Rising Rupee, RBI's Fund Transfer to Government, and Top Cues in Focus Today

Wed, 28 Aug Pre-Open

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Indian share markets ended their trading session marginally higher yesterday.

On the sectoral front, gains were seen in the metal sector and auto sector.

At the closing bell yesterday, the BSE Sensex stood higher by 147 points (up 0.4%) and the NSE Nifty closed higher by 48 points (up 0.4%).

The BSE Mid Cap index ended up by 0.5%, while the BSE Small Cap index ended the day up by 1.6%.

Top Stocks in Focus Today

From the IT sector, Infosys share price will be in focus today as the company on Monday said a board committee is considering closure of the Rs 82.6 billion buyback offer, with the company utilizing almost full size of the issue approved.

In a regulatory filing, Infosys said "the Buyback Committee of the company will, on August 26, 2019, consider proposals, including but not to limited to, the closure of the Buyback, pursuant to the terms of the Public Announcement, in view of the fact that the company has utilised 99.999999% of the maximum buyback size (excluding transaction costs)".

In January, the company had announced that it would buy back shares of the company for an amount aggregating up to Rs 82.6 billion at a price not exceeding Rs 800 per equity share.

TCS share price will also be in focus today as a US district court has refused to hold a fresh trial in a case where it had cleared TCS of discrimination against local employees.

The court last week denied the motion by three former TCS workers who had questioned the verdict of a California jury in November. The jury had rejected claims that the Indian IT firm preferred to staff its US offices with Indians instead of Americans.

To know more about the companies, you can read Infosys' 2018-19 annual report analysis and TCS' 2018-19 annual report analysis on our website.

RBI to Transfer Surplus of Rs 1.8 Trillion to Government

In the news form the macroeconomic space, the Reserve Bank of India (RBI) will transfer a surplus of Rs 1.8 trillion to the government as it has approved the recommendations of Bimal Jalan committee at the central board meet held in Mumbai on August 26.

The transfer sum comprises of Rs 1.2 trillion of surplus for the financial year 2019 and Rs 526.4 billion of excess provisions identified under the revised Economic Capital Framework (ECF) that was adopted at the central board meet.

Reportedly, the Central Board accepted all the recommendations of the Committee and finalised the RBI's accounts for 2018-19 using the revised framework to determine risk provisioning and surplus transfer.

The Central Board decided to maintain the realized equity level at 5.5% of the balance sheet as recommended by the committee, down from existing 6.8%. The resultant excess risk provisions of Rs 526.4 billion were written back, RBI said.

In regard to the above development, former Deputy Governor of the Reserve Bank of India (RBI) said the surplus transfer to government for next year will depend on whatever surplus RBI has for 2019-2020 and then they will have to look at the reserves.

At that point in time, if the proportion in balance-sheet is less than 5.5%, then it has to retain part of the surplus so that the minimum 5.5% is maintained.

It can also transfer more if it wants to increase the reserves to the limit of 6.5%. But that will depend on the Reserve Bank board. So, that decision will be taken next year.

As per Tanushree Banerjee, co-head of research at Equitymaster, this is a positive step if the above transfer is measured and goal oriented.

As per her, it could be a catalyst for the economy's turnaround. Tune in to find out the impact of surplus transfer by RBI on the economy:

From the Currencies Space...

The rupee witnessed buying interest against the US dollar yesterday. It opened its session 32 paise higher at 71.70 against the US dollar.

The domestic unit on Monday had declined by 36 paise to close below the 72 level for the first time in nine months, hit by a 'flash crash' in global currencies due to uncertainty over the trade front. It settled at 72.02 to the US dollar, the lowest closing level since 14 November 2018, even as equities spurted more than 700 points at close on stimulus measures.

Speaking of currencies, Vijay Bhambwani, editor of Weekly Cash Alerts, tells you the main reasons why not to trade commodities and currencies the same way you would trade equities. Here's an excerpt of what he wrote...

• Currencies are traded in pairs and the most liquid is the USDINR. Currencies are traded in four decimal points just as bonds are. The international derivative trader's association has indicated that forex may be traded in 6 decimals in the coming few years.
  
  It takes months sometimes for the currency pair to pass the next round figure, say from 70 to 71.
  
  Can you really trade commodities and currencies alike or for that matter, equities and currencies alike? Definitely not!

To know more, you can read Vijay's entire article here: Is Trading in Equities, Commodities, and Currencies the Same?

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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