Interest rates unlikely to rise further: RBI deputy governor

The equation between growth and inflation in India has become much more balanced in the last few months and interest rates were unlikely to rise further, a popular business television channel quoted RBI deputy governor Subir Gokarn as saying in an interview

Singapore: Reserve Bank of India (RBI) deputy governor Subir Gokarn on Thursday said interest rates are unlikely to rise further but the Reserve Bank of India may intervene in the forex market because of the rupee volatility, reports PTI.

The equation between growth and inflation in India has become much more balanced in the last few months and interest rates were unlikely to rise further, a popular business television channel quoted Mr Gokarn as saying in an interview.

“Growth risks obviously have come back into a much larger consideration based on what we’ve seen in the past few months,” CNBC quoted Mr Gokarn as saying.

The monetary policy had “reached the peak of the cycle”, said Mr Gokarn, who had addressed a regional outlook forum by Institute of South East Asian Studies of Singapore.

He said RBI would intervene in the forex market to reduce volatility in the rupee exchange rate, rather than to defend a particular rate.

The rupee had stabilised in recent weeks and was trading much closer to the real effective exchange rate against a basket of currencies tracked by RBI, he said.

The next level of exchange rate would depend on the foreign capital inflow which calls for boosting investor confidence by addressing the country’s fiscal deficit and infrastructure problems.

The rupee has fallen 16% against the US dollar during the past year despite RBI’s intervention through state banks, according to reports.

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Bankers, experts expects interest rates to fall by 1%

While bankers and experts expect the lending rate to fall by about one percentage point in the near-term, the Prime Minister’s Economic Advisory Council has strongly pitched for rate cut by the RBI in its monetary policy review later in the month

New Delhi: Auto and home loan borrowers can expect some relief soon as banks and the Reserve Bank of India (RBI) are likely to go for a one percentage point cut in interest rates in the backdrop of falling inflation, reports PTI.

While bankers and experts expect the lending rate to fall by about one percentage point in the near-term, the Prime Minister’s Economic Advisory Council (PMEAC) has strongly pitched for rate cut by the RBI in its monetary policy review later in the month.

“There is every possibility of a decline in interest rates... unless some major events take place, interest rates should come down by at least 100 basis points,” Union Bank of India chairman and managing director MV Nair said here.

The base rate of commercial banks, according to RBI data, ranges from 10% to 10.75%.

The trend for the monetary strategy going forward, according to experts, is expected to be set by the RBI in its third quarterly monetary policy review on 24th January.

The RBI, which has increased key rates 13 times since March 2010 had indicated in its December policy review that it could reverse the tight monetary policy stance in case inflation remains under control.

Food inflation, according to the latest data, fell into the negative zone in the week ended 24th December, at (-)3.36%.

With regard to headline inflation, it fell from 9.73% in October to 9.11% in November and is expected to decline further.

“I expect headline inflation could come down even below 7% by March-end... The environment appears to be in favour of the RBI reversing its monetary policy stance,” PMEAC chairman C Rangarajan said.

Earlier this week, RBI governor D Subbarao said interest rates have peaked and are set to ease from now on.

“From here on, we could expect reversal of monetary tightening. But it’s difficult to say when that will take place and in what shape it will roll out,” Mr Subbarao had told the BBC.

India Inc has blamed high interest rates, which have led to an increase in the cost of fresh borrowing, for hindering fresh investment and industrial growth.

Economic growth during the second quarter (July- September) stood at 6.9%, the lowest in over two years. Industrial production declined by 5.1% in October.

“We expect the repo rate to be reduced in Q2, 2012.

However, the RBI may cut the Cash Reserve Ratio (CRR) in the January policy meeting,” Standard Chartered Bank economist Anubhuti Sahay said.

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Share prices trapped in a range: Thursday Closing Report

Nifty has to break out of 4,730-4,780 for the next move to be clear

The market closed flat even as the food inflation for the week ended 24th December turned negative.  A weak opening of the European bourses saw the indices giving up their gain in the second half of trade. The National Stock Exchange (NSE) traded on a volume of 51.89 crore which is above its 10-day moving average. The Nifty is moving in a narrow range of 50 points of 4,730 and 4,780. For a trend to emerge there needs to be a fresh move which could happen if the index strongly breaches the range.

The market opened unchanged as investors turned cautious ahead of the quarterly results season which kicks off in a few days. Eyes are also on the Reserve Bank of India’s (RBI) quarterly monetary policy review, slated to take place later this month. On the global front, Wall Street ended flat overnight on lingering concerns about Europe and reflecting the sentiment, markets in Asia opened weak this morning. Back home, the Nifty started the day unchanged at 4,749 and the Sensex gained 10 points to resume trade at 15,893.

Selective buying by institutional investors helped the indices stay in the positive zone till post-noon trade. While the Nifty rose to its intraday high of 4,780 at around 1pm, the Sensex touched a high of 15,980 in early trade.

A negative of the European markets ahead of a government bond auction in France and fears of a possible downgrade in the sovereign ratings of France and Germany pushed the domestic benchmarks into the red in the post-noon session.

While the market made half-hearted attempts to pull itself out of the red, selling pressure kept a cap on the gains, ensuring a flat finish. The Nifty closed unchanged at 4,740 and the Sensex lost 26 points to settle at 15,857.

The advance-decline ratio on the NSE was 962:796.

In line with the key benchmarks, the broader markets also closed on a flat note. The BSE Mid-cap index shed 0.01% while the BSE Small-cap index rose 0.21%.

The sectoral gainers were BSE Auto (up 1.21%); BSE Capital Goods (up 0.95%); BSE Bankex (up 0.46%) and BSE Consumer Durables (up 0.03%). Among the losers, BSE Oil & Gas (down 1.68%); BSE Realty (down 1.65%); BSE Metal (down 0.74%); BSE TECk (down 0.45%) and BSE IT (down 0.35%) topped the list.

Jaiprakash Associates (up 2.77%); Bajaj Auto (up 2.70%); Hero MotoCorp (up 2.33%); Tata Power (up 2.02%) and Mahindra & Mahindra (up 1.83%) led the Sensex gainers. The key losers on the index were DLF (down 4.06%); Reliance Industries (down 2.34%); NTPC (down 2.03%); Coal India (down 1.75%) and Maruti Suzuki (down 1.66%).

The top five stocks on the Nifty were Cairn India (up 4.44%); Punjab National Bank (up 3.93%); Bajaj Auto (up 3.05%); IDFC (up 2.97%) and Ambuja Cement (up 2.83%). DLF (down 4.20%); GAIL India (down 3.35%); BPCL (down 2.39%); NTPC (down 2.15%) and RIL (down 1.98%) were the major losers on the Nifty.

Markets in Asia settled mostly lower on lingering concerns about the debt problems faced by Eurozone countries. Meanwhile, china’s service sector was steady in December from the previous month, the HSBC China Services PMI showed. The weakening of the euro against the dollar ahead of the French bond auction also weighed on the sentiments.

The Shanghai Composite declined 0.97%; the Jakarta Composite shed 0.03%; the Nikkei 225 declined 0.83% and the Seoul Composite lost 0.13%. On the positive side, the Hang Seng rose 0.46%; the KLSE Composite gained 0.68%; the Straits Times added 0.07% and the Taiwan Weighted climbed 0.68%. At the time of writing, the key European markets were down between 0.60% and 0.85% and US stock futures were in the negative.

Back home, foreign institutional investors were net buyers of stocks aggregating Rs138.97 crore on Wednesday. On the other hand, domestic institutional investors were net sellers of equities totalling Rs83.41 crore.

JSW Energy today said one of its promoter entities, Sun Investments, has pledged 6.78% stake of the company. However, the financial details were not disclosed. As per the company’s filing with the exchanges, Sun Investments pledged 540,000 shares of JSW Energy on 28th December. The stock declined 3.70% to settle at Rs39 on the NSE.

State-owned explorer and refining company Oil and Natural Gas Corporation (ONGC) has discovered about 4 trillion cubic feet (tcf) of gas reserves off the Daman coast, which can produce 7 million cubic meters a day of gas in four years. The company is expected to invest $4 billion in developing the reserves and is currently working on a plan to develop the reservoir in the Arabian Sea. The stock fell 1.74% to close at Rs262.05 on the NSE.

Mahindra Lifespace Developers, the real estate and infrastructure arm of the $14 billion Mahindra Group, is looking to raise Rs250 crore in debt before the end of the fiscal to part-fund ongoing projects in various states. The stock rose 1.79% on the NSE to close at Rs252.90.

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