Investors market were hoping that even if the rate is not cut this time, the RBI may give some indication of reducing it in the near future. But the opposite message came from Reserve Bank Governor Shaktikanta Das.
It was known that the interest would not increase. It was not unknown that it will not decrease now. And with that possibility, the Reserve Bank kept the interest rate (repo rate, i.e. the rate at which the Reserve Bank lends money to other banks) unchanged in this round of lending policy. As a result, it remained at 6.5 percent for six consecutive times. However, the stock market could not accept it. As soon as the decision of the apex bank was announced on Thursday, the index dropped quite a bit. At the end of the day Sensex lost 724 points.
Investors were hoping that even if the rate is not cut this time, the RBI may give some indication of reducing it in the near future. But the opposite message came from Reserve Bank Governor Shaktikanta Das. He said, if the rate of price increase in the retail market is not reduced, the interest rate will not be reduced. The apex bank aims to bring inflation down to 4 per cent. In December this rate was 5.69%. After knowing the attitude of RBI, the market fell.
Investors started to sell shares on hand. Shares of private sector banks and NBFCs (non-bank financial institutions) were particularly weak. While the two main indexes rose slightly on Friday, the mid-cap and small-cap indices, which are made up of shares of medium-sized companies in terms of total share value, continued to fall. What was the rate of increase in the price of goods in the retail market in January will be known this week. If the rate lowers, it can stimulate the stock market again.
But whatever the market thinks, the RBI’s statement is quite clear. Interest rates are not going down right now. In loans or deposits, neither. On the other hand, HDFC Bank has slightly increased interest rates on loans and deposits last week. With interest rates showing no signs of slowing, bond yields have started rising again on this news. That is, the bond price has fallen in the open market.
Yields fell to 7.05 percent after the budget announcement. It increased again last Friday to 7.11%. There is still a shortage of money in the banking system. Because of this, it is expected that the high interest deposits on bank term deposits will continue for a few more months. RBI will consider cutting interest rates only if retail price inflation declines for two consecutive months. The next meeting of their credit policy committee is in April.
The market is still quite steep. Sensex is above 71 thousand. In this situation, the shares of two large companies (large cap) have walked in the opposite direction of each other in terms of total share price. While ITC’s shares tumbled, LIC’s shares, which have been trading well below their initial public offering (IPO) price for nearly 21 months, soared. ITC’s largest shareholder BAT (British American Tobacco) will sell 4.03% of its 29.03% stake there, a decision announced to the market as a sell-off in the cigarette-hotel-consumer goods company’s shares. 4.04% decline in one day.
Read also: The Sensex opened with a bang, with investors netting โน 2.78 lakh crore as the market opened
On the other hand, after many days, the share price of LIC rose sharply and rose slightly above the IPO price except in May 2022. The country’s largest life insurance company released its shares in the market for the first time at a maximum price of Tk 949. It closed at Tk 1084 on Friday, leaving investors smiling. The main reason is that the company’s net profit increased by 49% to Tk 9444 crore in the last October-December period (the third quarter of the current financial year).
But the biggest losers for investors last week were falling Paytm shares. In November 2021, Paytm released its shares in the market for the first time at a price of Tk 2150. Last Friday it went down to just 419 rupees. The Reserve Bank has recently imposed several sanctions on Paytm Payments Bank for violating regulatory norms. Some services have been ordered to stop by February 29. That is why this decline.
The next 10 days will be the end of the third quarter financial results of the companies. Accounts of some big companies will come in the last phase. These will include companies such as Coal India, Hindustan Aeronautics, NHPC, Steel Authority, ONGC, Siemens etc. Hero MotoCorp released the results on Friday. The country’s leading bike maker’s profit rose 51% to Tk 1,073 crore in three months. The company has declared an interim dividend of Tk 100 per share.
(opinions are personal)
