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India Monetary Policy: MPC Keeps Rates On Hold But Shifts Stance To Calibrated Tightening
RBI is more focused on protecting the financial system and making sure that the NBFCs have enough liquidity than obsessing about inflation, Saurabh Mukherjea founder of Marcellus Investment Managers told BloombergQuint.
The Indian rupee weakened past the 74 per dollar mark after Reserve Bank of India (RBI) kept the repo rate unchanged at 6.50 percent.
Yesterday rupee touched record low of 73.81 per dollar, ended down 24 paise versus Wednesday's close 73.34 per dollar.
Rupee continues to remain under pressure and sell-off in equity markets, strength in the dollar and surge in global crude oil prices contribute to weakness in the currency.
MPC says its decision is consistent with the stance of calibrated tightening of monetary policy in consonance with the objective of achieving the medium-term target for CPI inflation of 4 percent.
Reserve Bank of India's Monetary Policy Committee maintained repo rate unchanged at 6.5 percent while it changed its stance from ‘neutral’ to ‘calibrated tightening’.
Key highlights from RBI's Monetary Policy Review:
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The finance ministry will next week call a meeting to discuss an alternative payment mechanism, especially for oil imports, people familiar of the matter told Bloomberg.
The meeting will explore, among other things, the possibility of rupee payments for trade with countries such as Russia, Venezuela, Iran and other oil-exporting nations, the people mentioned above said, asking not to be identified as they aren’t authorized to speak with the media.
Shares of the state-run oil exploration company fell as much as 14.5 percent, the most since October 2012, to Rs 147.35 on fears of subsidy sharing burden resuming in the after the government asked oil retailers to cut fuel prices by Re 1 per litre.
Interest rate sensitive banking, real estate and auto shares were trading lower ahead of the Reserve Bank of India's monetary policy decision.
The Reserve Bank of India is widely expected to raise interest rate by 25 basis points in the backdrop of rising crude to contain inflation.
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Shares of the Mumbai-based public sector lender rose 1.23 percent to Rs 57.65 after LIC raised its stake in the bank.
LIC acquired 33.98 crore shares of the bank via way of preferential allotment and raised its stake from 7.98 percent to 14.89 percent, IDBI Bank said in its exchange notification.
Shares of cement makers continue to trade with a negative bias after the Supreme Court stayed Competition Commission of India's Rs 6,300 crore penalty on cement companies for cartelisation.
Shares of the Chandigarh-based steel wheel rim maker recovered from low levels and rose as much as 1.5 percent to Rs 1,036 after it won euro 6 million order from Opel Germany.
The company won order for supplying 650,000-wheel rims over a period of six years starting October 2019, SSWL said in an exchange filing.
The markets have corrected from very expensive valuation to less expensive valuation and there can be a further downside, Gautam Chhaochharia, ED & head of India research at UBS told BloombergQuint in an interview.
Key highlights of the conversation:
Shares of the Noida-based consumer electronic products maker rose as much as 3.7 percent to Rs 2,600 after it started production of Mi LED TVs for Xiaomi, the company said in an exchange filing.
The TVs will be manufactured from its facility in Tirupati, Andhra Pradesh.
Shares of the Bengaluru-based jewellery and watch retailer rose as much as 4 percent, the most in over two months, to Rs 808.40 after its jewellery business picked up pace in the September quarter and market share rose on the back of new launches, the company said in a quarterly update.
Meanwhile, HSBC has maintained its buy call on the stock for target price of Rs 1,050, indicating an upside of 31 percent from yesterday's closing.
The brokerage in a note said:
Fuel Price Cut To Squeeze Oil Marketers Margins
Indian rupee swung in opening deals ahead of the Reserve bank of India’s rate decision.
The rupee opened lower at 73.64 but soon appreciated to 73.54 per dollar against yesterday’s close of 73.58.
The markets are focused on the central bank’s policy decision, where the monetary policy committee is likely to increase interest rates for the third straight meeting.
The increase comes at a time when the rupee has been testing new record lows, while bonds have also tracked losses.
According to a Bloomberg Survey, 40 of the 49 economists expect the RBI to increase its benchmark repo rate by 25 basis points to 6.75 percent. However, interesting would be whether the central bank will change its stance from neutral to hawkish, setting the stage for further rate increases amid a surge in crude oil prices which is expected to stoke inflation.
The rupee weakened to close at 73.58 on Thursday after hitting an all-time low of 73.82 per dollar with the implied opening from forwards suggesting the rupee may start trading at 73.67.
In the bond market, the yield on benchmark 10-year bond rose 5 basis points on Thursday to close at 8.16 percent after surging to a high of 8.21 percent intraday. The yield has climbed 13 basis points so far this week to Oct. 4. Besides, foreigners sold $150.3 million of rupee-denominated bonds this week to Oct. 3, taking total outflows this year to $7.3 billion.
UBS
Macquarie
JPMorgan
CLSA
Motilal Oswal
Goldman Sachs
UBS on Delta Corp
HSBC on Titan
Navkar Corporation
(As reported on Oct. 4)
Meanwhile, equity investors in India have been increasing the amount of cash they’re holding ahead of the central bank’s interest-rate decision later today.
Chanda Kochhar Steps Down As ICICI Bank CEO
Here are some key events scheduled for the remainder of this week:
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