QBiz: Markets on US Fed Alert, RBI’s Nod to 10 ‘Small Banks’

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 A Federal Reserve police officer keeps watch outside the Federal Reserve headquarters in Washington. (Photo: Reuters) 

1. Markets on the Edge As US Fed Weighs Rate Hike

The stock market rose one per cent on Wednesday along with world markets, as the possibility of the first interest rate hike in the US in almost a decade became imminent.

The US Federal Reserve’s two-day meeting to decide whether to increase interest rates for the first time since 2006, began on Wednesday and the policy announcement will be made late on Thursday night, India time.

Read more here.

2. RBI’s Big Move: Conditional Clearance to 10 Small Banks

A clutch of 10 small lenders — mainly microfinance institutions — from across the country on Wednesday got in-principle approval to set up small finance banks ostensibly for their familiarity with rural and small-town India and their strong track record of servicing very small borrowers.

Going by the Reserve Bank of India’s (RBI) choice of licensees, it is apparent that the central bank’s objective in selecting these lenders is greater financial inclusion, even as it adds yet another dimension to differentiated banking.

Read more here.

3. Bank NPAs: Bad Loans Could Get Bigger

If the addition to bad loans on banks’ books between 2011 and 2015 was more than the quantum of money lent by them in that time, as it seems to have been, it cannot be good news. To be sure, it’s been a tough environment with the economy slowing dramatically – all the way from 10 per cent to 5 per cent – and there was a fair bit of indiscriminate lending, not to mention the government’s dithering on policymaking and arbitrary rule-making.

But the extent of the damage at Rs 2.4 lakh crore is truly colossal because it means a large amount of costly capital is being set aside as provisions and, therefore, effectively blocked. A large chunk of this would have come from the corporate sector especially from bigger companies, the Kingfishers of the world. The bad news is, there could be more.

Read more here.

4. NHAI Global Arm to Build Roads in Iran, Sri Lanka, Nepal and Bhutan

With offers to build roads and highways in Iran, Sri Lanka, Nepal and Bhutan coming its way, the National Highways Authority of India (NHAI) has decided to go global. The Roads, Highways and Transport Minister Nitin Gadkari will soon set up a separate body — NHAI International — to tap into road-building possibilities outside India.

NHAI International will be a set-up outside the existing ambit of NHAI and will have its offices in several countries. It will work as a contractor mostly in the neighbouring countries on the same model as railway PSUs — IRCON, Railtel and RITES — are undertaking construction and consultancy projects internationally.

Read more here.

5. Govt Proposes Including ATF Within the Ambit of GST

The government is once again trying to include aviation turbine fuel (ATF) within the ambit of the goods and service tax (GST) to bring about uniform taxation on the fuel, which constitutes around 60% of the cost of airline companies.

There were proposals to this effect earlier but a final decision has not been taken. So far, petroleum products have been kept outside the ambit of GST.

Read more here.

6. Gold Imports May Rise to $37 Billion This Year

Gold imports in the first eight months of this calendar year were almost $24 billion. Analysts expect another 300 tonnes or $13-13.5 billion worth of import in the remaining four months of calendar 2015. The figure for all of 2014 was $31.2 billion.

There was an import surge to nearly $5 billion in August. These might be subdued in September, as the market has again slipped to a marginal discount of $1-2 an ounce and demand is low due to the 16-day Pitru Paksha period.

Read more here.

7. Home Ministry May Order CBI Probe Into Greenpeace’s Alleged FCRA Violations

The Home Ministry may order a CBI inquiry into alleged violation of various sections of the Foreign Contribution Regulation Act (FCRA) by the Indian arm of global NGO Greenpeace. An internal note to this effect has been moved within the ministry.

A CBI probe is being justified on the ground that there is a need to investigate the proceeds of bank accounts used by Greenpeace India, the circulation of money across various accounts and then allegedly parking them in fixed deposits.

According to Economic Times, there are divergent views within the ministry on the nature of probe to be ordered as even financial investigative agencies can carry out such probes.

Read more here.

8. Shares of Maruti, Bajaj Auto Get Cheaper as Valuations Head South

Shares of many well-managed companies like Maruti, Bajaj Auto and Cadila have turned cheaper after the recent fall with valuations (FY17e PE) of these companies — with superior return on capital employed (ROCE) — having fallen below their five-year averages, according to an Economic Times study. Seventy companies from the BSE 500 index with ROCE —an indicator of how efficiently firms manage equity and debt capital — above 15 per cent are currently trading with FY17 estimated PEs of less than that of their past five-year averages.

Most of these stocks have fallen 20-30 per cent from their highs in March-April.

Read more here.

9. Asia’s Millionaires to Become World’s Richest: Report

Millionaires in Asia Pacific are set to become the world’s richest this year, a report said on Wednesday, driven largely by wealthy individuals in India and China.

The combined wealth of Asia Pacific’s super rich will surpass its 2014 total of $15.8 trillion and overtake that of their North American counterparts — currently the world’s richest group with a shared wealth of $16.2 trillion last year, the study said.

Read more here.

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