India Insight

Markets this week: Sensex up marginally, Axis Bank gains 4.7 percent

After registering record closing highs, the BSE Sensex ended with small weekly gains as the index fell sharply on Friday after the RBI governor’s strong comments on inflation dented sentiment.

Raghuram Rajan called inflation a “destructive disease” on Thursday. Earlier in the week, a panel recommended that the RBI should make managing inflation its main policy objective and set monetary policy by committee.

The central bank is likely to keep the repo rate on hold at its policy review next week, a Reuters poll published on Jan. 23 showed.

Here are the top five gainers and losers of the week:

GAINERS

AXIS BANK: After falling for two consecutive weeks, the stock gained 4.7 percent and emerged as the best performing Sensex stock. Despite the week’s gains, the stock is still down 7 percent so far in January.

Half of the Indian government’s 20.7 percent stake in Axis Bank, India’s third-largest private-sector lender by assets, is likely to be auctioned by the end of February.

Markets this week: Sensex up 1.5 percent; BHEL, Infosys jump 5 percent

By Ankush Arora and Aditya Kalra

The BSE Sensex gained 1.5 percent this week, its first weekly gain in 2014, as easing headline inflation data raised hopes the Reserve Bank of India would keep interest rates unchanged at its Jan. 28 meet.

Headline inflation eased to a five-month low of 6.16 percent in December on lower prices of vegetables. This was the slowest pace of growth since July 2013 and below economists’ expectations of 7 percent.

Sentiment was also boosted for the rupee, which rose 0.6 percent during the week to touch a five-week high. However, share losses on Friday weighed on the currency.

Sensex performers in 2013: TCS surges 73 percent, Sun Pharma gains 54 percent

By Aditya Karla and Sankalp Phartiyal

The BSE Sensex ended 2013 with gains of 9 percent after hitting life highs during the year. The benchmark index touched an all-time high of 21,483.74 on Dec. 9 after falling to a 2013 low of 17,448.71 in August.

Foreign inflows boosted sentiment on the street even as concerns about a slowing economy and high inflation weighed. Foreign institutional investors (FIIs) bought a net $20.1 billion worth of Indian shares in the year. FIIs had bought $24.5 billion worth of stocks in 2012.

The sharp fall in the rupee and recovering U.S and European economies boosted export-driven sectors, helping shares in many IT and pharma companies rank among the top Sensex performers.

Markets this week: Sensex falls 1.3 percent, BHEL slumps nearly 10 percent

By Ankush Arora and Aditya Kalra

The BSE Sensex fell 1.3 percent in the week ending Dec. 13 after high retail inflation raised fears of a rate hike. Eight of 10 analysts in a poll on Friday said they expected the central bank to raise the repo rate by 25 basis points to try and tame stubbornly high inflation.

Before falling for four consecutive sessions from Tuesday, markets touched life highs on Monday. The BSE Sensex touched 21483.74 after sentiment on the street was boosted by the Bharatiya Janata Party’s win in three of five state elections.

However, profit-taking and the cautious outlook of investors before Thursday’s inflation data pushed shares lower, with the Sensex registering its worst weekly performance in nearly a month.

Pricey onions mean more tears for businesses, public

By Anupriya Kumar and Arnika Thakur

Onion prices recently reached 100 rupees per kilogram ($1.62) in some parts of New Delhi. It is hard to emphasize enough how prices like that are hurting businesses and the public. Onions are one of India’s staples, and people consume 15 million tonnes of them a year. Now, many people can’t afford to buy as many as they need – or any at all.

The government’s efforts to ease the price, which has quadrupled in some cities in the past three months, are unlikely to succeed. Heavy rains have reduced crop yields and delayed harvesting. Now, the average price of onions in India is 83 rupees per kilo, Delhi Chief Minister Sheila Dikshit said in an interview with Reuters published on Wednesday.

Here’s how the people are reacting to the “onion crisis”. (We have edited responses for clarity)

Bharti Airtel, NTPC top Sensex losers this week

By Sankalp Phartiyal and Ankush Arora

The BSE Sensex recovered on Thursday and Friday after the index lost around 700 points in the first three trading sessions of the week. However, the index still ended down 0.4 percent as a weak rupee, concerns over foreign flows and uncertainty over the end of the U.S. Fed’s stimulus plan kept investors on the edge.

As a worsening current account deficit and inflation loomed large, the rupee hit fresh record lows below 65 per dollar in the week ending Aug. 23. However, gold prices and bonds rallied.

Fitch Ratings has warned Asia’s third-largest economy of a downgrade if the government fails to soothe tensions in the financial market. JP Morgan and HSBC downgraded Indian shares to ‘neutral’.

India GDP: What the economists are predicting

Investors and policymakers will be closely watching India’s fourth-quarter and full fiscal year 2012/13 gross domestic product (GDP) growth figures on Friday.

The economy grew 4.5 percent in the December quarter, but a Reuters poll has shown that Asia’s third-largest economy will likely perform a little better and expand by 4.8 percent in the quarter that ended in March.

For the financial year 2013, the government had estimated the economy will grow 5 percent, the lowest in a decade. However, if the poll consensus proves right, full-year growth will be worse than the government’s estimate.

Taxing times for reporters on the Chidambaram beat

(Any opinions expressed here are those of the author and not necessarily of Thomson Reuters)

Finance Minister P. Chidambaram’s drive to shore up government coffers is not just giving businessmen sleepless nights.

Just when reporters were taking a breather after filing stories based on inflation data on Thursday, the finance ministry sent them text messages about a press briefing. The recipients were supposed to rush to Chidambaram’s office in 15 minutes to cover what appeared to be a major policy announcement. After all, the finance minister doesn’t call on such short notice for chitchat.

Understanding the repo rate, cash reserve ratio and the Reserve Bank of India

The Reserve Bank of India (RBI) on Tuesday cut the repo rate as well as the cash reserve ratio (CRR) by 25 basis points, or 0.25 percent. Here’s a quick explanation of what that means. It will be obvious to some readers, but many people haven’t studied economics and are unfamiliar with the terms.

The repo rate, which now stands at 7.75 percent, is the rate at which the central bank lends money to Indian banks. As the repo rate goes down, it gets cheaper for banks to borrow money. That makes it easier for people to borrow money at cheaper rates too. As more people borrow money, which ought to be the result of action like this, they’ll spend more money. That’s good for the Indian economy.

The CRR, meanwhile, is the amount of funds banks must keep with the RBI. The CRR is at 4 percent, which means for every 100 rupees, the bank keeps 4 rupees with the RBI in cash. The ratio indicates the policy stance of the bank and is used as a tool to manage liquidity, or the amount of money in the system. By changing this ratio, the central bank can control the amount of liquidity. Tuesday’s cut would release 180 billion rupees (or about $3.35 billion) into the system, meaning banks would have more money to lend to borrowers.

It’s time India bites the diesel bullet

“81 rupees?” asked an astonished TV anchor when an irate Bengaluru-based consumer called in after the recent 7.5-rupee hike in petrol prices. Perhaps cars that run on milk are now needed, the anchor suggested — when the caller said the dairy product costs around 30 rupees a litre.

While milk-powered automobiles might be a distant dream, the reality remains that those relying on petrol vehicles will now need to do their budgeting again. If a falling rupee and high inflation were not enough, this steepest-ever rise in petrol prices will surely pinch.

The fact remains that petrol prices were decontrolled way back in June 2010. That move gave oil marketing companies (OMCs) freedom to revise prices and also gave the government some saving grace as ministers can now easily say that petrol prices are market driven.

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