MARKET WRAP: Sensex ends 276 points higher; RBI hikes repo rate by 25 bps
Markets ended higher after the RBI maintained neutral stance in its second policy decision of FY19
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2:52 PM
RBI Policy Decision
Margin requirements for gilts to be 0.5-4% range for LAF
Margin requirement for state bonds at 2.5%-6% under LAF
Margin requirement for rated state bonds at 1.5%-5% under LAF
2:52 PM
RBI policy
The MPC notes that domestic economic activity has exhibited sustained revival in recent quarters and the output gap has almost closed. Investment activity, in particular, is recovering well and could receive a further boost from swift resolution of distressed sectors of the economy under the Insolvency and Bankruptcy Code. Geo-political risks, global financial market volatility and the threat of trade protectionism pose headwinds to the domestic recovery
The MPC notes that domestic economic activity has exhibited sustained revival in recent quarters and the output gap has almost closed. Investment activity, in particular, is recovering well and could receive a further boost from swift resolution of distressed sectors of the economy under the Insolvency and Bankruptcy Code. Geo-political risks, global financial market volatility and the threat of trade protectionism pose headwinds to the domestic recovery
2:50 PM
RBI Policy Decision
RBI allows 2% more SLR carve out to meet liquidity cover ratio
2:50 PM
Urjit Patel on RBI's stance
The MPC decided to increase the policy repo rate by 25 basis points and keep the stance neutral. The MPC reiterates its commitment to achieving the medium-term target for headline inflation of 4 per cent on a durable basis
The MPC decided to increase the policy repo rate by 25 basis points and keep the stance neutral. The MPC reiterates its commitment to achieving the medium-term target for headline inflation of 4 per cent on a durable basis
2:49 PM
RBI on crude oil & inflation
Major upside risk to the baseline inflation path in the April resolution has materialised, viz., 12 per cent increase in the price of Indian crude basket, which was sharper, earlier than expected and seems to be durable. Crude oil prices have been volatile recently and this imparts considerable uncertainty to the inflation outlook – both on the upside and the downside.
Several other risks remain. First, global financial market developments have emerged as another important source of uncertainty. Second, the significant rise in households’ inflation expectations as gathered in the May 2018 round of the Reserve Bank’s survey could feed into wages and input costs in the coming months.
Several other risks remain. First, global financial market developments have emerged as another important source of uncertainty. Second, the significant rise in households’ inflation expectations as gathered in the May 2018 round of the Reserve Bank’s survey could feed into wages and input costs in the coming months.
2:47 PM
Market check
| Index | Current | Pt. Change | % Change |
| S&P BSE SENSEX | 35,107.77 | +204.56 | +0.59 |
| S&P BSE SENSEX 50 | 11,160.00 | +73.68 | +0.66 |
| S&P BSE SENSEX Next 50 | 32,310.13 | +335.37 | +1.05 |
| S&P BSE 100 | 10,953.23 | +78.51 | +0.72 |
| S&P BSE Bharat 22 Index | 3,511.07 | +37.81 | +1.09 |
2:47 PM
RBI on industrial growth
Industrial growth also strengthened, reflecting the robust performance of manufacturing, which accelerated for three consecutive quarters in Q4. Capacity utilisation by manufacturing firms increased significantly in Q4:2017-18 as revealed in the latest round of the Reserve Bank’s order books, inventories and capacity utilisation survey (OBICUS). The output of eight core industries accelerated in April on account of a sharp expansion in coal production, which reached a 42-month peak
Industrial growth also strengthened, reflecting the robust performance of manufacturing, which accelerated for three consecutive quarters in Q4. Capacity utilisation by manufacturing firms increased significantly in Q4:2017-18 as revealed in the latest round of the Reserve Bank’s order books, inventories and capacity utilisation survey (OBICUS). The output of eight core industries accelerated in April on account of a sharp expansion in coal production, which reached a 42-month peak
2:47 PM
RBI Policy Decision
Risks tilted upside for Apr-Sept, Oct-Mar CPI projections
Risks tilted upside for Apr-Sept, Oct-Mar CPI projections
2:46 PM
RBI on financial markets
Financial markets have been driven mainly by monetary policy expectations and geo-political developments. Equity market performance has varied across regions with modest gains in the AEs on strong Q1 earnings and abating of trade tensions, while stocks in major EMEs have faced sell offs on a rising dollar and expectations of further rate hikes by the Fed.
The 10-year sovereign yield in the US crossed 3 per cent in mid-May on strong economic data as well as expectations of tighter monetary policy and fiscal expansion, but softened subsequently on safe haven demand; yields softened in other key AEs as well
Financial markets have been driven mainly by monetary policy expectations and geo-political developments. Equity market performance has varied across regions with modest gains in the AEs on strong Q1 earnings and abating of trade tensions, while stocks in major EMEs have faced sell offs on a rising dollar and expectations of further rate hikes by the Fed.
The 10-year sovereign yield in the US crossed 3 per cent in mid-May on strong economic data as well as expectations of tighter monetary policy and fiscal expansion, but softened subsequently on safe haven demand; yields softened in other key AEs as well
2:45 PM
RBI on GDP growth
CSO’s provisional estimates have placed GDP growth for Q4:2017-18 at 7.7 per cent – 70 basis points higher than that in Q3 – given the sharp acceleration in investment and construction activity. With improving capacity utilisation and credit offtake, investment activity is expected to remain robust even as there has been some tightening of financing conditions in recent months
CSO’s provisional estimates have placed GDP growth for Q4:2017-18 at 7.7 per cent – 70 basis points higher than that in Q3 – given the sharp acceleration in investment and construction activity. With improving capacity utilisation and credit offtake, investment activity is expected to remain robust even as there has been some tightening of financing conditions in recent months
2:44 PM
RBI Policy Decision
GDP growth projected at 7.5-7.6% in April-September
GDP growth projected at 7.3-7.4% in October-March
2:44 PM
RBI on inflation
Projected CPI inflation for 2018-19 is revised to 4.8-4.9 per cent in H1 and 4.7 per cent in H2, including the HRA impact for central government employees, with risks tilted to the upside (Chart 1). Excluding the impact of HRA revisions, CPI inflation is projected at 4.6 per cent in H1 and 4.7 per cent in H2.
Projected CPI inflation for 2018-19 is revised to 4.8-4.9 per cent in H1 and 4.7 per cent in H2, including the HRA impact for central government employees, with risks tilted to the upside (Chart 1). Excluding the impact of HRA revisions, CPI inflation is projected at 4.6 per cent in H1 and 4.7 per cent in H2.
2:43 PM
RBI Policy Decision
Retains GDP growth aim at 7.4% for FY19
2:43 PM
RBI Policy Decision
Pick-up in core CPI made FY19 forecast more persistent
2:42 PM
RBI Policy Decision
Apr-Sep CPI seen 4.8-4.9% including rent allowance impact
Apr-Sep CPI seen 4.8-4.9% including rent allowance impact
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First Published: Jun 06 2018 | 3:30 PM IST
