Stock markets in India are presently trading marginally higher. Sectoral indices are trading on a positive note with stocks in the metal sector and capital goods sector witnessing maximum buying interest.
The BSE Sensex is trading up 67 points (up 0.2%) and the NSE Nifty is trading up 19 points (up 0.2%). The BSE Mid Cap index is trading up by 0.4%, while the BSE Small Cap index is trading up by 0.7%. The rupee is trading at 63.39 to the US dollar.
In the news from the macroeconomic front, as per an article in the Economic Times, independent experts are of the view that India's economy is likely to grow 6.4-6.7% in the current financial year. This is down from 7.1% growth seen in 2016-17.
The estimates come ahead of the release of first official estimate scheduled on Friday.
The national economy expanded 6% in the first half of the year, with growth improving to 6.3% in July-September from a three-year low of 5.7% in the previous quarter.
Note that a sharp revival of 7% in the manufacturing sector had pushed up the overall GDP growth to 6.3% in the September 2017 quarter, as can be seen in the chart below. Gross value Added (GVA) that excludes product taxes and subsidies recovered from 5.6% in June 2017 quarter to 6.1% in September 2017 quarter. However, both agriculture and services continued to remain on a slow wicket.
While the above trend suggests an uptick in growth, it may still be early days, as the economy continues to grapple with several headwinds. As we wrote in a recent edition of The 5 Minute WrapUp...
A sustainable recovery will be possible only after the disruptive impact of GST stabilises and other structural issues get resolved.
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We will be tracking the developments in this space and keep you updated. Stay tuned.
In the news from the banking space, the finance ministry has approved proposal for infusion of Rs 75.7 billion in 6 weak public sector banks (PSBs) as part of the recapitalisation plan to bolster capital adequacy ratio.
All these banks, which got capital support, are under prompt corrective action of the Reserve Bank of India (RBI). The funding comes under Indradhanush plan of the government which promised Rs 700 bn infusion over period of four years ending March 2019.
The banks include Bank of India, IDBI Bank, UCO Bank, Bank of Maharashtra, Dena Bank and Central Bank of India. These banks have received equity through preferential issue of shares from the government with two of them informing stock exchanges about the development.
The government, as a part of its Indradhanush Plan to revitalise state-owned lenders, had proposed to infuse Rs 700 bn out of Budgetary Allocations in them. However, so far, it has infused Rs 518 bn in public sector banks (PSBs).
In October, the government also announced the recapitalisation plan to inject Rs 2.11 trillion into public sector banks over a period of two years. This move was mainly aimed at resolving the long standing non-performing assets (NPA) problem of PSBs. It is expected to shore up the capital of state-run banks, spurring them to clean up the bad loan mess and revive lending.
The implementation of this initiative will, however, take some time. As we wrote in a recent edition of The 5 Minute WrapUp...
So while recapitalisation will benefit PSBs, it appears to be a temporary cure for a recurring disease. The main problem is the lending and corporate governance processes these banks follow.
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