Market Medley

  Reference: RBI/2023-24/108 A. P. (DIR Series) Circular No. 13 dated January 5, 2024(effective April 5, 2024) Recently RBI in the above-mentioned circular has introduced new trade type “100MM contracted” to enable users to book hedges upto the limit of USD 100 Million or equivalent without establishing any underlying exposure.

 Indian Residents Now Permitted to Invest Overseas with Regulatory Caveat Indian residents are now allowed to invest in overseas registered funds with the primary condition being that the fund manager must be regulated. This marks a significant shift from the earlier stipulation, which required the investment vehicle itself to be regulated—a condition that did not align with the typical structure of funds. This relaxation facilitates smoother investment processes and broadens the scope for Indian investors in the global market.

 

  Focus Remains on Last Mile of Disinflation The June meeting of the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) continued to emphasize caution regarding the inflation trajectory. Most members supported a wait-and-watch approach, citing resilient growth prospects that provide some leeway. Our outlook remains for shallow rate cuts starting from the December policy meeting, with a potential change in stance either in the October meeting or concurrent with the rate cut action.

 

 In the dynamic financial landscape of India, companies often seek external commercial borrowings (ECBs) to fuel their growth and expansion. ECBs provide access to larger capital pools at potentially lower interest rates compared to domestic borrowings. However, as companies evolve, their financial strategies might pivot towards equity infusion, transforming debt obligations into equity stakes. This process, known as the conversion of ECB into Compulsorily Convertible Preference Shares (CCPS) or equity, is governed by the Reserve Bank of India's (RBI) regulations. Understanding and adhering to these guidelines is crucial for a seamless transition.

Central bank actions, ECB makes the first move In the fortnight filled with major action, BOJ, Fed, and RBI kept the rates on hold while ECB finally decided to deliver the first cut post pandemic inflation surge. They have maintained that the future cuts are not guaranteed and will be data dependent. FOMC took a slightly hawkish tone as gauged from the dot plot change

 On March 26, 2024, the International Financial Services Centres Authority (“IFSCA”) had released a consultation paper on setting-up of an entity in the International Financial Services Centre (“IFSC”) to provide Book-keeping, Accounting, Taxation and Financial Crime Compliance Services (“BATF”) either as a captive service provider to the group or to third party clients. Based on the comments received, the IFSCA has now notified final IFSCA (BATF) Regulations, 2024 (“BATF Regulations”).

  May Goods Trade Deficit Expands to US$23.8 Billion, Driven by Increased Oil Trade Deficit; Services Trade Surplus Continues to Moderate

 

  Fixed-income investments, such as bonds, play a crucial role in diversifying an investment portfolio and providing a steady stream of income. However, they are not immune to risks, and one of the most significant risks associated with bonds is interest rate risk. Bond sensitivity, often referred to as duration and convexity, is a fundamental concept that every investor should grasp to make informed decisions in the world of fixed-income securities. In this comprehensive article, we will delve deep into bond sensitivity, exploring what it is, how it works, and why it matters to investors.

 Interest rates play a crucial role in driving the value of foreign currencies through several key mechanisms. Here's how: 1. Interest Rate Differentials

Returns in fixed income funds are influenced by a variety of factors, reflecting the complexity and diverse nature of these investment vehicles. Key factors include:

  India Final PMI   India’s final PMI shows a continuous trajectory of growth both in manufacturing as well as service sector although the pace of momentum has slowed done. For May’24 the Composite PMI came at 60.5% (61.7% for Apr’24) , the manufacturing PMI cooled off to 57.5 (Apr’24-58.4%) and Service PMI slowed down to 60.2 (from 61.4% in Apr’24).

 The June monetary policy review by the Reserve Bank of India (RBI) adhered to its existing stance, maintaining interest rates and policy direction. However, the review was marked by two dissenting voices. External member Dr. Goyal joined Prof. Varma in advocating for a rate cut and a shift to a neutral stance. Despite these dissensions, the Governor's tone and the policy statement remained conventional, acknowledging the dual risks to inflation while slightly raising the growth expectation for the current financial year. An intriguing highlight of the review was the introduction of aspirational goals for RBI@100. The RBI outlined two primary objectives: Monetary Policy and Liquidity Management Capital Account Liberalization and Internationalization of the Indian Rupee Assessing the RBI The RBI operates as a conventional inflation-targeting central bank, a crucial context for its assessments. Given that inflation remains above target with component volatility, and growth is steady,...

 In a significant move to streamline regulatory processes and enhance financial inclusion, the Reserve Bank of India (RBI) today unveiled three major initiatives: the PRAVAAH portal, the Retail Direct Mobile App, and a FinTech Repository. These initiatives are set to transform the way regulatory approvals are processed, facilitate retail investments in government securities, and provide comprehensive insights into the Indian FinTech sector.

The Framework To recap, there are four key reasons why we judge that the Indian bond market is in a structural phase: A Steady Improvement in Our Macro-Economic Dynamics

 Losing a loved one is a difficult experience, and dealing with their financial affairs can add unnecessary stress. By planning ahead, you can ensure a smoother transfer of assets and ease the burden on your family. Here are 10 financial tips to make this process easier:

 The Reserve Bank of India's (RBI) surplus transfer of ₹2.1 trillion in FY2024 was notably facilitated by a significantly lower provision of ₹428 billion compared to ₹1.3 trillion in FY2023. Looking ahead to FY2026, we project that the surplus transfer could be at least as substantial as this year’s figure. Depending on various scenarios involving interest income on foreign exchange (FX) assets and reduced losses from investment revaluation, this transfer could potentially increase by 0.1-0.5% of GDP. This projection also factors in lowering the Available Realized Equity (ARE) to 6%.