Daily Archives: December 7, 2016

Dec 07

Fifth Bi-monthly Monetary Policy Statement 2016-17

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  • On the basis of an assessment of the current and evolving macroeconomic situation at its meeting on 07 Dec 2016, the Monetary Policy Committee (MPC) and Reserve Bank of India’s Governor Urjit Patel decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.25 per cent.
  • Consequently, the reverse repo rate under the LAF remains unchanged at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.
  • Global growth picked up modestly in the second half of 2016, after weakening in the first half. Activity in advanced economies (AEs) improved hesitantly, led by a rebound in the US.
  • International financial markets were strongly impacted by the result of the US presidential election and incoming data that raised the probability of the Federal Reserve tightening monetary policy.
  • On the domestic front, the growth of real gross value added (GVA) in Q2 of 2016-17 turned out to be lower than projected on account of a deeper than expected slowdown in industrial activity. Manufacturing slowed down both sequentially and on an annual basis, with weak demand conditions and the firming up of input costs dragging down the profitability of corporations. Gross fixed capital formation contracted for the third consecutive quarter. Although government final consumption expenditure slowed sequentially, it supported private final consumption expenditure, the mainstay of aggregate demand. The contribution of net exports to aggregate demand remained positive, but on account of a sharper contraction in imports relative to exports.
  • Turning to Q3, the Committee felt that the assessment is clouded by the still unfolding effects of the withdrawal of specified bank notes (SBNs). The steady expansion in acreage under rabi sowing across major crops compared to a year ago should build on the robust performance of agriculture in Q2.
  • Retail inflation measured by the headline consumer price index (CPI) eased more than expected for the third consecutive month in October, driven down by a sharper than anticipated deflation in the prices of vegetables.
  • Liquidity conditions have undergone large shifts in Q3 so far. Surplus conditions in October and early November were overwhelmed by the impact of the withdrawal of SBNs from November 9. Currency in circulation plunged by 7.4 trillion up to December 2; consequently, net of replacements, deposits surged into the banking system, leading to a massive increase in its excess reserves.
  • Sixth Bi-monthly Policy Statement for the year 2016-17 will be released on Feb 07, 2017

Dec 07

Daily Market Commentary : 6 Dec. 2016

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At the end of trading hours, the only positive is that the indices have closed in green. Sensex opened on a high note and more or less was stagnant in terms of variations throughout the day. Similarly, Nifty too stayed flat throughout the day.

Nifty closed with a gain of 14 points and closed at 8,143.15, while BSE Sensex ended with a gain of 44 points at 26392.76.

On the global front, most Asian indices closed in green and marginally up. In Europe, the FTSE 100 was down 0.08%. CAC 40 and DAX was up 0.29% and 0.06% respectively while, the US Nasdaq was also up 1%.

All eyes are set on the RBI’s monetary policy meeting today. The results of the meeting will be out within a few hours.

Today’s monetary policy announcement is crucial as it is likely to offer some guidance on the demonetisation drive. Apart from that, the announcement will also offer some clarity regarding economic growth and inflation.

A rate cut, or the lack thereof, is not as crucial as the governor’s thoughts on the impact of demonetisation. We want to know whether he expects the near-term demand slowdown to have a snowball effect on the economy and specific businesses. But no one at the RBI has offered a concrete view so far.

Gold was trading at Rs 27,935 per 10 gms and silver was trading at Rs 41,240 per kg.

The Indian rupee was trading at 67.92 per US dollar.

Out of 1882 stocks traded on the NSE, 698 declined and 904 advanced today.

Top 5 Nifty Gainers: Adani Ports & Sez (1.87%), HDFC (1.87%), M&M (1.26%), Hero MotoCorp (1.20%) and Tata Motors (1.02%).

Top 5 Nifty Losers: Sun Pharma (-4.28%), TCS (-1.02%), Lupin Ltd. (-0.80%), Wipro (-0.48%) and Tata Steel (-0.44%)

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Dec 07

Daily Market Commentary : 5 Dec. 2016

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While the day began with both the Indices trading in red, there was some momentum gained towards the end. The Auto and Bank sectors activities ensured that the Sensex and Nifty ended in green. When the market closed, Sensex gained more than 100 points while Nifty gained 42 points and closed above 8100.

Nifty closed with a gain of 42 points and closed at 8,128.75, while BSE Sensex ended with a gain of 118 points at 26349.10.

On the global front, most Asian indices closed in red and marginally down. In Europe, the FTSE 100 was up 0.52%. CAC 40 and DAX was up 1.39% and 1.65% respectively, where all indices were trading in green while, the US Nasdaq was also up marginally.

The performance of India’s service sector weakened in November as a result of cash shortages. New business declined for the first time since June 2015, leading to a solid reduction in activity. Correspondingly, backlogs of work rose, while employment increased only marginally. In spite of the falls in output and new orders, optimism regarding future activity improved. Input costs were broadly unchanged, whereas prices charged decreased slightly.

Dropping from 54.5 to 46.7 in November, the seasonally adjusted headline Nikkei India Services Business Activity Index moved into contraction territory for the first time since June 2015 and pointed to the sharpest reduction in output for almost three years. Anecdotal evidence highlighted a lack of cash in the economy. Activity decreased in three of the six monitored sub-sectors, namely Financial Intermediation, Hotels & Restaurants and Renting & Business Activities.

Factory production rose further during the month, but the rate of growth eased. Concurrently, the seasonally adjusted Nikkei India Composite PMI Output Index dipped from October’s 45-month high of 55.4 to 49.1 in November, thereby pointing to a slight contraction in private sector activity overall.

As was the case for activity, new business inflows at services firms declined during November. The fall in new work was the first in 17 months and the steepest in over three years.

Gold was trading at Rs 27,925 per 10 gms and silver was trading at Rs 40,950 per kg.

The Indian rupee was trading at 68.26 per US dollar.

Out of 1436 stocks traded on the NSE, 594 declined and 788 advanced today.

Top 5 Nifty Gainers: GAIL (1.84%), HDFC (1.78%), NTPC (1.36%), Infosys Ltd. (1.35%) and Adani Ports & Sez (1.23%).

Top 5 Nifty Losers: Hind.Unillver (-0.86%), ITC Ltd (-0.82%), Axis Bank (-0.65%), Asian Paints (-0.62%) and BHEL (-0.27%)

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