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