LIQUIDITY CONUNDRUM
The greatest stock market wisdom is having the right temperament to ride its volatility
Will investors learn from this cycle? History suggests the lesson will be shortlived. As the markets recover and memories of drawdowns fade, the allure of maximum exposure will again become irresistible. The investors, who lament their inability to buy on the dip today, will convince themselves that ‘this time is different’.
Are mutual funds sitting on bigger cash reserves better than others? Know why too much, or too less cash allocation can backfire
A few equity funds that moved to cash early have cushioned the fall from the market slump, but experts remain critical of cash calls due to market timing challenges. While some funds have benefited, the risks of underperformance and complex investor management persist. Most experts remain staunchly against mutual funds taking cash calls.
Credit market in for a tough time in FY26, liquidity is key
The credit market will face volatile financial conditions in FY26 due to challenges in retail lending, banking system liquidity, and growth-inflation issues. This will increase volatility and spreads for entities with weak credit outlooks. The easing of banking system liquidity and availability of risk capital will become critical to improve lending rates and financing.
How is instant noodles disrupting the ecology of South Korea’s tallest mountain?
At face value, instant noodles and mountains may not seem like they have a ton in common. But if you’re a park staff member in charge of the tallest mountain in South Korea, the unlikely conjunction of these things has probably proven as the latest hair-ripping ordeal.
Bond buyback: Govt proposes, market disposes, over price
At a buyback auction of government bonds last week, the RBI accepted bids worth only ₹10,512.99 crore versus ₹40,000 crore worth of securities the government had offered to repurchase, with the central bank rejecting most bids.
Instead of explicit cut, RBI may start liquidity management in Q1 of next year: Abheek Barua
“I am perhaps reading too much into it, but it seems RBI commentary was a little softer, more dovish than the earlier policies. The RBI is telling us that it is not that comfortable with the extreme negative liquidity balances that we have seen in the past so that is certainly good news to the market.”
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RBI to call out liquidity skew with bankers
An email sent to the RBI seeking comment for the story remained unanswered till press time. In an unexpected step, RBI Governor Shaktikanta Das said on October 6 that the central bank would hold open market bond sales to drain out excess liquidity in the banking system. The yield on the 10-year benchmark government bond has since climbed as much as 16 basis points to a seven-month high of 7.38%, inflating borrowing costs for the Centre, and corporates.
View: Will RBI squeeze banks with an open market operation?
The dense drama has laid open RBI’s dilemma and the confusion of the bond brigade. The protagonists are an affable governor who wants to tame inflation without hiking interest rates, particularly amid festivities, his articulate, pony-tailed deputy, Michael Patra, who has to justify RBI’s actions, words, and silence, and bankers who lend and borrow to manage liquidity while taking cues from the market, rivals and RBI to price loans and deposits.
Continue with SIPs, more on largecap side and less on smallcaps: Anurag Singh
"The whole capitulation of the US market has not really turned out that bad actually so on the face of it, it is looking resilient but the Indian market is a very different story of liquidity and money supply but out here in the US, we hit a point where markets really begin to wonder actually are we running ahead of fundamentals."
There's a speed bump ahead for Indian banks' run of success
Amid the storm in banking industry, experts have exuded confidence about India. The banking system in Asia's third largest economy is said to be safe and healthy as of now. While India does not face a huge risk, experts eye a niggle coming up for local banks, as they are forced to increase deposit rates to fund credit growth here on.
RBI policy outcome was as per market expectation: Nilesh Shah, MD, Kotak, AMC
Undoubtedly growth continues to soften. RBI itself has revised growth target downwards from 7% to 6.8% for FY23 but these are unusual circumstances. Globally there is a massive storm going on and within that India has so far done well.
History suggests inflation and interest rates have had little impact on market returns in the long term
The fund house, though, said the conundrum of rising commodity prices, rising inflation and thereby tight monetary policy might keep volatility intact in equities for some time.
Now, RBI is trying to anchor market rather than market leading RBI: Nilesh Shah
“This is the policy where RBI has started the normalisation process. Liquidity will be adequate but not in excess. The monetary policy will be less accommodative and hopefully with SDF, even though the reverse repo and repo rate corridor is maintained. It will probably result in the operating rate moving towards repo rate. This policy will make the market confident to keep faith in RBI.”
How to break through the transmission bottlenecks for small non-banks
This 'transmission conundrum' is not new. Rate reductions against the backdrop of difficult economic situations have often been negated by increasing credit spreads charged by financial intermediaries with direct and greater access to central bank money.
RBI's communication key to handling excess liquidity, says StanChart's Sahay
At present, liquidity in the banking system is estimated to be around 6 lakh crore rupees while the government is expected to be sitting on around 4 lakh crores, taking the core liquidity above 10 lakh crores.
The known unknowns will prompt investors to stay put
It’s a bull market that even many seasoned investors are hating. They don’t feel much in control with traditional stock market ratios and other indicators proving to be of little value these days as equities go from strength to strength.
Long & Short of Markets: Jhunjhunwala tip for new investors, stocks for the long haul & other top reads
Meanwhile, on Dalal Street, investors are confused whether to buy every dip in this 'hated' bull market or wait for the post-Covid era to arrive.
Is the next big fall in oil coming soon?
The rally in equities might fizzle out sooner than markets anticipate and if that happens, oil markets will face stronger heat and WTI oil prices might fall towards $36.
Top banks’ rush to raise funds signals something is not right: Sandeep Tandon
‘Risk appetite is also showing signs of exhaustion, which means the global rally can taper off’
Banks to turn cautious on retail loans due to COVID impact: Report
The lenders will prefer the low-risk home loans segment for their retail credit growth, but demand for such credit is set to decline the most as houses become unaffordable and the economic conditions make one defer purchases, it said.
LTRO: Will growth float in the liquidity flood?
Transmission of LTRO via the credit channel will face challenges, in our view.
Car sales dip most in two decades in 2019
Sales of cars and SUVs went into a free fall in 2019, witnessing the biggest decline in over two decades.
Lakshmi Iyer on why Indian & global bond yields are showing divergence
Globally, central banks are seeing negative rates and that is driving the money into gold.
Reforms, success of REIT open up floodgates for realty investment
In the first quarter of 2019, the industry has seen an investment to the tune of $2.5 billion.
RBI likely to raise rate by 25 bps
With the currency still under pressure and crude oil prices crossing $80, the rate increase cycle is far from over.
Swelling forex reserves could soon cost RBI in ways very few foresaw
The pressing need to absorb both dollar and rupee liquidity is already stretching the Reserve Bank of India’s range of tools and complicating policy.
If you are investing now, don’t expect short term returns: Manish Sonthalia, Motilal Oswal AMC
It is all about liquidity. It has nothing not do with the fundamentals.
Lending rates: Who will blink first? Reserve Bank of India or banks?
Cost of funds has been lowered by halfa-percentage point since January 15 with the repo rate, the rate at which banks borrow from the RBI, falling to 7.5%.
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