“The Reserve Bank will keep a track of growth as it evolves, keep track of inflation as it evolves and keep track of aspirations and inspirations as it evolves,” RBI governor D Subbarao said
Ahead of its mid-quarter policy, the Reserve Bank of India (RB) today said its monetary actions in the coming months will be determined by the outlook on monsoon and ensuing impact on inflation.
“And most importantly we also chase monsoon like millions of farmers across the country. So, the monsoon outlook, the monsoon performance is going to be the important factor in determining the RBI policy in the next three months,” RBI governor D Subbarao said while delivering a lecture in Hyderabad.
As per the Indian Meteorological Department (IMD) prediction, the monsoon is expected to be normal this year.
“The Reserve Bank will keep a track of growth as it evolves, keep track of inflation as it evolves and keep track of aspirations and inspirations as it evolves,” he said.
The RBI is scheduled to unveil its first mid-quarter monetary policy review on 17th June. There is pressure on the central bank to cut the policy rate in view of declining inflation and the urgency to boost sagging growth.
Although the headline inflation and core inflation has moderated below 5%, food inflation still remains high.
Food inflation in April stood at 6.08%, while the overall WPI inflation fell to a three-year low of 4.89%. However, retail or consumer price index (CPI) inflation is at 9.39% in April.
Noting that food inflation is still high, finance minister P Chidambaram had yesterday expressed confidence that it will come down with the full harvest of rabi crops.
“Food inflation is still elevated but we hope that it will come down further as full Rabi crops arrive in the market,” he had said.
Last month, the central bank lowered the short-term lending (repo) rate to 7.25% from 7.50% cent, lowest since May 2011, while retaining the CRR for banks unchanged at 4%.
The central bank has reduced the key policy rate thrice by 0.25% each so far in 2013 in its effort to boost growth which hit a decade low of 5% in 2012-13.
Chidambaram highlighted that while the RBI has already cut the repo rate by 125 basis points since early 2012, the commercial banks have cut rates by only 30 basis points.
“I think the RBI has told banks not to sell gold coins,” the finance minister P Chidambaram told a news agency. Well, gold sales from banks are small and will not help in reducing gold imports or lowering CAD. However, consumers will benefit from not buying gold from banks
There is a new twist to the story of banks selling gold coins. According to a Reuters report, finance minister P Chidambaram said, “I think the Reserve Bank of India (RBI) has advised banks that they should not sell gold coins”. Earlier, the RBI had refused to ban sale of gold coins by banks, citing that it wants to encourage ‘genuine’ investment in the commodity. While the FM is trying to contain gold imports in order to rein in current account deficit, from our perspective, stopping banks from selling gold coins is in the interest of the customer.
What happens when you buy gold coins from a bank? You end up losing twice. One, banks sell gold coins at a higher price than the jeweller and when you want to sell the same coin, they can’t buy it back, thus leaving you at the mercy of the local jeweller. The jeweller would readily buy the gold coin, unlike the bank, but would deduct the regular 2% cut. So you would shell out more money for buying gold coins from a bank but would have to suffer loss while selling it to a jeweller. For more details read
The reason for this leniency about gold sales by banks is that RBI wants investors to ‘genuinely’ buy gold rather than buy financial gold vis-a-vis gold ETFs and gold mutual funds and such. Last week, RBI governor D Subbarao said that the route of buying gold for genuinely saving should be available to the people, while emphasising that investment in the financial sector is good for the economy.
The RBI had earlier said that specially minted gold coins sold by banks might not be in the nature of bullion or primary gold, there would be no objection to the bank granting loans against these coins. Yet, by allowing banks to continue gold coin sale, it is exacerbating the current account deficit (CAD) deficit further.
The decision to restrict or stop gold coin sales comes after India had imported a whopping 162 tonnes of gold in May 2013, instilling fears that CAD will worsen and be uncontrollable. To cull demand, the government raised import duty of gold by 2%, from 6% to 8%, a second such hike in six months.
The price of gold on MCX has declined by 13% since December 2012, to Rs27,905 per 10 grams, making it an attractive proposition for consumers to buy jewellery and coins. But little do consumers know that buying gold is fraught with risks, especially when bought from banks in form of gold coins.
A gold coin of 2 grams from Bank of Baroda costs Rs5,860 as of 30 May. The same thing from a jeweller was priced at Rs5,028, about 16% less than what the bank had quoted.
It is not that RBI allows banks to sell at premium but also made the process for consumers to walk into any bank and buy gold easily. Some banks require KYC and some do not. We also had written this in detail over here: Gold sales by banks: High and inconsistent rates and different KYC rules. The idea of walking to a bank and buying gold without proof is ridiculous as it also permits money laundering in form of gold.
Nifty may continue to move lower on Monday unless it manages to close above 5,925
The market pared its gains in late trade on selling pressure from rate-sensitive sectors, ending in the negative for the second day in a row. The Nifty may continue to move lower on Monday unless it manages to close above 5,925. The National Stock Exchange (NSE) reported a volume of 51.34 crore shares and advance-decline ratio of 591:798.
The market witnessed a flat opening on caution ahead of the release of the US jobs report, which is seen as a factor in determining the Federal Reserve’s action on the continuity of its stimulus programme. Markets in Asia were down in morning trade on a strengthening yen, which dampened the outlook for exporters from the region. Wall Street closed higher overnight as the dollar fell against major global currencies on speculations that the jobs data would be lacklustre, forcing the Fed to continue its growth boosting measures.
Meanwhile, the Nifty opened 21 points lower at 5,900 and the Sensex rose three points to resume trade at 19,522. Selling in metal, realty, banking and fast moving consumer goods shares saw the indices moving lower in early trade.
The benchmarks recovered from their lows on buying interest in IT, healthcare and oil & gas stocks. The gains enabled the market venture into the green in mid- morning trade. The benchmarks hit their highs in noon trade wherein the Nifty rose to 5,973 and the Sensex climbed to 19,712.
The market pared part of its gains and traded sideways in the remainder of the noon session amid volatile trade. The benchmarks slipped into negative terrain in the late session pressure from auto and banking sectors.
The selling pressure pushed the indices to their lows in the last half hour with the Nifty touching 5,871 and the Sensex falling to 19,398. The market settled near the lows and in the red for the second day in a row.
The Nifty closed 40 points (0.68%) down at 5,881 and the Sensex ended the day at 19,429, a loss of 90 points (0.46%).
In the broader market space, the BSE Mid-cap index declined 0.56% and the BSE Small-cap index fell 0.10%.
BSE IT (up 1.59%) and BSE TECk (up 0.72%) were the only gainers in the sectoral segment. The main losers were BSE Auto (down 1.39%); BSE Realty (down 0.36%); BSE Bankex (down 1.34%); BSE Power (down 0.32%) and BSE PSU (down 1.26%).
Out of the 30 stocks on the Sensex, eight settled higher. The top gainers were TCS (up 3.48%); Dr Reddy’s Laboratories (up 2.82%); Wipro (up 1.67%); Infosys (up 0.80%) and Tata Power (up 0.57%). The major losers were Bharti Airtel (down 2.40%); Mahindra & Mahindra (down 2.27%); NTPC (down 2.12%); Maruti Suzuki (down 2.04%) and Jindal Steel & Power (down 1.91%).
The top two A Group gainers on the BSE were—Mahindra & Mahindra Financial Services (up 4.07%) and TCS (up 3.48%).
The top two A Group losers on the BSE were—Adani Power (down 6.75%) and Jain Irrigation (down 4.97%).
The top two B Group gainers on the BSE were—Vikas Globalone (up 19.9%) and Cerebra Integrated Technologies (up 19.99%).
The top two B Group losers on the BSE were—Filatex Fashions (down 18.85%) and Pioneer Distilleries (down 16.42%).
Of the 50 stocks on the Nifty, 10 ended in the in the green. The main gainers were TCS (up 3.53%); Dr Reddy’s (up 2.68%); BPCL (up 1.45%); Lupin (up 1.02%) and Infosys (up .86%). The key losers were Jaiprakash Associates (down .30%); Axis Bank (down 3.25%); Bharti Airtel (down 2.69%); Bank of Baroda (down 2.61%) and Maruti Suzuki (down 2.36%).
Markets in Asia closed weak as the strengthening yen dragged the Nikkei lower. Other markets in the region also followed the Nikkei as the strengthening yen tapered the outlook for exporters.
The Shanghai Composite dropped 1.39%; the Hang Seng tanked 1.21%; the Jakarta Composite tumbled 2.725; the Nikkei 225 fell 0.21%; the Straits Times declined 0.28%; the Seoul Composite declined 1.80% and the Taiwan Weighted shed 0.01%. Bucking the trend, the KLSE Composite gained 0.34%.
At the time of writing, the key European indices were down between 0.16% and 0.50% and the US stock futures were trading lower.
Back home, foreign institutional investors were net sellers of equities amounting to Rs270.47 crore whereas domestic institutional investors were net buyers of shares totalling Rs298.08 crore.
Rating agency Standard & Poor’s (S&P) today cut its long-term credit rating on Core Education and Technologies Ltd’s (CORE) to ‘B’ from ‘B+’ with a negative outlook. S&P said, “We lowered the rating on CORE because we believed that the sharp fall in the company's equity prices could negatively affect its access to capital markets and bank funding.” The stock declined 4.63% to close at Rs38.10 on the NSE.
Multiplex chain operator PVR today said its board has approved the merger of Cinemax India and a wholly-owned subsidiary with the company. The board of directors of the company at its meeting held on 7 June 2013 approved in-principle the proposed amalgamation of Cinemax India, a Mumbai-based listed firm and Cine Hospitality Pvt Ltd, a wholly-owned subsidiary of the company, PVR said in a filing to BSE. PVR closed 3.52%) lower at Rs323.30 on the NSE.
Aban Offshore, the country’s largest offshore drilling contractor, has received a Rs1,050 crore-order from state-owned ONGC. The project is expected to commence during the fourth quarter of this financial year. Aban Offshore lost 0.32% to settle at Rs296 on the NSE.