against the rising prices, what best it does is provide partial protection. There is almost 4.5% difference between current WPI and CPI numbers. Though, it is too early to speculate on its impact on gold demand, I am not sure replacing WPI with CPI as the inflation benchmark in the offer would have served the purpose of streamlining the Govt finances.
Second major issue is, which is really a downside, what happens if, we faltered on our path to regain the lost growth, FII flows dries up due to some reason and we are left with falling currency, which fires up the inflation and inflationary expectations in domestic economy and Govt is left with huge bonds liability in a slow growth environment which will raise Govt borrowing costs and inturn stoke further inflation. Nobody on the street is seem to be discussing this.
What all I know is, global economy is not out of mess, markets are been artificially inflated with central bankers printing huge quantity of money, commodity prices are down - not because of increasing competition or supply but decline in demand across the developed countries and every important economy is struggling to get growth back on its feet.
Govt earlier tried to discourage the gold demand by raising the import duty from 2% to 6% in beginning of this year but met with little success. Gold recently sent a shocker down the Govt spine when Apr statistics indicated a 138% jump in gold imports to $7.5 billion, taking the current account deficit to $17.8 billion from $10.3 billion in March.
Govt now is re-attempting to provide an alternative investment route in the form of inflation linked bonds to protect the investors against rising prices. In its earlier attempt in 1997, Govt offered protection to only principal payment. But this time, it went one step ahead and offered interest income to be also indexed to protect against inflation.
RBI's bond sale on Tuesday was a success as the corporates lapped up the product. Issue will open for retail investors in October this year.The main selling point is an offer of 1.44% real yield over the final WPI, with almost four months lag period, which means current offer is linked to January 2013 WPI rate.
There are two major issues with the current bond sale. First, the debt is indexed to WPI, which we know calculates the price changes in the trades among the corporates NOT consumers or retail investors. This essentially means, bond does not provides consumers protection against the rising prices, what best it does is provide partial protection. There is almost 4.5% difference between current WPI and CPI numbers. Though, it is too early to speculate on its impact on gold demand, I am not sure replacing WPI with CPI as the inflation benchmark in the offer would have served the purpose of streamlining the Govt finances.
Second major issue is, which is really a downside, what happens if, we faltered on our path to regain the lost growth, FII flows dries up due to some reason and we are left with falling currency, which fires up the inflation and inflationary expectations in domestic economy and Govt is left with huge bonds liability in a slow growth environment which will raise Govt borrowing costs and inturn stoke further inflation. Nobody on the street is seem to be discussing this.
What all I know is, global economy is not out of mess, markets are been artificially inflated with central bankers printing huge quantity of money, commodity prices are down - not because of increasing competition or supply but decline in demand across the developed countries and every important economy is struggling to get growth back on its feet.
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