Business This Week – Markets Dip, RBI Eyes Growth

Indian equity markets

Indian equity marketsThe Indian equity markets saw another very volatile week. The 30 share S&P BSE Sensex fell by about 130 points (0.48 percent) to close the week at 27,241.78. Profit booking by retail investors and heavy selling by foreign funds accounted for the pressure of the past week. The 50 share Nifty closed the week at 8,200.70, a weekly fall of about 19.65 points (0.24 percent). The primary equity markets, the BSE and the NSE remained closed on Thursday, December 25 on account of Christmas.

HDFC (1.18%) was the top gainer while Maruti Suzuki (1.31%) was the top loser at the Sensex. PSU banks were in focus this week. On the last day of the week, Friday, Union Bank of India gained 5.65 percent, Syndicate Bank rose 4.93 percent, and Corporation Bank gained 4.68 percent.

The week saw many equity gains due to the Union Cabinet’s approval of the promulgation of the Insurance Bill Ordinance and approval of 100 percent FDI in medical devices manufacturing sector via the automatic route. Market watchers expect a fresh infusion of foreign funds and increased retail investor activity in the first quarter of the next calendar year leading up to a pre-budget rally.

This week gold rose by about INR 100 per 10 grams in Delhi’s bullion market. A rising global trend and increased jewellery buying ahead of the January wedding season, has led to a comeback in gold prices, say experts. Gold ended the week at INR 27,100. Silver too traced a growth trajectory, gaining INR 300 per kg to end the week at INR 37300. Both retail and industrial sales of silver went up this week. Gold and silver prices in New York also saw a gain of about 1.9 percent and 2.8 percent on December 26, 2014.

Credit policy to remain unchanged, says RBI

RBI Governor Raghuram Rajan said that the Indian Central bank shall resist calls to slash credit rates and revise the RBI’s credit policy till the economy shows stability in growth and lowering inflation rates. “The message I have been sending is that we don’t want to flip-flop back and forth. This month inflation was two percent, therefore I will cut this much. Oh! It went up to five percent, maybe I should increase it. That’s not how a Central bank operates”, said Rajan. Reiterating his faith in the Indian economy, he also said that within a couple of years he expects growth levels to reach a reasonable high.

Under the leadership of RBI Governor Rajan, India’s foreign exchange reserves have reached close to an all-time high. Reports this week reveal that India’s forex reserves have reached about USD 319.99 billion, well in the vicinity of its highest figure USD 320.78 billion in September 2011. Dwindling forex reserves and widening current account deficit had been major concerns when Rajan had taken over charge of the Central bank in September 2013. Since then RBI has managed to add about USD 50 billion to its forex reserves.

SpiceJet chalks out revival plan

Budget airline SpiceJet has informed the aviation ministry that it shall soon be submitting a plan for its revival and for infusion of funds. The ailing carrier has been in dire straits with loans amounting to INR 1,600 crore (early December data) causing fears that it may soon be grounded. Last week, the Airports Authority of India (AAI) had agreed to extend credit till end of this month. Former promoter of the airline, Ajay Singh has been leading the attempts to find investors willing to bail out SpiceJet from its current condition. Though it is not clear who these investors are, it is likely that US-based J P Morgan Chase shall be leading the attempt to pump in funds. SpiceJet COO Sanjiv Kapoor and others met a number of officials of the civil aviation ministry on Friday and a written plan is likely to be submitted by next Monday.

Snapdeal and India Post take Benarasi weavers online

Snapdeal, one of India’s leading e-commerce websites, has joined hands with India Post to provide the weavers and artisans of Varanasi an online marketplace on the website. This comes as a major boost to the traditional silk and textile industry of Benaras. Weavers and producers in the region will now be able to fulfil orders received on the website by dropping off the items at their nearest post offices from where these goods will be delivered to the customer by India Post. This effort of Snapdeal and India Post to preserve the traditional textile heritage of the region and to showcase the products to a larger audience has been highly appreciated. “Through this partnership we will take the Banarasi weaves to customers in all corners of the country and extend this platform to include more weavers and artisans of our country”, promised Snapdeal CEO Kunal Bahl.

Vijay Mallya and Kingfisher Airlines not wilful defaulters: Calcutta High Court

Rejecting United Bank of India’s decision to hold Vijay Mallya and Kingfisher Airlines wilful defaulters, the Calcutta High Court ruled in favour of the now grounded airline. The court’s decision was taken on technical grounds – the committee of grievance redressal that agreed to declare Mallya and three other Kingfisher Airlines directors (Subhash R Gupte, Anil Kumar Ganguly and Ravi Nedungadi) wilful defaulters was made up of four members as opposed to the RBI mandate which requires three members. The High Court has, however, upheld all the evidences produced by the bank against the airline and allows for the bank to reinstate the committee with one executive director and two officials of general manager or deputy general manager rank, within a month.

The consortium of banks led by the State-run SBI has run up bad loans worth INR 6,520 crore in the Kingfisher Airline case.