Nik's Diary
The
Indian markets opened flat today ahead of the RBI’s monetary policy meeting. We
expect the RBI to reduce the repo rate by 25bp from 7.50% to 7.25%. Meanwhile,
major Asian indices are trading in the green today following an interest rate
cut by the ECB and better-than-expected US jobless claims data. The US markets
ended in the green on Thursday with S&P 500 closing at a record high after
the European Central Bank (ECB) cut its benchmark interest rate and US jobless
claims unexpectedly declined to a five-year low. The ECB in its policy meeting
reduced its benchmark interest rates by 25bp to 0.50% and signaled that another
reduction is possible if needed to revive the ailing economy. Meanwhile in the
US, upbeat jobs data generated positive sentiments, as the Labor Department
release showed that initial jobless claims unexpectedly fell to a five-year low
in the week ended April 27th. The report showed that initial jobless claims
fell to 324,000, a decrease of 18,000 from the previous week's revised figure of
342,000. Back home in India, the domestic markets rallied on Thursday,
shrugging off weak global cues, in anticipation of a rate cut at the RBI policy
meeting which is scheduled today. Globally, participants would also keep an eye
on the US monthly employment report which will be release today. .
ECB
cuts rates, RBI expected to reduce repo by 25bp
Responding
to a drop in euro zone inflation well below its target level and rising
unemployment, the ECB lowered its main rate by a quarter percentage point to a
record low 0.50 percent. ECB President Mario Draghi, promising to provide
as much liquidity as euro zone banks need well into next year and to help
smaller companies get access to credit, also indicated that some policymakers
had pushed for a bigger cut. "There was a very, very strong
prevailing consensus towards an interest rate cut," he told a news
conference after the ECB's Governing Council met in Bratislava. "Within
that, there was a prevailing consensus for a cut of only 25 basis
points." The ECB was also "technically ready" to cut its
deposit rate from the current zero percent into negative territory, meaning it
would start charging banks for holding their money overnight. Such a move
could encourage the banks to lend out money rather than hold it at the ECB,
though it would also probably have a big impact on banks' own operations and
major implications for funding and bond markets. Draghi said the ECB could
cope with these - a departure from his previous statements. "There
are several unintended consequences that may stem from this measure," he
said of a negative deposit rate. "We will address and cope with these
consequences if we decide to act. And we will again look at this with an open
mind and we stand ready to act if needed. "Thursday's cut in the main rate
had been widely expected after Draghi said last month that the ECB stood ready
to act, but few economists expect it to make a decisive
difference. Acknowledging that, the ECB said it would prime banks with as
much liquidity as they need until at least July 2014 and look at ways to boost
lending to smaller companies, which are the lifeblood of Europe's economies but
have been starved of credit in many countries. "Today's rate cut
mainly provides support for peripheral banks and could boost confidence
marginally," said ING economist Carsten Brzeski. QE
AHEAD? Draghi stuck with the ECB's forecast that economic recovery will
take hold later in the year but highlighted "downside risks" to that
position. The ECB would "monitor very closely" all incoming
evidence, Draghi said, a phrase which in the past has suggested further policy
action to come. Safe haven German Bund futures hit a new record high as
Draghi spoke and the euro fell. Unemployment hit a record high in March
and annual inflation plunged to 1.2 percent in April, pressuring the ECB to cut
rates this month to honour its mandate to deliver price stability, which it
defines as inflation close to, but below 2 percent. The sudden slump in
price pressures has also raised the possibility of the ECB having to look at
policy tools beyond interest rates to counter any further slide in
inflation. "Ultimately, we think the ECB will have to purchase
private-sector assets in order to fix the transmission mechanism," said
Andrew Bosomworth at PIMCO, the world's largest bond fund. Such asset
purchases could take the ECB into the realm of quantitative easing (QE) -
creating money to buy assets, a policy it has so far eschewed but which other
major central banks have embraced. SMALL COMPANIES, BIG PROBLEM The
ECB wants to improve the transmission of its monetary policy so its low rates
reach all corners of the euro zone. The bloc's south is not benefiting to
the same extent as the north from the ultra-low rates. If they are lending at
all, banks there are charging companies and households more for loans than
their peers in the north because of higher funding costs and credit
risks. "There can't be fears of lack of funding as an excuse for not
lending," Draghi said after the meeting in Bratislava, one of two that the
ECB holds outside of Frankfurt each year. The ECB has repeatedly voiced
its concern about the impact this has on lending to small- and medium-sized
enterprises (SMEs), which have little alternative to bank funding. The ECB
wants to revive an asset class that has widely been blamed for causing the
financial crisis - asset-backed securities (ABS). This asset class allows
banks to pass at least some of the credit risk on to other investors as they
try to boost their capital and liquidity buffers to adapt to new regulatory
standards - one reason for their reluctance to lend. "The Governing
Council decided to start consultations with other European institutions on
initiatives to promote a functioning market for asset-backed securities,"
Draghi said, adding that no decisions had been taken. Berenberg Bank's
Holger Schmieding said that if other institutions, such as the European
Investment Bank, helped promote an ABS market for SME loans, the ECB could
eventually pave a way to some quantitative easing. The ECB could accept
such packaged loans as collateral at its liquidity operations, or even buy them
outright, he said. "If so, this would extend the ECB's toolbox and
could potentially open the way for a little 'quantitative easing' by the ECB
later on," Schmieding added. Source:
reuters
Cabinet approves FM radio phase 3
e-auctions
The Cabinet has cleared the way for as many
as 839 new FM radio channels to go on air in nearly 300 cities later this year.
These channels are to be awarded in the third phase of expansion of FM Radio,
the guidelines for which were approved at the Cabinet meeting on Wednesday. The
third round of expansion has been delayed for nearly two years, as the telecom
scam cast a cloud over the process of allocation of natural resources such as
radio spectrum. The Cabinet accepted the recommendations of an Empowered Group
of Ministries on changes to be followed in the auction process. The Information
and Broadcasting Ministry expects to rake in around Rs 1,532 crore from the
auction of new radio channels. The Ministry expects to complete the auctions
this financial year. It has also been decided to charge a fee from existing
operators migrating from Phase II to Phase III. The migration fee will be
decided after consultation with the Telecom Regulatory Authority of India
(TRAI). The Cabinet had given its nod to conduct the auction of 839 channels in
294 cities in March last year, which will extend FM radio coverage to all
cities with over 1 lakh population. Subsequently, TRAI recommended auctioning
of additional frequency to be opened up by reducing the inter-channel spacing.
The Cabinet has now said that additional channels that will be available by
reducing the inter-channel spacing to 400 kHz could be considered after
feasibility studies are completed. Source:
hinduabusinessline
CG signs JV for setting up
switch gear manufacturing plant in Indonesia
Avantha Group Company Crompton
Greaves Ltd and PLNE (PT Prima Layanan Nasional Enjinring) have signed a joint
venture agreement to manufacture and commercialize High Voltage (HV) and Extra
High Voltage (EHV) switchgear in Indonesia. PLNE is an engineering company
owned by PLN (Perusahaan Listrik Negara), an Indonesian government-owned Sole
Electricity Utility Company. The joint venture will be owned 51% by CG and 49%
by PLNE and will be a part of CG's global organisation. The JV includes a technology transfer by CG over a
period of five years for the production of the entire range of switchgear for
the network - from 70kV to 500kV - and will be localized through CG‘s new
manufacturing base in Indonesia. Production is expected to commence in 24
months. The focus of the collaboration is to enhance the sustainable operation
of the entire transmission and distribution grid in Indonesia. CG's equipment
portfolio will also include the production of HV and EHV Switchyard equipment,
the range of SF6 Circuit Breakers, Current Transformers, Inductive Voltage
Transformers, Capacitor Voltage Transformers and Lightning Arresters. The
products manufactured in the new facility in Indonesia will be distributed
through CG's marketing network in the South-East Asian markets and the Pacific
Region. CEO and Managing Director,
Laurent Demortier of Avantha Group Company CG said, "This joint venture is
an important milestone in CG's expansion strategy. We are very proud to team up
with PLNE to set up a state-of-the-art manufacturing base in Indonesia. We
believe our collaboration will allow the development of a new series of
products well-suited for the Indonesian and South East Asian markets" CG has been committed to the Indonesian market since
1992 and has been a preferred local and principal manufacturer of power
transformers - with an installed capacity of 10,000 MVA per annum in Indonesia.
Indonesia is the fastest growing economy, with a GDP close to a trillion US$.
The installed generation capacity of Indonesia is expected to double to 84 GW
by 2020. The estimated market base of HV and EHV switchgear equipment in
South-East Asia and the Pacific Region is predicted to exceed $500 million in
the coming years. Shares of Crompton
Greaves Ltd was last trading in BSE at Rs.93.20, up by Rs.0.85 or 0.92%. The
stock hit an intraday high of Rs.94 and low of Rs.91.25. The total traded quantity was 0.95 lakhs compared to 2
week average of 1.52 lakhs. Source:
EquityBulls
Comments
Post a Comment