Archive for October 31st, 2009

RBI Raises Concern over Circular Investment Btw. MFs & Banks.

RBI Raises Concern over Circular Investment Btw. MFs & Banks

RBI Raises Concern over Circular Investment Btw. MFs & Banks

As per the latest data released from the Reserve Bank of India, nearly 90% of the funds, which are parked by the banks in mutual funds (MFs) come back into the banks.

The funds come in the form of overnight borrowings through various channels.

🙂

RBI said that the banks parked Rs 66,687 crore in MFs as of September 25, 2009 in debt and liquid schemes.

In turn, the MFs have lent Rs 29,504 crore under the collateralized lending and borrowing obligation (CBLO) platform and Rs 29,328 crore under market repo, respectively.

🙂

CBLO allows non-banks to lend to banks short-term surpluses.

The lending of MF through CBLO and market repo as a percentage of banks’ investment in mutual funds has surged to 88% in September from about 64% in July.

🙂

The objection of RBI came when MFs also subscribe to commercial paper issued by corporates, which is tantamount to lending to corporates by MFs, which is ostensibly from funds raised from banks.

RBI has objected against indirect lending by banks through intermediaries.

In this circular flow, MFs lend to corporates, which the banks themselves hesitate to lend, which exposes banks in a regulatory concern.

However, the more serious is its concern over the circular investment between MFs and banks.

Bharti Airtel’s Scrip Fell 6% Down !

 

 

Bharti Airtel’s scrip Friday fell 6.38 percent

Bharti Airtel’s scrip Friday fell 6.38 percent lower at the Bombay Stock Exchange (BSE)

Telecom major Bharti Airtel’s scrip Friday fell 6.38 percent lower than its previous close at the Bombay Stock Exchange (BSE) as investors dumped the stock because of disappointing second quarter results.

The scrip, which had fallen to an intra-day low of Rs. 290.30 from Thursday’s closing figure of Rs. 312.05, ended the day at Rs. 292.15.

Bharti Airtel said its net profit, according to US accounting rules, increased 13.4 percent to Rs. 2,321 crore (495 million) for the quarter ended Sep 30 from Rs. 2,046 crore in the like quarter of previous fiscal.

This was, however, a decline of 8 percent over the previous quarter of current fiscal.

Revenues were up 9 percent to Rs. 9,846 crore from Rs. 9,020 crore reported a year earlier.

“The industry is seeing entry of many players and this is bound to have a bearing on the fortunes of existing companies,” said Jagannadham Thunuguntla, equities head of brokerage and capital markets consultancy SMC Capital.

“In the short term, the stock could see some more pressure, though it is coming within range of a good buy, at least for the long term investor,” Thunuguntla added.

The Bharti scrip has lost as much as 30.2 percent over October and at current levels is the lowest in seven  months.