ECB raised rates by 50 bps for the first time in 11 years and higher than the street expectation of 25 bps.
The Euro Zone has been reeling under high inflation due to the Russian war and the supply chain bottle-necks caused. It also hinted at another rate hike when it meets on 08th September. Against the ECB target of 2% inflation, the actual consumer inflation is inching closer to double-digits. This should help the Euro recovery, after it fell to parity with the US dollar for the first time since 2002. Recession remains a key risk.
RBI announced that the upcoming meeting of the Monetary Policy Committee (MPC) was postponed by a day and would now be held between 03rd August and 05th August, with the policy statement on 05th August. The reason cited for the decision was administrative exigencies, although no further details were shared by the RBI. Earlier, in February 2022, the MPC meet had been postponed following the demise of Bharat Ratna, Lata Mangeshkar. Since March, RBI has raised repo rates by 90 bps and the CRR
by 50 bps.
It was a volatile day for the Indian rupee as it touched Rs80.06/$ in early trades but closed relatively strong at 79.85/$. Apart from the weakness in crude prices, persistent FPI inflows and RBI intervention to defend the rupee at the psychological level also helped. Till date, the rupee has crossed 80 daily over the last 3 days but is yet to give a close above that level. However, the rupee is still likely to face a lot of fundamental pressure with nearly $79 billion of unhedged dollar exposure likely to trigger strong demand for US dollars.
Hindustan Zinc Ltd, part of the Vedanta group, reported 55.9% growth in net profits to Rs3,092 crore for Q1FY23. It was helped by higher metal and ore prices. Overall revenues from operations for the quarter were up by 44.8% at Rs9,236 crore. The board of HZL approved formation of a 100% subsidiary which will set up 500,000 TPA fertiliser plant to handle the domestic shortfall. Higher metal prices on the London Metals Exchange (LME) boosted numbers. It used hedging techniques to manage risk of rising
input costs.
Sugar stocks gained up to 9% on Thursday after the government indicated it may allow 1 million tonnes of sugar exports in the 2021-22 sugar cycle. In India, the sugar cycle extends from October to September. Most of the key sugar stocks like Balrampur Chini, Triveni Engineering, Avadh Sugars, Dalmia Bharat, Uttam Sugar, Dwarikesh Sugar and Renuka were up between 3% and 9% on Thursday. Sugar stocks have been rank underperformers in the last 3 months so this rally gives some respite to sugar stock investors.
The beleaguered RBL Bank showed some promise with net profits turning around to Rs201 crore in Q1FY23 from a net loss of Rs459 crore in Q1FY22. Gross NPAs fell sequentially from 4.40% to 4.08%.
Even net NPAs were lower sequentially by 18 bps at 1.16%. The profit turnaround was driven by a sharp fall in RBL Bank’s provisions and contingencies from Rs1,384 crore to Rs253 crore. In the last few years,
RBL Bank has seen a lot of headwinds over the asset quality, management quality, corporate governance etc.
While the debate still rages over the last date for filing IT returns, reports suggest that the CBDT may stick to its July 31st deadline or limit the postponement to just 10-15 days to clear the backlog.
Normally, the online filing portal is vulnerable to last-minute delays and malfunctions, so timely filing is advised. As per extant rules, returns can be filed after the last date, till December of the year, but that entails a mandatory penalty as well as loss of set-off benefits. There is a minimum penalty of Rs5,000 for belated returns filed.
Indian companies are rushing to hedge overseas dollar debt against further fall in the rupee. This kind of a rush can lead to a cascading effect on the rupee value. According to estimates by the RBI, Indian firms have nearly $79 billion of unhedged offshore loans as of March 2022. That means; nearly half the total loans are unhedged. An 8% rupee depreciation means the cost of servicing such loans has gone up by 8%. The $79 billion unhedged exposure will act as an overhang and prevent meaningful strength in the INR.