Falling crude prices have come as godsend for India and are helping in curtailing the deficit on the fiscal front. Petrol and diesel prices have been cut once again and it appears that oil marketing companies never had it so good. Helped by liquidity markets made yet another high on the first day of trading of the December series and the last day of November month. GDP numbers for the second quarter of July-September 2014 were 5.3% against 5.7% of the first quarter and 5.2% of the year ago period. GDP for first half 14-15 is now 5.5% against 4.9% last year. Better, but things could have been better.
NSE is feeling the heat from BSE and has reduced transaction charges by 40%. This clearly shows that volumes are shifting to BSE or that BSE is gaining market share and traction. Competition is welcome and the gap between transactions charges on the BSE compared to NSE remain substantial even after this 40% cut. If members and clients want charges to be reduced further they have to ensure that BSE volumes rise further. One man’s food is another man’s poison but here there are only gainers with the customer being king.
SEBI has once again proved that they are consistently inconsistent. A month ago in the case of DLF they held the promoters andkey personnel responsible for non-disclosure of information in their offer document but held the signing off authority the merchant bankers not responsible. Here in the case of CARE, the company or its promoters are not responsible but merchant bankers are held responsible and have been fined the maximum permissible Rs 1 cr fine. Why in a span of a mere one month two diametrically opposite orders form the same regulator? It is not only baffling and intriguing but makes people worried. This inconsistency and the fact that the regulator interacts only with merchant bankers and never promoters or their authorised representatives makes one wonder how do you get your doubts if any cleared. DLF has its matter pending now with SAT the tribunal, and one can be sure that this inconsistent order from SEBI will be hotly debated and discussed.
There is an IPO from Monte Carlo opening on Wednesday and in keeping with the few IPO’s of this year will be heavily subscribed by the HNI category where funding is available quite cheap. It makes sense to apply for 23 shares as a lottery ticket as the retail portion is likely to get subscribed by 2.75-3.25 times. The issue is expensive no doubt and the application should be for listing gains. More on the issue post the anchor allocation which happens on Tuesday.
Tuesday the 2nd of December RBI meets for its monetary review. The stock market has already discounted in advance a 50 basis points cut while RBI is on record saying that a cut currently looks difficult. The Finance Minister is slated to meet the governor on Monday and impress upon him the government’s resolve to containing and keeping inflation under check. What Tuesday finally brings will be keenly watched. However what is worth noting is the comments made by Raghuram Rajan at the Kurien memorial lecture where he mentioned that amounts written off by banks over the last five years is a massive 1.62 lac crs. I believe the entire banking system does not earn this kind of amount in a year and this is why our system is burdened with bad quality assets. The governor further adds that when bad debts rise the premium on lending to the sector increases and this increased cost of borrowing is to be paid by all. Very very telling of the governor and reveals his mind set on the cut in interest rates being demanded.
The markets will be volatile and one needs to be cautious and nimble footed in such times. Trade cautiously.