Indian Markets Trade in the Red

Fri, 1 Apr 11:30 am

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After opening the day on a flattish note, the Indian indices registered losses and went on to trade in the red. Sectoral indices are trading on a mixed note with stocks from the telecom and metal sector witnessing maximum selling pressure. Capital goods and realty stocks are trading in the green.

The BSE Sensex is trading down 135 points (down 0.5%) and the NSE Nifty is trading down 43 points (down 0.6%). The BSE Mid Cap index is trading marginally higher and the BSE Small Cap index is trading up 0.6%. The rupee is trading at 66.42 to the US$.

Indian markets have been witnessing selling pressure on the back of weak Asian cues and the Reserve Bank of India (RBI)'s next monetary policy which is scheduled for April 5, 2016.

While the market expects 25 basis points rate cut, Ajit Dayal, in a recent article in The Honest Truth is willing to challenge the consensus. The question he has tossed is - "Could the RBI reduce interest rates by 100 basis points (1%) in the monetary policy meeting to be held on April 5th 2016?" And there is sound thought process behind why he believes so. Some of the reasons are significant reduction in consumer price inflation, a room for big cut in the real interest rates, benefit to banks due to larger rate cut . Not to mention that this could be the last window of opportunity for the RBI Governor. If you want to know more about why he thinks 1% rate cut is possible, visit here.

However, that is just a part of the picture. In a recent article in Vivek Kaul's diary, he makes a point exactly opposite of what Mr Dayal is making, I.e., RBI should not cut the repo rate by 1%, or at least not all at once. His reasons are equally sound - the strongest being that banks have not passed the cut in deposit rates to the lenders and that the entire thing needs to be viewed from the point of view of savers as well. To know more about Vivek's views on interest rates , please click here.

We will have a clear answer on this on 5th of April 2016. But what are your views on the quantum of interest rate cut? Who do you think will be right - Vivek Kaul or Ajit Dayal? Let us know your comments or share your views in the Equitymaster Club.

As per an article in Economic Times, Japan has committed loans worth around Rs 142 billion for five infrastructure development projects in India. The loans have been committed for projects including Transmission System Strengthening Project in Madhya Pradesh; Odisha Integrated Sanitation Improvement Project (II) and Dedicated Freight Corridor Project (Phase 1).

The loans are committed under Official Development Assistance (ODA). ODA is broadly divided into bilateral aid - in which assistance is given directly to developing countries, and multilateral aid - which is provided through international organizations.

The loans will be extended through Japan International Cooperation Agency (JICA) which provides bilateral aid in the form of Technical Cooperation, Japanese ODA Loans and Grant Aid.

One shall note that for the financial year 2015-16, Japan committed a total of Rs 229 billion, which is the highest amount committed in a year.

Investment in infrastructure is a key to ensure that any country's long term growth rate remains buoyant. However, India lags in infrastructure investments than its global peers by a huge margin. And the government is doing all it can to revive this sector. The has announced the creation of the National Investment and Infrastructure Fund (NIIF) to give a fillip to the infrastructure in India. To read more on major highlights of the NIIF, please click here.

As per a leading financial daily, Housing Development Finance Corporation (HDFC) has concluded the sale of 9% stake in HDFC Standard Life Insurance Company (HDFC Life) to Standard Life (Mauritius Holdings). HDFC Standard Life Insurance Company (HDFC Life) is a subsidiary of HDFC.

It was reported that the corporation has completed the transfer of the said shares pursuant to the receipt of the requisite approvals.

One shall note that the company in August last year had agreed to sell 17,95,39,209 equity shares of Rs 10 each of HDFC Life to Standard Life (Mauritius Holdings). It had agreed to sell the same at a price of Rs 95 per share aggregating to 9% of the issued and paid-up share capital of HDFC Life.

On a separate note, HDFC Bank is all set to raise up to Rs 50 billion by way of infrastructure bonds. CRISIL has assigned AAA/Stable rating to the bond issuance and the rating on the bank's other debt instruments has been reaffirmed at 'AAA/Stable'.

Last year, HDFC Bank had raised Rs 30 billion by issuing bonds on a private-placement basis. Reportedly, the bank will be raising money to enable it to participate in the pickup in credit demand that was expected both from the corporate and the retail sector.

The management had earlier stated that the bank will be looking at lending to projects in the infrastructure space which approximately accounts for up to 15% of the bank's book. The banks' interest in raising money via long-term bonds had picked up after the Reserve Bank had made changes in the regulation, announcing that bonds with tenor of more than seven years would be exempted from cash and statutory reserve requirements, if the proceeds were used to fund new long-term infrastructure projects and affordable housing.

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