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MPC members showed urgency to contain inflation: Emkay Global

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The unanimous 50bps hike in the repo rate recently by the Monetary Policy Committee (MPC) and a sharp upward revision in the inflation forecast, depicted continued urgency on policy catch-up amid the MPC’s reassessment of the inflation outlook, said Emkay Global Financial Services in a report.

The minutes also indicated the rate trajectory ahead.

The RBI released the minutes of the MPC meeting held during June 6-8, 2022 on Wednesday.

According to Emkay Global, the broadening of inflation pressures and generalisation and persistence of inflation made most members uncomfortable, even though some reckoned the largely imported nature of the current inflation.

“Most members believed that, amid fears of second-round effects on estimates, an early hike was necessary to avoid any unintended economic shocks,” Emkay Global said.

The minutes also gave cues on the rate trajectory ahead. While all reckoned rates needed to go up further, there was still divergence on the possible terminal rate, the report said.

Prof Jayant Varma believed that the RBI MPC, like most leading central banks, should also provide a dot plot to signal its future rate projections, which will help in anchoring long-term bond markets and inflation expectations.

Dr Michael Debabrata Patra argued that the repo rate needs to be increased to at least as high as the one-year-ahead inflation forecast suggests (near zero), knowing that monetary policy works with lags.

According to Dr Ashima Goyal, the current stage of recovery, the one-year ahead real rate must not fall below -1 per cent, Emkay Global said.

Some members see a need for demand compression but recommend moving with caution

Emkay Global said there were signs of caution in terms of aggressive policy tightening. Dr. Patra suggested that current inflation is predominantly a supply-side issue, and as a consequence, for monetary policy, rather than materially compressing demand, managing expectations is the key.

Dr Goyal argued that, unlike the West, India’s inflation is yet neither demand-driven nor seeing a wage-price spiral. Labour markets are not tight and wage increases are not universal yet across rural and urban sectors.

Meanwhile, the credit offtake is still modest – broad money growth at 8.8 per cent was much lower than nominal income growth.

Dr Ranjan suggested continued monetary-fiscal coordination to anchor inflation expectations while RBI Governor Shaktikanta Das stated that the second-round effect of adverse supply shocks is what they are targeting.

According to Emkay Global, the triple whammy of commodity price shocks, supply-chain shocks and resilient growth has shifted the reaction function in favor of inflation containment.

The inflation prints of the next two quarters are likely to exceed seven per cent, which could pressure the RBI into acting sooner rather than later.

FY23 could, thus, see rates go up further by 75bps plus, with the RBI now showing its intent to keep real rates neutral or higher to quickly reach pre-Covid levels, it said.

As per Emkay Global, a maximum tightening of the policy rate by six per cent by FY23, of which liquidity tightening to two per cent of net demand and time liabilities (NDTL) is tantamount to another estimated 25bps effective rate hike.

However, the front-loaded rate hike cycle does not imply a lengthy tightening cycle, and once they reach the supposed neutral pre-Covid monetary conditions, the bar for further tightening may go higher incrementally amid increasing growth inflation trade-offs, Emkay Global said.

Business

FIIs return to Indian markets, pump in over Rs 10,000 crore in October

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Mumbai, Oct 16: After months of selling, foreign investors seem to be regaining confidence in Indian stock markets as the data from NSDL shows that between October 7 and October 14, Foreign Institutional Investors (FIIs) were net buyers in five of the last seven trading sessions, purchasing shares worth over Rs 3,000 crore in the secondary market.

Their buying in the primary market was even stronger, crossing Rs 7,600 crore, as per the data.

Provisional data from the NSE also indicates that FIIs continued their buying streak on October 15, adding another Rs 162 crore.

This renewed buying interest has come alongside a steady rise in key market indices.

Since the beginning of October, both the Sensex and Nifty have gained around 3 per cent, while the BSE MidCap index has climbed 3.4 per cent and the SmallCap index has advanced 1.7 per cent.

The sudden shift in foreign fund flows has surprised many market watchers. Some analysts see this as a short-term rebound, while others believe it reflects improving corporate earnings prospects and stabilising economic conditions in India.

This turnaround is a sharp contrast to the heavy outflows seen earlier this year. From January to September 2025, FIIs sold more than Rs 2 lakh crore worth of shares in the secondary market.

This happened even as the Reserve Bank of India and the government took several steps to support growth, including GST rate cuts, a steep repo rate reduction in June, and an upgrade in India’s sovereign credit rating by S&P.

During that time, Indian markets lagged behind global peers. The Sensex and Nifty rose only about 3 per cent, while the MidCap and SmallCap indices fell 3 per cent and 4 per cent, respectively.

Now, sentiment is improving on hopes of a possible India–US trade deal amid growing US–China tensions.

Expectations of a US Federal Reserve rate cut later this month are also fueling optimism, as it could bring more liquidity into emerging markets and commodities.

Experts believe India remains an attractive investment destination for global investors, supported by a weaker rupee, relatively modest valuations, and expectations of double-digit earnings growth for Nifty companies in the second half of FY26.

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Business

Sensex, Nifty open higher on positive global cues

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Mumbai, Oct 15: Indian stock markets opened on a positive note on Wednesday, taking cues from the upbeat global sentiment.

The Sensex climbed 243 points, or 0.30 per cent, to trade at 82,273, while the Nifty rose 79 points, or 0.31 per cent, to start the day at 25,225.

Commenting on the Nifty’s technical outlook, experts said that though the 20-day SMA stepped in yesterday, to limit the extent of the drop, we prefer to give more weightage to the bearish engulfing pattern, thus acknowledging the prevailing bearish bias.

“Meanwhile, we remain equally prepared to switch sides, if Nifty manages to push beyond 25230. However, we will wait for a break beyond 25330 to play directional upsides,” they added..

Buying was seen across most sectors, with heavyweights like Bajaj Finserv, Bajaj Finance, NTPC, L&T, Power Grid, BEL, Bharti Airtel, Trent, and Asian Paints leading the gains. These stocks moved up by as much as 1.2 per cent in early trade.

However, some pressure was seen in select counters such as Tech Mahindra, Axis Bank, Infosys, and Titan Company, which slipped up to 1.2 per cent.

In the broader market, the Nifty MidCap index gained 0.38 per cent, while the Nifty SmallCap index advanced 0.20 per cent — indicating a positive trend beyond the frontline indices.

Among sectoral indices, Nifty IT and Financial Services rose 0.6 per cent each, while PSU Bank and Realty indices also traded higher — reflecting a broadly optimistic market mood.

Experts said that investors are likely to track global market trends, crude oil prices, and institutional flows for further direction.

“In the current environment of heightened volatility and mixed market cues, traders are advised to maintain a cautious “buy-on-dips” approach, particularly when using leverage,” analysts said.

“Booking partial profits during rallies and maintaining tight trailing stop-losses is recommended to manage risk. Fresh long positions should be considered only if the Nifty sustains above the 25,300 mark,” they added.

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Business

Explained: EPFO overhauls withdrawal rules to boost transparency, ease access for 30 crore members

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New Delhi, Oct 14: The Employees’ Provident Fund Organisation (EPFO) has restructured its partial withdrawal regulations, combining 13 distinct clauses into three main categories: Essential Needs, Housing Needs, and Special Circumstances. This change aims to make it easier to access provident fund savings.

For the nearly 30 crore members who collectively own a corpus of about Rs 30 lakh crore, the reform aims to make the withdrawal process quicker, simpler, and more transparent.

The revised framework, referred to as EPFO 3.0, has standardised withdrawal limits.

Depending on the goal, members can now access up to 100 per cent of their eligible provident fund balance, which includes employer and employee contributions. However, at least 25 per cent of the EPF balance needs to stay in the account in order to maintain a safety net for retirement.

This implies that members can keep the required balance while withdrawing up to 75 per cent of their total corpus.

Additionally, the new regulations standardise the requirements for services. In the past, there were specific requirements for each type of withdrawal, such as five years of service for housing purposes and seven years for marriage-related withdrawals.

All partial withdrawals are now subject to a single 12-month minimum service period, which streamlines the procedure and removes any ambiguity.

Members will no longer need to provide documentation of their withdrawals under the “Special Circumstances” category, which is a significant relaxation. In the past, withdrawals under this heading required proof of emergencies, such as natural disasters or job loss.

The new clause, which permits members to leave without giving a reason, is anticipated to reduce red tape and expedite approvals.

The EPFO has also increased the withdrawal limits for marriage and education-related withdrawals. Instead of the previous cap of three combined withdrawals, members can now make up to 10 withdrawals for education and five for marriage.

Stricter guidelines for final settlements are also introduced by the reforms, though. In contrast to the previous two-month eligibility window, members can now only apply for an early final settlement 12 months after quitting their job and for pension withdrawal 36 months later.

In the event of a job loss, the 25 per cent minimum balance requirement only applies to partial withdrawals; it does not apply to full settlements.

While it is anticipated that the simplified framework will increase efficiency and transparency, workers who are laid off or have experienced extended periods of unemployment may find it difficult to obtain their provident fund savings immediately during a time when they may need it most, due to the revised settlement timelines.

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