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Indian Indices Open Flat
Mon, 22 Aug 09:30 am

Barring Japan, major Asian stock markets have opened the day on a negative note. Stock markets in China and Taiwan are trading lower by 0.7% and 0.9% respectively. Benchmark indices in Europe and US ended their previous session in red with stock markets in Germany ending the day lower by 0.6%. The rupee is trading at 67.05 per US$.

Indian stock markets have opened the day on a flattish note. The BSE Sensex is trading higher by 60 points (up 0.2%) and the NSE Nifty is trading higher by 6 points (up 0.1%). While both, BSE Mid Cap and BSE Small Cap are trading higher by 0.2% and 0.3% respectively.

Barring stock from the metal sector, major sectoral indices have opened the day on a positive note. Stocks from oil & gas and power sector are witnessing maximum buying interest.

The government appointed Mr Urjit Patel as the new governor of Reserve Bank of India (RBI). This comes as an unexpected decision as Mr Patel has very strong opinions about maintaining the inflation trajectory as set by the RBI. Further, he is also considered to be a fiscal hawk. Meaning, he places great emphasis on keeping government budgets under control.

Mr Jaitley is keen on reducing the interest rates further. However, with the appointment of Mr Patel, this does not seem to be happening unless there is a significant reduction in the inflation levels.

A paper written by Mr Patel in 2012 goes on to suggest his strong views on maintaining inflation at lower levels. Reportedly, the paper has some very scathing remarks about the attitude of the then government and the RBI top brass to inflation.

  • "A spate of recent statements seems to suggest that the medium-term objective of around three percent inflation articulated by inter alia the Reserve Bank of India (RBI) is being given a quiet burial; A senior (and serious) official earlier this year described six percent annual inflation as 'comfortable', and 'quiet (sic) acceptable'-comfortable and acceptable to whom? Is the suspension of long-standing sound, conservative, inflationary targets temporary, or, is this the new 'normal?"

Recently, Mr Ajit Dayal has written an excellent piece stating as to if the RBI will remain independent?

Click here to access his views on the same.

In another news update, the government's grand plan to double the number of road projects awards seems to be in jeopardy. This is on the back of the existing stalled projects coupled with failed deals between parties to sell the existing road projects. This in-turn leads to weak financial position for the road developers to bid for the new projects.

Reportedly, the deals to sell the existing assets are getting stuck on account of certain external factors such as delays in getting no objection certificates from National Highways Authority of India (NHAI) as well as from the stakeholders at the project or the holding company. In certain cases banks are refusing to take a haircut on the loans they have provided, which in-turn are leading to delays in the deals.

Not only external factors, internal factors too are playing its part in delaying the existing deals. Difference in valuations as computed by buyer and seller are also causing delays. Reportedly, there is a valuation disconnect between the buyer and seller due to the difference in estimates of WPI (Wholesale Price Index) and traffic growth.

The government should fix certain problems beneath their control as soon as they can in order to achieve their ambitious dream to double the road project awards in the current fiscal.

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Nov 22, 2017 11:11 AM