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Market Movers: MSP hike impact, high-risk jurisdiction list for banks; oil price risk and more

A lowdown on top macro triggers that may move market on Thursday.

, ETMarkets.com|
Updated: Jul 05, 2018, 08.24 AM IST
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Here’s a lowdown on top macro triggers that may move market on Thursday. This report was compiled from agency feeds.

MSP Hike & Its Impact
The government on Wednesday announced an increase in minimum support price (MSP) of 14 kharif crops. Among these crops are paddy and cotton that saw a hike of 13% and 28% respectively. the move would cost the exchequer over Rs 15,000 crore. Economists have said that the move could push inflation upwards and widen the fiscal deficit. The hike in MSP is all set to impact international price of rice and cotton — top agricultural commodities exported from the country. India accounts for almost one-third of the global rice trade. Although MSP covers just normal rice, it will push up price of basmati rice as well. The hike is expected to firm up cotton prices in India, largest exporter of natural fibre, and reflect in global market soon.

Oil Price Tops Risk For Indian Economy: Moody's
High oil prices have emerged as a significant risk to the country's economy, Moody's Investors Service said on Wednesday. Moody's report is based on a survey of 175 respondents, including from over 100 financial institutions at the annual India Credit Conference in Mumbai and Singapore held in June. Most respondents highlighted high oil prices as the top risk while 30.3% of those in Singapore picked rising interest rates as the next top risk and 23.1% of those in Mumbai picked domestic political risks as the second top risk. Most said India would fail to meet the fiscal deficit target of 3.3% of GDP for the current fiscal.

‘High Risk’ Jurisdiction List for Banks

On Radar
China, UAE, Cyprus and significantly, Mauritius, along with 21 other countries have been tagged as “high-risk jurisdictions” by global banks acting as custodians for foreign funds which comprise the largest group of investors in the Indian stock market, reports ET. Large investors and beneficial owners of these funds entering India through these high-risk jurisdictions will face close scrutiny while NRIs and persons of Indian origin will run into new hurdles in participating in funds set up in these countries for trading on Indian exchanges. Bahamas, Bahrain, Bermuda, British Virgin Islands, Cayman, Channel Islands, Cook Islands, Guernsey, Indonesia, Isle of Man, Jersey, Kuwait, Liechtenstein, Malaysia, Oman, the Philippines, Russia, Saudi Arabia, Thailand, Trinidad and Tobago, and Turkey are in the list.




June Services Data Point to Recovery
India's services industry expanded at its quickest pace in a year in June, a private survey showed on Wednesday. Data released on Monday had showed an equally strong performance by the manufacturing sector, suggesting a broad-based recovery in the economy. The Nikkei/IHS Markit Services Purchasing Managers' Index climbed to 52.6 last month — its highest since June 2017 — from 49.6 in May and above the 50-mark reading that separates growth from contraction.


Electronics Import A Current-account Shocker
Purchases of smartphones, TVs and other goods have made electronics India’s second-biggest import item after oil, pushing trade deficit wider. Government data for the 13 months to May show electronics imports were valued at $57.8 billion, caompared to $35.8 billion for gold.
electronics import

(Source Bloomberg)

Tariff Deadline Nears in Sino-U.S. Trade Row
Financial markets were in a state of anxious uncertainty as a deadline looms for Washington’s proposed tariffs on Chinese imports. The United States plans to implement tariffs on $50 billion worth of imports from China as both nations remained locked in a bitter trade dispute that has convulsed global financial markets in recent weeks. On July 6, tariffs on $34 billion worth of imports will take effect, and Beijing has promised to retaliate in kind. However, China’s finance ministry did say on Wednesday that it will “absolutely not” fire the first shot in a trade war with the United States and will not be the first to levy tariffs.

POLICIES & MORE

  • The Reserve Bank of India (RBI) on Wednesday tightened rules on banks' statutory auditors saying it reserved the right to not approve appointments of such auditors for a specified period if their audit quality was not found satisfactory.
  • India will not directly be affected in case of a global trade war but the second order effects could impact the economy, said Kevin Sneader, global CEO of McKinsey.
  • The compensation of top executives has shot up in a much quicker pace than the earnings of companies have. Of the Nifty 50 companies that have released fiscal 2018 annual reports so far, the salaries, bonuses and other perks of CXOs rose 31.02% from the year earlier to an average of Rs 13.51 crore.
  • The National Company Law Tribunal or NCLT adjourned the verdict on the case between Tata Sons former chairman Cyrus Mistry and Tata Trusts, which owns two third of the holding company, to Monday, July 9.
  • The Telecom Regulatory Authority of India on Tuesday enforced its tariff order, interconnection regulations, and quality of service (QoS) norms for the TV broadcasting sector.

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FUNDAMENTALS

Rupee Down: After strong overnight recovery, the Indian rupee on Wednesday reversed most of its gains towards the fag-end session, losing 17 paise at 68.74 against the US dollar.

Long-term Bond Yields Ease: Government bonds (G-Secs) surged following rising demand from corporates and banks. The 7.17% 10-year benchmark bond maturing in 2028 went up to Rs 95.49 from Rs 95.2875, while its yield moved down to 7.85% from 7.88%. The 6.68% G-Secs maturing in 2031 gained to Rs 89.02 from Rs 88.75, while its yield edged down to 8.04% from 8.08%.

Shorter-term Bond Yields Mixed: The 6.84% G-Secs maturing in 2022 firmed up to Rs 96.00 from Rs 95.94, while its yield eased to 7.92% from 7.94%. The 7.59% G-Secs maturing in 2026, the 7.35% G-Secs maturing in 2024 and the 8.79% G-Secs maturing in 2021 were also quoted higher at Rs 97.07, Rs 96.65 and Rs 102.75 respectively.

Call Rate Up: The overnight call money rates ended higher at 6.05% from Tuesday's level of 6.00%. It resumed higher at 6.25% and moved in a range of 6.25% and 5.95%.

Liquidity: The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 3897 crore in 5-bids at the overnight repo operations at a fixed rate of 6.25% as on Wednesday, while, its sold securities worth Rs 45,291 crore in 71-bids at the overnight reverse repo auction at a fixed rate of 6.00% as on July 03.

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