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RBI intent to check yields, bat for stronger rupee sparks bond market rally

  The Reserve Bank of India’s (RBI) resolve to keep bond yields under check and the loud signal emitted in favour of a stronger rupee swiftly translated into rallies in the bond and currency markets on Tuesday. The rupee closed at 72.87 a dollar, up 1.03 per cent from its previous close of 73.62. The 10-year bond yields fell 18 basis points to close at 5.942 per cent from its previous close of 6.117 per cent. While announcing the bond market related measures on Monday post market hours, the central bank had observed that the “recent appreciation of the rupee is working towards containing imported inflationary pressures.” The central bank in the past few sessions had stopped buying dollars and let the rupee appreciate in sync with the daily deluge of capital flows. The statement made the central bank’s intent clear. In the absence of meaningful export growth in a contracting global economy, the RBI was more willing to curb imported inflation through stronger rupee. On a larger theme tho
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GST compensation cess mop-up rises for first time in five months

  Goods and services tax (GST) collections slumped to a three-month low in August, and came in 12 per cent lower year-on-year (YoY), indicating slower recovery in economic activity. However, compensation cess collections rose for the first time in five months, and 6 per cent YoY, amid the tussle between the Centre and states. The overall mop-up remained well below the Rs 1-trillion mark for the sixth straight month owing to the pandemic, even as unlocking began in June. GST collections stood at Rs 86,449 crore in August, compared to Rs 87,422 crore in July, according to finance ministry data. It was at 88 per cent of August 2019 collections. A large portion of the fall could be attributed to imports, which were down 23 per cent YoY, while domestic transactions were down just 8 per cent YoY. “During the month, revenues from imports were at 77 per cent and revenues from domestic transactions (including import of services) at 92 per cent of revenues from these sources during the same mont

10-year bond yields climb back to 6% as Reserve Bank of India goes silent

  A conspicuous silence from the Reserve Bank of India regarding support for the nation’s bonds has left traders wondering whether the recent gains in yields is a new normal. The central bank may be trying to increase the attraction of sovereign debt by letting yields rise, according to PNB Gilts Ltd. The benchmark 10-year bond yield advanced to 5.97% on Wednesday, the highest since May. If that’s true, the RBI would be treading a delicate balance as a prolonged absence from the market could raise questions over support for the government’s record Rs 12-trillion ($160 billion) debt sales this fiscal year. Indian bonds are offering negative real rates, after a surge in inflation brought on by a supply crunch due to rolling lockdowns. “The RBI could protect the 6% level. The level is a psychological mark that the RBI may want to see that yields don’t rise over and above,” said Vijay Sharma, executive vice president for fixed-income at PNB Gilts. The losses may deepen if the central bank

By retaining India's rating S&P has taken a balanced view of the economy

A lot of uncertainty over India’s sovereign rating has been cleared by S&P which has retained the BBB– grade with stable outlook. After Moody’s had lowered India’s rating to a similar level earlier with negative outlook there was debate on how the other agencies would react. The view taken by S&P appears to be more balanced as it has factored in the challenges and opportunities that the country faces but takes a different view that the economy will regain poise in FY22 and grow by 8.5 per cent after falling by 5 per cent this year. It is certainly more sanguine about the prospects given the strong fundamentals which can help to withstand the Covid-19 impact. Lets us see the positives that have been highlighted by the rating agency. Three things stand out. First growth prospects appear to be above average post Covid-19 which is realistic. Second, the external situation is very good. Contrary to expectations in FY20 and the shutdown, the forex reserves have been moving upward

FM's economic vaccine: Final tranche is high on reforms, low on stimulus

The government on Sunday provided little immediate relief except increasing allocation to its flagship rural job scheme by 66 per cent, but used the pandemic to usher in bold public sector reforms in its last leg of its announcements on the Rs 20-trillion package. State-owned units will remain only in strategic areas, which, however, are yet to be defined, while those in other areas will be privatised, according to public sector enterprise policy, which the government will detail later. Union Finance Minister (FM) Nirmala Sitharaman also gave leeway to states in terms of market borrowing, but much of it is conditional on reforms, such as the one-nation-one-ration card. This, if fully tapped, will release Rs 4.28 trillion for states, but will widen the fiscal deficit to 5 per cent of state gross domestic product for each. This, together with the Centre’s additional borrowing of Rs 4.20 trillion, will take the combined fiscal deficit of the country to well over 10 per cent of gross d

Sebi May Relax Rules on 6-Mth Gap Between Two QIP Issues

The Securities and Exchange Board of India (Sebi) on Monday proposed to relax the requirement of the mandatory six-month gap between two successive Qualified Institutional Placement (QIP) issues. The regulator said it has received requests from companies seeking a waiver on this requirement of a six-month cooling off period between two successive QIP issues. “The reasons for such exemption, as informed by the issuer companies, are urgent needs of funds and the fact that other fund raising mechanisms, such as a public issue or rights issue, are time-taking in comparison to a QIP issue,” Sebi said in a discussion paper that seeks public comments by April 15. The proposal was discussed by Sebi’s expert committee on primary markets. To address concerns of companies and to support fundraising, relaxation may be provided for successive QIPs within six months of previous QIP issues, in cases where terms of placement for the subsequent issues are disclosed upfront in the special resolutions.

GST collections: From Maharashtra to Rajasthan, how top 10 states fare

Karnataka, Uttar Pradesh, and West Bengal witnessed a significant increase in GST collections Of the top 10 states in terms of goods and services tax (GST) collections from domestic activities, six saw a fall in year-on-year growth in February. While three states — Karnataka, Uttar Pradesh, and West Bengal — witnessed a significant increase in GST collections, Rajasthan saw a tad one percentage point rise. Business Standard, 03rd March 2020