The Reporter | Sensex, Nifty End 1% Lower As Banks Drag After RBI Maintains Status Quo | NDTV Profit
#RBI sticks to its stance-indicates a long wait for a rate; Governor #ShaktikantaDas on #Paytm
Tune in to 'The Reporter' for these and more top news of the day. #NDTVProfitLive
Tune in to 'The Reporter' for these and more top news of the day. #NDTVProfitLive
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00:00 of trade on the Lal Street, the lack of dovishness on the RBI led the markets to actually decline
00:06 in trade and the markets closing at the day's low point. The Nifty had a big fall, over
00:10 200 points off on the Nifty in today's day of trade, inching closer to 21,700 which is
00:16 where the markets will find some support. Bank Nifty as well felt disappointed. No commentary
00:22 on liquidity, no change in stance and no rate cut meant that banks' stocks declined in today's
00:27 day of trade. An 800 point cut was seen on Bank Nifty closing at levels closer to 45,000.
00:33 Broader markets performed slightly better than the benchmark. The mid-cap index did
00:37 see a cut of 40 odd points. The small-cap index also declined quite sharply in the last
00:42 hour of trade. Up until the last hour, remember the small-cap index was actually trading with
00:47 a positive bias but finally going home with a cut of 0.4%. So some disappointment on the
00:52 street on back of the lack of dovishness on the RBI led to broad-based selling on the
00:57 street today. Also, main sectors or key sectors like we call it were all down over a percent
01:02 in today's day of trade with FMCG, consumption, banking leading the way down in today's trade.
01:07 Well, that's of course how the breadth of the market played out. The bias clearly was
01:10 on the downside with most stocks going down as compared to going up. The top loser in
01:15 today's trade was ITC. ITC was seeing some selling pressure today on back of reports
01:21 that British Tobacco is looking to power its stake in ITC. Well, you also had Britannia
01:26 post yesterday's earnings continues to see selling today down over 3%. Nestle as well
01:32 for the same reason declined about 3% in trade. Well, Kotak Mines Bank had a rough day and
01:37 Solid Access Bank, ICSEA Bank, HDFC Bank. So private sector banks have actually looked
01:42 quite weak over the last few days, continue to see selling pressure in today's day of
01:46 trade as well. Well, but what is drawing everyone's attention is SBI. After a very sharp run-up
01:52 yesterday the stock added another 4% despite in ignoring the cues that the RBI gave. PSU
01:59 Bank especially saw a little bit of gains between SBI and PNB Bank. OMC is at okay,
02:05 PowerGrade a strong run on back of solid earnings. So that was pretty much how the markets were.
02:09 The big RBI meet is now behind us. Markets will go back to focusing on global cues and
02:15 earnings from tomorrow.
02:17 Thanks a lot for that, Samina. Now, the RBI Governor Shaktikanta Das also said that the
02:22 Central Bank has given Paytm enough time to respond, but it failed to do so. Now, let's
02:27 go across to Vishwanath Nair for what the commentary coming in from the Central Bank
02:32 on Paytm was. Vishy.
02:34 Right, Pallavi. So as you said, there was going to be some amount of discussion on Paytm
02:40 when the RBI monetary policy announcement happened and then the press conference followed.
02:45 So essentially, the governor said that any kind of action that the regulator takes on
02:49 any entity that is followed only that is preceded always with a lot of bilateral discussions
02:56 between the two entities, between the RBI as well as the regulated entity, and that
03:00 the RBI typically gives a lot of time to the regulated entity to fix the problems that
03:05 the RBI has highlighted. Now, in specifically Paytm's case, the problems were highlighted
03:09 first in March of 2022. So nearly two years later is when the RBI has taken that action.
03:15 So there is, of course, that much amount of time that has been given to Paytm. The other
03:19 important factor that needs to be noticed here is the RBI specifically said that any
03:24 action that it takes, it is taking with considering the appropriate size of the problem and that's
03:31 how that action follows. So it's not like there's some kind of disproportionate sort
03:35 of action that the RBI takes against any entity. It only matters if the problem is big enough.
03:41 That's when the restrictions also come in very strongly. The RBI specifically assured,
03:47 the RBI governor assured all depositors and users of various payment forms that you will
03:53 be protected and that the RBI is going to stand up for you if the service provider is
03:58 not doing right by you, if they're making any mistakes or if they're committing any
04:04 non-compliances, then of course the RBI will step in and take required action. As far as
04:09 startups and fintechs go, the RBI was very, very clear that they want to encourage financial
04:13 innovation. They do not want any kind of problems to come for the fintech industry. Having said
04:21 that, if there are non-compliances, the RBI will act.
04:26 Thanks a lot for that, Vishy. Now, RBI Governor Shaktikanta Das also indicated that the restrictions
04:31 imposed on Paytm Payments Bank have come in after bilateral engagements did not lead to
04:38 corrective actions. So also, let's listen in to what the governor had to say about Paytm
04:44 Payments Bank.
04:46 We give sufficient time, you know, we give sufficient time to every regulated entity,
04:52 every entity that is supervised by the Reserve Bank to comply with the requirements, the
04:56 regulatory requirements. We give sufficient time and sometimes, as he pointed out, sometimes
05:02 it may even look more than sufficient time. And we would not like to act, you know, we
05:10 are a responsible regulator, we are a responsible supervisor. If everything had been complied,
05:17 I am talking about in a general sense, why should we act? I mean, after all, we have
05:23 a responsibility, it's a responsible institution, RBI, so that's how it is.
05:31 As you know, as a matter of policy, we don't comment on individual entity or actions that
05:36 we initiate in such cases. But that anyway, since this question is on the upper most of
05:41 mind of most of you, I think I would like to say two, three things, essentially to set
05:47 the context. What, you know, while we don't want to be discussing the individual details
05:54 here because that will not be proper. In terms of context, as you all know, that this is
05:58 a supervisory action on a regulated entity for a persistent non-compliance. Second, such
06:05 supervisory actions are invariably preceded by months and at times years of bilateral
06:11 engagement where we are not only pointing out the deficiencies but also provide more
06:19 than adequate time for them to take corrective action.
06:22 Third, of course, is in terms of, as a regulator, it's incumbent upon us to protect the interest
06:30 of the ultimate consumer and thereby protecting the stability of the financial system. So
06:36 these actions have to be seen in that particular context.
06:40 Coming to the second part of your question, what lies ahead? You know, as part of MPC,
06:44 we don't give a forecast in these matters. So I think you will have to wait and of course
06:48 we have been, feedback we have been getting, we will work on and as a responsible regulator,
06:54 suitable steps will be taken to ensure that the customer inconvenience, if any, is minimized.
07:00 So we will take care. I think with that we can give a rest to this question and then
07:04 move on to MPC is my request.
07:06 That was a slice of the extremely interesting commentary from the Governor and the Deputy
07:13 Governor on Paytm and Paytm Payments Bank. Broadly in today's policy, the RBI, the Monetary
07:20 Policy Committee rather, continue to maintain a status quo along expected lines. It also
07:26 said that the transmission of rate hikes is not complete. Mimansa Verma has more on this.
07:31 Mimansa.
07:32 Yeah, hi, Pallavi. So RBI today in the Monetary Policy pointed out that the transmission of
07:37 interest rate hikes is not yet complete. They talked about why transmission is a problem
07:42 as of now. So while rates on deposits reset much faster, on the lending side it takes
07:48 a little bit of time to pass on the higher interest rates because the proportion of loans
07:53 linked to external benchmark which are the EBLR loans as popularly known as, the proportion
07:59 of those loans is less than 50% in the banking system. While private banks have their loan
08:05 book linked to EBLR, state-owned banks account for a larger portion of loans linked to MCLR.
08:11 Now, as the cost of funds rises for a bank, that is how the MCLR loans are also repriced.
08:19 The RBI has also emphasized that there has to be a need for better transmission of the
08:23 250 basis point hike in the interest rates between May 2022 and February 2023, which
08:31 is why they have maintained the stance at withdrawal of accommodation. If you look at
08:35 numbers on the outstanding loans, the weighted average lending rate rose 113 basis points,
08:42 while the domestic term deposit rates on outstanding deposits increased 180 basis points.
08:51 So the incomplete transmission of policy rates was another thing that they pointed out. So
08:55 the incomplete transmission of policy rates is a function of adjustment in the bank's
09:00 net interest margin to maintain market share on the incremental credit, which is what the
09:05 Deputy Governor Swaminathan J has mentioned. To quote him in the hiking cycle, banks who
09:09 are in anxiety to maintain their market share in incremental credit also adjust their margin,
09:15 which also impedes the complete transmission of higher interest rates by the RBI in the
09:20 banking system.
09:22 Thanks a lot for that, Mimansa. Now, moving on, shares of ITC slipped 4% in trade as its
09:29 largest shareholder, British American Tobacco, says that it's working to monetize stake.
09:35 Sajit Mangat joins us to give us an overview of what's happening on that front.
09:39 That's right. The shares of ITC were under pressure after its largest shareholder, British
09:45 American Tobacco, announced that it plans to monetize some of the stake that it holds
09:49 in the FMCG cigarette company. Further, it said that it's planning to raise cash to the
09:58 rate of nearly $43 billion over the next five years before dividend, and that this cash
10:04 would be distributed to the shareholders. And as part of that, it's looking to monetize
10:08 some of the stake which it holds in ITC. Now, remember, that holds nearly 29% stake in ITC,
10:14 and it plans to offload somewhere between 3% to 4% so that it can bring down the stake
10:20 in ITC to 25%. The entire 29% stake today at current market value is valued at nearly
10:27 1.5 lakh crores or 18 odd billion dollars. And going forward, when ITC is going to demerge
10:35 its hotels business, which is ITC Hotels, that will have a proportionate stake in ITC
10:41 Hotels, and that would be a non-quote to it, and so it will be monetizing that stake as
10:47 well. So going forward, there will be pressure on ITC because this 4% stake in ITC would
10:53 come to the market, and while there will be many to grab it, but it's still a liquidity
10:57 that is coming into the market, and so there will be some pressure.
11:00 Thanks a lot for that, Sajid. Now, the Minister of Petroleum and Natural Gas, Hardeep Singh
11:07 Puri, spoke to NDTV about India's approach towards green energy transition. He said that
11:13 the world is keen to participate in the India story. Listen in to what he had to say.
11:19 If you have a domestically manufactured electrolyser, I would also add the cost of which is 30%
11:28 less than what a similar electrolyser imported would cost, but I would say something more.
11:34 We are, and we have demonstrated the capacity to do more of these in a short period of time.
11:41 So that is, I think, the real success story. Secondly, we did give a big boost to ethanol
11:50 blending. We are already at 12%. Indian oil is setting up 400 dispensing stations in four
11:58 states, and I think in a matter of time, E20, the Honorable Prime Minister announced at
12:03 Bengaluru in April last year, and he himself said 9,700 stations are selling E20, and this
12:12 will go up. I think no matter which way you look at it, domestic exploration and production,
12:18 our biofuel story, our compressed biogas story, our green hydrogen story, India is on the
12:23 move. But the Indian approach is what I think deserves to be acknowledged and commended.
12:29 The Prime Minister said India is with the world and India is for the world. And he said
12:34 we need to cooperate in cutting edge technologies and we will cooperate. So I think that is
12:40 the fine print and which is a message which has resonated. Large number of ministers with
12:46 whom I've had roundtables, people whom I've met bilaterally, they're all wanting to participate
12:52 in the India story. That is, I think, the message.
12:56 With that, it's time to slip into a short break. But stay tuned to NDTV Profit. We have
13:01 a lot more lined up for you on the other side.
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16:20 Welcome back. You're watching The Reporter on NDTV Profit. Now, equity fund inflows have jumped 28% to a 22-month high in January, driven by investments into small cap and
16:37 multi-cap schemes. Small and mid-cap funds together accounted for Rs. 5,000 crore. That's nearly one-fourth of the equity inflows into actively managed mutual fund schemes.
16:50 Investors continue to believe in the prospects of the broader end of the market, and that's in spite of valuations, even as advisors are cautious because of the run-up in those markets.
17:02 We spoke to the Amfi CEO Venkat Nageshwar Chalasani to understand what the Mutual Fund Association is doing to increase penetration in Tier 2 and Tier 3 cities. Listen in.
17:15 One of the most important thing that Amfi is doing is investor education program. While the individual AMCs also do it, but the Amfi as a trade body conducts this program across the country.
17:32 It's not just that we touch base upon the universities, we go to the corporates, we go to the schools, we go to the colleges, we go to the villages.
17:44 We are communicating to everyone what are the various avenues that are there, what are the risks that are there emanating from these investments,
17:51 and how calculated risk and what is their appetite and basis their appetite, what type of funds investment should be done.
18:00 All this investor education program is one of the major agendas for the Amfi and is conducted across the country.
18:08 Now, as global investors like Goldman Sachs and Morgan Stanley pull out of China, India is mightily standing as the alternative investment pool.
18:20 In fact, Japanese investors, known for their conservative strategies, are also betting on India.
18:25 What makes India attractive and why is it the sudden favorite? My colleague Malika Mishra explains. Have a look.
18:32 A report by Bloomberg titled Wall Street Snubs China for India in a Historic Market Shift calls for a deeper understanding of what makes India attractive.
18:44 Let's go one by one. First, Marshall Weiss, Wandable Holding and Janice Henderson are focusing on India rather shifting their focus from China to India.
18:57 Why is this important, you ask? It's because they're the world's top financial institutions that hold the power of impacting markets and sentiment.
19:06 Their priority in India cannot be simply ignored, especially when investors are now pulling out of China from a country that has been an attractive investment bet for almost two decades.
19:18 America's Morgan Stanley, Goldman Sachs and Japan's conservative investors known for their cautious investment strategies seem to muster significant and calculative confidence in India's growth story.
19:31 But is India being the fastest growing emerging market the only reason?
19:36 Well, while the bullish sentiment isn't new, the resemblance of the countries to China at one point and therefore its potential replacement is fanning the flame.
19:47 The country's population is still largely poor. Stock markets are expensive and bond markets insincere.
19:54 But most are making the crossover anyway, calculating that the risks of betting against India are greater.
20:02 Moreover, according to the Bloomberg report, history shows that India's economic growth and the value of its stock market are closely linked.
20:11 If the nation continues to expand at 7 percent, the market size can be expected to grow on an average by at least that rate.
20:19 Over the past two decades, cross domestic product and market capitalization rose in tandem from 500 billion dollars to three point five trillion dollars.
20:28 That is a whopping 600 percent increase in two decades.
20:33 Let's look at some more factors. It's not just Morgan Stanley or Goldman Sachs, but as I mentioned earlier, Japan's retail investors who have traditionally favored the US are also warming up to the country.
20:48 Five of the India focused mutual funds now feature among the top 20 by inflows.
20:54 In fact, Nomura Indian Stock Fund is at a four year high.
21:00 Talks about India rising as a manufacturing alternative to China has been loud and clear for a while now,
21:06 especially after the quiver and sentiment of global investors and businesses towards China post the pandemic.
21:12 The Bloomberg report said if China is viewed as a threat to the Western global order, India is regarded as a potential counterweight.
21:21 And just to put into perspective, India's nifty 50 recorded returns of 23 percent in the last 12 months against a drop of 19 percent of China's Shanghai Shenzhen CSI 300.
21:33 PM Modi plans to sell India as the world's new growth engine.
21:38 And on those lines, Finance Minister Nirmala Sitharaman announced in her interim budget that infrastructure spending will be increased by 11 percent to 11.1 trillion rupees in the coming fiscal year.
21:53 But is India expensive? With attention comes price and India is no different.
22:00 The euphoria has made Indian equities among the most expensive in the world. S&P BSC Sensex Index has almost tripled from its March 2020 low, but earnings have only about doubled.
22:13 In fact, according to data compiled by Bloomberg, global funds took out more than three point one billion dollars from local shares in January, the largest monthly total in a year.
22:27 India fans say that they're investing for the long term, adding that with a still low per capita income, the country is setting the stage for multi-year expansion and new market opportunities.
22:38 India is also trying to globalise the rupee, although at a more modest scale than China's yuan expansion.
22:45 The confidence in India seems to stem from the long term impact of multiple initiatives and not necessarily from the near term outlook on the nation's stocks and bonds.
22:56 Cane Oil and Gas is looking to invest four billion dollars over the next three to four years.
23:03 We spoke to the deputy CEO, Steve Moore, on the company's plans to ramp up production. Listen in.
23:10 Cane, as you know, works across exploration, development and production. So we're focusing on all those areas to underpin the growth.
23:20 So the exploration we're moving into new areas such as the northeast. We're just about to kick off a major campaign across four blocks.
23:28 We'll drill nine or 10 wells in the northeast. We're also looking at new exploration areas on the east coast, close to our existing rather assets and also in deep water.
23:39 And similarly, on the east coast around the Cambe field and the DSF, the developed small field blocks that we've picked up in that area.
23:47 Of course, we'll also be doing further exploration and a lot of appraisal work in Rajasthan, where we've had 38 discoveries over the last 10 or so years.
23:57 And we're trying to fully quantify what's there on the development side.
24:01 A lot of the development will come out of that exploration work, but also from the discovered small field blocks, particularly the G4 block, which were actively developing on the east coast and the Ambe block on the west coast.
24:16 We're also bringing into operation some of the fields that have been discovered over the last 10 years.
24:22 Durga, which was a discovery from two years ago in the OALP rounds in Rajasthan, was commercialized yesterday.
24:29 We just brought it on stream and we've got a plan to go to a 2004 discovery called Shakti, which is a heavy oil field that needs thermal techniques this year as well.
24:41 On the technology side, we continue to apply the technologies that I think Cairn is famed for, which is the polymer flood that we started in Mangala that we're expanding to all the fields.
24:52 And then we're building on that to add to the polymer mix a surfactant.
24:57 Surfactant is effectively something that washes the reservoir. It can get you very high recovery factors.
25:03 The other technology that we're working to implement that hasn't been implemented so far in Rajasthan is taking carbon dioxide and putting that back into the reservoir and flooding the reservoirs with CO2.
25:16 That gives also very high recoveries but a lower cost, but it can only be used in our deeper fields.
25:23 But it also is an opportunity to take the CO2 that we're currently venting, which is obviously not good for the environment, harness it, and it's a key part of our path to net zero, which we're trying to achieve by the end of the decade.
25:37 And with that, it's a wrap on this edition of The Reporter, but stay tuned to NDTV Profit for fresh news and updates.
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