Jan 3, 2009|
A stimulating week
The week gone by saw several attempts by policymakers the world over to make sure that 2009 turns out to be not as bad as has been predicted. In India, it was no different. The Reserve Bank of India (RBI), during the week, continued with its endeavour of lowering the cost of funds, using its tools of monetary policy for easing interest rates and providing more liquidity to productive sectors. It reduced the repo rate from 6.5% to 5.5%, reverse repo rate from 5.0% to 4.0% and cash reserve ratio from 5.5% to 5.0%. But the fact remains that the central bank has barely managed to convince bankers to pass on the rate cuts to customers in the recent past. How the banks will reciprocate to these further cut in rates remains to be seen.
The RBI seems to be worried about the official recognition of recession in the developed economies of the US, UK, Euro area and Japan. The heightened downside risk to the global economy is what concerns it. Along with this, the policy initiatives in the advanced economies geared towards managing the potentially deflationary trends, particularly the US Fed's move of bring interest rates to near–zero seems to have influenced the RBI decision to loosen its fists. Going forward, the further reduction in CRR is expected to inject additional liquidity to the tune of Rs 200 bn.
In a final attempt to revive the economy, before the general elections, the government has offered a booster dose by way of a second stimulus package to the ailing sectors. The package will offer a combination of easy access to credit as well as fiscal relief to export oriented businesses, cement and commercial vehicle industries that are essential to pump prime the economy. It may also be noted that the fiscal incentives announced so far will continue only until till a new government gets an opportunity to present a full budget after the general elections. The tax cuts announced in the second stimulus package would entail loss of tax revenue to the tune of Rs 400 bn in addition to the cost of the first package of Rs 310 bn. The Planning Commission believes that this would take the country's fiscal deficit to the range of 5.5% to 6% in the current financial year, nearly 2.5% higher than budgeted.
Policy makers in the US too are busy scratching their head over formulating their own stimulus package. One that will help re-ignite their economy in the best possible way. Struck with a patriotic streak, Obama's advisers are now toying with the idea of including a "buy American" provision in the economic stimulus legislation that the new administration will shortly be looking to implement. With such a proposal, they are hoping to save or create 3 million American jobs. The package is expected to provide tax cuts and spending on infrastructure like roads, bridges and transit systems.
Crude oil rose about 22% during the week as the conflict in Gaza Strip increased concerns that Middle East supplies would be cut. Incidentally this is the largest weekly gain that oil has seen since 1986. The prospects of distress in the region rose as Israeli warplanes conducted fresh attacks against Hamas on the seventh day of a bombing campaign in the Gaza Strip. The region is the source of about one-third of the world's oil. This unnerving geopolitical news has been one of the biggest factors contributing to the wild swings in crude prices. Gold rose a meager 0.7% for the week as the dollar climbed against the euro reducing the metal's attractiveness.
|Source: Yahoo Finance
||Source: Yahoo Finance
Movers and shakers during the week
||Change from 52-wk High
|Top gainers during the week (BSE-A Group)
||388 / 34
||261 / 25
||547 / 22
||499 / 46
|Top losers during the week (BSE-A Group)
||507 / 48
|Indiabulls Fin. Serv.
||985 / 78
|REI Agro Ltd.
||1,795 / 355
||41,307 / 9,125
||560 / 206
The enthusiasm of governments of various countries to ensure the revival of their economies had a positive effect on indices the world over. The benchmark indices in the US and UK rose 6.7% and 8.2% respectively. Asian markets too posted strong gains with the key indices in Hong Kong and Singapore posting strong gains. The BSE-Sensex ended the week with a healthy gain of 4.1% lead by strength in the metal and realty sectors.
More Views on News
Jun 10, 2017
Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.
Aug 18, 2017
Buying the index now will hardly help make money in stocks even in ten years.
Aug 18, 2017
Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.
Aug 17, 2017
PersonalFN simplifies the mutual fund account statement for you.
Aug 17, 2017
A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407