Posts Tagged ‘liquidity’

FII investment, this year, is the highest ever inflow in India

FDI inflow India Last year Touched 80 Thousand crores

The FII investment of Rs 80,500 crore in 2009 is the highest ever inflow in the country in rupee terms in a single year and comes a year after they pulled out over Rs 50,000 crore.


FII inflow so far this year has broken the previous high of Rs 71,486 crore parked by foreign fund houses in domestic equities in 2007.


Market analysts believe that the FII inflow in India may continue in the next year as well, if the liquidity conditions remain strong.


As per Market experts, FIIs are expected to continue to be positive on domestic markets and in general Indian markets seems to fare well in 2010.


Delhi-based SMC Capitals Ltdโ€™s Equity Head Jagannadham Thunuguntla has supported the view, saying,

โ€œIf liquidity conditions remain strong next year, one can expect FII inflow to remain strong into India even in 2010 as well.โ€


The Bombay Stock Exchangeโ€™s benchmark sensex, comprising 30 bluechip stocks, has gained more than 70% so far in 2009, one of the best performers among leading global bourses.


โ€œHowever, if dollar-carrytrade-unwinding starts, then one can expect rush of FII outflow from the country, resulting in pressure on Indian markets,โ€ he cautioned.


Significantly, last year the FIIs had pulled out a net Rs 52,900 crore from the domestic bourses โ€” a trend triggered with the collapse of global financial services icon Lehman Brothers in the middle of September 2008.

This selling trend continued till the first two months of the passing year.


RBI Emphasizes on Managing the Economic Recovery, For Now :)

RBI emphasizes more on Managing economic Recovery


The Reserve Bank of India, country”s Central bank, has said that managing economic recovery is now its focus area and the first phase of monetary tightening will arrest inflation without hurting growth.

RBI Executive Director Deepak Mohanty was found quotingย  that at present, the focus around the world and also in India has shifted from managing the crisis to managing the recovery.


He said that withdrawing soft monetary policy, which was initiated to weather the financial crisis is the key challenge.

“The key challenge relates to the exit strategy that needs to be designed, considering that the recovery is as yet fragile but there is an uptick in inflation, though largely from the supply side, which could engender inflationary expectations,” he said.


Besides this, Mohanty said that the first phase of exit has been initiated by RBI in its monetary policy review in October 2009.

That was done mainly by withdrawal of unconventional measures taken during the crisis.

RBI, in its monetary review in October has raised the requirement for banks to hold portion of the deposits in cash, gold and government securities to 25 per cent.

Moreover, it had also done away with special liquidity provision for banks to provide money to mutual funds and others.


RBIโ€™s Monetary Policy – Analyst View

Hello Friends, last month we witnessed loads of action with the RBIโ€™s monetary policy being laid down.

Just an extension of our previous blog โ€œRBIโ€™s Monetary Policy Stance โ€“ Part 3โ€.



Analyst View RBI policy

RBI Monetary Policies and Projections Part 4


In this Blog we would read the Analyst views with respect to the monetary point of view.

Analysis from the Analyst from monetary point of view:

Though there is a hike in SLR to 25 % but we think it will not have much more impact because the total investment book of commercial banks is already at 30.4% of total NDTL.

Although key rates of CRR, reverse repo and repo rates have been left unchanged, special repo facilities have been withdrawn.

Real estate loans provisioning are set to become more expensive.

NPA norms for banks have been tightened while liabilities of scheduled banks arising from transactions in CBLO with Clearing Corporation of India Ltd. (CCIL) will be subject to maintenance of CRR.


The RBI is thus attempting to withdraw liquidity from areas where excess liquidity had reached a point it was more than comfortable with, while also targeting better quality management of credit.

Another point is that in the policy stance, RBI has given first priority to keep a vigil on trends in inflation and to be prepared to respond swiftly and effectively through policy adjustments to stabilize inflation expectations.

Second, it will 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.

Lastly, RBI will maintain a monetary and interest rate regime consistent with price stability and financial stability, and supportive of the growth process.


In conclusion, it bears emphasis that the Reserve Bank is mindful of its fundamental commitment to price stability.

It will continue to monitor the price situation in its entirety and will take measures as warranted by the evolving macroeconomic conditions swiftly and effectively.


To conclude all the factors it seems that with the withdrawal of special liquidity measures together with an imposition of CRR in borrowing in CBLO market, RBI has taken a first to step towards controlling liquidity.


With prioritizing inflation it is expected that the next step of RBI could hike in CRR as it has also reduced the indicative growth of Broad money to 17% from 18%.


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RBI, Monetary Projections And Indian Economy

Hello Friends,

Just an extension of our previous blog โ€RBI And Its Policies โ€“ Part 1โ€ณ.

RBI, Monetary Projections And Indian Economy

RBI, Monetary Projections And Indian Economy

In this Blog we would touch upon the aspects as that of Monetary projection from RBI, assessment of economy scenario at present and relevance of RBI policy on economy.

Monetary projection:

For policy purposes, money supply (M3) growth for 2009-10 is placed at 17.0 per cent, down from 18.0 per cent projected in the Annual Policy Statement.

Consistent with this, aggregate deposits of scheduled commercial banks are projected to grow by 18.0 per cent.

The growth in adjusted nonfood credit, including investment in bonds/debentures/shares of public sector undertakings and private corporate sector and Commercial Papers (CPs), has been revised downwards at 18.0 per cent as in the Annual Policy Statement.



Since the last review in July 2009, there has been a discernable improvement in the global economy.

The recovery is underpinned by output expansion in emerging market economies, particularly in Asia.

World output has improved in the second quarter, manufacturing activity has picked up, trade is recovering, financial market conditions are improving, and risk appetite is returning.


A sharp recovery in equity markets has enabled banks to raise capital to repair their balance sheets.

If we talk about the home country then there are definitive indications of the economy attaining the ‘escape velocity‘ and reverting to the growth track.


The performance of the industrial sector has improved markedly in recent months.

Domestic and external financing conditions are on the upturn.

Capital inflows have revived.

Moreover activity in the primary capital market has picked up and funding from non-bank domestic sources has eased.

Liquidity conditions have remained easy and interest rates have softened in the money and credit markets.

Growth projection for GDP for 2009-10 on current assessment is placed at 6.0% with an upward bias, the same as the previous policy review.

But some darker parts also persist.

There are clear signs of rising inflation stemming largely from the supply side, particularly from food prices.

Private consumption demand is yet to pick up.

Agricultural production is expected to decline.

Services sector growth remains below trend.

Bank credit growth continues to be sluggish.

The central bank has warned of possible asset price bubbles, raised banks’ provisioning requirements for commercial real estate loans and lifted inflation forecast.

WPI inflation for end-March 2010 is projected at 6.5 per cent with an upward bias.

This is once again higher than the projection of 5.0 per cent made in the Annual Policy Statement in July 2009.


Stay Tuned for more on the topic.

We would look into Monetary Policy stance, more facts about economic indicators and Analysis from the Analyst from monetary point of view.

Note : For More Finance Gyan, Latest Industry, Stock Market, Economy News and Updates, please click here

RBI And Its Policies – Part 1

Hello Friends, last month we witnessed loads of action with the RBI’s monetary policy being laid down.

However here we bring more on the RBI policies and projections.

RBI policies and projections

RBI policies and projections


The Reserve Bank of India (RBI) laid the groundwork on Tuesday i.e. on 27th Oct in its monetary policy for a rise in interest rates by tightening credit to the commercial property sector, lifting its inflation forecast and warning of the threat of asset price bubbles.


The RBI had injected in massive liquidity in the banking system in the past one year or so to help revive the domestic economy in the aftermath of the global financial crisis.

For now, the Reserve Bank has decided to keep the policy repo rate unchanged at 4.75 per cent, the reverse repo rate unchanged at 3.25 per cent and the (Cash Reserve Ratio) CRR of banks unchanged at 5 per cent of their (NDTL).

The following measures constitute the first phase of ‘exit’:

– The Statutory Liquidity Ratio (SLR), which has earlier been reduced from 25 per cent of NDTL to 24 per cent, is being restored to 25 per cent.

-The limit for export credit refinance facility, which was raised to 50 per cent of eligible outstanding export credit, is being returned to the pre-crisis level of 15 per cent.

The two unconventional refinance facilities:

(i) special refinance facility for scheduled commercial banks; and

(ii) special term repo facility for scheduled commercial banks [for funding to Mutual Funds (MFs), Non-banking Financial Companies (NBFCs), and Housing Finance Companies (HFCs)] are being discontinued with immediate effect.


Further, the liabilities of scheduled banks arising from transactions in Collateralized Borrowing and Lending Obligations (CBLO) with Clearing Corporation of India Ltd. (CCIL) would now be subject to the maintenance of the CRR.


Stay Tuned for more on this in our coming blogs.

We would cover Monetary Projections of RBI and Economy scenario and indicators at the moment.

Market to Go Volatile This Week, Due to Host of Factors

Market to Go Volatile This Week, Due to Host of Factors

The Market is likely to remain volatile this week as a host of triggers are set to guide investor sentiments. These factors are :

1. Expiry of the October series of derivatives contracts,

2. September quarter results of some key companies such as Reliance Industries and

3. the RBI money policy review.


Global cues may also induce some choppiness in the market.

Noted Market analyst, Jagannadham Thunuguntla, head of equities at SMC Capital quoted that;

โ€œThe market is facing heavy pressure.ย  There a wide gap between fundamentals and stock valuations.ย  The second quarter results have come up less than what most investors had anticipated”.

He also added “though the average profits of companies, which have so far reported second quarter results, have grown 30-40 per cent on cost-cutting measures, growth in net sales has been sluggish“.

Also Thunuguntla said that “we have huge liquidity in the market thanks to the 100 per cent rally and this has helped the market sustain at this level till now. No doubt, fundamentals are catching up with valuations slowlyโ€.


Thunuguntla said the market was in a consolidation phase.

โ€œIt may remain volatile this week ahead of the expiry of near-month futures and options contracts and the RBI policy review.โ€

On the global front, the US will disclose its third quarter GDP figures on Thursday.

Meanwhile, the rate of inflation jumped to 1.21 per cent for the week ended October 10 against 0.92 per cent a week ago.

The BSE Sensex slipped 512.01 points, or 2.96 per cent, last week to close at 16,810.81.01.

The Nifty index on the NSE dipped 145.10 points, or 2.82 per cent, to end the week at 4,997.05.


According to other observers, Nifty has a support at 4,900.
Market sentiment may get hurt if this level is breached.

Thunuguntla also said investors would keenly follow the quarterly results of Reliance Industries as well as global cues.

โ€œAmid the fight between the Ambani brothers, investors will watch the RIL results keenly.ย  Global cues will also be followed after a few bad economic numbers from the US last week,โ€ he said.


Foreign institutional investors (FIIs) on Friday remained net sellers, offloading equities worth Rs 295.70 crore, according to figures available at the website of market regulator Sebi.


Stock Markets to be Propelled by the NTPC Stake Sale :)

stake sale in NTPC is expected to propel the stock markets :)

Stake sale in NTPC is expected to propel the stock markets ๐Ÿ™‚

The government’s nod for stake sale in state-run power utilitiesNTPC and SJVNL – is expected to bolster investor sentiment and propel the stock markets in days to come, experts said.

The Cabinet Committee on Economic Affairs (CCEA) has approved five and 10 per cent disinvestments in NTPC and SJVNL respectively.

Government seems to be confident and ready to adopt a more liberalised economic policy and looks like committed to increase investors’ wealth, experts said.


Marketmen believe, a follow-on public offer (FPO) of NTPC, the second most valued public sector unit with a market capitalisation of over Rs 1.77 lakh crore, would help increase trading volumes at the counter.


PSU stocks generally have less volume and low volatility.
The market would now look at the issue price of the FPO and an increase in demand would help to shore up supply,” SMC Global Vice President Rajesh Jain said.


Meanwhile, it is expected that the stake dilution would increase liquidity in the scrip and would help in reducing the fiscal deficit of the economy, but it may at the same time, act as a dampener on the stock price.

However, experts are waiting for the entire structure of the issue to be released for further clarity.


NTPC shares are currently trading around Rs 216 a share levels.

Given the current market conditions, the company would be able to mop up around Rs 8,500 crore through the stake sale.

After five per cent stake dilution, the government’s holding in NTPC would come down to 84.5 per cent from the current 89.5 per cent.


Dollar Supremacy to End? New Global Reserve Currency to Set In ?

UN called on Tuesday for a new global reserve currency to end dollar supremacy. Is dollar Supremacy at risk?

UN called for a new global reserve currency to end dollar supremacy. Is dollar Supremacy at risk?

The United Nations has called on for a new global reserve currency to end dollar supremacy, which has allowed the United States the โ€œprivilegeโ€™โ€™ of building a huge trade deficit.

โ€œImportant progress in managing imbalances can be made by reducing the reserve currency countryโ€™s โ€˜privilegeโ€™ to run external deficits in order to provide international liquidity,โ€™โ€™ UN undersecretary-general for economic and social affairs, Sha Zukang, said.


Speaking at the annual meetings of the International Monetary Fund and World Bank in Istanbul, he explained:

โ€œIt is timely to emphasis that such a system also creates a more equitable method of sharing the seigniorage derived from providing global liquidity.โ€™โ€™

Greater use of a truly global reserve currency, such as the IMFโ€™s special drawing rights (SDRs), enables the seigniorage gained to be deployed for development purposes,โ€™โ€™ he said.

The SDRs are the asset used in IMF transactions and are based on a basket of four currenciesโ€”the dollar, euro, yen and poundโ€”which is calculated daily.


China had called in March for a new dominant world reserve currency instead of the dollar, in a system within the framework of the Washington based IMF.

Beside this another worrying news for Dollar lovers is floating around that Arab states had launched secret moves with China, Russia, Japan and France to stop using the dollar for oil trades, though denied by many of arab states.


Dalal Street Investors Hoping for Diwali Cracker ;)

Dalal Street Investors Hoping for Diwali Cracker

Dalal Street Investors Hoping for Diwali Cracker

September, for Dalal Street investors, was an unusually good month, raising hopes of a better Diwali in October after two consecutive years of subdued celebrations.


During the month, sensex gained in 14 of the 20 session and added 1,461 points, or 9.3%, to 17,127.

Brokers and dealers admitted that much of these gains came on the back of liquidity, the inflow of money from abroad.

BSE data showed that so far this month net buying by FIIs in the secondary market alone was at a whopping Rs 18,200 crore, nearly $4 billion.


On last Wednesday of september alone, FIIs net bought stocks worth over Rs 1,000 crore.

Sebi data showed net FII buying in 2009 at $12.2 billion, the second highest yearly inflow ever for the Indian market.


However, going forward there could be some correction, market participants feel.

October is a short month, and one would be wary of the latest move in the index, which has been very fast.

Based on cues from the US, one would not be surprised to see a correction of about 10%, to say 4,600 nifty by end of October, which is healthy in our view, experts said.


On last Wednesday of september, Nifty ended at 5,084.

With the Bharti Airtel-MTN deal off and the US markets showing weakness in early trades, the market could witness some correction in coming days.