“Policy rates are very close to neutral and are likely to move marginally higher,” says Nomura

Scope for the RBI to ease rates is “quite limited”, point out Nomura Economics Research analysts

Nomura Economics Research expects a 25bps (basis points) rate cut in Q2 of 2013 from the RBI (Reserve Bank of India) and then rates to remain on hold for some time. Based on Nomura’s year-ahead forecast that the negative output gap (see graph below) will gradually close and WPI (wholesale price index) inflation will be sticky at around 7%, the Taylor rule suggests that policy rates are very close to the neutral rate currently and, in fact, should move marginally higher.

Taylor rules do have limitations, but they reiterate the RBI’s guidance that room for further easing is “quite limited.”


Interest rate implied by Taylor rule = Real equilibrium interest rate + inflation + 0.5*(Inflation gap) + 0.5*(Output gap), where the real equilibrium interest rate is assumed at 1%, desired inflation rate at 5% and potential GDP growth rate is estimated based on the Hodrick-Prescott filter. Estimates beyond Q1 2013 are based on Nomura projections on GDP growth and WPI inflation. 


The RBI recently estimated its neutral nominal policy rate at around 6%.  This holds when WPI inflation is close to the target 5% and the output gap is zero.  It is found that in reality, WPI inflation is around two percentage points above the desired rate, while growth is below potential. The RBI assumes potential output growth at around 7%, but it is believed that it has fallen to 6%-6.5%. Using actual growth and inflation data, Nomura finds that policy rates have broadly followed the Taylor rule.



SAT defers hearing in SEBI-Sahara case to 13th April

The Securities Appellate Tribunal (SAT) on Tuesday adjourned its hearing in the Securities and Board of India (SEBI) and Sahara case to 13th April.


In an order, the SAT said, hearing of the appeal filed by Sahara Group chief Subrata Roy would be taken up along with appeals filed by Sahara India Real Estate Corporation and Sahara Housing Investment Corporation, the two Sahara group companies and its three directors.

In all the appeals, Sahara has challenged the attachment order passed by SEBI on 13 February 2013. In a release, Srinivasan Ganesh, senior counsel for Sahara, said, “In these appeals, Sahara has challenged the attachment order passed by SEBI, inter-alia on the grounds that SEBI has no jurisdiction to pass such orders under the SEBI Act and that their documents of redemptions made to investors have been wrongly rejected as ‘not acceptable’ and that such orders of documents are in clear violation of the directions no7 contained in order dated 31 August 2012 passed by the Supreme Court.”

Officials from SEBI were not immediately available for comment.

The apex court had on 31st August last year directed the two companies to refund around Rs24,000 crore to their investors within three months with 15% interest per annum for raising the amount from its investors in violation of rules and regulations.

On 13th February, SEBI passed two separate orders, together running into 160 pages, directing attachment of properties and freezing of accounts.
It was after the Supreme Court said that the regulator was free to freeze the accounts and attach properties if Sahara firms were not complying with the apex court’s earlier orders of August 2012 towards refund of investors’ money totalling over Rs24,000 crore.

The assets ordered to be attached included those related to the group’s Aamby Valley resort town near Pune, real estate assets in Delhi, Mumbai and at other places across the country, shares, mutual funds and various other investments.

Passing the attachment orders, SEBI said that the two companies had raised Rs6,380 crore and Rs19,400 crore, respectively from bondholders and “various illegalities” were committed in raising of these funds.

With regard to Subrata Roy and three other directors, namely Vandana Bhargava, Ravi Shanker Dubey and Ashok Roy Choudhary, SEBI ordered freezing of all bank and demat accounts of these four persons, as also attachment of all moveable and immoveable properties in their name with immediate effect.

During its previous hearing on 23rd March at Mumbai, the SAT decided to hold final hearing on 26th March at New Delhi. It, however, decided to take up the matter again on 13th April along with all related petitions.



Vaibhav Dhoka

4 years ago

SEBI's action are from Supreme courts order,Does SAT have Locus to hear appeal?It is common mans doubt.

TS Rao

4 years ago

Is it to give time to Sahara so they could subvert the process?

Nifty, Sensex will make an attempt to rally soon: Tuesday Closing Report

For Nifty to rally, it should hold above today’s low of 5,612 and close above 5,665

The Indian market managed to snap its seven-day losing streak and settle marginally higher on support from consumer durables and fast moving consumer goods sectors. For Nifty to rally, it should hold above today’s low of 5,612 and close above 5,665. The National Stock Exchange (NSE) recorded a turnover of 56.16 crore shares and advance-decline ratio of 667:881. 
The Bombay Stock Exchange, the National Stock Exchange, forex, futures and wholesale commodity markets will remain closed tomorrow for the festival of Holi.
The market opened in the negative as investors across the globe pondered over the Cyprus bailout deal. Domestic political rumblings at the Centre also weighed on the sentiments. On the global front, markets in Asia were mixed in morning trade with China, Hong Kong and Japan trading in the negative. US markets pared their gains and settled lower in overnight trade on concerns from Cyprus.
The Nifty opened 20 points lower at 5,614 and the Sensex started off at 18,645, down 36 points from its previous close. Profit taking pushed the benchmarks to their lows in initial trade with the Nifty going down to 5,612 and the Sensex retracting to 18,612.
The market witnessed choppy trade with the indices fluctuating between the red and green in morning trade in view of the expiry of the March F&O derivatives contract, which will take place on Thursday.
The benchmarks picked up momentum in noon trade on buying support from fast moving consumer goods and pharma stocks. The gains helped the market hit its intraday high at round 1.30pm. At this point the Nifty touched 5,655 and the Sensex rose to 18,759.
The see-saw movement of the market continued in late trade in the holiday-marked week. The benchmarks managed to close with minor gains, snapping the seven-day losing streak. The Nifty added eight points (0.14%) to 5,642 and the Sensex rose 23 points (0.12%) to settle at 18,705.
The broader indices witnessed a mixed close as the BSE Mid-cap index fell 0.11% and the BSE Small-cap index rose 0.04%.
The top sectoral gainers were BSE Consumer Durables (up 1.59%); BSE Fast Moving Consumer Goods (up 1.13%); BSE TECk (up 0.66%); BSE IT (up 0.45%) and BSE Auto (up 0.35%). The main losers were BSE Oil & Gas (down 2.06%); BSE Realty (down 1.95%); BSE Capital Goods (down 1.85%); BSE Power (down 1.05%) and BSE Metal (down 0.41%).
Fifteen of the 30 stocks on the Sensex closed in the positive. The major gainers were Bharti Airtel (up 2.98%); HDFC (up 2.17%); Hindustan Unilever (up 2.15%); Tata Motors (up 1.72%) and ITC (up 1.34%). The losers were led by Reliance Industries (down 3.25%); GAIL India (down 3.20%); Tata Steel (down 2.72%); Hero MotoCorp (down 2.69%) and Larsen & Toubro (down 2.24%).
The top two A Group gainers on the BSE were—ING Vysya Bank (up 4.85%) and AstraZeneca Pharma India (up 3.38%),
The top two A Group losers on the BSE were—Reliance Infrastructure (down 5.83%) and IFCI (down 5.09%),
The top two B Group gainers on the BSE were—Salora International (up 20%) and Shardul Securities (up 20%).
The top two B Group losers on the BSE were—SAL Steel (down 16.67%) and Advik Laboratories (down 15.33%).
Of the 50 stocks on the Nifty, 24 ended in the green. The key gainers were Bharti Airtel (up 3.08%); HUL (up 2.50%); Ranbaxy Laboratories (up 2.33%); Coal India (up 1.68%) and Tata Motors (up 1.55%). The chief losers were Reliance Infrastructure (down 5.69%); Siemens (down 5.65%); RIL (down 3.37%); Hero MotoCorp (down 2.95%) and GAIL India (down 2.88%).
Markets across Asia settled mostly higher after factoring concerns about the Cyprus bailout plan. The Chinese market, however, settled lower on reports that Chinese banks have started reducing their exposure in the real estate sector.
The Hang Seng rose 0.27%; the Jakarta Composite surged 1.35%; the KLSE Composite gained 0.54%; the Straits Times climbed 0.645; the Seoul Composite advanced 0.30% and the Taiwan Weighted settled flat with a positive bias. Among the losers, the Shanghai Composite dropped 1.25% and the Nikkei 225 fell 0.60%.
At the time of writing, the key European markets were up between 0.07% and 0.65% and the US stock futures were in the positive.
Back home, foreign institutional investors were net buyers of stocks amounting to Rs717.89 crore on Monday. On the other hand, domestic institutional investors were net sellers of equities totalling Rs425.61 crore.
Educomp Solutions, India’s largest education company, today announced that it has completed the sale of its entire 50% stake in Eurokids International to a group of investors led by GPE India. The company said it made a profit of Rs70 crore on this investment, and that the proceeds would be ploughed back into its core businesses. Educomp declined 3.42% to close at Rs62.15 on the NSE.
Suzlon Group has successfully completed the $647-million bond issue through its wholly owned subsidiary AE Rotor Holding (AERH). The US dollar-denominated bonds, with 4.97% coupon have been provisionally rated at ‘Baa2’ by Moody’s and will be listed on the Singapore Stock Exchange (SGX). Suzlon Energy settled flat at Rs13.50 on the NSE.
Tata Motors will undertake an 11-day shutdown to carry out maintenance of equipments at its Jamshedpur plant from 27th March, a senior company official said today. The shutdown was needed as it is not possible to carry out maintenance of equipments, especially, in the paint house during the day to day operations. The stock declined 1.61% to close at Rs153.60 on the NSE.


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