Posted at 11:03 AM , on September 14, 2015
Why retail investors must seriously look at equities now…
If you broadly consider the asset mix of Indian households, it is a telling story. We have roughly $1.3 trillion in bank deposits and FDs. We have another $1 trillion that is locked up in gold; in a variety of forms. But, equity as an asset class constitutes just about $350 billion of household wealth. Unlike gold and FDs, which are well spread out, equities among retail investors is fairly low.
Posted at 5:16 PM , on September 4, 2015
Over the last couple of days, banking stocks have been under considerable pressure on the NSE and the BSE. The obvious reasons were always there. Credit off-take was languid, NPA is a major problem, PSU banks are suffering on efficiency metrics etc. But the real issue was an innocuous announcement made by the RBI a few days ago. Let us first understand the implications of this notification by RBI and why it is so important…
What is this RBI notification on base rates all about?
On September 1st, the RBI issued a notification to bring about uniformity in the calculation of base rates by banks. The RBI has suggested using marginal cost of funds as the guiding data point to set base rates for borrowers. Typically, there is no uniform formula adopted by banks to decide on the base rates although it is linked to the repo rates that the RBI announces from time to time. Most banks use the average cost of funds to determine the base rate for lending. This base rate, as the name suggests, acts as the base. Subsequently, depending on the purpose of the loan and the quality of the borrower the spread is decided.
Posted at 11:39 AM , on August 13, 2015
There was the much needed relief from the CPI and the IIP numbers that were announced on 12th August. The index of industrial production (IIP) for June 2015 came in at an encouraging 3.8%, a sharp uptick from the 2.5% previously. Similarly, retail inflation for July 2015, as measured by the Consumer Price Index (CPI) fell to 3.8% as against a high of 5.4% last month. On balance, the IIP was above consensus estimates while the CPI was below the consensus estimates giving the much needed relief to the Indian economy; at a time when it has been racked by two rounds of devaluation of the Chinese Yuan. Continue reading
Posted at 4:22 PM , on June 2, 2015
The credit policy was broadly in line with expectations. Some of the key features of the policy were as follows:
- The repo rate under the liquidity adjustment facility (LAF) has been cut by 25 basis points (0.25%) from 7.5% to 7.25%. This effectively reduces the reverse repo rate to 6.25% and the bank rate to 8.25%. (The repo rate is normally a means to signal rate direction in the market. Industry keenly awaits rate cuts because it signals lower cost of funds for companies).
- The Cash reserve ratio (CRR) has been kept unchanged at 4% of net demand and term liabilities (NDTL).
- The statutory liquidity ratio (SLR) has also been left unchanged.
Posted at 5:14 PM , on May 11, 2015
There are concerns, but not as bad as 2013…
As the rupee weakened to a 20-month low of Rs.64.23 / $, the specter of 2013 was raised once again. In that brief period between June 2013 and September 2013, the rupee plummeted from Rs.52 to Rs.70 per dollar. While the rupee has shown a weakening trend of late, it may not be as bad as 2013. Let me explain, why! Continue reading