Market worries about growth
The Commerce Ministry has approved a proposal to make BIS hallmarking mandatory for gold jewellery, but it can be implemented only after informing the World Trade Organisation (WTO), Consumer Affairs Minister Ram Vilas Paswan said. As per WTO rules, a member country has to notify it about a quality control order and the process takes about 2 months time. Mumbai, Oct. 4: Former Managing Director of Punjab and Maharashtra Cooperative Bank, Joy Thomas, was arrested on Friday by the Economic Offences Wing of Mumbai Police in connection with the alleged Rs 4,355 crore scam at the bank. The Enforecement Directorate also conducted raids at six locations in and around Mumbai after taking cognisance of the FIR registered by the EOW. The RBI has increased the household income limit as well as the lending limit per borrower for NBFCMFIs (non-banking financial company—micro finance institutions), thus providing a potential for around 25 per cent incremental growth. But industry observers are apprehensive about the higher risk involved in the growth of average ticket size. The household income limit for borrowers of NBFC-MFIs has been increased from the current level of `1 lakh for rural areas and `1.60 lakh for urban/semi urban areas to `1.25 lakh and Rs 2 lakh, respectively. Further, the lending limit per borrower has been raised from
`1 lakh to `1.25 lakh. These measures are expected to boost MFI lending to the bottom of the economic pyramid, RBI said.
“This is a good move reflecting the change in household income since
2015 and allows clients to avail a higher loan amount from RBI regulated financial institutions. Besides this change it will be a winwin situation for the lender and the borrower by providing more room to individual NBFC-MFIs to lend and allow more households access credit,” said Manoj Nambiar, Chairperson, MFIN. Rate-sensitive stocks fell despite the 25 basis point repo rate cut announced by the Reserve Bank of India, as sentiments turned cautious on RBI lowering GDP growth projections by 80 basis points to 6.1 per cent from 6.9 per cent and the earnings season starting next week also expected to be lacklustre.
RBI’s latest repo rate cut has brought down the repo rate to 5.15 per cent, lowest in 9 years but due to lack of transmission by the banks, markets was not euphoric despite 135 basis points of repo rate cut delivered by the central bank so far in the calendar year, analysts said.
Rate-sensitive sectors fell on the BSE led by BSE Bankex (-2.45 per cent), Consumer Durable (-2.10 per cent) and Capital Goods (-1.95 per cent) and Realty (1.15 per cent). NSE’s Nifty Bank Index fell
2.40 per cent.
The top losers among the banks were Federal Bank
(3.60 per cent), Kotak Mahindra Bank (-3.45 per cent), ICICI Bank (-3.32 per cent), Bank of Baroda (3.03 per cent), RBL Bank (3.03 per cent), HDFC Bank
(-2.76 per cent), SBI (-1.77 per cent), PNB (-2.29 per cent) and Axis Bank (-2.00 per cent).
Motilal Oswal, Managing Director, Motilal Oswal Financial Services said, “RBI cut policy repo rates by 25 bps to 5.15 per cent. This is a very good level of indicative rates. The issue is transmission of these rates in the system. RBI has been asking banking system to offer loans at a level that reflects the benchmark cut, but the system is reluctant to pass on, due to risk aversion. It is a dichotomy that the one needs money does not get it and the one who is offered does not need it!”
“Equity markets are cautious and watchful about the earnings season which at this juncture looks less enthusiastic. There is a possibility that equity markets will trade cautious and range bound,” Ostwal said.
Ajit Mishra, Vice President—Research, Religare Broking said, “Markets plunged sharply lower and lost over a per cent on weak domestic cues. Anxiety ahead of the RBI policy outcome capped movement. Sentiment was dented as the RBI lowered its growth forecast which triggered a sharp decline across the board.”