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Sensex Trades Flat; RBI Cuts Repo Rate by 25 bps
Fri, 4 Oct 12:30 pm

Share markets in India are presently trading on a volatile note after the Reserve Bank of India's monetary policy committee (MPC) reduced the repo rate by 25 basis points (bps) to 5.15%.

Sectoral indices are trading mixed with stocks in the FMCG sector and consumer durables sector witnessing selling pressure, while IT stocks and automobile stocks are witnessing buying interest.

The BSE Sensex is trading down by 30 points while the NSE Nifty is trading down by 16 points. The BSE Mid Cap index is trading down by 0.1%, while the BSE Small Cap index is trading up by 0.1%.

The rupee is currently trading at 70.87 against the US$.

In news from the banking sector, the Reserve Bank of India (RBI) cut its benchmark interest rates for the fifth time this year to boost economic growth. The RBI cut repo rate by 25 basis points to 5.15%, which takes its cumulative cuts so far this year to 135 bps.

The six-member MPC decided to continue with an accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target.

The MPC also sharply reduced its growth forecast for the fiscal year 2019-2020 to 6.1% from 6.9% earlier. The committee noted that risks to growth have emerged due to weak domestic demand and sagging export prospects on account of continuing trade tensions.

On the other hand, it retained its consumer price inflation forecast for the second half of the fiscal year 2019-202 as expected at 3.5%-3.7%.

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In other news, the RBI on Thursday increased the withdrawal limit for Punjab and Maharashtra (PMC) Bank customers to Rs 25,000 from Rs 10,000.

In a press release, it said "the Reserve Bank of India again reviewed the bank's liquidity position and, with a view to reducing the hardship of the depositors, has decided to further enhance the limit for withdrawal to Rs 25000."

In a relief for customers caught unaware by the sudden curbs on the co-operative bank, the new limit will allow 70% of the bank's depositors to withdraw all of their money, the central bank said in a statement.

RBI also said that it has decided to appoint a three-member committee to assist the RBI-appointed administrator of the bank.

On 23 September, the RBI barred PMC bank from carrying out any operations for the next 6 months. It had initially capped the deposit withdrawal at Rs 1,000 per account which was relaxed to Rs 10,000 in two days and now stands at Rs 25,000.

The above developments came into effect after the central bank found certain irregularities in the bank, including under-reporting of NPAs and large deposit withdrawals.

Note that the recent Punjab and Maharashtra bank fiasco has put small savers in the limelight yet again.

These banks have poor lending practices. Depositors have had to pay the price time and again.

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In the short run, this has an adverse effect on microfinance lending as well. Micro finance institutions (MFIs) are skeptical about lending to even genuine borrowers in an uncertain environment.

But this is actually a blessing in disguise for MFIs with strong business practices.

After all, last mile connectivity in lending is still a huge opportunity.

Huge Opportunity in Last Mile Lending in India

Here's what Tanushree Banerjee wrote about this in a recent edition of The 5 Minute WrapUp...

  • The average ticket size of a microfinance borrower in India is around Rs 38,000 which is much lower than the global average (Rs 65,000).

    The sector itself has grown at an average annual rate of 27% for the last 4 years.

    Still states like Uttar Pradesh, Bihar, and Madhya Pradesh with a large rural population are highly under-penetrated even today.

A private bank that is part of Tanushree's 7 stocks to buy list has already taken a step in this direction.

It will be a big beneficiary when the microfinance boom plays out in India.

Moving on to news from the pharma sector, Alembic Pharma's joint venture (JV) Aleor Dermaceuticals has received approval from the US Food & Drug Administration (USFDA) for its Abbreviated New Drug Application (ANDA) Clobetasol Propionate Spray, 0.05%.

The approved ANDA is therapeutically equivalent to the reference listed drug product (RLD), Clobex Spray, 0.05% of Galderma Laboratories L.P.

Clobetasol Propionate Spray, 0.05% is indicated for the treatment of moderate to severe plaque psoriasis affecting up to 20% body surface area (BSA) in patients 18 years of age or older.

It has an estimated market size of US$ 22 million for twelve months ending December 2018.

Alembic Pharma has a cumulative total of 103 ANDA approvals (91 final approvals and 12 tentative approvals) from USFDA.

Alembic Pharma share price is presently trading up by 5.4%.

To know more about the company, you can read Alembic Pharma's latest result analysis and Alembic Pharma's 2018-19 annual report analysis on our website.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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