Posts Tagged ‘investment demand’

Weekly Update 6th-10th September 2010

Stocks rallied this week as the manufacturing in U.S. and China expanded at faster pace reassured investors about the economic recovery. The ISM manufacturing increased to 56.3 for a sizable eight tenths gain from July.


China’s PMI rose to 51.7 from 51.2, signaling that the economy’s slowdown is stabilizing. In U.S. payroll jobs in August slipped 54,000 after falling a revised 54,000 in July for the third straight month but there was a moderate gain in the private sector.


Government jobs dropped 121,000 while private non farm employment continued to rise, gaining 67,000 in August. Also on the positive side, wages were up. President Barack Obama said there is “no quick fix” for the economy and will unveil new ideas next week to boost growth and hiring. Chief of Bank of Japan said that the bank is ready to take more actions after giving 10 trillion yen ($118 billion) to a bank loan facility and the nation’s Prime Minister said that the Japanese government is ready to take “bold” action on the currency if necessary which is threatening its exporters.


India being second biggest emerging economy showed yet another strong performance in terms of growth. The economy saw an expansion of 8.8 percent in the first quarter ending June, the fastest pace in two and a half years giving an imprint of strong underlying domestic demand. Trade data showed that exports rose for the ninth straight month in July 2010, growing an annual 13.2% to $16.24 billion and Imports for the month rose 34.3% to $29.17 billion, widening the country’s trade deficit to $12.93 billion. Exports during the April-July period rose 30.1% to $68.63 billion.


Being a short trading week, stock specific activity is expected to rule in the market as investors would like to see Industrial Production numbers for the month of July scheduled to be released on Friday, 10th September. In line with rebound in the global indices, Indian market too witnessed sharp bounce after testing the major support zone of 5350 levels. As expected, dollar index traded with the negative bias throughout the week and likely to be sideways to negative bias in the coming days as well. Keeping in the mind all the cues, one may stay long with trailing stop loss strategy or book partial profit on rally to avoid any notional loss. Nifty has support between 5400-5350 and Sensex between 17800-17600 levels.


Currency play together with some improvements in economic releases invited bulls in industrial metals while energy pack could not retort positively. Bullions continued to rock on investment demand. Now there is a state of confusion on the subject of the further trend in commodities. Dollar index has taken the crucial support of 82 and moved northward. Base metals gave knee jerk reaction on weak unemployment data of US at the same time as precious metals are trading near multi week high. Various interest rate meeting may inject volatility in commodities. Buying is still intact but upside appears to be limited in short run in base metals. Furthermore, base metals and crude oil are moving in a different direction that is a cause of concern for the market players. It is creating an ambiguous situation and indicating unclear trend of commodities.


RBI’s Monetary Policy Stance – Part 3

Just an extension of our previous blog “RBI, Monetary Projections And Indian Economy

RBI’s Monetary Policy Stance - Part 3

RBI’s Monetary Policy Stance - Part 3

In this Blog we would touch upon the aspects as that of RBI’s Monetary Policy Stance and few more facts which carries direct or indirect connection with the RBI Policies.


For example, business confidence index ,industrial recovery status, overall consumption and investment, export-imports status etc;

The True Facts:

So far business confidence has also improved, and demand conditions seem to have picked up, as seen by better order book and increased capital finance requirements.

Industrial recovery seems to be on its way with 5.8% growth in IIP during April-August ’09.

A revival in capital flows, and stronger performance of the core infrastructure sector (4.8% for April-August ’09) seems to be indicating a slight recovery in the economy.

However, there has been a deceleration in growth of private consumption and investment demand, and raw material prices are expected to rise on account of inflationary pressures.

The deficient monsoon could also reduce rural demand.

First quarter earnings of corporates reflect a decline in sales, and non-food credit growth has decelerated, with credit card and consumer durables related credit turning negative.

Exports have continued to decline as external demand dependent services remain sluggish.

The economy is showing some signs of recovery, while a rising CPI has now pushed WPI into the positive territory, mainly on account of higher food prices.

The RBI’s stance will thus have to manage the trade-off inflationary pressures between supporting growth and controlling .


Monetary Policy Stance

On the basis of the above overall assessment, the stance of monetary policy for the remaining period of 2009-10 will be as follows:

– Keep a vigil on the trends in inflation and be prepared to respond swiftly and effectively through policy adjustments to stabilize inflation expectations.

Monitor the liquidity situation closely and manage it actively to ensure that credit demands of productive sectors are adequately met while also securing price stability and financial stability.

-Maintain a monetary and interest rate regime consistent with price stability and financial stability, and supportive of the growth process.


Stay Tuned for more on the topic.

We would cover Analysis view from the Analyst with respect to the monetary point of view.

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