Indian and global market news and impact analysis India 1) Leaders of the BRICS emerging market nations launched a $100 billion development bank and a currency reserve pool on Tuesday in their first concrete step toward reshaping the Western-dominated international financial system. The bank aimed at funding infrastructure projects in developing nations will be based in Shanghai. The BRICS were prompted to seek coordinated action following an exodus of capital from emerging markets last year, triggered by the scaling back of US monetary stimulus. The new bank reflects the growing influence of the BRICS, which account for almost half the worlds population and about one-fifth of global economic output. 2) RBI signals cheaper housing, infra loans. To boost demand for infrastructure and housing, the Reserve Bank of India (RBI) on Tuesday said banks would not have to maintain cash reserve ratio (CRR) or statutory liquidity ratio (SLR) and will not have to meet priority-sector lending targets for funds raised through bonds for extending credit to these sectors. While the exemption from CRR and SLR requirements was announced by the Finance Minister in his Budget speech, the banking regulator further sweetened the deal by including loans for affordable housing. 3) Railways might allow private sector operations in some areas. To facilitate foreign direct investment (FDI) in high- speed rail projects, the government is likely to allow private sector entry in operations. Private operations might also be allowed in dedicated freight lines and rail connectivity projects under the public-private partnership (PPP) models. 4) The Australian Bureau of Meteorology (BOM) said El Nino, the phenomenon associated with scanty rainfall and drought in India and other parts of Asia, may be weakened by a cooling of the Pacific Ocean in the past month, Although monsoon recovered last week, the rainfall was mostly confined to east India, hence in the coming week areas which have received deficient rainfall, like north-west and central India, will receive showers and this will further reduce the deficiency of rainfall,” According to IMD. A weakening of the El Nino weather phenomenon and an expected recovery in monsoon rainfall in coming days may, to some extent, keep inflation at manageable levels and protect rural demand even as the government prepares to handle India’s third drought in 20 years. Global 1) US Retail sales rose just 0.2 percent last month, the Commerce Department said Tuesday, held back by a sharp drop at building and garden supply stores. Sales also fell at restaurants and at auto dealers. The latest performance showed consumers again struggling to fire on all cylinders. Outlays at restaurants, clothing outlets and department stores picked up, while purchases of cars, furniture and building materials fell. 2) Chinas economy grew 7.5% in the second quarter compared with 7.4 percent in the previous three months, slightly exceeding economists expectations, an indication that Beijings strategy of selective spending and credit-easing to boost the worlds second-largest economy is having some success. On a quarterly basis, the National Bureau of Statistics said growth picked up to 2.0 percent from a revised 1.5 percent in the first quarter. There could be more policy stimulus going forward, and we might see an interest rate cut. The biggest risk is a retreat in the economic growth rate, especially softening in the property market.
Posted on: Wed, 16 Jul 2014 07:40:10 +0000