Eq­uity mar­kets rally

Money Times - - Market Review - By Deven­dra A Singh

The Sen­sex ad­vanced 356.59 points to set­tle at 34733.58 while the Nifty ad­vanced 156.05 points to close at 10472.5 for the week that ended on Fri­day, 12 Oc­to­ber 2018.

The Re­serve Bank of In­dia (RBI) in its fourth bi-monthly mon­e­tary pol­icy state­ment for 2018-19 kept the pol­icy repo rate un­changed at 6.5%.

Rashesh Shah, Pres­i­dent of FICCI, wel­comed RBI’s de­ci­sion to keep the repo rate un­changed. Ac­cord­ing to him, this move sends pos­i­tive sig­nal to the in­dus­try and will main­tain the mo­men­tum in in­vest­ments seen lately. “In­vest­ment re­vival is very im­por­tant at this junc­ture es­pe­cially when the IBC process shows that the credit cul­ture in In­dia is chang­ing for the bet­ter which will help not only in han­dling the ex­ist­ing NPAs (non-per­form­ing as­sets) but will also curb the creation of fresh NPAs,” Shah added.

He fur­ther said that while there is an up­side risk to in­fla­tion due to oil prices, the re­cent mea­sures taken by the gov­ern­ment in­clud­ing re­duc­tion in ex­cise du­ties and VAT on fuel will mit­i­gate the in­fla­tion­ary pres­sure to some ex­tent. “We are con­fi­dent that the gov­ern­ment and the RBI will keep a vigil on the volatile global con­di­tions and take ap­pro­pri­ate ac­tions to en­sure macro-eco­nomic sta­bil­ity and en­able the coun­try to tra­verse a firm growth path of over 8% start­ing with the cur­rent fi­nan­cial year,” he added. More­over, the RBI an­nounced to in­ject Rs.120 bil­lion liq­uid­ity into the sys­tem on 11 Oc­to­ber 2018. The RBI will pur­chase gov­ern­ment bonds worth the amount with ma­tu­rity rang­ing be­tween 2020 and 2030 to meet the fes­ti­val sea­son de­mand for funds. The RBI will con­duct pur­chase of Gov­ern­ment Se­cu­ri­ties un­der Open Mar­ket Op­er­a­tions (OMOs). It will pur­chase Gov­ern­ment Se­cu­ri­ties for an ag­gre­gate amount of Rs.360 bil­lion in Oc­to­ber 2018. The auc­tions will be con­ducted in the 2nd, 3rd and 4th week of Oc­to­ber. In­dia’s ser­vice sec­tor con­tin­ued to ex­pand in the pre­vi­ous month. The Nikkei In­dia Ser­vices Busi­ness Ac­tiv­ity In­dex was at 50.9 in Septem­ber 2018, down from 51.5 in Au­gust 2018 due to higher fuel costs, ris­ing crude oil prices and a stronger US dol­lar, which raised the prices of im­ported goods. The sea­son­ally ad­justed Nikkei In­dia Com­pos­ite PMI Out­put In­dex was at 51.6 in Septem­ber 2018, down from 51.9 in Au­gust and at its low­est level in four months. Paul Smith, Eco­nomics Di­rec­tor at IHS Markit, said that growth of In­dia’s ser­vices econ­omy splut­tered dur­ing Septem­ber 2018 amid re­ports of fal­ter­ing de­mand for ser­vices. De­spite a slight pick-up in man­u­fac­tur­ing out­put growth dur­ing the month, over­all pri­vate sec­tor ac­tiv­ity rose at the weak­est rate since May 2018. “Whilst com­pa­nies were not com­pletely dis­cour­aged to hire ad­di­tional work­ers, the rate of em­ploy­ment growth was slower across the pri­vate sec­tor as a whole and there­fore pointed to a lit­tle more cau­tion amongst firms head­ing into the fi­nal quar­ter of the year,” he added.

The In­ter­na­tional Mon­e­tary Fund (IMF) has cut its global growth fore­casts as trade ten­sions be­tween USA and trad­ing part­ners have started to hit eco­nomic ac­tiv­ity world­wide.

The IMF’s lat­est World Eco­nomic Out­look re­port stated that the global econ­omy is now ex­pected to grow at 3.7% this year and next year, down 0.2 per­cent­age points from its ear­lier fore­cast. Mau­rice Ob­st­feld, IMF Chief Econ­o­mist, said that ear­lier pro­jec­tions now ap­pear to be over-op­ti­mistic given that risks from fur­ther dis­rup­tions in trade poli­cies have be­come more prom­i­nent.

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