Top 5 News Feed

RBI hikes REPO RATE by 25 basis points, reduces MSF by 75 basis points:

The Reserve Bank of India increases Repo Rate from 7.25% to 7.5% and reduces Marginal Standing Facility Rate (MSF) from 10.25% to 9.5%. The RBI Governor has focused on inflationary expectations and currency management strategies. The MSR was reduced to tighten up the liquidity and arrest volatility in FOREX market. The intent has also been to alter the path of Current Account Deficit (CAD) and improve prospects for its stable funding in future. The RBI has also reduced Cash Reserve Ratio to 95% from 99%. These measures will certainly give long term benefits and have been taken to improve the scenario of external financing as well as to focus on valuation on rupee, fiscal deficit and inflation. There has been a positive impact overall and the bears are rejoicing as Sensex and Nifty has also ended the week with gains, Nifty - above 6,000, with a gain of about 160 points, and the Sensex above 20,000.

SME’s to get listed on BSE:

Now Small and Medium Scale Enterprises will get listed on Bombay Stock Exchange, to avail benefits. It is the first stock exchange to provide this platform. Any company whose post-issue face value capital is less than Rs.250 million is eligible to get listed on this platform, subject to other applicable provisions. Till now 32 companies have been listed and 70 are waiting to be listed.   The MSME sector contributes to around 40% of India's exports and employs about 80 million people. BSE will also guide the investors and various intermediaries in this respect.

 In my opinion this is a very positive step as it will not only help them in raising effective equity capital but will also cater to their to growth and expansion. There will also be a scope of wealth creation for these enterprises and an open opportunity for investors to identify and invest in a profit making SME.

                                                                                                                                
No Power Takers:

Many States of India suffer blackouts while power plants remain idle. Consumers are forced to face the problem of power cuts, which may even last for six to eight hours, due to artificially created shortage of power. The main reason behind this load shedding is the wide difference between the price realized and cost procured of electricity.

Due to increase in the fuel prices the price of long term power has increased by 50%. Over two years only three states-Uttar Pradesh, Tamil Nadu and Rajasthan have invited bids. The distribution companies (discoms) are avoiding buying power, as they are facing losses due to high cost, non-recovery, pilferage etc. If this problem is not solved, a loan of Rs.72000 Crore on power sector may turn into a non-performing asset.

A price check and proper facilitation of Fuel Supply Agreements (FSA) may help the government and the discoms in solving this issue. 

TATA Sons and SIA to fly together:

The sons are all set to come up with a second airline in India but in partnership with Singapore Airlines (SIA). It is a $100 million investment where the Tatas will own 51% of the joint venture. As per FIPB approvals the airline will be based in New Delhi, the initial board will have three members, two nominated by Tatas and one by SIA. The experts have welcomed the entry of a new financially strong and highly moral player in the Indian Aviation Industry. Whereas the Air Asia Partner, Mr. Arun Bhatia has coined the tie up to be unethical. There seemed to be certain agency problems involved as the Tatas had informed Air Asia but not taken its other partners into confidence. However the Tatas and SIA are quite sure of getting their stamp of approval. The government also allows investment up to 49% by foreign airlines. Looking at the past records of the Tata Group which gave India its first airline, this tie up seems to be fruitful for the country.

Gold, Silver losing their Glitter:

The prices of both the precious metals plunged down in the bullion market, gold by Rs 280 to Rs30, 500 for ten gram, bearing a loss of Rs 30, whereas silver by Rs1,600 to Rs49,500. An odd time phase and a low demand of the metals in domestic as well as overseas markets is the main reason behind this price fall. Recovery in the rupee, making dollar quoted precious metals prices puts a pressure on their prices. The low price may encourage the domestic investors to invest in this asset but it will give losses to traders on selling in the global markets. According to analysts a small increment in prices is expected next month.

 

Contributed by:

Sunayana Tandon

Economics, Section A

Batch 2013-15