RBI buys bonds worth Rs9,092.90 crore under OMO

The central bank had already infused liquidity worth Rs15,218 crore in two tranches in the last 10 days. While it bought bonds worth Rs9,435.48 crore under its open market operation on 24th November, it infused Rs5,782.95 crore on 1st December this year

Mumbai: As part of its strategy to ease the liquidity crunch, the Reserve Bank of India (RBI) on Thursday bought bonds worth Rs9,092.90 crore under its open market operations (OMO) against a target of Rs10,000 crore, reports PTI.

Four securities were offered today as part of OMO, the central bank said in a statement.

While the government security (G-Sec) maturing 2017 with a coupon rate of 8.07% garnered Rs1,682.88 crore, 7.83% G-Sec maturing on 2018 had garnered Rs4,439.85 crore.

Similarly, the RBI purchased 8.13% G-Sec of Rs1,860.3 crore maturing at 2022 and 8.28% G-Sec 2027 at Rs1,109.83 crore.

The central bank had already infused liquidity worth Rs15,218 crore in two tranches in the last 10 days. While it bought bonds worth Rs9,435.48 crore under its open market operation on 24th November, it infused Rs5,782.95 crore on 1st December this year.

OMOs are the “first preference” of RBI while injecting liquidity and there is an opportunity to raise up to Rs2.74 lakh crore through the window.

RBI deputy governor Subir Gokarn had last week said that liquidity is likely to be under pressure for some more time amid factors like advance tax payment.

Overnight drawings by banks from RBI’s liquidity adjustment facility have exceeded Rs1,20,000 crore and RBI had said in the past that deficit has exceeded its targeted 1% of net demand and time liabilities (NDTL).

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IPO mop-up plunges 89% to $1.14 billion in Jan-Nov

The Ernst & Young report forecasts that the key to the IPO market recovery lies in the speedy resolution of the European debt crisis, which is likely to have a stabilising effect on the global capital market and restore investors’ confidence

New Delhi: Indian companies mopped up barely $1.14 billion through initial public offers (IPOs) till November this year, a nearly 89% plunge over last year, reports PTI quoting Ernst & Young (E&Y).

During January-November 2011, Indian firms raised $1.14 billion, compared to $10.75 billion garnered in 2010.

“The Indian capital markets reacted in a similar manner to the global markets, (and) coupled with the domestic issues we are facing, the slowdown in IPOs was even pronounced in India,” E&Y India partner and IPO leader R Balachander said.

“Both, the institutional and more prominently the retail investors are apprehensive of growth prospects and waiting for sentiments to improve,” he added.

The number of IPOs was less than half of that last year, and stood at 34 in the first 11 months of 2011 as compared to 71 in 2010.

Looking ahead, Mr Balachander said, “The recovery of IPO market in India will depend on both, a somewhat stable global capital market regime and more importantly the recovery in the stock market indices in the country.”

In addition, a revival in the PSU disinvestment programme will also help by offering shares at an attractive price to retail investors apart from a further easing of the regulations, with which the Securities and Exchange Board of India (SEBI) is proactively engaged in.

Globally, in the first 11 months of 2011 capital raised by companies was down 45% and number of deals also fell by 20% compared to 2010.

The report predicts that the value of IPOs in 2011 will be around $170 billion.

“After a promising start in the first two quarters, IPO activity dropped dramatically midway through the year, principally due to investors concerns about sovereign debt issues in Europe and Standard & Poor’s downgrade of US credit rating,” the report noted.

In Asia, stock exchanges completed 543 deals in the first 11 months of the year generating $77.7 billion, a 56% drop compared to the $177.6 billion raised in the whole of 2010.

IPO activity on US exchanges held up relatively well with a modest 16% drop in capital raised, to $36.4 billion in 114 share sale programme listed so far this year.

European exchanges raised $29.6 billion in value via 251 IPOs as compared to $36.7 billion mopped-up through 252 share sale programmes.

Overall, the report forecasts that the key to the IPO market recovery lies in the speedy resolution of the European debt crisis, which is likely to have a stabilising effect on the global capital market and restore investors’ confidence.

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After FDI in retail, another jolt for govt in FDI in insurance

The Standing Committee on Finance, which adopted its report on Insurance Laws (Amendment) Bill, 2008, on Thursday said keeping in mind the present global scenario, any hike in foreign equity would not be in the interest of Indian companies

New Delhi: After the setback on foreign direct investment (FDI) in retail, the government was in for another jolt as a Parliamentary Committee has rejected its proposal for raising the foreign investment cap in insurance sector from 26% to 49%, reports PTI.

Apart from various aspects of the insurance bill, the Standing Committee on Finance also asked the government to bring an integrated modern banking law for India, instead of bringing piecemeal amendments.

The Committee, which adopted its report on Insurance Laws (Amendment) Bill, 2008, on Thursday said keeping in mind the present global scenario, any hike in foreign equity would not be in the interest of Indian companies.

It also recalled that Parliament was assured that the present cap of 26% will not be breached in future.

The Committee also recommended that the present statement of objectives of the Bill should be redrafted as it gives a ‘misleading’ impression that the issue of foreign participation in Indian insurance companies was decided upon the recommendations of an expert committee, which is not a fact.

It also said that in health insurance business, a company with a minimum Rs100 crore capital should only be allowed to set up shop and hence the present requirement of Rs50 crore should be accordingly increased.

On the issue of foreign insurance companies planning business in special economic zones, the Committee has recommended that no unregistered foreign entity should be allowed to operate in areas governed by SEZ Act, 2005.

On the Banking Laws (Amendment) Bill, 2011, the Committee said that to encourage “corporate democracy”, voting rights in private banks respect to the proportion of holding should be increased from 10% to 26%.

The Bill proposes to remove the voting right restriction of 10% for private sector banks in the total voting rights of all the shareholders of the banking company.

In the case of private sector banks, the voting rights would be commensurate with investors’ shareholding.

The Bill seeks to amend the Banking Regulation Act, 1949, the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970, and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, and to make consequential amendments in certain other enactments.

According to the bill, the amendments would enhance the regulatory powers of the Reserve Bank of India and increase the access of the nationalised banks to the capital market to raise funds required for expansion of the banking business.

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