The Nifty and the Sensex opened the day on a flat note ahead of the RBI's rates announcement.
Join us as we follow the top business news through the day.
Indian shares close down after central bank holds rates steady
RBI's statements failed to boost investor sentiment.
Reuters reports: "Indian shares closed slightly lower on Friday after the country's central bank kept interest rates unchanged as widely expected and unveiled liquidity support measures, with investors focusing on rising inflationary pressures.
The NSE Nifty 50 index ended down 0.1% at 15,670, and the S&P BSE Sensex closed down 0.25% at 52,100.05.
For the week, both the indexes rose over 1% to their third straight week of gains.
The country's benchmark 10-year bond yield ended at 6.032%, while the Indian rupee closed at 72.99 against the dollar, mostly flat.
The Reserve Bank of India (RBI) held the repo rate , its key lending rate, at 4% and kept the reverse repo rate, the borrowing rate, unchanged at 3.35%.
Supply constraints due to coronavirus curbs and rising input costs, on the back of higher commodity prices, could fuel inflation, the RBI said.
Analysts said there were no major surprises to lift the markets higher, even though the central bank assured ample liquidity.
"There seems to be sufficient patience embedded in the guidance for the market not to worry about any imminent shifts in stance," said Suyash Choudhary, head – fixed income, IDFC AMC.
On Friday, the Nifty bank index was the top drag, down 1%.
The blue-chip Nifty 50 and the Sensex have risen over 5% each since the central bank's last meeting in April, boosted by robust corporate results and a fall in daily COVID-19 cases.
Among individual shares, Spandana Sphoorty Financial jumped as much as 20% after reports that Axis Bank was in talks to buy the micro finance company.
Shares of steel forgings maker Bharat Forge ended up about 8% after reporting a March-quarter profit, against a year-ago loss."
Digital payment failures rise during the pandemic
Technical declines or transaction failures of digital payments in India increased during the pandemic. Accenture estimates that payment failures for multiple banks have now climbed up to 2% from less than 1% before the pandemic.
"This is due to the larger volume of digital transactions, especially smaller ticket size ones," said Sonali Kulkarni, financial services practice lead at Accenture India in an interaction with The Hindu . These declines happen due to system errors, and network and bank IT infrastructure issues, and they pose a key challenge for digital payments, she added.
Govt caps trade margin on oxygen concentrators at 70%
Got tries to curb profiteering.
PTI reports: "The government has capped the trade margin on oxygen concentrators at 70 per cent in order to keep in check the price of the much in demand critical life saving component amid the second wave of the coronavirus pandemic.
The trade margin has been capped at 70 per cent on price to distributor level on oxygen concentrators.
In an official release, the Chemicals and Fertilisers Ministry said the decision has been taken in view of the extraordinary circumstances arising due to the pandemic which has resulted in volatility in Maximum Retail Prices (MRP) of oxygen concentrators.
The government has thus decided to step in to regulate the price of oxygen concentrators, the release issued on Friday noted.
As per information collected by the government, margin on the oxygen concentrators at the distributor level currently ranges up to 198 per cent, it added.
"By invoking extraordinary powers under Para 19 of the DPCO, 2013 in larger public interest, NPPA has capped the trade margin up to 70 per cent on price to distributor (PTD) level on oxygen concentrators," the release said.
Union Minister of Chemicals and Fertilisers Sadananda Gowda in a tweet said the trade margin has been capped in consumer interest to ensure its continued availability at affordable price during the pandemic.
"The price regulation will safeguard profitability and prohibit profiteering at the cost of consumer during the pandemic," he added.
The order shall be applicable up to November 30, 2021, subject to review, the release said.
Revised MRPs will be informed in public domain within a week by NPPA, it added.
Based on the notified trade margin, NPPA has instructed the manufacturers / importers to report revised MRP within three days.
Every retailer, dealer, hospital and institution shall display a price list as furnished by the manufacturer, on a conspicuous part of the business premises in a manner so as to be easily accessible to any person wishing to consult the same, the release said.
"The manufacturers / importers not complying with the revised MRP after trade margin capping, shall be liable to deposit the overcharged amount along with interest at the rate of 15 per cent and penalty up to 100 per cent under the provisions of the Drugs (Prices Control) Order, 2013 read with Essential Commodities Act, 1955," it added.
State Drug Controllers (SDCs) shall monitor the compliance of the order to ensure that no manufacturer, distributor, retailer shall sell oxygen concentrators to any consumer at a price exceeding the revised MRP, to prevent instances of black-marketing, the official release noted.
With the spike in cases in the second wave of COVID-19 in the country, demand for medical oxygen has shot up considerably.
The government said it is striving to ensure uninterrupted supply of oxygen and oxygen concentrators in adequate quantity in the country during the pandemic.
Oxygen concentrator is a Non-Scheduled Drug and presently under voluntary licensing framework of Central Drugs Standard Control Organisation (CDSCO).
Its price is being monitored under the provisions of DPCO 2013. In February this year, the National Pharmaceutical Pricing Authority (NPPA) had successfully capped the trade margin on anti-cancer drugs."
Luggage retail brand Witco shuts down business due to COVID-19 and restrictions
Witco (India) Pvt Limited, one of the oldest retail brands from Chennai, has wound up its business due to the COVID-19 pandemic. “We regret to inform you that we have closed down our business. The decision to close down this business was not an easy one, but unfortunately due to COVID-19 and the restrictions on international travel it was not sustainable for us,” the 70-year-old brand, which sold luggage and bags, said in a note on its official website on Thursday. “We would like to thank all of our customers and our esteemed clientele for their patronage over the last 70 years,” it added.
The firm's managing director V.P. Harris, told The Hindu , “We shut down our operations in January itself. What really happened was last March [2020] when the first lockdown was announced we (the family) sat together and evaluated the business and we found that international travel will not happen for a long time.”
Banks to lend ₹15,000 crore to hotels, restaurants, travel agents, SPA owners
To mitigate the adverse impact of the second wave of the pandemic on certain contact-intensive sectors, the Reserve Bank of India (RBI) in additional measure has opened a separate On-tap Liquidity Window of ₹15,000 crores till March 31, 2022 with tenors of up to three years at the repo rate.
Under the scheme, banks can provide fresh lending support to hotels and restaurants; tourism – travel agents, tour operators and adventure/heritage facilities; aviation ancillary services – ground handling and supply chain; and other services that include private bus operators, car repair services, rent-a-car service providers, event/conference organizers, spa clinics, and beauty parlours/saloons.
RBI projects retail inflation at 5.1% in FY22 on supply-side measures, monsoon
RBI ups its inflation forecast.
PTI reports: "The Reserve Bank of India on Friday said it expects retail inflation to be at 5.1 per cent in the current financial year supported by the progress of monsoon and effective supply-side interventions by the government.
The projection is well within the Monetary Policy Committee's target to keep the rate of inflation at 4 per cent with an upper or lower tolerance level of 2 per cent.
However, the apex bank remained equally cautious about the upside risks due to rising global commodity prices.
Moreover, the persistence of the second wave of the pandemic and the consequent restrictions on activity on a virtually pan-India basis puts upside risks to inflation, RBI observed in its monetary policy review.
Presenting the second bi-monthly monetary policy review, RBI Governor Shaktikanta Das announced that the key repo rate -- the short-term lending rates to banks -- will be kept unchanged at 4 per cent.
The favourable base effects that brought about moderation in headline inflation by 1.2 percentage points in April, may persist through the first half of the year, conditioned by the "progress of the monsoon and effective supply-side interventions by the government", Das said.
Taking into consideration the measures taken so far as well as the upside risks, Das said the CPI (Consumer Price Index) inflation is projected at 5.1 per cent during 2021-22.
This consists of 5.2 per cent in the first quarter, 5.4 per cent in the second quarter, 4.7 per cent in the third quarter and 5.3 per cent in the fourth quarter of this fiscal, with risks broadly balanced, he said.
"... insulating prices of essential food items from supply side disruptions will necessitate active monitoring and preparedness for coordinated, calibrated and timely measures by both Centre and state governments to prevent emergence of supply-side bottlenecks and increase in retail margins," the governor said.
The retail inflation came in at 4.3 per cent in April which has provided some cushion as well as policy side elbow room, RBI said.
The CPI retail inflation data for the month of May is awaited in the third week of this month.
RBI said a normal south-west monsoon along with a comfortable buffer stock should help to keep cereal price pressures in check.
While on the other hand, the rising trajectory of the international crude oil prices within a broad-based surge in international commodity prices and logistics costs is worsening cost conditions.
"These developments could keep core price pressures elevated, although weak demand conditions may temper the pass-through to consumer inflation," the RBI governor said in his statement.
RBI said it will continue to take an accommodative stance as long as necessary to revive and sustain growth on a durable basis to mitigate the impact of the pandemic on the economy, while ensuring that inflation remains within the target going forward.
Retail inflation is a key input for the Reserve Bank to decide on its monetary policy every two months."
India’s forex reserves may have exceeded $600bn: RBI Governor Shaktikanta Das
Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said India’s forex reserves may have crossed record level of $600 billion on the back of robust capital flows.
As per the RBI’s data issued on May 28, the country’s foreign exchange reserves rose by $2.865 billion to a record high of $592.894 billion for the week ended May 21, boosted by gold and currency assets.
“Based on the current estimation, we believe that our forex reserves may have crossed $600 billion,” he said while announcing the bi-monthly monetary policy review.
To boost liquidity, the RBI announced several steps including a special liquidity facility for various sectors impacted by the COVID-19 pandemic.
RBI lowers GDP growth projection to 9.5% for 2021-22
Another update from the RBI's policy announcement.
PTI reports: "The Reserve Bank on Friday lowered the country's growth projection for the current financial year to 9.5 per cent from 10.5 per cent estimated earlier, amid uncertainties created by the second wave of the coronavirus pandemic.
Addressing the media after the meeting of the Monetary Policy Committee, RBI Governor Shaktikanta Das said the sudden rise in COVID-19 infections, and fatalities has impaired the near nascent recovery that was underway, but has not snuffed it out.
The impulses of growth are still alive, he said, and added that the aggregate supply conditions have shown resilience in the face of the second wave.
The RBI Governor said the RBI will "continue to think and act out of the box", planning for the worst and hoping for the best.
Das further said the measures announced on Friday, in conjunction with other steps taken so far are expected to reclaim the growth trajectory from which "we have slid".
In April, the Reserve Bank had projected the real GDP growth for 2021-22 at 10.5 per cent.
India's economy had contracted by less-than-expected 7.3 per cent in the fiscal year ended March 2021, after growth rate picked up in the fourth quarter. The gross domestic product (GDP) grew by 1.6 per cent in the January-March period, up from 0.5 per cent in the previous quarter.
"... real GDP growth is now projected at 9.5 per cent in 2021-22 consisting of 18.5 per cent in Q1; 7.9 per cent in Q2; 7.2 per cent in Q3; and 6.6 per cent in Q4 of 2021-22," the Governor said."
RBI creates special liquidity facility of ₹ 16,000 crore for SIDBI
To further support the funding requirements of micro, small and medium enterprises (MSMEs), particularly smaller MSMEs and other businesses including those in credit deficient and aspirational districts, the RBI has decided to extend a special liquidity facility of ₹16,000 crore to SIDBI for on-lending/ refinancing through novel models and structures.
“This facility will be available at the prevailing policy repo rate for a period of up to one year, which may be further extended depending on its usage,” the RBI said.
Indian shares edge higher after central bank holds rates steady
Stocks on an uptrend after the RBI's rate hold.
Reuters reports: "Indian shares inched up and bond yields were flat on Friday after the country's central bank kept interest rates unchanged, as widely expected, to support Asia's third-largest economy as it grapples with a second wave of the COVID-19 pandemic.
The Indian rupee weakened to 73.08 against the dollar after the decision.
By 0457 GMT, the NSE Nifty 50 index and the S&P BSE Sensex were up 0.25% each at 15,729.15 and 52,363.14, respectively, by 0457 GMT.
The Reserve Bank of India (RBI) held the repo rate — its key lending rate — at a record low of 4% on Friday, while the reverse repo rate — the borrowing rate — was unchanged at 3.35%.
In a Reuters poll, all 51 surveyed economists had expected the RBI's monetary policy committee (MPC) to hold rates.
The country's benchmark 10-year bond yield was mostly flat after the decision.
The blue-chip Nifty 50 and the Sensex have risen over 5% each since the central bank's last meeting in April, boosted by robust corporate results and a fall in daily COVID-19 cases."
Petrol crosses ₹100/litre mark in Leh, Andhra Pradesh, Telangana
After Rajasthan, Madhya Pradesh and Maharashtra, petrol price has crossed the ₹100-per-litre mark in Leh, in almost all districts of Andhra Pradesh and parts of Telangana after fuel prices were again hiked on Friday.
Petrol price was increased by 27 paise per litre and diesel by 28 paise a litre, according to a price notification of state-owned fuel retailers.
The hike - 18th in the last one month - took fuel prices across the country to a historic high.
In Delhi, petrol hit an all-time high of ₹94.76 a litre, while diesel is now priced at ₹85.66 per litre.
Fuel prices differ from state to state depending on the incidence of local taxes such as VAT and freight charges.
Petrol price is well above the ₹100-per-litre mark in all districts of Rajasthan, Madhya Pradesh and Maharashtra - the states which levy the highest value-added tax (VAT) in the country.
India cenbank keeps rates at record low as virus lashes economy
The RBI does as expected.
Reuters reports: "The Reserve Bank of India (RBI) kept interest rates steady at record lows on Friday, as widely predicted, as it assesses the impact of a devastating second wave of COVID-19 infections on the economy.
The RBI held the repo rate, its key lending rate, at 4% and kept the reverse repo rate, the borrowing rate, unchanged at 3.35%.
In a Reuters poll, all 51 economists surveyed had expected the RBI's monetary policy committee (MPC) to leave rates unchanged.
Traders are awaiting details on the central bank's liquidity stance and a potential bond buying programme announcement.
The RBI has slashed the repo rate by a total of 115 basis points (bps) since March 2020 to soften the blow from the pandemic. This follows 135 bps worth of rate cuts since the beginning of 2019."
Indian shares unchanged ahead of central bank rate decision
Shares remain flat ahead of the RBI's policy announcement.
Reuters reports: "Indian shares traded flat on Friday, ahead of a central bank decision that could leave interest rates at record lows as the country grapples with a second wave of the pandemic.
The NSE Nifty 50 index and the S&P BSE Sensex were unchanged at 15,697.25 and 52,248.08, respectively, by 0347 GMT.
The focus will likely be on the Reserve Bank of India's (RBI) messaging on providing adequate liquidity to support the economy.
"With a weaker economic backdrop and prospects for sticky inflation, the RBI has little option but to remain accommodative," said Rahul Bajoria, an economist at Barclays in a preview note.
All 51 economists polled by Reuters expect the monetary policy committee to keep the key lending rate or the repo rate unchanged at 4% for a sixth straight time.
The blue-chip Nifty 50 and the Sensex have risen over 5% each since the central bank's last meet in April, boosted by robust corporate results and falling daily COVID-19 cases."
Airlines in India may post $4.1 bn loss in FY22: CAPA
Airlines in India are likely to post a consolidated loss of $4.1 billion in financial year (FY) 2022, forecasts aviation consultancy CAPA.
This sum is similar to the losses for the financial year 2021, taking the total losses for the two years since the pandemic to $8 billion.
Airlines may require almost $5 billion in recapitalisation in FY22, out of which $1.1 billion is in the pipeline in the form of IPOs, QIPs and other instruments, says CAPA.
After a steep dive in passenger traffic in April and May following a surge in COVID-19 cases, June is likely to see a moderate recovery, followed by acceleration in traffic in the second quarter.
