Business This Week – Apprehensive Equity Markets, SLR Cut

Business this week - Apprehensive equity markets, SLR cut

Business this week - Apprehensive equity markets, SLR cut It could be the uncertain outcome of the Delhi elections, it could be apprehension to the upcoming Union Budget, it could be a natural reaction of domestic markets to international pressures and the worsening conditions in Greece – whatever the reason, the Indian equity markets brought little cheer to the investors this week. The 50 share CNX Nifty closed the week at 8661.05 points – a drop of about 147.85 points since its last weekly close. The 30 share benchmark index, S&P BSE Sensex closed the week at about 28,717.91 points. This is a drop of about 465.04 points since the last weekly closing. Both the indices ended in the red causing retail investors to worry that the Bull Run may be over. Market experts have, however, gone on record to predict that while the markets may remain jittery and apprehensive in the run up to the Union Budget, steady long term growth is very much on the cards.

Wipro, Hindalco, Sesa Sterlite, Infosys, TCS, and Sun Pharma were the top gainers at the Sensex while BHEL, Tata Power, Mahindra & Mahindra, ICICI Bank, Bajaj Auto, and SBI were the top losers at the index.

The domestic currency ended the week at 61.6950 to the US dollar. The Euro and the Dollar are expected to go down slightly following disheartening news from Europe. While crude seems to have recovered about 14-15 percent from the recent crash, stability in oil prices should go a long way in the correct assessment of economic growth in the country, experts feel. Another week to watch for oil prices, then. The major metals – gold and silver – also dropped across Indian markets after short span of rising prices. Global reactions and bulk selling is the reason cited for the slump.

ATF costs slashed 11.27 percent

The week started with some great news for airline companies. On February 1, the price of aviation turbine fuel (ATF), also known as jet fuel, was cut down by about 11.27 percent. At the start of the week ATF was poised to cost less than regular diesel. The slash in the price of ATF was the second such cut this year – earlier on January 1, 2015, jet fuel prices had been cut down by INR 7,520.52 per kilolitre (approximately 12.5 percent).

As on February 1, 2015, state-run Indian Oil Corp declared that the price of ATF in the national capital would be decreased by INR 5,909.9 per kilolitre and would sell at INR 46,513.02 per kilolitre at the start of the month. ATF constitutes one of the major costs for most airline companies. It looks unlikely, however, in the current scenario that benefits would be passed on to passengers.

RBI cuts SLR by 50 basis points

In the much awaited bi-monthly monetary policy review on February 2, India’s central bank the RBI announced that it would continue to hold rates steady but would spur banks to lower their lending rates by cutting down on the statutory liquidity ratio (SLR) by 50 basis points. Statutory liquidity ratio (SLR) is the minimum amount of government bonds or securities that a bank must hold. Cutting down on the SLR is likely to increase the banks’ liquidity and enable the banks to inject more credit into the economy.

The central bank, however, kept the repo rate unchanged at 7.75 percent and the reverse repo rate stood steady at 6.75 percent. SLR was cut to 21.5 percent of the total deposits in the bank, effective the fortnight starting February 7. The RBI also decided to raise the limit of overseas investments permitted under the Liberalized Remittance Scheme to USD 250,000 per person per annum.

Fare hike unlikely in Rail Budget

The Union Minister of State for Railways, Mr. Manoj Sinha brought relief to frequent travelers in the country by closing the week with an announcement that there is currently no proposal for a fare hike in the upcoming rail budget. This comes as a respite since Mr. Sinha had hinted earlier on that there may be a considerable increase in the fares of major trains. Mr. Sinha said that the focus of the Railways and his ministry would be to provide quality services and focus on cleanliness, hygiene, adherence to timings, safety, and such utilities. Union Railway Minister, Mr. Suresh Prabhu had earlier said that a decline in fare was unlikely as well. “Railway recovers only 50 percent of the passenger cost it bears. There is already a huge element of subsidy provided to passengers in the fares…There is a huge demand-supply gap and finance is major constraint…The point is how to raise resources”, he said.

Axis Bank to raise INR 15,000 crore

Leading private sector bank Axis Bank announced that it shall soon be seeking the approval of its shareholders to raise about  INR 15,000 crore (USD 2.42 billion) through the issue of long-term bonds or non-convertible debentures. In its filing to the exchanges, Axis bank said that these debt securities would be issued to select investors. Axis Bank is the third largest private sector bank in the country and had recorded a net profit of about INR 1899.76 crore for the quarter ending December 2014. The bank said it intended to garner funds through “private placement bases, in one or more tranches, as per the structure and within the limits permitted by the RBI, of an amount not exceeding Rs 15,000 crore”.