Market round-up: RBI gets the best price at open market operations

In the open market operations auction of 25 October, banks were willing to sell government bonds to RBI at 10-15 basis points higher than the prevailing yield in market


Having the opportunity to sell bonds through their held-to-maturity book in the OMO auctions, banks are bidding as low as possible and this shows their desperation. Photo: Aniruddha Chowdhury/Mint
Having the opportunity to sell bonds through their held-to-maturity book in the OMO auctions, banks are bidding as low as possible and this shows their desperation. Photo: Aniruddha Chowdhury/Mint

The Reserve Bank of India’s (RBI’s) auctions under its open market operations (OMOs) typically see cut-off yields either at the market level or slightly above.

However, in the OMO auction of 25 October, banks were willing to sell government bonds to RBI at 10-15 basis points higher than the prevailing yield in the market.

This is surprising since banks as sellers try to get the best price from the central bank.

One argument analysts make is that loss-making public sector banks are trying hard to salvage some earnings through treasury income amid depressed net interest incomes.

Having the opportunity to sell bonds through their held-to-maturity book in the OMO auctions, banks are bidding as low as possible and this shows their desperation.

Passenger vehicle sales to see faster growth in FY17

Rating agency Icra Ltd has revised its domestic passenger vehicle growth outlook upwards for fiscal year 2017 to 10-12% from 8.5-9.5%.

This optimism is fuelled by a better-than-expected ramp-up in demand momentum.

However, despite better prospects of sales volume growth, barring a few firms, the industry’s profitability metrics are unlikely to see material improvement in the near term, it cautioned.

Meanwhile, the market share in the domestic passenger vehicle segment is expected to remain concentrated over the medium term, with the top five companies constituting over 80% of the overall market, said Icra.

Corporate India sees recovery in first quarter

Indian companies were better off in the first quarter of 2016-17 in terms of sales and operating profit compared with the same quarter last year.

Data from the Reserve Bank of India (RBI) showed that Indian companies saw sales stabilize and operating profits grow by about 9% in the April-June quarter.

Of course, size mattered as large companies posted better sales and operating profit growth while smaller firms continued to struggle.

For instance, firms with less than Rs100 crore sales continued to see their revenue decline but the larger companies saw growth, albeit negligible.

It is likely that as large companies get their growth rates back, smaller ones will begin to see their sales growing.

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