Tag: liquidity

RBI Policy: Shaktikanta Das announces 4 steps as central bank moves to rebalance liquidity

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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RBI Governor Shaktikanta Das said on Thursday that the central bank has turned to rebalancing liquidity on a dynamic basis. The RBI chief said adequate liquidity has been ensured to support its ‘accommodative’ stance of policy.

The RBI has taken “quick and decisive” steps to ease liquidity constraints, restore market confidence and prevent contagion to other segments of the financial market, Das said, adding that the highest priority has been given to maintaining financial stability. 

The RBI said it is logical to restore the revised liquidity management framework and announced four steps:

• Variable rate repo (VRR) operations of varying tenors to be conducted when warranted
• VRRs, VRRRs of 14-day tenor to operate as main liquidity management tool
• These main operations to be supported by fine-tuning operations to tide over any unanticipated liquidity changes
• From March 1, fixed-rate reverse repo, Marginal Standing Facility (MSF) operations to be available only between 5:30 pm and 11.59 pm on all days (instead of 9:00 am to 11:59 pm)

The RBI’s move was in tandem with its intent to start to restore normal liquidity operations in a phased manner, after assuring bond markets of ample liquidity.

The announcements came as part of the RBI’s first bi-monthly review of 2022, in which the central bank decided to maintain the status quo on key interest rates.

ALSO READ: Das calls crypto a big threat to macro stability

The overall system liquidity, though moderated, remains in a large surplus, Das said. Variable reverse repo rates (VRRRs) have become the main option for managing liquidity, he said.

The RBI’s decision to continue with a dovish stance and remain accommodative was along expected lines, said Rajee R, Chief Ratings Officer at Brickwork Ratings. The emphasis that VRR and VRRR will be the main tools for liquidity adjustment is in continuance with the RBI’s calibrated liquidity management policy to maintain financial stability, she added.

The RBI Governor said the rebalancing of liquidity has involved two-sided operations:

• Overnight fixed-rate reverse repo towards 14-day variable rate reverse repo (VRRR) auction as the main operation
• Repo auctions of 1-3 day maturities (to meet transient liquidity mismatches, shortages)

In a customary post-statement interaction with media, Das said liquidity is not in the domain of the MPC but the RBI. “The yield curve and liquidity issues are entirely in the RBI’s domain so it is in my statement (and not MPC),” he said.

In its policy statement, the RBI said the “key to effective liquidity management is ‘timing’, and having a nuanced and nimble-footed approach that responds swiftly to the manner in which liquidity tilts”. A slew of measures taken by the RBI to tackle the pandemic has brought down borrowing costs to their lowest levels in decades, according to the RBI statement.

Since August 2021, when the rebalancing began, the daily average absorption under the fixed rate reverse repo has moderated sharply, and the effective reverse repo rate increased to 3.87 percent (as of February 4) from 3.37 percent.

ALSO READ: RBI raises e-Rupee voucher cap

The RBI also extended its term liquidity facility of Rs 50,000 crore to emergency health services. It had rolled out the on-tap liquidity window in May 2021 for ramping up COVID-19 related healthcare infrastructure and services in the country. It said the extension, to June 30, 2022, is in view of the response to the scheme.

“The RBI remains concerned about the on-ground impact due to COVID-19 and is doing its bit to get banks to lend into areas which need support in this regard,” said Shivaji Thapliyal, Lead Analyst, Banking and Non-lending Financials-Institutional Equities at YES Securities.

The RBI also extended the on-tap liquidity window of Rs 15,000 crore for contact-intensive sectors. The central bank had in June 2021 opened the liquidity window for certain contact-intensive sectors. The window is now extended till June 30, 2022.

Catch all RBI policy updates here

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RBI to conduct overnight VRR auction of Rs 75,000 cr on January 24

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India on Monday said it will be conducting an overnight variable rate repo auction under liquidity adjustment facility (LAF) for an amount of Rs 75,000 crore today. The date of reversal is on January 25, 2022, the central bank said in a release.

According to the operational guidelines, the auction will be conducted on CBS (e-Kuber) platform and the minimum bid amount would be Rs 1 crore and multiples thereof. The allotment would be in multiples of Rs 1 crore.

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The banks can place multiple bids in percentage terms up to two decimal places. Bids at or below the repo rate will be rejected.

On January 20, the RBI had conducted an overnight variable rate repo (VRR) auction of Rs 50,000 crore. The central bank had said it will continue to rebalance liquidity conditions in a non-disruptive manner while maintaining adequate liquidity to meet the needs of the productive sectors of the economy.

(With inputs from PTI)

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RBI policy: Shaktikanta Das proposes to enhance 14-day VRRR auction, re-establish it as main liquidity management operation

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India (RBI) will continue to rebalance liquidity conditions in a non-disruptive manner, said central bank’s governor Shaktikanta Das on Wednesday. He said that RBI’s aim is to re-establish 14-day Variable Reverse Repo Rate (VRRR) as the main liquidity operation.

The RBI is to absorb Rs 6.5 lakh crore in VRRR auction on December 17 and absorb Rs 7.5 lakh crore in VRRR auction on December 31.

“From January 2022, liquidity adjustment will be mainly via variable reverse repo auction,” Das said.

“We retain flexibility to fine-tune liquidity operations. The RBI will allow banks to make one-time pre-payment with respect to TLTROs announced,” he added.

Meanwhile, Reserve Bank of India (RBI) Governor Shaktikanta Das announced that the central bank has decided to keep key rates unchanged – repo rate – at 4 percent and the stance remains accomodative.

With this, it is the ninth consecutive time since the rate remains unchanged. RBI had last revised its policy repo rate or the short-term lending rate on May 22, 2020 in an off-policy cycle to perk up demand by cutting the interest rate to a historic low.

Das said MPC voted unanimously for keeping interest rate unchanged and decided to continue with its accommodative stance as long as necessary to support growth and keep inflation within the target. RBI retained its growth projection at 9.5 percent for the current fiscal despite concerns over Omicron.

Das also said the headline inflation would peak in the fourth quarter of the current fiscal. The inflation projection has been retained at 5.3 per cent for the current financial year.

Catch all RBI policy related updates here

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Exclusive: India should be able to achieve double-digit growth this year, says Krishnamurthy Subramanian

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India should be able to achieve double-digit growth this year, said Krishnamurthy Subramanian, Chief Economic Advisor in an exclusive interaction with CNBC-TV18.

“I don’t see any worries on current account deficit and trade deficit numbers. Also, recovery is gaining momentum. The same can be seen in the latest PMI,” he said.

On inflation, he said that it is less of a threat in India because we have worked on supply-side issues.

“Liquidity has to be calibrated and watched. We should not overweight global scenario on inflation w.r.t India. The impact of exogenous factors on India’s inflation is very small,” Subramanian said while speaking to CNBC-TV18.

On COVID-19 vaccination, he said that the drive will continue to be an important element in providing immunity.

Speaking about farmers, he said that measures to alleviate conditions for small farmers can be thought about.

On GST, he mentioned that number of rate slabs required should be reviewed.

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India is seeing cash being returned and recycled: Blume Ventures’ Sanjay Nath

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Indian startups have raised over $28 billion so far this year, according to Venture Intelligence. In the process, India has created a unicorn every 10 days with 34 startups now being part of the billion dollar club, not just that the deals are getting bigger and bigger every day.

While ecommerce is the clear favourite, followed by fintech and edtech, these sectors have also been the top benefactors of the lockdown life. Sectors like enterprise tech, logistics, healthcare have also attracted serious interest and big moneys and of course, SaaS has now become the Indian success story globally quite evident after the stellar debut of FreshWorks.

India’s food tech Zomato led the IPO bandwagon and now there is a queue of homegrown tech startups ready to light up the stock markets.

Read Here: Startup Digest: Delhivery files papers for IPO, Ola reports first-ever operating profit

Just this week we have Nykaa and PolicyBazaar and India’s biggest startup IPO Paytm opens next week to be followed by Delhivery, PharmEasy, Mobikwik and many more.

Talking about the big buzz we cannot ignore the kind of currency crypto is gaining in India, with both investors and consumers looking to get a bite of the shining new star on the horizon.

In this episode of ‘Young Turks – Diwali Special’, CNBC-TV18’s Shereen Bhan spoke to Sanjay Nath, Co-founder & Managing Partner at Blume Ventures, Nimesh Kampani, Cofounder & CEO of Trica and Rehan Yar Khan, Managing Partner at Orios Venture, to take stock of the year that has gone by and what lies ahead.

Talking about the IPO trend Nath said, “What is interesting is that this is a real recycling of cash. If you think about it, I have lost track of the number of unicorns that we have had. Mind you a lot of that has been paper value and what is interesting, starting from Zomato, here in India, and with FreshWorks in the US and with the upcoming IPOs what India has not really shown which is happening now, is this cash being returned. The reason that is important is that when the cash is recycled, and at that scale, it just creates a more vibrant ecosystem.”

Talking about standout theme this year Nath said, “Earlier SaaS mainly was restricted to enterprise SaaS, and just, let us say, built in Bangalore for the world. But today, SaaS has become a model, you have a pricing model, a business model, you have vertical SaaS, you have horizontal SaaS, it has also being applied to different verticals. It has become a business model in and of itself so that is one. I will also say that the digital tailwinds have also impacted tier-2 and tier-3 cities. So you see, you see sectors like agri tech, we have got Stellapps and Jai Kisaan beneficiaries of the sector. You also have vernacular gaming entertainment, which was earlier maybe restricted to let us say Rummy and gaming/gambling. But today, you have got tier-2 and tier-3 cities becoming active users and also willing to pay for that I think those are huge beneficiaries.”

Read Here: Chennai agro-tech start-up Waycool to target IPO by 2025

On liquidity Khan said, “The liquidity story is a very interesting one. It shows that if Indian entrepreneurs are given liquidity, the market certainly exists to build large companies. It all started about a decade back when venture capital entered India, and started providing capital to companies and that has now gone on and increased yes courtesy central bankers from across the world in the last 18 months. But it just shows the power of what can be built in our country if our people are given the financing. That is very, very heartening, because the market certainly exists, the entrepreneurial zeal has always existed in this country. The innovation has always existed in this country, we were always short of capital and now that we have the capital, look at what we are doing with it.”

On standout theme this year he said, “E-sops and coming of the age E-sops has been a big one this year because with the IPOs it is not just investors which are seeing liquidity, it has employees which are seeing liquidity back and that is fuelling more and more talent into this ecosystem. So to my mind that has been a very big one.”

For full interview, watch accompanying video…

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Correction proves market is ‘super hot’, says Ramdeo Agarwal; cautious on PSUs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Dalal Street, in the recent few trading sessions, has witnessed volatility with Thursday’s trading session seeing the sharpest fall since April this year. Speaking to CNBC-TV18, Raamdeo Agrawal, Chairman & Co-founder at Motilal Oswal Financial Services, believes that this is not a major concern as corrections are part of a classic bull market.

“This is an absolutely textbook bull market, which we are in now, it is very difficult to predict every day, every week, every month,” he said.

“It is a very, super-hot IPO market, super-hot volumes in the marketplace. This party can be very long and very large, you cannot put a finger and say that now IPO market is very hot so of course there is cause for correction,” he added.

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The market veteran believes that currently liquidity, momentum, optimism and positive outlook are all in the bulls’ favour.

Is there a disconnect between what is the state of the economy and the stock market? Agarwal believes so.

” The stock market is moving ahead of the economy as the economy is expected to kind of blossom, post-COVID in next 12-18 months or two years. So, I think it is very difficult to correlate economic development with what is happening in the stock market. I think we need a healthy correction, which is on right now,” he explained.

The numbers are supported by all business verticals with core business firing on all cylinders, the company said, adding capital market business net income jumped 52 percent annualised, and asset and wealth management verticals grew over 226 percent. This was led by a 44 per cent growth in AMC’s profit, and an 88 percent in wealth management and a 12x growth in private equity business driven by strong profit on exit of investment.

On earnings, Agrawal, said, “Our operating earnings are very strong and I don’t see operating earnings breaking down because ours is 80 percent retailing business. I am still seeing every month on-boarding of 100,000 customers. I think the activity level is a record high. We are in the classic momentum phase in terms of investors’ participation in the marketplace. So I think the second half looks to be as promising if not more than the first half in terms of operating earnings.”

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Agrawal has been cautious on PSUs right from the beginning because, according to him, the thinking in bureaucracy is disconnected from the stock market.

“They are not running the companies or the departments to please the stock market. Though they are listed in the stock market. They have a kind of very different incentive or agenda at times. So that makes it difficult many times, because ultimately what you are buying is a feature of the company in a predictable fashion. If you make the feature unpredictable, then I don’t know how to assess the value,” he said.

For the full interview, watch the accompanying video.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Bullish on markets, risk assets; monetary tightening biggest risk for India: Citi

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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It has been a year of big returns in the market. From Diwali of last year, the Nifty is up 43 percent and the midcaps have surged 70 percent in the same period.

To discuss the outlook and the sectors that look attractive as we get into Samvat 2078, CNBC-TV18 spoke Mohammed Apabhai, Managing Director, Head-Asia Pacific Trading Strategies at Citi.

On markets and liquidity, Apabhai said, “I have been basically bullish on markets and on risk assets since about March 2020 and what we have been arguing is that equity markets and risk assets in general would continue rallying, while central banks would continue providing liquidity. That is pretty much what happened for the last 18 months. What is now happening is that the central bankers are starting to turn and change their views. But even though they are changing their views, and they are talking about interest rates, all of these things are still another six months away. So when you are looking at that provision of liquidity, it is going to continue at least until February, March 2022.”

Read Here: Global stocks ease from record peaks, central banks in focus

With regard to risk for emerging markets, he said the biggest risk is monetary tightening.

“The risks that I can see for India- one is that we continue to be bullish broadly on the oil price. In a very bullish scenario, we wouldn’t be surprised to see $99 on Brent crude, that is certainly a trading view that could happen. But I think the biggest risks that you have, is really following a period of relatively loose monetary policy. Especially in India, what you are starting to see is tighter monetary policy.”

He added, “The third is regulatory risk. In China, of course, we have seen a lot more regulatory risk than what we have in India and the fourth one is systemic risk, which is seen more in China and India.”

Also Read: China industrial profit growth accelerates in Sept despite cost pressures

On inflationary pressure, Apabhai said, “When I am looking at Indian inflation, what I actually see is a picture of relatively subdued inflationary pressures. I mean, when you have US CPI at 5.2 percent, then India around 5 percent on CPI doesn’t actually look that bad. I think, yes, there are inflationary pressures, there are supply chain issues, and we believe that these are relatively short-term, we think that they are relatively transient.”

“The market in the US, for example, is factoring in something like two or three rate hikes within the next 18 months, which we think is going to be too high and already the US term structure is starting to twist a little bit, and it is starting to flatten, which shows that the economy is not able to take that level of high interest rate. So I think there is going to be some inflationary pressure. But I think as the effects of COVID start to normalise, we think that a lot of those inflationary pressures are relatively short term.”

On industrial metals, he said, “Overall, industrial metals will be following the general economic cycle, which is generally a bullish view until the first quarter of 2022 and then after that, it is probably going to be a bit more of a concern.”

Read Here: Metals off highs on dollar strength; steel prices fall to 3-month lows

“The place I think, where there is actually the most opportunity, either from the bull side or the bear side, is actually in China, because in China, I am still bearish. I have been bearish on that market for a little while now, probably since January or February of this year. It does feel like there is one more leg down to come. But that is really the place where investors should be watching. I think in 2022, what we need to watch out for is going to be the point where the market becomes very concerned about growth, maybe it is because we will be looking at imminent rate hikes. But I think the point is that from March 2020, until about March 2022, we stay long.”

On S&P and Nifty Index, Apabhai said, “The projection for the S&P, for example, is for the market to reach a level of 4888. So I am not going to tell you just be bullish, I am going to tell you to be sort of bullish up to this level, our numbers can’t justify a level of the market above that level. Correspondingly, in India, the Nifty Index should get to around 19,966, which is around the sort of 20,000 mark.”

For full interview, watch accompanying video…

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Stock market profits to flow into real estate; Asian Paints valuations stretched: Gautam Trivedi

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Nifty50 seems to have steadied after seeing a 25 percent rally in the past six months. In the last five sessions, it has fallen a percent and is trading flattish on Tuesday, at the time of publishing. Nepean Capital would advise investors to book profits in big gainers, Gautam Trivedi, co-founder and managing partner, told CNBC-TV18 but added that he doesn’t expect a major correction.

“I would urge people to start booking some profits where stocks have done exceptionally well, but all of the ingredients that have caused the Nifty rose as much as 140 percent from the lows of March of last year, are still in place whether easy access to market; thanks to 4G, liquidity, eKYC has significantly changed the way and the speed at which you can open an online account, zero commission brokerages, low-interest rates; all these are in place and I do not see that changing,” he said.

Also Read: Incredible bull run; no reason to fear if investing long-term, says expert

“However, I do not see the market rally, necessarily, having a major correction yet,” he added.

Also Read: Here’s how market pandits are pegging the Nifty Realty bull run

According to him, profits from the stock market will find their way into real estate.

“(This) typically happens during every bull run, but having said that the prices of the absolute real estate companies have gone up a fair bit. Longer-term of course, they are still the best place to play the real estate sector,” said Trivedi.

On Asian Paints, he said, “Promoters have done a great job in handing over the reins to the professional management, but there are some headwinds with respect to not just Asian Paints but the paints’ industry. One, two big groups (JSW, Grasim) entering the space, for good reasons because the margins, the business itself is lucrative for them to do so. Second, the price of raw material; every move up in US dollar has a negative impact on the paint industry. So valuations are stretched and for the time being, I would stay away from the sector.”

For the entire interview, watch the video

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Energy inflation important in relation to rising prices in India: Bank Julius Baer’s Mark Matthews

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Energy inflation is important with regards to rising prices in India, said Mark Matthews, managing director and head of Asia research at Bank Julius Baer, on Thursday. Matthews said another round of very good earnings growth is expected in India, while also adding that IT companies have transformed marvelously.

“Agriculture holding up well, wages going up in the urban areas which is good for consumption. There is the issue of inflation and so I am a little concerned; it’s an issue for the rest of the world, the energy inflation. Now we are entering into winter and maybe there will be less demand for coal and therefore Coal India can provide the entire amount instead of having to buy some from overseas — that will be something to be cautious on,” Matthews told CNBC-TV18.

Also Read: Coal crisis: Economies back to normalcy leading to rampant demand, says Care Advisory & Research

On tapering, he said, “The Fed’s liquidity injection has been a big deal on the way up and withstands a reason it should be somewhat of a big deal on the way down. I cannot explain it but they have done a very good job by communicating and for about 3 months they have been dropping hints about tapering starting around November. So let us wait and see in November.”

Also Read: No power-cuts in Tamil Nadu despite coal shortage, here’s why…

According to him, another round of very good earnings growth is expected in India. “On a fundamental valuation basis, the next 12 months should be flat, but looking beyond that, we are going to get another round of very good earnings growth and that’s why I would stick with it,” said Matthews.

Matthews also said that India has done a great job on the vaccination front with the total number of inoculated nearing 100 crore and daily COVID-19 cases averaging below 20,000.

For the entire interview, watch the video

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

RBI to discontinue GSAP, but stands ready with instruments like operation twist

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India (RBI) on Friday said that the need for undertaking further G-sec Acquisition Programme (GSAP) operations does not arise. The central bank, however, said it stands ready with instruments like operation twist.

Operation twist is a monetary policy strategy used by central banks aimed at stimulating economic growth through lowering long-term interest rates.

While unveiling the bi-monthly monetary policy review, RBI Governor Shaktikanta Das said the liquidity overhang and absence of fresh government borrowing suggest that bond purchases are not required at the moment.

Das said GSAP has been successful and anchoring yield expectations, coupled with other liquidity measures.

RBI further proposed to take 14-day VRRR options in a fortnightly manner.

“Depending on evolving liquidity conditions, the pace of government expenditure, RBI may consider complementing 14-day VRRR actions with 28-day VRRR auctions. VRRR should not be interpreted as a reversal of accommodative policy stance,” Shaktikanta Das said.

“V in VRRR will also represent voluntary. There is no compulsion for banks to put money in this window. We don’t want surprises, policy approach will be calibrated and more of gradualism,” Das said.

The central bank governor also announced a calendar for fortnightly VRRRs.

Meanwhile, the central bank decided to keep the benchmark interest rate unchanged at 4 percent but maintained an accommodative stance even as the economy is showing signs of recovery after the second COVID wave. This is the eighth time in a row that the Monetary Policy Committee (MPC) headed by Das has maintained the status quo.

RBI had last revised its policy repo rate or the short-term lending rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting interest rate to a historic low. MPC decided to keep the benchmark repurchase (repo) rate at 4 percent, Das said while announcing the bi-monthly monetary policy review.

Consequently, the reverse repo rate will also continue to earn 3.35 percent for banks for their deposits kept with RBI. Das said MPC voted unanimously for keeping the interest rate unchanged and decided to continue with its accommodative stance as long as necessary to support growth and keep inflation within the target.

Catch all RBI policy-related updates here

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow