Market Walk

RBI’s proactively raising the repo rates by 40 bps

RBI’s unexpected repo rate to 4.40% while the SDF rate moved up to 4.15% and the bank rate to 4.65%

On Wednesday, RBI stole the thunder from the Fed by pre-empting the monetary dilemma and proactively raising repo rates by 40 bps. This took the repo rates to 4.40% while the SDF rate moved up to 4.15% and the bank rate to 4.65%. In addition, the RBI also sought to amplify the impact of the rate hike by hiking the CRR (cash reserve ratio) by 50 bps from 4% to 4.5%. This will absorb liquidity to the tune of Rs.87,000 crore from the markets. Fed was already expected to raise policy rates by 50 bps in its 04th May policy.

Kotak Mahindra Bank reported 50% rise in net profits on a yoy basis at Rs.3,892 crore

For the Mar-22 quarter, Kotak Mahindra Bank reported 50% rise in net profits on a yoy basis at Rs.3,892 crore. Net profits for the full year were up 21% at Rs.12,089 crore. The profits are almost 30% better than the consensus profit estimates. NIM stood at a healthy 4.78%. Gross NPAs improved by 37 bps to 2.34% for Q4. For the fourth quarter the Kotak loan book grew 21% to Rs.2.71 trillion while deposits grew 11% to Rs.3.11 trillion, with CASA accounting for 60.7%. Kotak Bank capital adequacy stands healthy at 22.7%.

Indian ETFs saw record inflows of Rs.1.28 trillion for FY22

In a move that would be music to the ears of passive funds, the AUM of Indian exchange traded funds (ETFs) tracking the Nifty-50 index has crossed Rs.2 trillion. Indian ETFs saw record inflows of Rs.1.28 trillion for FY22. Between March 2017 and March 2022, the AUM of ETFs as an asset class has jumped manifold from Rs.52,368 crore to Rs.500,000 crore. The number of ETFs in India has also surged from 84 to 228. With active funds struggling to consistently beat the index over the long term, ETFs seem to be the answer.

US Federal Reserve late at night, raised interest rates by a massive 50 bps

There was little surprise when the US Federal Reserve, late at night, raised interest rates by a massive 50 bps. This is the sharpest single point hike since the year 2000. With inflation at 8.5%, Jerome Powell had already indicated that Fed would hike rates by 50 bps in May and take the Fed rate close to 2.75% by the end of the year 2022. The unwinding will roll out in June with a reduced amount of $47.5 billion, but will be graded up to $95 billion in 3 months. RBI had already pre-empted the rate hike with a 40 bps hike.

India reported record service exports at $255 billion, up 23.4% on a yoy basis

For the full fiscal year FY22, India reported record service exports at $255 billion, up 23.4% on a yoy basis. Even on a 2-year pre-COVID comparison, the service exports were up 19.5%. The big contributors were telecom, IT and transport. The total Indian exports for FY22 comprising of services and merchandise exports, touched a record $676 billion, up 28.4% yoy. This was despite tepid show by aviation, tourism and hospitality; being contact intensive. FTAs with the UK, European Union, Israel and Canada should help.

LIC is worried by the RBI’s decision to hike rates by 40 bps due to its ongoing IPO

If there is one company that was really worried by the RBI decision to hike rates by 40 bps it was LIC, largely due to its ongoing IPO. The concern was evident in the grey market price (GMP) of LIC. The GMP, which had been hovering around Rs.85 till Tuesday, surged to Rs.125 in early trades on Wednesday after the very strong anchor demand for the LIC IPO. However, post the RBI announcement of a 40 bps rate hike, the GMP crashed back to Rs.86 levels. Only employee and policyholder portion got fully subscribed.

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