On Wednesday, the Reserve Bank made the suggestion that banks and other financial institutions think about doing away with paper receipts at their branches and implementing electronic receipts at ATMs.

The Reserve Bank of India (RBI) stated in a discussion paper on "Climate Risk and Sustainable Finance" that it plans to develop a strategy based on best practices from around the world for reducing the negative effects of climate change, as well as lessons learned from participation in standard-setting bodies and other international fora.

A wide directive for all RBI Regulated Entities (REs) to have proper governance, a plan to address climate change risks, and a risk management system to efficiently manage them from a macroprudential viewpoint are all part of the approach, it was stated.

Additionally, the central bank has suggested capacity training, voluntary initiatives, and financial disclosure and reporting for REs connected to climate risk.

The REs should voluntarily establish goals for boosting funding for green initiatives over the short, medium, and long term in relation to specifically selected sectors.

Till September 30, RBI is accepting views on the discussion paper.

The discussion paper stated: "REs could consider converting their branches to green branches by minimizing the usage of paper in their operations and introducing the option of e-receipts at their ATMs in order to green the banking processes by making them more environmentally friendly."

The discussion paper states that the REs may consider strategies to encourage the adoption of e-receipts.

Additionally, it was stated that the REs may wish to convert all of their data centres to green data centres by switching to renewable energy as a source of electricity for the facilities and putting into practice recommendations made by recognized frameworks like the Green Data Centre Rating Systems.

The RBI also stated in the discussion paper that there is a growing need to educate the Indian financial sector about the value and advantages of green finance, placing a particular focus on building capacity and raising awareness of climate risk and sustainable finance to address the problems caused by climate change.

The discussion paper also advised that the Indian Banks' Association (IBA) establish a working group on capacity building in the fields of climate risk and sustainable finance to meet the capacity building needs.

It went on to say that the board of directors of the REs would be crucial in identifying environmental and climate-related risks as well as opportunities and evaluating the current and possible effects of these risks on their strategy and objectives.

The decisively positive stock market rally in the month of October 2022 comes as a whiff of fresh air after the relative disappointment of September 2022. In fact, September was the month the markets and the investors were mugged by hard reality. The month October 2022 saw neutral flows from FPIs, with the outflow from equity secondary markets was entirely offset by inflows in the primary markets. With the IPO markets seeing a revival, this trend should get accentuated in the coming months.

Unlike the previous month, when the Nifty ended in the negative, October saw a 1,000 points rally in the Nifty as it closed above the psychological 18,000 levels. The Nifty ended the month of October 2022 with gains of 5.37%. It was a reversal of the previous month trend as it was the rate sensitives like PSU banks, Private banks, NBFCs and auto stocks that triggered the sharp rally. The frontline Nifty comfortably outperformed the mid-cap and the small cap indices as value buying and short covering was most visible in the large stocks.

Nifty closes October 2022 a full 5.37% higher

The last big monthly rally in the Nifty was in July 2022 when the Nifty had rallied 8.7%. In subsequent months, the Nifty rallied 3.5% in August but fell -2.56% in September 2022. The rally in October 2022 was amidst numerous headwinds. The Fed was relentless in its hawkishness, US recessions fears are still prominent and the RBI has also been raising rates at a rapid pace. In terms of geopolitical risk, Ukraine war is worsening and the restrictions imposed by China on COVID are worsening supply chains. Here are some key factors that impacted markets in October and the palliative effects.

a)      Fed hawkishness remained the biggest issue. After the 75 basis points rate hike in September, the Fed now looks all set to hike rates by another 75 basis points in November 2022 and 50 basis points in December 2022. The markets are now reconciled to the reality that the US Fed would target terminal rates of around 5%. However, the bet now is that it would be substantially front-loaded in 2022, with limited hawkishness in 2023. That is something the markets are betting on.


b)      FPI flows were not too great in the month of October, closing almost flat for the month. However, the positive takeaway was the way the FPI flows got a boost from the IPO markets. A slew of IPOs have been announced and all of them are seeing genuine buying interest from the FPIs, especially for the anchor portion. In October 2022, the FPI flows into IPOs fully neutralized the secondary market outflows. Markets are now betting that as the IPO momentum picks up, this situation could only get better for the markets.


c)      Q2 results are on in full swing and there is the big concern over costs. Across the board, companies have seen robust growth in top line but higher input costs have damaged the bottom line growth. This is extremely steep in the case of industrial sectors like cement, metals and infrastructure. However, the positive takeaway has been the solid top line growth and the gains for exporting companies from the weak rupee dollar equation.


d)      There were 2 factors that actually worked in India’s favour. Firstly, the inflation may have been overstated in the Indian context and that has been brought out by a recent Bloomberg report. The report states that once the impact of the free food program is factored in, the actual inflation should be much lower and so the real rates should be much higher. That is likely to be a positive surprise for the markets. Also, India has been sourcing cheaper oil from Russia, and that impact is still not factored.


e)      The other big positive story is the outsourcing story that is gathering momentum in India. From Foxconn making chips in India to Apple relying on India for microchips to Tata and Airbus setting up an aircraft manufacturing facility in India; the story has a common thread. Global players are willing to partner with Indian companies and invest financial and intellectual capital into these ventures. As China shoots itself in the foot with its overt aggression and COVID flip-flops, India is rapidly emerging as a viable alternative. This is worth its weight in gold.
October 2022 rally was not about high frequency indicators or technicals. It was a bet on lower inflation and the India outsourcing story. That is a lot more sustainable.

October 2022 belonged to rate sensitive sectors


Data Source: NSE

Here is a quick look at how the key sectors performed in September 2022. Out of the sectors evaluated for October 2022, 8 out of the 10 sectors gave positive returns, a classic example of return to positive bias. While 4 sectors outperformed the Nifty, there were 5 sectors that gave lower returns than the Nifty with auto industry at par with Nifty. Among general indices, Nifty was up +5.37%, Mid Cap index up +2.49% and Small Cap up +2.59%. The rally was broad-based, but clearly it was the Nifty that took the cake.

The rallying sectors were largely from rate sensitive sectors. PSU banks topped the list with 15.56% returns in October, led largely by SBI. Private banks also rallied by 6.33% while the autos rallied at par with the Nifty. IT index was a surprise gainer at 6.47% after being ab underperformer in last few months. The gains in IT can be attributed to the weaker rupee and value buying coming back into frontline IT stocks. Also, the attrition is likely to gradually come under control and IT companies are drastically cutting costs. Oil & gas was another key gainer at 5.66% as the OPEC supply cuts worth 2 million bpd resulted in robust Brent Crude prices. The gains were limited to upstream oil companies.

Consumer stocks disappointed in October 2022

Broadly, there were 2 sectors that gave negative returns in October 2022 viz. consumer durables and FMCG; not much to worry about. Consumer durables contracted by -0.58% while FMCG saw negative returns of -0.25%. In both cases, the worry was on top line and bottom line. Rural demand was slowing and that was most likely to hit consumer stocks. At the same time the input costs were rising and competition was not allowing companies to pass on these costs. The pressure on these consumer stocks is likely to continue, despite the last quarter being a festival season. While metals gave positive returns, it underperformed the Nifty on concerns that a slowdown in China would impact metals demand in a big way. The concerns are also reflected in the LME prices.

A lot has changed in market sentiments in the last few months. August was a month of hope but September was a return to reality. In contrast, October 2022 has seen aggressive demand for equities on the premise that the outsourcing story and eventually lower inflation should help the Indian economy in multiple ways. That is, perhaps, the biggest positive and feel-good factor emerging from the month of October 2022.