Rel Capital Q4 net up 19 pc at Rs 365 cr; declares 55 pc dividend

Anil Ambani-led Reliance Capital on Tuesday announced a consolidated net profit of Rs 365.57 crore for the fourth quarter ended March 31, a 19.46 per cent growth over the corresponding period last year

Bonds higher,Rupee ends lower

The spot rupee closed lower at Rs 40.48 per USD as against its previous close of Rs 40.16.

The widely traded 8.24%, 2018 paper ended higher at Rs 102.04 as against its previous close of Rs 100.70

Plan to pull down inflation to 5.5% over the yr: YV Reddy

In its Credit Policy, the RBI has hiked the CRR by 25 bps to 8.25%. It has left the repo, reverse repo rates unchanged.
The response of markets to policy changes have been divergent, the RBI Governor, YV Reddy said. The global growth is slowing down significantly, he said, adding that the inflation is a concern. He sees a conflict between price stability and financial stability. The global slowdown may not lower aggregate food demand, he added. The pass-through of high fuel prices is still incomplete, he said, speaking to the news media. He expects to bring down inflation to 5.5% over the year.
Excerpts from the press conference:
"What we tried to do last time on January 29, I took lot of your time to explain the reasons for the thoughtful in action because we just didn’t act.
When we explained, I explained two things that there is a continuing inflationary pressure and that there are lot of uncertainties and when there are so many global uncertainties, it is not appropriate to take a particular position and get yourself locked in that position and therefore it's better to watch and see what happens.
So we watched and we did take action during the interim as required considering the liquidity conditions. The question is what is the situation now?
The situation now is that there is greater inflationary pressure than what we expected. As far as growth is concerned, moderation is more or less on expected lines, global uncertainties have however increased and infact there is a constellation of adverse factors. We knew that there was global liquidity, we knew that the financial markets were in trouble, we knew that there was problem in fuel, we knew that there are problems related to food, but all of them have happened at the same time and all these factors happening together have resulted in an extraordinary degree of uncertainty.
Also global growth is definitely slowing down and it is significant. The global inflationary pressures have intensified and more importantly, the policies are responding to the immediate problems of financial markets in advanced countries and some of these measures taken in the interest of financial stability at the shorter end, may exactly operate against their important mandate of price stability.
In a way you have a conflict between price stability and financial stability. Although the policy proceeded in the assumption that is usually within inflation and growth and we have maintained price stability and financial stability is supposed to the sub-zoomed in the overall stability. But for the first time, almost globally there is a very clear dilemma or a conflict between choosing the short-term financial stability and the medium-term inflation. The sub-zoomed issue again is when there is a growth slowdown in the major economy. So these are unprecedented dilemmas for policy. Further when the policy measures have been taken, the response of the markets has not been as anticipated, there was a bit of a diversion between the policy objectives and to some extent policy outcome compared to what it was expected.
So we have this extraordinary global situation and domestically everything is going on track, financial stability is maintained, financial markets are alright, financial institutions are doing reasonably well. The only pressure point relates to inflation. Therefore naturally our major focus now in terms of the policy is inflation and therefore that gets the highest priority in terms of the policy.
If I quickly see the change between January stance and this stance, in January the stance was to reinforce the emphasis on price stability. Now we have made it very clear that it accords high priority to price stability. Then we also said well anchored inflationary expectation. Why are we saying these two different things? Either way is because the price stability is depending on the way the price was moved whereas inflation expectations are partly on the action that we take.

So sometimes you have to demonstrate your determination to act on inflation to convince people and for that your expectations should be reasonable. So in a way these are two interrelated and this comes to the important focus at critical junctures of policy as we have now.

Second aspect is somewhat common that we have to respond swiftly to the ongoing developments. In terms of the type of dilemma we face for taking decisions at a global level, it is agreed that there is a global slowdown. If there is a global slowdown what will be the impact on the commodity markets, that really matters.

Food and fuel maybe slightly not entirely linked, because if you look at food, a large demand for food is coming from India and China and that demand is likely to be inelastic because both the economies are growing. So if both the economies are going, there are lot of people to eat more and their food habits are going to be also more intensive in terms of proteins etc."

Sensex to reach @ 19000 in short term

Sensex are Reach to top around 18,500-19,000 for the near-term. Sensex remains bullish for the long-term. "The markets will face a lot of resistance at higher levels on fundamental concerns. So, it will remain rangebound."

RBI hikes CRR by 25 bps

In its Credit Policy, the RBI has hiked the CRR by 25 bps to 8.25%. It has left the repo, reverse repo rates unchanged. The RBI aims at 4-4.5% inflation going forward. It is attempting to bring down the inflation to 5.5% in FY09.

The RBI has set the FY09 GDP growth target at 8-8.5%. It is aiming at a credit growth of 20% in FY09. The central bank has upped its home loan limit of 50% risk weight to Rs 30 lakhs from Rs 20 lakhs. The local factors would remain dominant for policy setting, The RBI said. It will continue emphasising on anchoring inflation expectations. It will also ensure a rate environment with high priority to price stability, it said.

The RBI plans to respond swiftly on a continuing basis to evolving situations. Its emphasis would be on credit quality and delivery for sensitive sectors.


The CRR hike that has come in is only a quarter percent; that’s important. It will take out about Rs 9,250 crore. Quite clearly there was no point in hiking the repo rate at a time when banks are not going to the RBI to borrow and therefore the Reserve Bank has first tried to drain liquidity.

So, the stance is very clear. It has made stabilising inflation or price stability the first goal. That is the change in the stance. It is a slight change in language. But it is emphatic that price stability will be the major goal and the entire monetary and interest rate environment will accord highest priority to price stability and well anchored expectations and then financial market stability and then conducive to growth.
The other important point to note however is that despite this huge emphasis on inflation and the stance to drain our liquidity or manage liquidity to ensure inflation expectations.
The other part of the policy is that it is extremely robust or optimistic on growth. What is the growth target? - 8-8.5%. I cannot remember whether any of the brokerages or institutions were giving GDP target of that order. It is extremely optimistic on investment demand. But there is a slight hint that maybe, the RBI is kind of overstating the optimism because at some point, the RBI Governor says that there is a fear of exaggerated bearishness because of the global environment. So, one has to take that phrase also into cognizance.
But setting aside that caveat, it is extremely optimistic on growth. However, the stance seems to be that since growth is definitely taking care of itself, we will concentrate on liquidity. And when it comes to liquidity, the CRR will be the major instrument used.
The other thing that the RBI is very clear on is it is not at all unhappy with the fall in credit growth. Here is another important statistic and forecast from the RBI. They want the banks credit growth to come down to 20%. Remember in the last policy, it was 24-25%, moderated from 32% in the year earlier. Now it says 20%, which means the current credit offtake of 21% is also higher than the RBIs target of 20%. So, it is quite clearly aiming for a situation where liquidity will be drained, banks will not be encouraged to lend left, right and centre. But it believes all this will not impact growth and it will remain at 8-8.5%. Quite clearly, it is a hawkish stance, no two ways about it. There is no hysteria about inflation. There is a cold assessment and acceptance that inflation is going to remain at elevated levels. It is not going away in a hurry.
But the year-end inflation target has been kept at 5.5%. So, that again is an acceptance. Higher inflation, higher growth target - 5.5% is up from 5%; that the RBI had forecasted for FY08.
The other important point is money supply. The target, which was at 17-17.5% and everyone believes that that target will go on increasing because of higher financial inclusion - that target is down to 16.5-17%. That could be to some extent to also modulate it with a slightly lower growth after growth has come down from 8.5-9% and accordingly, the target for M3 has been brought down to 16.5-17%. So, that is really the major part of the monetary policy instruments and stance. Liquidity will be managed very actively by CRR stipulations and the first dose has already come; a quarter percent hike and that will take effect from May 24, which means another Rs 9,250 crore will be drained. In future as well, the accent will be on inflation since growth apparently is taking care of itself.
Meanwhile, the Vice-Chairman of the Planning Commission, Montek Singh said that he does not see the CRR hike putting an upward pressure on interest rates. One is likely to see moderation in inflation over the time, he added. However, Singh feels that the cement prices are not a cause for concern. "The RBI has done what any Central Bank would do to control inflation. It’s the sensible thing to do. With the good monsoon and wheat, we are in a better situation to control price pressure over the next few weeks," he said.