MC:RBI to rupee woes keep market busy after Greek victory
Indian equities pared losses in the last couple of hours of trade as both the BSE Sensex and NSE Nifty closed marginally lower as compared to more than a 1% fall since early trade on Friday. In comparison to its global peers, the Indian market outperformed, may be due to a steep fall in crude oil prices. However, rupee woes ceased to disappear. The Indian currency breached the psychologically important 57 per dollar mark and touched a new lifetime low of 57.22 per dollar.
European markets, and to a large extent global markets, were awaiting the result of the Greek election on June 17. Greece's pro-euro, pro-bailout New Democracy Party emerged victorious, providing some respite to markets concerned over a Greek exit from the euro zone. The socialist party Pasok and the New Democracy is likely to form a coalition government and this almost guarantees Greece's stay within the euro zone in the near term. Positive news led to some upside in the European, US and Asian markets. However, the euphoria subsided over the week.
Monday started with expectations and hopes of a rate cut by RBI. However, the market was delivered a double whammy of an unchanged rate cut and a subsequent outlook downgrading by rating agency Fitch. In order to keep inflation within bounds, the RBI disappointed the markets in its mid-quarter policy review, keeping repo rates unchanged at 8%. However, experts are now hoping for a rate cut in RBI's July policy review.
By Monday evening, Fitch had revised India's outlook to negative from stable. Raising questions about India's growth potential in the absence of structural reforms, Fitch’s Long-Term Foreign-and Local-Currency Issuer Default Ratings (IDRs) were affirmed at 'BBB-' and Short-Term Foreign Currency at 'F3'. India's Country Ceiling was also affirmed at 'BBB-'.
Blaming the weak rupee, state owned oil companies decided to put off the petrol price cut for some time. Indian Oil , Bharat Petroleum and Hindustan Petroleum , as per practice, were to revise petrol price from June 15 but put they off their decision by a couple of days.
In an effort to protect the world economy, on Tuesday, India along with four other countries of the five-nation BRICS (Brazil, Russia, India, China and South Africa) gave a major monetary boost to the IMF's USD 430 billion bailout fund for the debt-wracked 17 nation Eurozone. India announced a 10 billion USD contribution to the fund.
On Tuesday, Canada based equity research firm Veritas downgraded Reliance Communication 's target price to Rs 15 citing high debt, poor corporate governance standards and whimsical accounting policies. Following this, the RCom stocks touched a 52-week low of Rs 60.
In another crucial development, the country was busy witnessing the fiasco for choosing the 13th President of India. The quest to find Pratibha Patil's successor became even more intense, with Congress finally announcing finance minister Pranab Mukherjee’s name as their chosen presidential candidate. As the NDA still remains undecided on their choice, the finance minister is all set to book his ticket to Raisina Hill.
On Wednesday, the US Federal Reserve’s Open Market Committee (FOMC) meet was eyed with great expectations. However, the Fed kept rates unchanged, extended Operation Twist and hinted at the launch of a third round of quantitative easing if required.
The much-trumpeted cable TV digitisation which was to be implemented from July 1 in the four metros of Delhi, Kolkata, Mumbai and Chennai, was put off till Ocotber 31. The Ministry of Information and Broadcasting on Wednesday decided to modify the June 30 deadline for a complete switchover from analogue to digital signals, keeping in view the fact that the four metros were still not ready for it.
In the meanwhile, Fitch not only downgraded its outlook on India, it also cut credit rating outlook of 11 financial entities to negative from stable on Wednesday. State Bank of India, Punjab National Bank, Bank of Baroda, Bank of Baroda (New Zealand) Limited, Canara Bank, IDBI Bank Ltd., ICICI Bank Ltd., Axis Bank, Export-Import Bank of India, Housing and Urban Development Corporation Ltd. (HUDCO) and Infrastructure Development Finance Company Ltd. (IDFC) was included in the list.
For the first time ever, a Rs 10,000 crore defence deal was awarded to a consortium of private players led by Larsen & Toubro . The engineering and construction major will team up with Tata Power and HCL for executing the project.
Fairplay watchdog, Competition Commission of India (CCI) slapped a Rs 6,300 crore penalty on 11 cement companies on Thursday, asking them to pay up 50% of their FY10 profits as penalty. Industry biggies like ACC , Ambuja Cements , JK Cement , India Cement and Jaypee Cements featured in the list of cement manufacturers who had to pay the stipulated fine.
Market regulator Securities and Exchange Board of India (SEBI) is planning to pull up fund houses and fund managers for non-performance. Probes into mutual funds for non performance of schemes and non-compliance with stated investment objectives would be initiated, UK Sinha, Chairman of SEBI informed on Thursday.
The much-awaited meeting of the Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee for discussing the auction of telecom spectrum was deferred on Thursday. But, on Friday it was known that the Department of Telecom (DoT) is expected to move a cabinet note on spectrum pricing policy next week.
Friday again saw a nosediving rupee hitting a record low of 57.22 per dollar. While the Indian currency ended the day at 57.12 against a dollar, it posted its worst weekly fall in nine months. Brent crude too dropped below USD 90 a barrel for the first time since December 2010. However, despite the fall in global rates, oil companies are still reluctant to cut the price of petrol.
In a major setback to the Trinamool Congress led Bengal government, the Calcutta High Court has held the 'Singur Land Rehabilitation and Development Act, 2011' unconstitutional and void. Tata Motors had leased 997 acres of land in Singur for setting up the Nano car factory. However, after opposition from TMC, Tata shifted it to Gujarat in 2008.
In the backdrop of criticism for policy inaction, the centre is seeking support for allowing 51% FDI in multi-brand retail. Commerce Minister Anand Sharma is trying to convince the chief ministers of various states for implementing the decision.
A falling rupee, question over FDI in retail and further action from CCI has surely set the stage for an action packed week ahead.
