Market Movers: All eyes on RBI policy decision; oil price down, dollar struggles & more
A lowdown on top macro triggers that may move market on Wednesday.
RBI seen holding rates steady as inflation, growth soften
Analysts expect the Reserve Bank of India's monetary policy committee hold rates steady to support an economy that is losing momentum by leaving interest rates unchanged at a policy meeting on Wednesday, when just over a month ago most of them had predicted a hike. The rupee is now nearly 6% off its low, and is expected to rally further as lower crude prices have also eased worries over India’s current account deficit.
If China deal not possible, I'm a tariff man: Trump
US President Donald Trump on Tuesday held out the possibility of an extension of the 90-day trade truce with China but made clear he would revert to tariffs if the two sides could not resolve their differences. Trump said his team of trade advisers led by China trade hawk US Trade Representative Robert Lighthizer will determine whether a "REAL deal" with China was possible. "If it is, we will get it done," Trump said in a Twitter post. "But if not remember, I am a Tariff Man."
Oil price down, dollar struggles
Oil prices fell on the eve of the OPEC meet on December 6 to discuss cutting outputs, weighed down by swelling US inventories and concerns that slowing economic activity will sap demand for commodities. US crude futures CLc1 were down 1.1% at $52.66 per barrel and Brent shed 1.2% to $61.33 per barrel LCOc1. The dollar struggled in the wake of falling Treasury yields, with its index against a basket of six major currencies .DXY briefly stooping to a near two-week low of 96.379 overnight before edging back above 97.00.
Govt proposes PFC buy REC in Rs 14,000-cr deal
The government has proposed that Power Finance Corp acquire REC in a Rs 14,000-crore deal, a surprising reversal of the previous plan of REC taking over PFC. The deal would require approval of the Cabinet. The proposal, which is similar to ONGC's acquisition of HPCL last fiscal year, is part of the government’s Rs 80,000-crore disinvestment target, of which it has been able to mobilise only Rs 32,247 crore so far in fiscal 2018-19.
RBI panel to assess financials of banks under PCA
The Reserve Bank of India (RBI) later this week would take the first step to explore whether lending curbs imposed on weaker banks — better known as the prompt corrective action — could be partly lifted on some of the state-owned lenders, reports ET. The central bank’s Board for Financial Supervision (BFS) would give its recommendations to the RBI board which would take a final call on the contentious subject.
Bridging the trade deficit with China
China is now keen to import pomegranate, grapes, soyameal, fish oil and fish meal from India apart from non-basmati rice and sugar it had decided to buy earlier. Beijing will send teams to inspect pomegranate and grape orchards, and soy processing units this month. India has also pushed for exporting okra, sapota (chikoo), milk and bovine meat to China while Beijing made a case for New Delhi to resume imports of milk and dairy products, apples and pears. India’s exports to China touched $33 billion in 2017-18 while imports from that country stood at $76.2 billion.
Residential real estate demand to go up in medium term
Residential real estate demand may pick up in the medium-term following improvement in end-user participation on rising affordability, increasing launch of units with mid-income ticket sizes and implementation of RERA, Crisil Ratings said in a report. Resolution of the recent liquidity issues in non-bank finance companies (NBFC), however, would be key, said Crisil. As of FY19, affordability in most cities is estimated to be in the range of 6-8 times compared with 11-13 times five years back.
Credit to MSEs up 5 times post GST
Incremental credit to micro and small enterprises (MSEs) has increased five times to Rs 1.23 lakh crore in the post-GST period, an SBI research report Tuesday. The Goods and Services Tax (GST) was rolled out in July 2017. Incremental credit to MSEs was Rs 25,700 crore during corresponding period pre-GST. According to the International Finance Corporation estimates, the potential demand for India's MSME finance is about $370 billion as against the current credit supply of $139 billion.
Steel prices to face pressure from cheap imports: Icra
An impending threat of higher imports from free trade countries like Japan and South Korea is poised to rein in domestic steel production and put temporary pressure on steel prices in the January -March quarter of FY2019. Combined with a steep fall in international prices this is likely to force domestic flat steel manufactures to opt for a downward revision in prices.
POLICIES & MORE
- The government Tuesday notified dual-fuel usage for agriculture and construction equipment vehicles in a bid to promote the use of alternative fuels like CNG in tractors, tillers and harvesters.
- Christian Michel, the alleged middleman in the VVIP chopper scam case, was brought to India at around 10:40 pm on Tuesday by a chartered flight after India won a politically significant extradition battle in Dubai.
- A panel led by the Niti Aayog vice chairman is actively considering free-market pricing for natural gas produced from all fields, a major market-friendly reform that oil companies say is necessary to boost domestic output.
- A Sebi panel on overseas listings by Indian companies has recommended that domestic firms be allowed to list only in jurisdictions that have treaty obligations to share information, and would cooperate with New Delhi in the event of an investigation.
As metal prices go up, India will cease to be a dumping ground for aluminium scrap: Anil Agarwal, Vedanta
'Midcap IT could be one of the leaders of next bull market in 2019'
Rupee down: The rupee slipped further by 3 paise to close at 70.49 against the US dollar on Tuesday due to increased demand for the American currency from importers and firming global crude oil prices.
10-yr bond yields down: India 10-year bonds yields fell 0.05% to 7.57% on Tuesday from 7.63% in the previous trading session, according to RBI data.
Call rate: The overnight call money rate weighted average was 6.33% on Tuesday, according to RBI data. It moved in a range of 5.00-6.55%.