The Monetary Policy Committee (MPC) minutes were made public on 21st February. This refers to the detailed discussion of the members of the MPC ahead of the decision to maintain status on rates in the February monetary policy. With inflation way above its 4% ideal limit, the MPC was put to a real test on whether to hike rates or not. There is also pressure from global central banks turning increasingly hawkish in the last few months. However, it emerges from the MPC minutes that only the green-shoots of economic recovery may have kept the MPC members from hiking rates in February.
Former RBI deputy governor, H R Khan, has underlined the need for the RBI to undertake operational risk audit of banks, especially in the light of what has happened recently in the case of Nirav Modi, Mehul Choksi and Vikram Kothari. Currently, the RBI has been warning banks about the gaps in the SWIFT payment system but that apparently does not seem to have sunk through. Khan has underlined the need to go beyond mere cautionary statements as issues at PNB were really serious where the SWIFT transactions were not integrate with the core banking solutions, leading to the crisis.
With the sharp rise in bond yields (nearly 125 bps in the case of 10-year benchmark), there appears to be a sense of urgency in dumping bonds. State lenders are selling $73 million worth of bonds daily and that has put tremendous pressure on the bond markets. Additionally, there is a virtually paucity of buyers in the bond markets leading to doubts over whether the government will be able to go ahead with its aggressive borrowing program this fiscal. The 10 year bond yield touched a high of 7.633% and is up by over 125 bps since August last year. PSU banks are also inactive in the bond market.
After the warning coming in from MSCI about the exchange decision to stop supplying data to global exchanges, Indian stock exchanges have rushed to assuage the concerns of MSCI. Exchanges have tried to assure MSCI that they will manage an orderly transition but that is certainly not cutting much ice with the likes of MSCI which now wants to downgrade India’s weightage due to access worries. On Feb 09th the exchanges had announced termination of all data feed and licensing arrangements with global bourses to prevent the offshoring of Indian trading volumes to other exchanges.
The Nifty 50 is likely to sport a new from the 2nd of April 2018. Bajaj Finserv, GRASIM and Titan will be the new additions into the Nifty 50 index. Ambuja Cements, Aurobindo and Bosch will be the 3 companies that will move out of the Nifty 50 index. With the inclusion of Bajaj Finserv will take the number of financials in the Nifty to 11 even as it continues to dominate the overall Nifty weightage. In the previous revision on September 29th 2017, the other group company, Bajaj Finance, had been added to the Nifty list along with HPCL and United Phosphorous. The NSE Next 50 index also saw some key changes with the inclusion of two major insurance companies’ viz. SBI Life and GIC into the index. Now Financials continue to dominate the main index as well as the subsidiary index.
Nearly 20 months after voting to exit the EU, the UK has admitted that the transition out of the EU may actually take longer than was originally anticipated. The entire process is scheduled to be completed by early next year leaving UK with just 1 year to complete the withdrawal formalities. Theresa May conservatively estimates that the transition may last around 2 years although the EU is willing to wait till the end of 2020 for the completion of the transition. In June 2016, Britain had surprisingly voted in favouring of seceding from the EU.
