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RBI Leaves Repo Rate Unchanged
Tue, 2 Feb 11:30 am

After opening the day in the green, the Indian indices booked losses and are trading on a negative note. Most sectoral indices are trading in the red with stocks from the pharma, metal, and energy sectors witnessing maximum selling pressure.

The BSE Sensex is trading down 31 points (down 0.1%) and the NSE Nifty is trading down 21 points (down 0.3%). The BSE Mid Cap index is trading flat and the BSE Small Cap index is trading up 0.1%. The rupee is trading at 67.89 to the US$.

The Reserve Bank of India (RBI) today left the key repo rate unchanged at 6.75%, at the first bi-monthly monetary policy of 2016. For doing so, the central bank justified that it wants to wait till the Union Budget before taking action. It also left the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) unchanged. Moreover, in its statement, the RBI indicated that it was on course to meet its January 2016 target of keeping consumer inflation below 6%. However, it increased its January 2017 target from 4.8% earlier to 5% (subject to upward risks arising out of Pay Commission rollout).

Automobile stocks are trading on a mixed note with Maharashtra Scooters and Force Motors leading the losses. As per a leading economic daily, Tata Motors has reported 10% rise in its sales for the month of January on a YoY basis. The company sold 47,034 units in the last month as against 42,595 units in the same month last year.

Utility vehicle sales declined by 2% YoY during the last month to 1,378 units. In the commercial vehicles segment, the company's domestic sales stood at 30,670 units, up by 20% over January 2015. Exports during the month stood at 5,636 units as compared to 3,961 units in January 2015, up 42%.

Domestic sales of commercial and passenger vehicles rose by 7% YoY at 41,398 units. However, sales of passenger vehicles in the domestic market fell by 18% YoY at 10,728 units. As for passenger cars, the sales were 20% lower at 9,350 units in January.

Sales for automakers saw a tepid performance for the month of January. Many companies witnessed a fall in their sales on the back of lesser number of working days in the month on account of holidays. Presently the stock of the company is trading down by 0.3%.

Mining stocks are trading in the red with Vedanta and Hindustan Zinc leading the losses. As per a leading financial daily, Coal India has achieved a 9.8% growth in sales volumes in the first 10 months of this financial year. This came as production for the company improved amid concerns of an oversupply after demand from power companies grew less than expected. The company sold 437.6 MT (million tonnes) of coal during the April-January period as output increased 9.6% to 426.31 MT. For the month of January, the company's output rose 13.4% on a YoY basis to 52.86 MT.

However, the major concern for the company is oversupply. Although higher production helped the company to boost sales, stockpiles of coal with the company declined marginally to 42.2 million tonnes. This, along with 34 million tonnes of stocks with power plants, has led to a situation of oversupply. The company is now finding it hard to sell its entire output. This is because thermal power companies are unable to accept more coal as their stockpiles have ballooned to cover supplies for an average of 25 days.

Further, two of the subsidiaries of Coal India surpassed 100 MT in production during December. On the back of this, the coal ministry is worried that the company may be forced to curtail production and miss its targets if it is unable to sell all its output. It will be a crucial thing to watch out as to what the company will do to take up this new challenge.

We believe, the above concern will be overruled by the company's solid balance sheet, plenty of reserves at its disposal and growing demand for its produce in the long run. Presently the stock of the company is trading down by 1.7%.

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Feb 2, 2016

RBI still believes that inflation has not yet stabilized or not come under control. Hence RBI has retained the Repo Rate unchanged. Time and again it is seen that RBI is more influenced by the variation of inflation.

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Jan 23, 2018 01:53 PM