Ajay Srivastava of dimensions woke me to another nineties dictum we used to abide by. The higher the interest rates, the more money for the banks to make. Of course the transition will be difficult but it may well happen that while the markets readjust sharply (and hence the ferocious return above may well be antsy pantsy horrific and squeamishly fragile)
The Dollar has finally found its match of the Indian Hockey team’s heydeys. But before we go for the corny stuff, the details as we see it. interest rate margins will expand as banks , esp midcaps start the healing process for themselves by raising lending rates (YES has increased base rate today by 25 bp) The capital markets will continue to slide but once the banks break their downtick as the rupee’s downtick will continue beyond such levels till even periliously close to the 70s whether India’s sovereign bonds borrowed in rupees or dollars.
Banks as they are wont to, will soon be found readjusting faster and in a position to look at the bright side of things as India Inc wakes up to the new levels to operate International business at, and markets will even return to celebrate another round of robust reported results from Bharti today morning.
Double digit rates are probably not so tough for India Inc but that move has definitely failed for the Central bank and for the Fin Min. However the UPA/Congress has had a few laughs in the last few days and its still not party time for the NaMo face to take over the Indian mindset.
Indices are probably not going below 5300 levels but those looking for a return to 5800 may be a little buzzed by unwanted attention (and crank calls, maybe) to their person and offices. Markets will probably wait to rise back (and will keep falling as opposed to nursing the morning’s wounds) till the close of week operations but FIIs had probably started closing out their hedge positions last week and yesterday so the indices will know how much exactly the rupee exchange matters. however at this end of the business cycle, credit growth is definitely unhindered from here. Also it is a relief to see DLF fall back to 150 levels , though at a very broad market cost as the distinction between infrastructure investment and constrction growth finally gets encilled in on other India experts. Funnily enough even REC is also 150 levels right now as NBFCs will get boxed in by their banks again the fastest, in the most efficient leg of the rate transmission workaround and banks will also probably reassess the advantages f having increased monetary transmission to retail and wholesale markets as they had ample liquidity for more than 12 months whence rate cuts cycle was squeezed. rupee well nigh opened to 61 levels in the morning nd it is atleast one market where the droping vlues have not poduced many losers yet (ha ha!)
- Rupee nears 60, on verge of losing all gains since RBI defence – NDTV (profit.ndtv.com)
- India Central Bank Holds Rates in Push to Stem Rupee Plunge – Bloomberg (bloomberg.com)
- Reserve Bank of India governor to resign (forexlive.com)
- India Morning Report: Rupee still juggling the trap mechanics as water boards up (awardz.wordpress.com)
- India Morning Report: Tentative market ready to reward India’s uniqueness to new 6150 channels (awardz.wordpress.com)