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The Week That Was

India Infoline News Service | Mumbai |

Contrary to consensus expectation, RBI left the Repo rate unchanged at 7.75%. The MSF rate was also retained at 8.75% and thus the corridor at 100 basis points.

Top Stories

Surprise, surprise! No rate hikes, says Raghuram Rajan

The RBI governor has given a positive surprise to the market. In a statement issued today as part of the Monetary and Liquidity Measures, the RBI said. On the basis of an assessment of the current and evolving macroeconomic situation, it has been decided to:
  • Keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.75%; and
  • Keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0% of net demand and time liability (NDTL).
  • Consequently, the reverse repo rate under the LAF will remain unchanged at 6.75%, and the marginal standing facility (MSF) rate and the Bank Rate at 8.75%.
Assessment

The outlook for global growth continues to remain moderate, with an uneven recovery across industrial countries. Activity in major emerging market economies (EMEs) barring China has decelerated on account of weak domestic demand, notwithstanding some improvement in export performance. While volatility in financial markets has receded, it could pick up again following the inevitable taper of quantitative easing in the US, given the large dependence of EMEs on external financing. In India, the pick-up in real GDP growth in Q2 of 2013-14, albeit modest, was driven largely by robust growth of agricultural activity, supported by an improvement in net exports. However, the weakness in industrial activity persisting into Q3, still lacklustre lead indicators of services and subdued domestic consumption demand suggest continuing headwinds to growth. Tightening government spending in Q4 to meet budget projections will add to these headwinds. In this context, the revival of stalled investment, especially in the projects cleared by the Cabinet Committee on Investment, will be critical...Read More

RBI’s Mid-Quarter Monetary Policy Review: December 2013

RBI hones rules to Hasten Remedy of India's bad loans: Fitch

NAREDCO welcomes RBI decision

KV Developers comment on RBI Credit Policy Review

RBI has chosen to adopt a ‘wait and watch policy’: Dr. Arun Singh

Mid-Quarter (December 2013) Monetary Policy Review: A hike in waiting!


V Balakrishnan quits Infosys

Infosys, a global leader in consulting, technology and outsourcing solutions, announced the following changes to the Board of Directors.

Resignation of V. Balakrishnan

V. Balakrishnan has conveyed his intention to resign as a Member of the Board and from the services of the Company. The resignation is effective December 31, 2013. The Board places on record deep sense of appreciation of the services rendered by V. Balakrishnan during his tenure as the Member of the Board, Chief Financial Officer of the Company and then as the Member of the Board in-charge of Infosys BPO, Lodestone, Finacle, India Business Unit and Global Immigration. N. R. Narayana Murthy, Executive Chairman said, "Bala has been an early adopter and a keen anchor-builder of Infosys. It is difficult to imagine Infosys without Bala’s passion, commitment, and intellect. The Board and every Infoscion thank Bala for his wonderful contribution and wish him great success in his future endeavors."...Read More


Finally, Fed decides to taper

First, the world worried about a tapering. But when it finally came, although modestly, the market is rallying. Federal Reserve surprised the market by announcing a modest reduction, or tapering, in its bond buying program. The Fed, which has been buying bonds since 2008 will from Jan ’14, buy $75bn in bonds each month against $85bn earlier. The Fed committee says it is determined to avoid inflation that is too low, as well as inflation that is too high.

Following is the complete Fed statement issued regarding tapering of stimulus:

Information received since the Federal Open Market Committee met in October indicates that economic activity is expanding at a moderate pace. Labor market conditions have shown further improvement; the unemployment rate has declined but remains elevated. Household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months. Fiscal policy is restraining economic growth, although the extent of restraint may be diminishing. Inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for the economy and the labor market as having become more nearly balanced. The Committee recognizes that inflation persistently below its 2 objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term...Read More


RIL gets Cabinet nod for higher gas price

The Cabinet Committee on Economic Affairs approved giving higher price for Reliance Industries Ltd. (RIL) for natural gas from April next, according to reports. According to the proposal, the bank guarantee will be encashed if it is proved that RIL hoarded gas or deliberately suppressed production at the Dhirubhai-1 and 3 (D1&D3) main gas fields in its eastern offshore KG-D6 block. The new rate will come into effect from April 1. Report said that the bank guarantee will cover the difference between the current gas price of $4.2 per million British thermal unit (mBtu). The Petroleum Ministry had initially proposed to deny the new gas prices. The gas production from the D1&D3 fields has fallen to less than 10 million metric standard cubic metres per day (mmscmd) from the peak of 54 mmscmd in March, 2010.

RIL plans to shut Jamnagar refinery in February for maintenance: reports


Nov WPI at 7.52%

The annual rate of inflation, based on monthly WPI, stood at 7.52% (provisional) for the month of November, 2013 (over November, 2012) as compared to 7.00% (provisional) for the previous month and 7.24% during the corresponding month of the previous year. Build up inflation rate in the financial year so far was 6.70% compared to a build up rate of 4.84% in the corresponding period of the previous year.

The movement of the index for the various commodity groups is summarized below:-

PRIMARY ARTICLES (Weight 20.12%)

The index for this major group rose by 1.9 to 256.3 (provisional) from 251.6 (provisional) for the previous month.

The groups and items which showed variations during the month are as follows:-

The index for 'Food Articles' group rose by 2.0 to 256.4 (provisional) from 251.4 (provisional) for the previous month due to higher price of egg (8%), condiments & spices (7%), fruits & vegetables (6%), beef & buffalo meat and fish-marine (5% each), pork (4%), urad and jowar (3% each), moong, maize, ragi and wheat (2% each) and arhar, mutton, masur, milk and barley (1% each). However, the price of fish-inland (10%), tea (5%), gram (2%) and poultry chicken and rice (1% each) declined...Read More

Impact investing: Innovative strategies for double bottom line

Consumer Price Index: November 2013


Weekly: Sensex, Nifty gains ~2% each

Nifty witnessed mixed trends as investors digested fresh economic news flow from India and US. Contrary to consensus expectation, RBI left the Repo rate unchanged at 7.75%. The MSF rate was also retained at 8.75% and thus the corridor at 100 basis points. Terming its decision to hold rates as a ‘close one’, RBI cited uncertainty surrounding the short-term path of inflation and weak state of the economy as the key determinants. Meanwhile, the Fed finally made a choice to modestly reduce the pace of its monthly asset purchases, in other words, gradually tapering its stimulus program. Local political factors will take a back seat till we reach near the general elections and therefore global events and liquidity flows would largely determine the direction of the market. In the short-term, we expect markets to consolidate as investors look at reassessing the impact of the RBI status quo as well as Fed’s modest tapering. While there remains a strong scope of 25 basis points rate hike in near term, it could possibly be the end of the current rate up-cycle. However, we think that monetary easing is still far away as that would demand sustained and significant moderation in inflation. The NSE Nifty closed higher by 2% to close at at 6, 278 while the BSE Sensex gained by 1.8% to close at 21, 080...Read More

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