High government cash balance likely to limit additional borrowing
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The fears of additional borrowing due to GST shortfall may not be as substantial as bond dealers anticipated initially. Any large additional borrowing announcement would have triggered a spike in the yields. This time it didn’t.
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Lockdowns may have dented the government s revenues, but there s a positive side too.
The central government s cash balance with the Reserve Bank of India was estimated at Rs 4.2 lakh crore in the week ended May 21, according to QuantEco, a Mumbai-based research firm. This was the highest since demonetisation, cooling fears that market borrowings may not spike.
Barclays has pegged India’s economic growth for fiscal 2021-22 (FY22) – as measured by gross domestic product (GDP) – at 7.7 per cent in the bear-case scenario, if the country is hit by the third wave of the Covid pandemic going ahead. The economic cost, it believes, could rise by at least a further $42.6 billion, assuming another round of similar stringent lockdowns are imposed across the country for eight weeks later this year. After factoring in recent developments, Barclays has pegged the economic cost of the latest shutdowns at $8 billion per week in May, up from $5.3 billion per week in last two weeks of April, and well above the $3.5 billion a week estimated early in the second wave. “We believe these economic losses will remain steady at $8 billion a week through the month of May, but expect them to ease from June,” Barclays said.
Wholesale price index spike may hit consumer price index with lag: Economists
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India’s wholesale inflation rose to a near 11-year high of 10.5% in April, data released on Monday showed. By contrast, retail inflation, as measured by the consumer price index (CPI), eased to 4.29% in April, from 5.52% in March, remaining within the Reserve Bank of India’s (RBI) target band of 2-6% for the fifth straight month.
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Economists expect convergence in wholesale and retail inflation going ahead as higher commodity and fuel prices lead to a cost push in retail inflation.
The sharp spike in the wholesale price index (WPI) in April is likely to spill over to retail inflation with a lag, but a normal monsoon and lower food inflation may moderate the impact, economists said. Retail inflation is expected to remain in the 5-5.5% range in the near term but could pick up toward the end of the financial year, they said. The meteorological department has foreca
Indian equities are likely to outperform their emerging market (EM) peers in 2021, says the latest report by Morgan Stanley and bets on domestic cyclical stocks followed by rate sensitives. The research and broking house, however, has kept its December 2021 target for the S&P BSE Sensex unchanged at 55,000 levels (base case; 50 per cent probability) for now – an upside of around 10 per cent from the current levels. “Our unchanged BSE Sensex target of 55,000. This level implies that the BSE Sensex would trade at a forward P/E multiple of 17.5x and a trailing P/E of 21.2, ahead of the 25-year average of 19.7x. This premium over the historical average reflects a higher confidence in the medium-term growth cycle in India. We are overweight on India in a global emerging markets (GEMs) context,” wrote Ridham Desai, head of India research and India equity strategist at Morgan Stanley in a coauthored report with Sheela Rathi and Nayant Parekh.
Read more about Markets will digest dent on June quarter earnings as one-time hit: CLSA on Business Standard. If India is unable to slow the number of infections, additional lockdown measures might be required, which analysts at Rabobank International say would negatively impact the supply side of the economy