Continued uncertainty over the Greek debt crisis and the possibility of a late onset of El Nino pushed the equity markets of the country into a volatile week. The key indices, however, closed in the green for the week. The 30 share S&P BSE Sensex closed the week ending 26 June at 27,811.84 points (previous weekly close at 27,316.17 points), a gain of merely 495.67 points or 1.81 percent. The other important index, the 50 share CNX Nifty 8,381.10 points (up from last week’s closing at 8224.95 points) – a net weekly gain of about 156.15 points or 1.89 percent. Market watchers attribute the second consecutive weekly gains of the equity markets to relief over a robust monsoon season.
According to the India Meteorological Department, the country experienced rainfall about 44 percent more than normal levels. For the June 19-26 week, foreign institutional investors (FII) in the capital market remained predominantly in a buying mode and net investments from FIIs were pegged at INR 130.91 crore. Market gurus are still advising retail investors to exercise caution and to invest wisely in long-term scrips. In weeks to come, the markets are likely to react to talks on the Greek front, FII investment levels, and any possible rate cut that the RBI might consider. Banking stocks did not seem to perform well this week. ICICI Bank, one of the country’s major private banks, declined by about 1 percent and Kotak Mahindra Bank also lost 1.9 percent this week.
The bullion market did not see much excitement this week. Following global cues and slowing demand, gold fell to about INR 26,680 per ten grams – a two month low for the yellow metal. Silver, too, failed to cheer with poor industrial demand and closed Friday at INR 36,190 per kg.
PM launches Housing for All, Smart Cities, Urban Renewal Schemes
This week, Prime Minister Narendra Modi launched some of India’s biggest urban infrastructure schemes. Housing for All by 2022 – also called the Pradhan Mantri Awas Yojana – intends to build about 2 crore houses in the urban regions of the county by the year 2022. The scheme shall make inexpensive housing available to the lower income groups living in cities. Special provisions have been made to protect the interests of women, SC/ST, transgenders, and differently-abled people. The Pradhan Mantri Awas Yojna is likey to cost the central government about INR three lakh crore over the next seven years. This includes the cost of subsidising home loans with an interest subsidy of about 6.5 percent.
The Smart Cities project aims at identifying 100 smart cities through the country and developing them. These cities will be selected by the people of India through a ‘City Challenge Competition’. The cost of the project is pegged at INR 48000. Smart Cities project will focus on the provision of smart solutions in all aspects of urban life and on enhancing the quality of life in these cities. Developed through a PPP model, these cities will be known for their clean and green environment.
The Atal Mission for Rejuvenation and Urban Transformation (AMRUT) comes with an INR 50,000 crore price tag and focuses on urban renewal and upgradation of infrastructure in existing cities. These 500 cities, identified by the states, shall receive a facelift with special emphasis on upgradation of sanitation and drainage systems and cleanliness. The government has announced that these three schemes shall be based on the public private partnership model both in terms of finance and successful administration.
Café Coffee Day Files for IPO
According to news reports, Coffee Day Enterprises, the firm that owns the Cafe Coffee Day chain in India, has filed a draft prospectus and is on its way to launch an IPO (Initial Public Offering). The IPO is expected to raise about INR 11.5 billion or about USD 181 million. Approval from the SEBI (Securities and Exchange Board of India (SEBI) could take about three months and Coffee Day Enterprises may come out with the IPO a month later. Cafe Coffee Day or CCD as it is known has over 1500 outlets in India.
India’s biggest airline, Indigo is also likely to file the prospectus for an IPO launch soon.
Extension of Pre-2005 Currency Exchange Deadline
The Reserve Bank of India has extended the deadline for exchange of all pre-2005 currency notes till 31 December 2015. Till such time all such bank notes will remain legal and in circulation. The last date for the exchange had been fixed in January but was postponed to 30 June and now has been extended again. The Mahatma Gandhi series of notes have been in circulation for about a decade and the notes prior to this series were not designed to carry a number of security anti-counterfeit measures making it necessary to withdraw them. The RBI also said, “A majority of the old banknotes have been withdrawn through bank branches”.
RBI Governor Warns of Great Depression
Addressing a conference organised by the London Business School, RBI Governor, Raghuram Rajan warned that global economy was showing signs similar to those at the start of the Great Depression of 1929. The world’s economy could be headed towards another such downturn and its aftermath. Such a scenario is preventable, though. Rajan also said that economists, bankers, and governments should put together “new rules of the game” to prevent such a collapse. “I am not going to venture a guess as to how we establish new rules of the game. It has to be international discussion, international consensus built over time after much research and action”, said the RBI Chief.
Raghuram Rajan is currently heading India’s central bank and was previously the Chief Economist at International Monetary Fund (IMF). Rajan has been following global economic trends and his predictions are well-regarded. He is one of the few economists who had successfully predicted the global financial meltdown of 2008.
The Great Depression was a time of severe global economic crisis that began with the “Black Tuesday” stock market crash in the US in October 1929. In the early 30s, the meltdown spread to other countries. Unemployment was high, investments low and global economy fell by over 15 percent.