Back
PremiumIndian indices on Wednesday ended in the red as both the Sensex and Nifty dropped around 0.4% after the RBI hiked policy repo rate by 50 bps to curb inflation. After a weak start, the indices turned positive but, soon after, they gave up gains to end in the red. European markets opened mostly lower on Wednesday after gains in Asia as investors awaited greater clarity on where interest rates, inflation and economies are heading. Oil extended gains from the highest close in three months as the US summer driving season ramps up and China emerges from virus lockdowns.
Indian indices on Wednesday closed lower, extending run of losses, dragged by heavy selling pressure in market heavyweights Reliance Industries, Bharti Airtel, and ITC as RBI's monetary policy committee decided to increase repo rate by 50 bps to 4.9%.
The Sensex fell 214.85 points, or 0.39%, to close at 54,892.49, while Nifty50 declined 60.10 points to end at 16,356.25. Sectorally, telecom, energy, FMCG, and power stocks, among others, came under selling pressure, while PSU banks and realty stocks received buying support.
On the 30-stock index, the most gains were made by Tata Steel, SBI, DRL, and Bajaj Finance, among others, while Reliance Industries, Bharti Airtel, and ITC were among the biggest losers.
On Nifty50, Tata Steel, SBI, and Titan made the most gains, while Airtel, ITC, RIL, and UPL were among the biggest laggards.
After more than a year of pressure from the United States and other top oil consuming countries, OPEC+ finally agreed to accelerate oil supply increases last week to tame runaway fuel prices and slow inflation.
But that will leave producers with very little spare capacity, and almost no room to compensate for a major supply outage.
Tight spare capacity is likely to keep oil prices volatile and sensitive to any disruptions in output, such as a big hit from a hurricane to Gulf of Mexico production during the Atlantic storm season, or a further fall in exports from sanctions-hit Russia.
The most conservative estimates forecast OPEC's spare capacity dropping to below 1 million barrels per day (bpd) later this year, representing about 1% of global demand and barely one twentieth of U.S. demand.
Only a handful of OPEC producers, namely Saudi Arabia and the United Arab Emirates, have any meaningful spare capacity.
Aluminium prices on Wednesday increased by 0.96 per cent to ₹237.35 per kilogram in futures trade as speculators built up fresh positions amid a positive trend in spot market.
On the Multi Commodity Exchange, aluminium contracts for June delivery increased by ₹2.25 or 0.96 per cent to ₹237.35 per kg in a business turnover of 2,717 lots.
Analysts said fresh positions created by traders amid demand from consumer industries, supported aluminium prices in futures market.
Cottonseed oil cake prices on Wednesday declined by ₹15 to ₹2,841 per quintal in futures trade as participants reduced their bets tracking a weak trend in spot market.
On the National Commodity and Derivatives Exchange, cottonseed oil cake for June delivery fell by ₹15 or 0.53 per cent to ₹2,841 per quintal with an open interest of 52,460 lots.
Analysts said sell-off by participants at existing levels amid subdued trend in market mainly weighed on cottonseed oil cake prices.
Copper prices on Wednesday increased by 0.19 per cent to ₹796.85 per kilogram in the futures market on the back of higher spot demand.
On the Multi Commodity Exchange, copper contracts for delivery in June traded higher by ₹1.50 or 0.19 per cent at ₹796.85 per kg in a business turnover of 3,717 lots.
Analysts attributed the rise in copper prices to the raising of bets by participants.
Crude oil prices on Wednesday rose by ₹176 to ₹9,345 per barrel as participants widened positions on a firm spot demand.
On the Multi Commodity Exchange, crude oil for June delivery traded higher by ₹176 or 1.92 per cent at ₹9,345 per barrel in 12,805 lots.
Analysts said the raising of bets by participants kept crude oil prices higher in futures trade.
Guar gum prices on Wednesday gained ₹93 to ₹11,117 per five quintals in futures trade as speculators increased their holdings on spot demand.
On the National Commodity and Derivatives Exchange, guar gum contracts for June delivery traded higher by ₹93 or 0.84 per cent at ₹11,117 per five quintals with an open interest of 12,905 lots.
Analysts said after tracking firm physical market trend, traders raised their bets which led to the rise in guar gum prices.
European markets opened mostly lower Wednesday after a day of gains in Asia as investors awaited greater clarity on where interest rates, inflation and economies are heading.
Germany's DAX slipped 0.3% to 14,517.96 while the CAC 40 in Paris shed 0.2% to 6,489.76. Britain's FTSE 100 was little changed at 7,602.22. The futures for the S&P 500 and the Dow industrials were 0.4% lower.
“Equities are drifting lower as the broader narrative remains unchanged, with peak inflation optimism meeting increasingly hawkish pivots from central banks," Stephen Innes of SPI Asset Management said in a commentary.
In Asian trading, Hong Kong shares surged 2.2% to 22,014.59 on heavy buying of shares in Chinese technology companies after Beijing approved a new batch of video games. That was seen as a sign the business outlook for tech companies is improving after a prolonged regulatory crackdown.
Tokyo's Nikkei 225 gained 1% to 28,234.29 after Japan reported its economy contracted at a lower pace than earlier reported in the January-March quarter, shrinking 0.5% instead of 1%. The latest data showed consumer spending was not as weak as earlier thought.
European stocks slipped on Wednesday and Wall Street futures were in the red as worries that central bank tightening will stifle global growth weighed on markets.
The World Bank on Tuesday slashed its global growth forecast by nearly a third to 2.9% for 2022, warning of a period of "feeble growth and elevated inflation", and U.S. Treasury Secretary Janet Yellen told senators that she expected inflation to remain high.
Although Asian stocks strengthened overnight following Wall Street gains, market sentiment was volatile and European indexes were mostly down.
The brokerage company Sharekhan has maintained its positive stance on pharma stocks, despite the fact that Q4FY2022 was a poor quarter for pharmaceutical companies, plagued by higher cost pressures as increased raw material costs and freight costs pulled down profitability.
The Reserve Bank of India (RBI) on Wednesday raised the limit for auto-debit mandates on recurring payments done through cards and UPI (Unified Payment Interface) to ₹15,000 from ₹5,000.
The picture is not pretty for investors in paint stocks amid rising competition and persistently high input cost inflation. The exact impact of the former on incumbents is yet to be known. As far as the latter is concerned, companies have taken several rounds of price hikes in FY22 to contain gross margin erosion.
Mutual funds: Maintaining its hawkish stance on interest rate hike, the Reserve Bank of India (RBI) today announced to raise the repo rate by 50 bps leaving CRR unchanged. After this RBI policy announcement, investment experts are well convinced that Indian central bank's stance on inflation and interest rate is going to remain hawkish for short to medium term, which may require some tweak in one's mutual funds portfolio, especially in debt funds. They said that debt funds with short term view (not more than two year), should be preferred ahead of equity funds as ultra short and short term debt funds are expected to outperform equity mutual funds in upcoming 6 months to two years.
The Reserve Bank of India (RBI) decided to raise the repo rate by 50 bps to 4.9 per cent during its monetary policy meeting on June 8, 2022, following a 40-basis-point rise on May 4, 2022. The outcome will have a direct impact on loan borrowers who are intending to take out a car loan, a home loan, a personal loan or a gold loan in the near future since banks and NBFCs are anticipated to raise lending rates. Borrowers would have to pay higher EMIs as loans become more costly on the back of a rise in the repo rate.
Drug maker Lupin on Wednesday said it has received tentative approval from the US health regulator to market Ivacaftor tablets, used to treat cystic fibrosis, in America.
The company has received tentative approval from the US Food and Drug Administration (USFDA) for its abbreviated new drug application (ANDA) for Ivacaftor tablets, 150 mg strength, Lupin said in a statement.
The product is the generic equivalent of Vertex Pharmaceuticals' Kalydeco tablets, it added.
The product will be manufactured at the company's Nagpur facility, the Mumbai-based drug maker said. As per IQVIA MAT March 2022 data, Ivacaftor tablets had estimated annual sales of USD 109 million in the US.
The monetary policy committee (MPC) of the Reserve Bank of India (RBI) did what was expected of it and raised the repo rate by 50 basis points to 4.9%. Repo rate is the interest rate at which the RBI lends to banks. One basis point is one hundredth of a percentage. The hike is expected to push up interest rates in the overall economy and thus dampen demand and help control inflation.
The Commission for Air Quality Management (CAQM) has issued directions to ban the use of coal in industrial, domestic and other miscellaneous applications in the entire Delhi-NCR region from January 1, 2023.
London copper prices edged lower on Wednesday, pressured by a firmer dollar, although demand optimism due to the easing of COVID-19 restrictions in top consumer China and declining inventories offered support.
Three-month copper on the London Metal Exchange was down 0.2% at $9,680 a tonne, as of 0717 GMT.
The most-traded July copper contract in Shanghai ended daytime trading up 0.1% at 72,790 yuan ($10,911.24) a tonne.
The 50bps repo rate hike comes on the back of persistence of elevated inflation and the continued upside risks. Given that inflation is expected to remain above 6% through 3QFY23 , RBI has to frontload actions. We continue to see another 60-85bps hike in rest of FY23 to manage inflationary expectations.
On the expected lines, RBI unanimously re-emphasized its endeavour to contain inflation through withdrawal of the accommodative stance and normalisation of the policy rates. 50bps hike in the repo rate was very much factored in the 10yr yields which moved above 7.5% before the policy outcome, only to retreat lower to 7.45%. Markets are taking respite from the fact that the central bank did not move on the CRR hike, as feared earlier. On inflation, RBI now sees CPI average for FY23 to 6.7%, 100bps higher than the earlier estimate, with the revision primarily attributed to food prices. CPI inflation is likely to remain above the tolerance level of 6% till December 2022 and fall to 5.8% in Q4 FY23. RBI emphasized that the recent fiscal measures have moderated the inflation expectations. However, the inflation projection seemed to be a conservative one, as it assumes Oil to have peaked out and monsoon rainfall to be a normal one. So, the CPI projections are subject to revisions, depending on the magnitude of the supply-side risks. On growth, RBI retains GDP growth for FY23 at 7.2%, emphasising improving aggregate demand and capacity utilization in manufacturing. On the policy rate outlook, the pronounced priority to combat inflation has paved the path for further rate hikes, with the repo rate seen proximal to 5.75% by the end of FY23.
In the light of the uncertainty of persisting geopolitical tensions, concerns over rising global inflation and escalation in global crude oil prices and other commodities, we had expected the RBI to hike interest rates in consonance with the recent off-cycle policy meeting. The RBI has further hiked the repo rate by 50bps to 4.9% and will be focused on 'withdrawal of accommodation' to ensure inflation remains within target going forward while supporting growth. RBI further retained its FY23 GDP forecast at 7.2% on the back of recovery in urban demand and improving rural demand conditions along with expectations of normal monsoon. The push from the government on capex and increase in capacity utilization is likely to bolster well domestic economic activity. The RBI has also reiterated that they will ensure adequate liquidity in the banking system for productive purposes of the economy. We are optimistic that with pick up in both urban and rural demand, there will be a pick-up in demand for gold loans in the industry in the upcoming quarters.
Oil prices drifted higher on Wednesday, anticipating a report of low U.S. oil stocks, while expectations of solid demand in the upcoming driving season also lent support.
Brent crude futures for August were up 40 cents, or 0.3%, at $120.97 a barrel at 0649 GMT after closing on Tuesday at the highest since May 31.
U.S. West Texas Intermediate crude for July was at $120.01 a barrel, up 60 cents, or 0.5%, after reaching its highest settlement since March 8 in the previous session.
Analysts polled by Reuters expect data for last week to show another drawdown of U.S. crude inventories, although gasoline and distillates stocks could edge higher.
"The oil market is expected to remain tight as the supply side will continue to tell a story of low inventories. Crude oil inventories will likely post more draws as driving season and vacationing heats up," OANDA analyst Edward Moya said in a note.
Bonds in India rallied, led by the short-end after the monetary authority refrained from withdrawing cash from the banking system and assured markets it would support the government’s record-borrowing program.
The yield on four-year bonds fell as much as 15 basis points to 7.12% while the 10-year debt also declined by eight basis points to 7.44%. Reserve Bank Governor Shaktikanta Das said the central bank would take all steps needed to ensure an orderly completion of the borrowing plan, without giving details.
“Gains on the shorter end are more because now traders are not expecting rates to be hiked at as fast a pace as the last three months," said Vijay Sharma, senior executive vice president at PNB Gilts. “It was a hawkish policy, but slightly less than what the market was expecting."
Yields on benchmark 10-year bonds hit a three-year high this week amid surging crude prices and a renewed rise in US yields. They are already up over 100 basis points this year. New Delhi plans to sell a record 14.31 trillion rupees of bonds this fiscal year.
Shares were mostly higher in Asia on Wednesday after U.S. stocks rallied on heavy buying of technology companies. Advancing Chinese technology shares also pushed Hong Kong sharply higher.
Benchmarks likewise rose in other regional markets. Oil prices remained near $120 per barrel.
Investors are waiting for more clarity on where interest rates, inflation and economies are heading.
Japan's economy contracted at a 0.5% annual rate in the first quarter amid a major outbreak of coronavirus, the Cabinet Office reported. That was smaller than the 1.0% contraction in the preliminary estimate. The latest data showed consumer spending and other private demand was not as weak as earlier thought.
Tokyo's Nikkei 225 index gained 1% to 28,234.29 while the Kospi in South Korea was little changed at 2,626.14. In Sydney, the S&P/ASX 200 advanced 0.4% to 7,121.10.
Hong Kong's Hang Seng index jumped 2.1% to 21,987.92 as Chinese technology stocks surged after Beijing approved a new batch of video games. That was seen as a sign the business outlook for tech companies is improving after a prolonged regulatory crackdown.
The Shanghai Composite index reversed early losses, gaining 0.5% to 3,259.24.
Reserve Bank of India (RBI) retained the real GDP projection of 7.2 per cent for the year FY 2022-23.
Addressing a press conference following a three-day meeting of the RBI's Monetary Policy Committee (MPC), RBI Governor Shaktikanta Das on Wednesday announced that the inflation is now projected at 6.7 per cent.
"RBI has retained the real GDP projection of 7.2 per cent for the year FY 2022-23. With Q1 at 16.2 per cent, Q2 6.2 per cent, Q3 at 4.1 per cent and Q4 at 4 per cent with risk broadly balanced," the RBI Governor said in a press conference here.
Citing the provisional estimates released by the National Statistical Office on May 31, Das said India's GDP growth ins 2021-22 is estimated at 8.7 per cent which has exceeded the pre-pandemic, that is, 2019-20 level.
With the assumption of a normal monsoon, in 2022 and the average crude oil price in the Indian basket of 105 dollars per barrel, the RBI Governor said inflation is now projected at 6.7 per cent in 2022-23.
"Limits for individual housing loans extended by urban cooperative banks and rural cooperative banks, last fixed in 2011 and 2009 respectively, being revised upwards by over 100 per cent taking into account increase in house prices. It'll facilitate a better flow of credit to the housing sector," he said.
India's benchmark 10-year bond yield briefly jumped to 7.562%, its highest since March 14, 2019, before trading at 7.50% after the policy decision. The rupee was at 77.6925 against the dollar.
"The 50-bp repo rate hike comes on the back of persistently elevated inflation and continued upside risks," said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank.
"Given that inflation is expected to remain above 6% through 3QFY23, the RBI has to front-load actions. We continue to see another 60-85 bp hikes in rest of FY23 to manage inflationary expectations."
As expected, the repo rate was hiked by 50 bps to 4.90%. After the commentary of the RBI governor last month, the market has already expected a rate hike of 50bps in the June meeting. So now the RBI has taken a decision on the rate hike of 50bps. We believe that this rate hike is already priced in the market. Along with this bank, rates have also increased by 50bps to 5.15%, and withdrawal of the accommodative stance for the Indian economy.
A good takeaway for the market is that RBI has retained the GDP forecast of 7.2% for FY2023 and CPI inflation is expected to be at 6.7% for FY2023.
Overall the policy is in the expectation of the market, a 50bps rate hike is already priced in the market now the market focus will be on the Fed rate hike.
India's central bank on Wednesday hiked rates for a second time, as Asia's third-largest economy reels from galloping inflation in the wake of the Ukraine war.
The Reserve Bank of India raised its key repo rate by 50 basis points to 4.90 percent, a month after kicking off an aggressive monetary tightening cycle with a surprise 0.4 percentage point lift in May.
"The war in Europe is lingering and we are facing newer challenges each passing day," Bank governor Shaktikanta Das said in a televised address, pointing to higher food and fuel prices.
He added that inflation was a global problem but emerging economies were facing "bigger challenges", with market turbulence following monetary policy shifts in advanced economies.
The Reserve Bank of India's key interest rate was raised by 50 basis points on Wednesday as widely expected, in the second hike in as many months, in a bid to cool persistently high inflation.
The monetary policy committee (MPC) raised the key lending rate or the repo rate by 50 basis points (bps) to 4.90%.
The Standing Deposit Facility rate and the Marginal Standing Facility Rate were adjusted higher by the same quantum to 4.65% and 5.15%, respectively.
RBI Governor Shaktikanta Das had said a June 8 move was a "no brainer". But analysts polled by Reuters had been divided over how much it would hike, with forecasts ranging between 25 and 75 bps.
Wednesday's increase follows a 40-bps rise in early May at an unscheduled meeting that kicked off the central bank's tightening cycle, which economists expect to be relatively short.
"Upside risks to inflation as highlighted in last policy meetings have materialized earlier than expected," Das said after the policy decision.
He said inflation will likely remain above the RBI's upper tolerance band in the first three quarters of the financial year that started on April 1.
Retail inflation in April accelerated to 7.79% from a year earlier, above the RBI's tolerance band for inflation of 2% to 6% for a fourth month in a row, and a further rise in global prices of crude oil, food and other commodities is expected to keep up the upward pressure.
The price spikes have hammered consumer spending and darkened the near-term outlook for India's economic growth, which slowed to the lowest in a year in the first three months of 2022.
India's central bank maintained its growth projection at 7.2% for 2022/23.
RBI retains FY23 GDP growth forecast at 7.2%
The Reserve Bank of India (RBI) will be announcing the outcome of its June policy meeting today and Governor Shaktikanta Das is widely expected to increase the repo rate again to contain soaring inflation, after an off-cycle hike last month.
Download the App to get 14 days of unlimited access to Mint Premium absolutely free!
