The Reserve Bank of India has kept interest rates unchanged but is aiming to give the economy a gentle nudge with a liquidity boost. RBI’s monetary policy committee held the benchmark interest rate at 6.5 percent today while announcing a 50 basis-point cut in the cash reserve ratio (CRR) to 4 percent. The move is set to inject Rs 1.16 lakh crore into the banking system. Markets reacted: stocks gained, reversing early losses, bonds fell, and the rupee strengthened on measures to boost foreign inflows - which include higher interest rates on deposits for non-resident Indians. Interestingly, Governor Shaktikanta Das sidestepped a question about his tenure as it nears its end on December 10, after a six-year journey steering the central bank through turbulent times, including the Covid pandemic.
What does the liquidity nudge mean? Dinesh Unnikrishnan, who correctly predicted a CRR cut by RBI on our pages earlier this week, describes today’s moves as “safe play” as the central bank navigates a delicate growth-inflation equation. Adding another layer to the discussion, Madan Sabnavis, chief economist at Bank of Baroda, views the CRR cut as just the beginning of a broader monetary easing cycle aimed at accelerating economic growth. Also check out Ishaan Gera’s analysis on a now-familiar trend: another upward revision of India’s inflation forecast by RBI.
India Inc is gearing up for some major action. LG Electronics is set to make a splash on Dalal Street with a mega $1.8 billion IPO. Ashwin Mohan scooped news of the South Korean consumer durables giant’s local unit, LG Electronics India, filing draft documents with the market regulator for the share sale hours before the official announcement. If successful, this would be one of the top 5 IPOs in India by size, alongside Hyundai Motor India, Life Insurance Corp. of India, Paytm, and Coal India. LG Electronics has hired Morgan Stanley, JPMorgan, Axis Capital, BofA Securities and Citi to manage the share sale.
Paytm is set to cash out from Japan’s PayPay. Paytm is selling in the company to SoftBank for $250 million, reports Chandra R. Srikanth. The sale is in line with Paytm’s strategy to divest non-core assets and bolster its capital base following a challenging year. Following Moneycontrol’s news break, Paytm confirmed the development to both NSE and BSE.
There’s good news for local investors: FIIs are back in the buying game. In a dramatic shift, foreign institutional investors have gone from heavy sellers to aggressive buyers. In just four sessions, they’ve scooped up Indian shares worth Rs 23,500 crore, reports Ravindra Sonavane. The renewed buying has fuelled a rally, with benchmark indices rising for five consecutive sessions, gaining more than three percent.
However, the retail frenzy appears to be fading, with demat account growth slowing to a seven-month low. November data shows the incremental addition of new demat accounts is declining compared to recent months, writes Sonavane.
And finally, digital mapmaker MapmyIndia’s decision to spin off its B2C business into a separate company in which its CEO will have a 10 percent stake, has raised a debate on governance questions. In a thought-provoking piece, Shriram Subramanian, founder of proxy advisory firm InGovern Research Services, flags several issues surrounding the company’s decision. In a complementary analysis, R. Sreeram delves into the road ahead for MapmyIndia after the controversy.
Have a great weekend.
