Weekly Capsule with Impact Analysis for the week ending 23rd December

Highlights of the Week (Dec 19 – Dec 23) and Impact Analysis

Ø MPC minutes released for the Dec RBI meet had consensus on status quo

Ø There was consensus across the 6 members of the MPC over maintaining the repo rate at current levels of 6.25%

Ø Upside inflation risks, uncertain impact of demonetization and hawkish stance of the US Fed prompted this move

 

Ø Richmond Fed President Jeff Lacker has hinted at 3 Fed rate hikes in 2017

Ø US Fed rates are likely to end at 2% by the end of 2017 and closer to 2.5% by end of 2018

Ø The original indication was of 2 rate hikes and this makes the Fed policy more hawkish with a sharper trajectory

 

Ø FPIs pull out over $9 billion in the months of November & December

Ø Demonetization risk in India and the Fed hawkishness was responsible for the FPIs turning negative on EMs.

Ø Within the Emerging Markets (EM), India has accounted for nearly 50% of the total FPI outflows

 

Ø Cyrus Mistry has resigned from the boards of key Tata Companies

Ø With odds loaded against him, Mistry has quit the board of all Tata companies where EGMs were to be held to oust him

Ø Mistry, however, has moved the National Company Law Tribunal (NCLT) over governance issues at the Tata group

 

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