RBI Combating Inflation
NIFTY50 16,356 60 (-0.3%) SENSEX 54,892 214 (-0.3%)
8 June 2022
Hello Traders !
Rate hike tremors, Markets close in the red. RBI hikes rates to combat inflation.
After a strong start, markets swung between positive and negative, before closing lower.
In all, 28 of the Nifty50 stocks closed in the red.
RBI’s decision to hike the interest rate was largely expected, but indices were dragged down by Reliance and ITC.
Among the Nifty sectoral indices, Realty (+1.8%) and Media (+1.4%) gained the most, while FMCG (-1.0%) and Oil and Gas (-0.9%) were the top losers.
Gainers Change(%) Losers Change(%)
TATA Steel +1.6% Bharti Airtel -2.9%
SBI +1.6% ITC -2.2%
Titan +1.3% Reliance -1.8%
Today’s Action
World Bank cuts India’s GDP forecast
The World Bank has slashed India’s GDP growth forecast to 7.5% from 8% for the current financial year, citing reasons like rising inflation, geopolitical tensions and supply chain disruptions. In April 2022, the World Bank had trimmed the forecast from 8.7% to 8%. However, despite the downward revision, the forecast still remains above RBI’s growth forecast of 7.2%.
Realty stocks
DLF (NSE): 325 6.9 (+2.1%), Macrotech (NSE): 1,098 51 (+4.9%)
Shares of leading real estate companies like DLF, Oberoi Realty and Macrotech Developers were up by over 3% on Wednesday. The RBI has announced several measures to improve credit flow and boost demand for real estate. It has increased the upper limit of individual housing loans disbursed by urban and rural co-operative banks. Moreover, the central bank has permitted state & district cooperative banks to extend finance up to 5% of their total assets to developers of commercial and residential projects.
Lupin gets drug approval in US
Lupin (NSE): 612 2.8 (+0.4%)
Drug maker Lupin has received a tentative approval from the US health regulator USFDA to market Ivacaftor tablets in the US. This drug is used to treat cystic fibrosis. As per IQVIA MAT March 2022 data, Ivacaftor tablets had annual sales of $109 million in the US. The product will be manufactured at the company's Nagpur facility.
Weak start to monsoon
As per the data from the India Meteorological Department (IMD), India has received 14.5mm of rainfall, against a normal 23.1mm in the first week of June. The southwest monsoon has been nearly 37% ‘below normal’ in this period. Meanwhile, in Kerala, monsoon rain is 48% ‘below normal’, while in Puducherry, it is 56% ‘above normal’.
Credit cards get UPI boost
SBICARD (NSE): 783 18.8 (+2.4%), PAYTM (NSE): 613 4.1 (-0.6%)
In its monetary policy announcement on Wednesday, the RBI has proposed to link credit cards to the UPI platform. The move is expected to provide convenience and additional payment options to consumers. The implementation will begin with Rupay credit cards.
RBI’s rate for inflation
If you’re paying EMIs, or are planning to take a new home or auto loan, we have some not-so-good news for you. Amid rising inflation, the Reserve Bank of India’s Monetary Policy Committee (MPC) met this week to decide on interest rates. Here are the key takeaways from the meeting:
Interest rates hiked
As expected, the MPC hiked the repo rate by 0.5% to 4.9% to counter the soaring inflation. Repo rate is the rate at which the RBI lends money to commercial banks. This is the second rate hike in five weeks. In May this year, the central bank had opted for an off-cycle rate hike of 0.4%. It was the first rate hike since August 2018.
Why rates were hiked
The MPC has been focused on economic growth since 2020, when the pandemic brought the country to a standstill. However, the RBI has now begun to prioritize inflation reduction, as fuel and food prices have skyrocketed.
Owing to this, the MPC decided to hike rates and said it will take steps to reduce liquidity in the economy.
Retail inflation
The MPC has raised the retail inflation forecast to 6.7%. This is much higher than the 5.7% forecasted in its April meeting. The projection has been raised considering tense geopolitical conditions and rising commodity prices. It expects crude oil to average at $105 a barrel this year.
GDP growth forecasts
The RBI has retained its FY23 GDP growth forecast at 7.2%. The MPC said that the domestic economic activity is picking up, and the rural consumption is also expected to increase on expectations of a normal monsoon.
Thanks for your support and for visiting our blog. Please follow us more for valuable content.
ConversionConversion EmoticonEmoticon