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Raising RBI rates to increase EMIs; stocks, currency markets give thumbs up

By on September 30, 2022 0

The Reserve Bank’s decision on Friday to raise the key interest rate by half a percentage point will boost EMIs for home, auto and other loans, though the hawkish move was cheered by equity markets and foreign exchange, with the benchmark BSE Sensex rising over 1,000 points and the rupee appreciating 33 paise against the US dollar.

Meanwhile, the government has announced a steep 40% increase in the price of natural gas, which will eventually make CNG and natural gas more expensive for consumers.

Hours after the RBI raised the benchmark (repo) lending rate to a three-year high of 5.9%, India’s banking giant SBI and biggest mortgage lender HDFC raised their lending rates by 50 basis points. Other banks and NBFC are expected to follow soon.

Since May, the central bank has raised the repo rate by 190 basis points in its fight against high inflation.

Given the deteriorating global situation and domestic inflation, the RBI has lowered its GDP growth projection for the current fiscal year to 7% from its previous forecast of 7.2%.

Data for the eight core infrastructure industries showed segment growth slumped to a nine-month low of 3.3% in August due to lower crude oil and natural gas production.

The Petroleum Ministry’s Petroleum Planning and Analysis Cell (PPAC) carried out a sharp 40% hike in the price of natural gas, which is used to generate electricity, make fertilizers and is converted into CNG to make operate automobiles. This comes against a backdrop of firming global energy prices.

Stock indices have made a strong comeback after falling for seven consecutive sessions.

Overcoming a shaky start, the 30-stock BSE Sensex climbed 1,016.96 points or 1.80% to settle at 57,426.92. During the day, it gained 1,312.67 points or 2.32% to 57,722.63.

Similarly, the broader NSE Nifty climbed 276.25 points or 1.64% to end at 17,094.35.

In the broader market, the BSE’s small-cap gauge jumped 1.45% and the mid-cap index climbed 1.39% on Friday.

Among the BSE sector indices, telecommunications rose 3.49%, metals 2.66%, financials 2.36%, real estate 1.94% and electricity 1. .94%.

The oil and gas index ended slightly lower.

The Rupee extended its initial gains and settled 33 paise at 81.40 against the US Dollar on Friday.

Foreign institutional investors unloaded shares worth Rs 1,565.31 crore on Friday, according to data available from the BSE.

On the macroeconomic front, output from eight core infrastructure sectors rose 3.3% in August – the lowest in nine months – from 12.2% a year ago. The previous low was in November 2021 at 3.2%. It stood at 4.5% in July.

Output growth in eight infrastructure sectors – coal, crude oil, natural gas, refined products, fertilizers, steel, cement and electricity – was 9.8% from April to August this fiscal year, compared to 19 .4% a year ago.

Crude oil and natural gas production contracted by 3.3% and 0.9%, respectively, in the month under review. Fertilizer production increased by 11.9% against a contraction of 3.1% in the same month last year.

Another set of government data revealed that the central government budget deficit reached 32.6% of the annual target for the current fiscal year through August, from 31.1% recorded a year ago.

In real terms, the budget deficit – the difference between expenditure and revenue – was Rs 5,41,601 crore during the April-August period of this financial year.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)