Rates on Hold in India; Higher Bank Reserves

Mayank Mehta
29 Jan, 2010
New York City

The RBI mopped up additional liquidity by increase cash reserve ratios for banks but left rates unchanged. The RBI also raised its outlook for the economic growth to 7.5% from 6.9% and indicated the rate can be sustained in the next fiscal year. Central government has nearly completed its borrowing.

[R]6:00 PM Mumbai, 8:30 AM New York – Reserve Bank of India mopped up additional liquidity by increase cash reserve ratios for banks but left rates unchanged. The RBI also raised its outlook for the economic growth in the current fiscal year to 7.5% from 6.9% and indicated the rate can be sustained in the next fiscal year. Central government has completed 98% of its borrowing in the year.[/R]

The Reserve Bank of India left its key lending rate unchanged but increased the cash reserve ratios for banks to trim liquidity. The RBI also increased its estimate of economic growth to 7.5% for the current year ending in March and indicated that the growth rate is likely to sustain in the next financial year.

The repo rate was left unchanged at 4.75%, reverse repo rate at 3.25% and bank rate has been left at 6%.

Cash reserve ratio for banks was increased by 75 basis points from 5.0% to 5.75% in two stages that will drain Rs 36,000 crore of excess liquidity from the system.

In its monetary policy review statement, RBI noted that broad money supply growth increase has moderated to 16.5%, below target growth rate of 17% and inflation remains concentrated in food prices. Outside food, inflation hovered around 2.1% in December.

The central bank also noted that central government has completed 98% of its borrowing requirement for the current fiscal year.

The Sensex index in India increased 51.09 or 0.31% to 16,357.96 and CNX Nifty index rose 14.80 or 0.3% to 4,882.05. Among the Sensex 30 stocks, 13 rose and 17 fell.

On BSE trading, 1,464 stocks advanced, 1,385 declined and 63 were unchanged.

Most bank stocks reversed initial losses in choppy trade after the Reserve Bank of India kept interest rates unchanged after a monetary policy review today.

State Bank of India chairman O P Bhatt said he did not see any upward pressure on lending rates in the next six months.

Banking, realty and capital goods stocks gained. Reliance Industries edged higher.

Rupee edged lower 2 paisa to 46.37 against one dollar.

Gainers & Losers

Aditya Birla Nuvo Limited rose 0.3% to Rs 846.15 after the diversified conglomerate said third quarter sales rose 18% to Rs 4,053.2 crore from Rs 3,429 crore a year ago. Net profit for the quarter was Rs 8.2 crore compared to net loss of Rs 156.4 crore a year ago.

Balarampur Chini Mills Limited added 1.8% to Rs 120.25 after the sugar refiner said third quarter sales rose 1% to Rs 434 crore from Rs 428.7 crore a year ago. Net profit for the quarter rose 49% to Rs 76.5 crore compared to net profit of Rs 51.3 crore a year ago.

BF Utilities Limited gained 3.1% to Rs 1,048.00 after the company plans to Rs 1,500 crore by issue of securities including equity or equity linked securities.

Colgate-Palmolive (India) Limited advanced 3.2% to Rs 678.55 after the personal care products maker said third quarter sales rose 17% to Rs 490.6 crore from Rs 419.2 crore a year ago. Net profit for the quarter rose 50% to Rs 116.4 crore or Rs 8.56 per diluted share compared to net profit of Rs 77.7 crore or Rs 5.72 per share a year ago.

Chennai Petroleum Corporation Limited increased 2.8% to Rs 235.40 after the petroleum company said third quarter sales rose 22% to Rs 6,849.8 crore from Rs 5,617.5 crore a year ago. Net profit for the quarter was Rs 220.3 crore or Rs 14.80 per diluted share compared to net loss of Rs 1,269.9 crore or Rs 85.28 per share a year ago.

Karur Vysya Bank Limited fell 0.2% to Rs 398.40 after the bank said third quarter sales rose 20% to Rs 451.2 crore from Rs 375.1 crore a year ago. Net profit for the quarter rose 28% to Rs 75.9 crore compared to net profit of Rs 59.2 crore a year ago.

Lupin Limited rose 0.9% to Rs 1,420.45 after the pharmaceutical company said third quarter sales rose 30.6% to Rs 1,255 crore from Rs 961 crore a year ago. Net profit for the quarter rose 37% to Rs 160 crore compared to net profit of Rs 116.5 crore a year ago.

NTPC Limited dropped 0.6% to Rs 214.25 after the power generation company said third quarter sales fell 0.8% to Rs 11,183.7 crore from Rs 11,277 crore a year ago. Net profit for the quarter rose 5% to Rs 2,365 crore compared to net profit of Rs 2,251 crore a year ago.

Rolta India Limited rose 0.4% to Rs 199.70 after the providing computer aided designing on profit booking after the stock rose 6% in the preceding three sessions.

Shriram Transport Finance Company Limited decreased 0.6% to Rs 489.05 after the commercial vehicle financier has announced the completion of its qualified institutional placement raising Rs 583 crore ($125 million).

Siemens Limited gained 4.2% to Rs 644.40 after the industry, energy and healthcare company said first quarter sales rose 12.5% to Rs 1,834 crore from Rs 1,629 crore a year ago. Net profit for the quarter fell 28.5% to Rs 236.4 crore compared to net profit of Rs 330.6 crore a year ago.

Tata Chemicals Limited increased 5.0% to Rs 297.60 after the producer of chemicals, crop nutrition and consumer products said third quarter sales fell 40% to Rs 1,541.8 crore from Rs 2,565.8 crore a year ago. Net profit for the quarter was Rs 102.6 crore compared to net profit of Rs 5.8 crore a year ago.

UCO Bank increased 7.7% to Rs 60.90 after the state-run bank said its board will meet on Saturday January 30 to consider raising funds through various modes.