High oil prices reduce scope for easing interest rate: RBI

“Oil prices have remained very steady despite global economic concerns while in 2008 they declined sharply in a small period. It reduces space that monetary policy has in dealing with the situation,” RBI deputy governor Subir Gokarn told reporters

New Delhi: With international oil prices continuing to remain high, the Reserve Bank of India (RBI) may not have much scope to reduce interest rates in its forthcoming mid-year monetary policy review next month, reports PTI.

“Oil prices have remained very steady despite global economic concerns while in 2008 (when recession hit the global economy) they declined sharply in a small period. It reduces space that monetary policy has in dealing with the situation,” RBI deputy governor Subir Gokarn told reporters here.

The RBI, which has raised key interest rates 12 times since March 2010 to contain inflation, is scheduled to announce mid-year monetary policy review on 25th October.

International oil prices have remained persistently high.

Brent crude oil was trading at over $107 a barrel despite fears of double-dip recession hitting global economy.

Mr Gokarn’s statement comes within days of RBI governor D Subbarao defending the tight monetary stance of the central bank to check inflation, which has remained near the double-digit mark despite series of interest hikes.

While the short-term borrowing (repo) rate has gone up by 3.5% since March 2010, inflation has remained stubbornly high at near 10%, much above the RBI’s comfort level of 4%-5%.

In addition to other factors, rising crude oil prices and rupee depreciation have been fuelling inflation at home. The oil marketing companies has revised upwards price of petrol twice in the last six months.

Mr Subbarao, while speaking at a function in New York, has said, “At this high level, inflation is unambiguously inimical to growth; it saps investor confidence and erodes medium term growth prospects.”

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Govt likely to allow QFIs to invest in equity markets directly

The move is being considered at a time when the stock markets are volatile due to debt problems in several advanced economies and domestic concerns like inflation and high interest rate. Besides, there are concerns over flight of foreign capital in the recent times

New Delhi: With an aim to further liberalise the capital market, the government is contemplating to allow foreign individuals—Qualified Foreign Investors (QFIs—to buy equities directly in stock markets, reports PTI quoting a senior finance ministry official.

Currently, only overseas High Networth Individuals (with a minimum networth of $50 million), which are registered as sub-account of Foreign Institutional Investors (FIIs), are allowed to participate in the stock market.

“We are exploring the options to widen the class of investors in the Indian equity market by allowing QFIs,” the official told PTI.

The decision, he added, would help in projecting India as a global investment centre and attracting equity capital from abroad.

The move is being considered at a time when the stock markets are volatile due to debt problems in several advanced economies and concerns on domestic fronts, like inflation and high rate of interest. Besides, there are concerns over flight of foreign capital in the recent times.

FIIs have pulled out Rs632 crore from Indian equities so far in 2011.

In order to promote the portfolio investment route, the government last month allowed QFIs—individual, group or association—to invest up to $13 billion in equity and debt schemes of mutual funds in the infrastructure sector.

“We are trying to collect and analyse data on QFI investments in mutual funds,” the official said, adding the decision has made it easier for overseas investors to participate in the infrastructure sector projects in India.

While the official did not provide further details regarding QFIs in capital market, he said, if allowed, it would be on the same pattern as in mutual funds.

For mutual funds, the government has allowed two routes—holding mutual fund units in demat account through Securities and Exchange Board of India (SEBI) registered depositary participants and holding MF units via Unit Confirmation Receipts.

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Share prices may continue to remain flat: Wednesday Closing Report

Nifty to move in the range of 5,010 and 4,880

Concerns about a slowdown in domestic corporate earnings for the September quarter due to high costs and rising interest rates and the ongoing global worries led the market lower today. Today the Nifty opened higher and made an intraday high of 5,006 at the beginning of the trading session itself, which surpassed the highs of the past three days. However, it couldn't sustain the momentum and soon went below yesterday's close.

We had mentioned in our yesterday's market closing report that we may see a sideways movement with an upward bias to the level of 5,015. Today the Nifty fell marginally by 25 points to close at 4,946. This fall was on a volume of 52.32 crore shares on the National Stock Exchange (NSE). We may now see the Nifty moving in the range of 5,010 and 4,880.

The Indian market opened in the positive on mixed cues from the Asian region. The Nifty opened above the 5,000-mark at 5,006, up 35 points and the Sensex rose by 139 points to resume trade at 16,663. The opening figures of the two benchmarks were their highs for the day. However, profit-booking soon resulted in the market slipping into the red.

Reports on late Tuesday indicated that seven of the 17-member euro-zone nations had suggested that private creditors take a bigger share of the writedown on their Greek bond holdings. The development has threatened to derail Greece's bailout hopes.

As expected, trade was volatile with the benchmarks staying on both sides of the neutral line till around 10.45am after which intense selling pressure pushed the market to the day's low. At the lows, the Nifty touched 4,922 and the Sensex went down to 16,373.

The market made a feeble recovery attempt but sellers kept a tab on the indices, which continued to remain in the negative terrain in the post-noon session. The market closed in the red on concerns about the September quarter results from corporates and on global worries. The Nifty closed down 25 points at 4,946 and the Sensex settled at 16,446, a loss of 78 points.

The advance-decline ratio on the NSE was 433:996.

The broader indices underperformed the Sensex today with the BSE Mid-cap index falling 0.88% and the BSE Small-cap index declining 0.97%.

BSE Fast Moving Consumer Goods, BSE IT (up 0.93% each), BSE Healthcare (up 0.43%), BSE Realty (up 0.33%) and BSE TECk (up 0.22%) were the top gainers in the sectoral space. The main losers were BSE Capital Goods (down 2.09%), BSE Metal (down 1.77%), BSE Consumer Durables (down 1.75%), BSE Bankex (down 1.25%) and BSE Auto (down 1.18%).

The top performers on the Sensex were DLF (up 3.08%), ITC (up 1.91%), NTPC (up 1.60%), ONGC (up 1.29%) and Infosys (up 1.18%). The main draggers of the index were Jaiprakash Associates (down 4.37%), Larsen & Toubro (down 2.90%), Maruti Suzuki (down 2.83%), Tata Steel (down 2.66%) and Bharti Airtel (down 2.16%).

HCL Technologies (up 3.27%), NTPC (up 2.35%), GAIL India (up 2.33%), DLF (up 2.20%) and Ranbaxy (up 2.13%) were the leaders on the Nifty. Reliance Capital (down 7.22%), JP Associates (down 5.17%), Reliance Infrastructure (down 4.89%), Sesa Goa (down 3.57%) and Siemens (down 3.40%) were the major losers on the index.

Markets in Asia settled mixed as the European debt crisis weighed on investor sentiments. With stiff opposition to policy-tightening in Greece and Italy, and a split among euro-zone leaders about the terms of the Greek bailout terms, investors across Asia preferred to wait for some positive signals before making any big moves.

The Shanghai Composite declined 0.95%; the Hang Seng fell 0.66%; the Straits Times lost 0.91% and the Seoul Composite tanked 0.73%. On the other hand, the Jakarta Composite surged 1.13%; the KLSE Composite rose 0.54%; the Nikkei 225 added 0.07% and the Taiwan Weighted gained 0.80%.

Back home, institutional investors-both foreign and domestic-were net buyers in the equities segment on Tuesday. While foreign institutional investors pooled in Rs34.08 crore, domestic institutional investors pumped in Rs270.05 crore.

 State-run NTPC has tied up a syndicated loan worth Rs2,341 crore from a consortium of Indian banks for its 390-MW Muzaffarpur thermal power project in Bihar. The loan would be utilised for financing capital expenditure on the Muzaffarpur thermal power project. NTPC gained 2.35% to close at Rs169.55 on the NSE.

Mumbai-based Ipca Laboratories plans to acquire a pharmaceutical company in Indonesia with a view to enter the largest South-East Asian market. The company has put together a $20 million war-chest for the acquisition, to be made within the next few months, said Kuala Lumpur-based Sugumaran, adding that a number of companies have been shortlisted, though he kept the names confidential. The stock fell 1.75% to close at Rs264 on the NSE.

Unichem Laboratories has earmarked Rs120 crore for capital expenditure plans in the current financial year, including the establishment of a new SEZ formulations plant and an R&D centre. Of this, Rs40 crore would be spent for the formulations plant at the SEZ, Pithampur, Rs48 crore for an R&D centre and the balance for normal capex activities. The scrip fell 3.25% to Rs138.35 on the NSE.

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