Market Cues: Asian markets flat, RBI could cut reserve ratio
December, 05th 2011
Asian markets opend flat on Monday morning as investors await for cues from Europe on austerity measures. The Reserve Bank of India may cut cash reserve ratio or CRR by 0.25 per cent. Industry has criticised protests against foreign direct investment in retail. Bank of India is all set to get back into the mutual fund business
Asian markets opened flat on Monday as global investors await for cues from Europe. French President Nicolas Sarkozy and German Chancellor Angela Merkel meet in Paris on Monday under pressure to align their positions on centralizing control of Euro Zone budgets to stem a debt crisis that threatens Europe's currency union. Italian Prime Minister Mario Monti said on Sunday that his government of technocrats had approved a package of austerity and growth measures worth 20billion euros to "reawaken" the Italian economy and help save the euro common currency from collapse.
RBI may cut CRR
The Reserve Bank of India is likely to cut cash reserve ratio or CRR by 0.25 per cent to inject liquidity in the system. CRR is the portion of deposits that banks have to maintain with RBI. It currently stands at 6 per cent. A 0.25 per cent cut could infuse Rs 15,000 crore into the system. The payment of advance tax instalment by individuals and corporates on 15 December 2011 sucks out liquidity. It is learnt that the liquidity shortfall in the banking system is to the tune of Rs 80,000 crore.
Kishore Biyani, chairman, Pantaloon Retail, has said that protests against the FDI policy in multi-brand retail was misplaced and directed towards saving a few middlemen at the cost of benefiting consumers. Indian businessmen like Deepak Parekh and Ashok Ganguly called them a false drama. Mamata Banerjee, chief minister of West Bengal, announced on Saturday that she was told by finance minister Pranab Mukherjee that the FDI decision in on hold until a consensus is reached between the government and allies.
A majority of the country's leading CEOs feel that domestic and international investments are likely to register single digit increases or even decline in 2012. "Only 33.3 percent of respondents expect domestic investments to increase by more than 10 percent in 2012 while 66 percent expect it to increase by less than 10 percent or to decline," said the Confederation of Indian Industry (CII) as per its snap poll conducted among leading CEOs of the country.
Bank of India in MF
Bank of India announced that it would buy 51 per cent of Bharti Axa Investment Managers, an asset management company. This would mark the re-entry of the state-owned bank in the mutual fund business. Bharti Enterprises and Axa are selling their 25 per cent and 26 per cent stake respectively in the business.
DLF, the biggest real estate company, continues to divest non-core assets. The company got Rs 450 crore from IDFC for divesting its stake in Galaxy Mercantile, a joint venture between DLF Home Developers, a subsidiary company and IDFC that owns 1.3 m square feet IT park in Noida. DLF owned a 71 per cent stake in Galaxy. The company has received Rs 200 crore as the first tranche.
Gold prices up
Gold prices have edged higher, after posting their sharpest weekly rise in more than a month, as investors expect euro zone leaders to craft a concrete solution to the debt crisis at a key European Union summit later in the week. Spot gold edged up 0.3 percent to $1,751.59 an ounce, after rising nearly 4 percent in the previous week.
Caesar Maasry,Goldman Sachs
We downgrade India back to Underweight primarily on macro concerns, with a Dec-2012 target of 5,200 for Nifty and expect 10% EPS growth for MSCI India in calender year 2012 against a 14% bottom-up consensus estimate
Nandan Chakravorty, Enam Securities
In the absence of confidence-infusion by the government, the market move may not sustain for long. In fact, if such incremental global liquidity buoys crude again, it could delay any move to start cutting interest rates.