CRR is cash reserve ratio which is portion of the deposits mobilised in a fortnight to be kept with RBI as a statutory requirement.
Repo is the rate at which RBI infuses liquidity through purchase of government securities while reverse repo is the process of absorption of liquidity from the system through sale of government papers . These are tools for open market operations.
Reserve Bank of India may keep interest rates unchanged in the monetary policy to be announced on Tuesday.
Inflation concerns and high money supply will remain the primary concern of the central bank, sources close to the development said.
According to the sources, inflation concerns and high money supply will remain the primary concern of RBI for at least a couple of months more. This means the central bank will wait at least till the next policy review in April before adopting a softer stance on rates.
However, they added that the cash reserve ratio (CRR) may be increased 25 basis points to curb liquidity following the rising interest rate differential between the US and India after the 75 basis point cut in the US Federal Reserve rate.
Sources close to the development said there was an internal view within RBI that the time is perhaps ripe for a 25 basis point cut in the repo rate, since the corridor between the repo and reverse repo has been quite high at 175 basis points as against the conventional 100 basis points.
This can be accompanied by a 25 basis point hike in CRR. This, a section within RBI felt, will help tighten liquidity without the cost of issuing market stabilisation bonds and treasury bills. At the same time it would signal a softer stance on interest rate.
With the cut in the US Federal Reserve rate and expectations of another 25-50 basis point reduction in the January 30 Open market committee meeting, this section felt that a repo rate cut is necessary to stem the deluge of foreign exchange inflows due to the interest rate arbitrage.
However, RBI is veering to the view that a status quo is necessary as inflation concerns still remain high.
Besides, Indian economy growth may not be as high as last year; and the forex inflows will be more evenly distributed across all Asian countries. Moreover, if the liquidity management becomes a problem, RBI has all the instruments at its disposal to step in whenever necessary.
There is in fact a liquidity surplus in the system with no substantial increase in credit pick-up and money supply is already ruling much higher at 21-22 per cent above RBI’s forecast of 17-17.5 per cent.
Currently, CRR is maintained at 7.5 per cent after six tranches of hikes since April 2007.
Showing posts with label Stocks and Sensex. Show all posts
Showing posts with label Stocks and Sensex. Show all posts
Sunday, January 27, 2008
Saturday, January 26, 2008
Stock Market Crash: Jan 2008...Important lessons learnt
A very goood post from Moneycontrol by none other than Udyan Mukherjee
"The thing about life is that one makes mistakes. Many mistakes were made in the second half of 2007 and those sins have to be washed away by blood, such is the way of financial markets. Some participants will go down under and never be able to get back to the market again but most will survive. The pain will linger for many months, maybe years but lessons have to be learnt. Every such debacle has lessons for us and the sooner we forget them the more we suffer.
The first lesson is not to let stock price performance become the sole reason for buying, a mistake which was made in abundance in the last 3 months. What couldn't be explained by fundamentals was credited to liquidity. The present lost all relevance as people chose to focus on the distant future, perhaps simply because the present could never justify those ticker prices; only a hazy dream of the future could. Traders and investors had no time for fundamental analysts, in many cases they were labelled "cribbing fools". Chartists became the most celebrated tribe on the street as only they could see and predict the one way run to glory for many of the hot stocks even as fundamental watchers cringed at valuations....till the music stopped. Don't get me wrong, charts do work in trending markets but once stock prices veer away completely from fundamental value, people need to get careful. But they never are. Now that the blinkers are off, people should ask themselves why stocks like RNRL, Ispat, RPL, Essar oil and Nagarjuna fertilisers have lost 50-70% of their value. It is simply because their stock prices had snapped all connection with underlying business fundamentals, earnings and value. Their stock prices became the only reasons for buying them which works for a while but not forever.
The other big lesson, one which should have been driven in earlier in May 2006, is the danger of overextending oneself in the futures market. The lure of stock futures is easy to understand. Put in some margin, take a big exposure on a fast moving stock, make a killing when prices shoot up. Repeat exercise. Just that people forgot that prices may also come down and at a pace which noone can even imagine, maybe their friendly stockbrokers forgot to tell them that part of the story. The result : unbridled speculation that ran into lakhs of crores, excesses that we are paying for today. Even this fall will not cure investors of their love for futures speculation but if at least some amount of caution is injected it would have been a worthwhile learning. Futures are not toys for amateurs, they are time bombs in the hands of inexpert and inexperienced traders, it's only a matter of when the fuse runs out.
The other learning which I hope will play out in the future, as it has in the past, is that it pays to be brave in times of panic such as these. If I was allowed to invest myself , which I am not, I would have no hesitation in deploying serious money into the market today, knowing fully well that prices may fall more tomorrow. And I would be standing there tomorrow to buy more of the same, till my money ran out. India is going to be a terrific stock market story for many years to come, even an intermediate bearish patch cannot shake that conviction of mine. At best, one will have to wait a bit for the returns to follow. That's alright. You are happy to put money in a bank FD and then wait for one full year to collect that measly 8%, aren't you? Then why does the stock market need to give you 20% every month? In the last one year, I haven't seen so many good stocks trade at such mouth watering levels. Forget trading, avoid the duds which were fuelled up by operators, just go out and buy those bluechips. They will deliver, even if there is a global market meltdown for a while, and if you are a bit patient you will be rewarded. But do remember January 2008, as history will repeat itself again in the future. Just that our memories tend to be too short and our greed too much"
"The thing about life is that one makes mistakes. Many mistakes were made in the second half of 2007 and those sins have to be washed away by blood, such is the way of financial markets. Some participants will go down under and never be able to get back to the market again but most will survive. The pain will linger for many months, maybe years but lessons have to be learnt. Every such debacle has lessons for us and the sooner we forget them the more we suffer.
The first lesson is not to let stock price performance become the sole reason for buying, a mistake which was made in abundance in the last 3 months. What couldn't be explained by fundamentals was credited to liquidity. The present lost all relevance as people chose to focus on the distant future, perhaps simply because the present could never justify those ticker prices; only a hazy dream of the future could. Traders and investors had no time for fundamental analysts, in many cases they were labelled "cribbing fools". Chartists became the most celebrated tribe on the street as only they could see and predict the one way run to glory for many of the hot stocks even as fundamental watchers cringed at valuations....till the music stopped. Don't get me wrong, charts do work in trending markets but once stock prices veer away completely from fundamental value, people need to get careful. But they never are. Now that the blinkers are off, people should ask themselves why stocks like RNRL, Ispat, RPL, Essar oil and Nagarjuna fertilisers have lost 50-70% of their value. It is simply because their stock prices had snapped all connection with underlying business fundamentals, earnings and value. Their stock prices became the only reasons for buying them which works for a while but not forever.
The other big lesson, one which should have been driven in earlier in May 2006, is the danger of overextending oneself in the futures market. The lure of stock futures is easy to understand. Put in some margin, take a big exposure on a fast moving stock, make a killing when prices shoot up. Repeat exercise. Just that people forgot that prices may also come down and at a pace which noone can even imagine, maybe their friendly stockbrokers forgot to tell them that part of the story. The result : unbridled speculation that ran into lakhs of crores, excesses that we are paying for today. Even this fall will not cure investors of their love for futures speculation but if at least some amount of caution is injected it would have been a worthwhile learning. Futures are not toys for amateurs, they are time bombs in the hands of inexpert and inexperienced traders, it's only a matter of when the fuse runs out.
The other learning which I hope will play out in the future, as it has in the past, is that it pays to be brave in times of panic such as these. If I was allowed to invest myself , which I am not, I would have no hesitation in deploying serious money into the market today, knowing fully well that prices may fall more tomorrow. And I would be standing there tomorrow to buy more of the same, till my money ran out. India is going to be a terrific stock market story for many years to come, even an intermediate bearish patch cannot shake that conviction of mine. At best, one will have to wait a bit for the returns to follow. That's alright. You are happy to put money in a bank FD and then wait for one full year to collect that measly 8%, aren't you? Then why does the stock market need to give you 20% every month? In the last one year, I haven't seen so many good stocks trade at such mouth watering levels. Forget trading, avoid the duds which were fuelled up by operators, just go out and buy those bluechips. They will deliver, even if there is a global market meltdown for a while, and if you are a bit patient you will be rewarded. But do remember January 2008, as history will repeat itself again in the future. Just that our memories tend to be too short and our greed too much"
Monday, January 21, 2008
Stock Market Crash and Me
It was a Chilly morning.Wifey asked me to hurry up and drop her 4 her training. My thoughts were fixed on how would i recover the 26000 loss in the stock market on friday..."Jaldi Karo"....and i was shaken...
I hurriedly got up and got ready...
Reached office in a hurry to beat the parking rush...reached just in time to get a parking...
Heard a few ppl discussing the reliance power IPO subsrciption levels in the lift..had avery good feeling that i applied in time....
reached my seat...powered my laptop...n the there it was....the losses had increased to 34000..could not muster the courage to sell....discussed it with a frnd...said forget it...n then there it was....i was having ..n news flashed that Sensex had dropped a whopping 1200 points....a sense of fear ran through my spine...and the constant question...how much i must be losing now..and i sense of regret..why did i not selll it earlier...
by the time markets closed...i was lsoing 60000...
A bad day @ office indeed!!!
I hurriedly got up and got ready...
Reached office in a hurry to beat the parking rush...reached just in time to get a parking...
Heard a few ppl discussing the reliance power IPO subsrciption levels in the lift..had avery good feeling that i applied in time....
reached my seat...powered my laptop...n the there it was....the losses had increased to 34000..could not muster the courage to sell....discussed it with a frnd...said forget it...n then there it was....i was having ..n news flashed that Sensex had dropped a whopping 1200 points....a sense of fear ran through my spine...and the constant question...how much i must be losing now..and i sense of regret..why did i not selll it earlier...
by the time markets closed...i was lsoing 60000...
A bad day @ office indeed!!!
Friday, January 06, 2006
Buzzing stocks in indian equity market
The indian equity markets have given a fabulous run and made a new high. Looking at the liquidity and the foreign inflows nothing looks like a concern on the horizon. Having said that, the outlook on sectors like two wheelers, capital goods, MNC pharma and Oil refining companies looks very positive.
Stocks like Bajaj Auto, BPCL, HPCL, Aventis, Glaxo can be looked at from the current levels for long term investments.
Auto sector is booming
Tata motors is my pick of the day. I recommend a buy on it.
It can reach Rs. 700 levels within a month from its present Rs. 650 levels.
Stocks like Bajaj Auto, BPCL, HPCL, Aventis, Glaxo can be looked at from the current levels for long term investments.
Auto sector is booming
Tata motors is my pick of the day. I recommend a buy on it.
It can reach Rs. 700 levels within a month from its present Rs. 650 levels.
Thursday, January 05, 2006
6 stock recommendations for coming week
The following counters are looiking good.
Investing in these stocks for a period of 1 month can give handsome returns of 10%
1. Suzlon Energy
2. Tata Motors
3. Dena Bank
4. Ambuja Cement
5. Bharti Televentures
6. Reliance industries
Investing in these stocks for a period of 1 month can give handsome returns of 10%
1. Suzlon Energy
2. Tata Motors
3. Dena Bank
4. Ambuja Cement
5. Bharti Televentures
6. Reliance industries
India to grow at 7.7% in FY07: BankAm
This is a report published on rediff.com, india's premier website
Booming manufacturing and services sector is likely to push up India's GDP growth to 7.7 per cent in 2006-07, but inflationary pressure may lead to hike in interest rates, Bank of America said on Thursday.
However, Bank of America warned that cutting fiscal deficit as per FRBM (Fiscal Responsibility and Budget Management) Act is likely to remain a challenge in the absence of further budgetary reforms.
"In India, GDP growth is likely to remain in high gear at 7.7 per cent in 2006-67, as economic activity continues to transit from the public to private sector," Bank of America chief economist Mickey Levy said in the report 'Global Outlook for 2006'.
Growth is likely to be more evenly distributed among varying sectors, with the manufacturing and services sectors maintaining forward momentum and agriculture benefiting from a normal rainfall.
Rising income levels will see inflationary pressure mounting in addition to the effect of the gradual pass-through of higher fuel prices in 2005.
"Wholesale Price Inflation is projected to average higher at 5.1 per cent in 2006-07 compared to 4.6 per cent in 2005-06 in part due to a low base this year," Levy's said.
Policy rates (repo and reverse repo) will remain on an uptrend because managing the build-up of inflationary expectation continues to be an over-riding concern for Reserve Bank of India.
Though privatisation of state-owned companies in a smaller scale will relieve fiscal pressure in the near term, achieving commitments under the Fiscal Responsibility Act will be difficult in the next fiscal in the absence of further budgetary reform.
The current account deficit of the country may pose a challenge in 2006-07, the report said.
The strong investment cycle, low real interest rates and the credit boom will continue to exert significant upward pressure on the trade imbalance.
"Import growth will outpace export growth, although we see the current account deficit staying at a manageable 2.5 per cent of GDP, up from around two per cent in 2005," Levy said.
The present shift away from state domination is likely to continue to proceed with a further ease in the regulatory environment, which will keep India at the forefront of destinations for foreign direct investment.
The steady stream of FDI projects and incremental investment liberalisation is likely to trigger a significant improvement in long-term investment flows in 2006.
There is likely to be improvement in long-term capital inflows, together with an expected stable flow of overseas borrowing and equity inflows, and the overall balance should remain in surplus with rising foreign reserves.
Booming manufacturing and services sector is likely to push up India's GDP growth to 7.7 per cent in 2006-07, but inflationary pressure may lead to hike in interest rates, Bank of America said on Thursday.
However, Bank of America warned that cutting fiscal deficit as per FRBM (Fiscal Responsibility and Budget Management) Act is likely to remain a challenge in the absence of further budgetary reforms.
"In India, GDP growth is likely to remain in high gear at 7.7 per cent in 2006-67, as economic activity continues to transit from the public to private sector," Bank of America chief economist Mickey Levy said in the report 'Global Outlook for 2006'.
Growth is likely to be more evenly distributed among varying sectors, with the manufacturing and services sectors maintaining forward momentum and agriculture benefiting from a normal rainfall.
Rising income levels will see inflationary pressure mounting in addition to the effect of the gradual pass-through of higher fuel prices in 2005.
"Wholesale Price Inflation is projected to average higher at 5.1 per cent in 2006-07 compared to 4.6 per cent in 2005-06 in part due to a low base this year," Levy's said.
Policy rates (repo and reverse repo) will remain on an uptrend because managing the build-up of inflationary expectation continues to be an over-riding concern for Reserve Bank of India.
Though privatisation of state-owned companies in a smaller scale will relieve fiscal pressure in the near term, achieving commitments under the Fiscal Responsibility Act will be difficult in the next fiscal in the absence of further budgetary reform.
The current account deficit of the country may pose a challenge in 2006-07, the report said.
The strong investment cycle, low real interest rates and the credit boom will continue to exert significant upward pressure on the trade imbalance.
"Import growth will outpace export growth, although we see the current account deficit staying at a manageable 2.5 per cent of GDP, up from around two per cent in 2005," Levy said.
The present shift away from state domination is likely to continue to proceed with a further ease in the regulatory environment, which will keep India at the forefront of destinations for foreign direct investment.
The steady stream of FDI projects and incremental investment liberalisation is likely to trigger a significant improvement in long-term investment flows in 2006.
There is likely to be improvement in long-term capital inflows, together with an expected stable flow of overseas borrowing and equity inflows, and the overall balance should remain in surplus with rising foreign reserves.
Indian makets on a roll
The indian Equity markets are on a roll although the Sensex(Indian index) is volatile today
The sensex has jumped from 6000 levels in early 2005 to 9600 now.
The heavyweights leading the rally are Reliance industries, ONGC and tata motors.
FII and mutual funds have pumped in a huge amount of money and have made India a attractive economy to look at.
The sensex has jumped from 6000 levels in early 2005 to 9600 now.
The heavyweights leading the rally are Reliance industries, ONGC and tata motors.
FII and mutual funds have pumped in a huge amount of money and have made India a attractive economy to look at.
Subscribe to:
Posts (Atom)
