Sorry, I’d rather understand why the party for reduction in MSF and INR 17000 cr (INR 170 Bln) of Borrowing added in 0.25% of the Deposits. The channel to the low repo rate of 7.50% is still 150 points after the cut and the 10 yr yields are not really expected to move south from 8.6% ‘except at the low rate of’ 50 basis points in the next three months it had already proffered before Rajan made the change.
Anyway, markets at least recognize or get their bank spokespersons/contacts to say banks are at ease again so the 5950 mark has come. already on the markets. The Upward potential is truly limited at this juncture, all the media noise budget (DAVP one mite bite) for showing activity in the Economy not making up for the spending cuts to stay in and the investments still a far way off.
However, markets per se are undervalued fundamentally with earnings positive thru the crisis except that they wait on such changes in fundamentals which are India’s bane for moving up while China gets a free look again just for having underperformed as it finds no legs in manufacturing worth reviving the Economy in goods production and of course the stat spin fails to take the big opportunity off the table
Rajan seemingly has made it clear he will be taking the Repo rate up again, and as the October meet approaches, markets will be equally quick to reach the bottom of the 5750 – 6000 range of the markets. the Repo rate at 7.50% already looks steep enough to me esp as trading markets stay idled to a high rate pre Taper.
I rather liked the Welfare flavor of August & September and wonder if it will come back again. At least its things we can do. The exchange rate is no good at 61.77, and hopefully its just waiting to go u to 60 levels as signs of others interested in the breakdown to 77-78 recede.
The inflation rate Formulatonomics of getting to that ratio as differential to ‘PPP’ are rather lost to most with a real India, Economics or Finance background though. You want PPP, you should go for a reference you can live with and that still counts as the Mac or the Pizza probably where we are definitely looking for a rate under 40 instead. Indian inflation would count as facts show as deadbeat deflation at 6% itself, as the Economy at 4% is almost a dead duck in the water ( in India references, it being the flat minimum of National activity)
RBI eases short-term rates and liquidity with 50bps MSF cut; small banks gain (dnaindia.com)
India Cuts MSF Rate to Ease Cash Squeeze After Climb in Rupee (bloomberg.com)
Cut in MSF, RBI to monitor CAD and Inflation(WPI)- Bank Policy and Mid Quarter Review (September 2013) (awardz.wordpress.com)
- RBI repo rate hike disappoint India Inc (thehindu.com)
- RBI’s Marginal Standing facility – Basics and Some history (mostlyeconomics.wordpress.com)
- RBI eases short-term rates and liquidity with 50bps MSF cut; small banks gain (dnaindia.com)
- India Morning Report: A technical correction to make space in the move (awardz.wordpress.com)
- Column: Decoding Governor Rajan (rediff.com)
- India Morning Report: Rupee at 66, GDP Growth at 4% and Interest Rates at 9% (awardz.wordpress.com)
- India Morning Report: No Taper and Nifty on to 6100 levels (awardz.wordpress.com)