The Tribune, Chandigarh, India

Sensex skids 112 points; RBI cautious on further rate cuts

Mumbai, January 29
The BSE Sensex fell to a one-week low on Tuesday, led by a decline in rate-sensitive stocks such as HDFC Bank, after the Reserve Bank of India lowered its key policy rate, but made further rate cuts conditional on government moves to control fiscal deficit.

The RBI cut the policy repo rate by 25 basis points to help support an economy set to post its slowest annual growth rate in a decade, and even unexpectedly reduced the cash reserve ratio (CRR) to address the country's liquidity deficit.

The central bank stressed that halting a slide in growth had become critical, but it went on to list constraints, notably worryingly high current account and fiscal deficits, and the risk that inflation could flare again.

The cautious call led indexes to pull back after earlier hitting their highest in two years since January 2011 immediately after the Reserve Bank’s decision.

Analysts said the government's upcoming budget for the fiscal year starting in April would be key in determining the markets' near-term outlook.

"Policy was broadly in-line with market expectations, but there has been a sense of caution mainly due to widening current account deficit and inflation," said Kaushik Dani, fund manager at Peerlees Mutual Fund. "The way the budget pans out will determine how RBI formulates its March policy," he added.

The Sensex fell 0.56 percent, or 112.45 points, to end at 19,990.90, closing below the psychologically important 20,000 mark. The index had earlier gained as much as 0.5% to its highest intraday since January 6, 2011.

The broader Nifty fell 0.41%, or 24.90 points, to end at 6,049.90, marking its lowest close in a week after earlier also hitting a two-year high.

RBI's caution comes ahead of what is expected to be a volatile week, with continued earnings results and the expiry of derivatives on Thursday, while the Federal Reserve is set to conclude its two-day meeting on Wednesday

Rate-sensitive stocks fell after the RBI made further rate cuts conditional on government's efforts towards fiscal consolidation, making hopes of aggressive easing cycle this year highly improbable.

Among banking stocks, HDFC Bank fell 2.7%, while SBI ended 1.2%. Real estate developer DLF fell 1.2%, while Tata Motors fell 1.4%. Oil and gas stocks declined on profit-taking, with ONGC falling 0.5%. — Reuters

Rate cut to boost housing demand, say realtors

New Delhi/Mumbai, Jan 29
The real estate industry and property consultants today hailed the RBI’s decision to cut key policy rates, saying that it is a positive step that would boost housing demand and encourage foreign investment in the sector.

Developers and consultants expect the move would lead to reduction in interest rates for buyers as well as builders.

Commenting on the development, Unitech managing director Sanjay Chandra said: "This is a small but necessary positive move to boost investment as well as demand in the real estate sector. These growth oriented monetary measures combined with the government's fiscal measures should auger well for the industry in 2013."

Global realty consultant Jones Lang LaSalle India said the RBI showed commitment to improve liquidity in a cash-strapped economy by reducing the policy rates.

"The RBI has taken a huge positive step by announcing the above policy measures. There should be a revival in investment and growth, including in the real estate space...The RBI's policy is definitely a key to boosting real estate market sentiment and sending out positive signals to global investors," Jones Lang LaSalle India MD (capital markets) Shobhit Agarwal said.

Confederation of Real Estate Developers Associations of India (CREDAI), the apex body for realty firms, welcomed the decision, but felt that the repo rate cut by 25 basis points is "just not enough".

"What we need is creation of a robust supply to curb inflation, for which the RBI needs to continue to ease fund supply position, month-on-month and quarter-on-quarter for realty sector," CREDAI national president Lalit Kumar Jain said.

National Real Estate Development Council (NAREDCO) said infusion of additional funds will trigger businesses for real estate and around 300 affiliate sectors and lift the declining IIP figures. "To revive housing industry, there is also a need to bring down the high mortgage rates to improve the common man's affordability, which had been hit in past because of high inflation and rocketing interest rates. Hopefully monetary and fiscal policies of 2013 will prove promising for both realtors as well as buyers," NAREDCO director general R.R. Singh said.

Realty consultant Cushman & Wakefield (C&W) said the central bank has been keen on keeping inflationary pressures under control, which had led to stringent moves from the RBI over the past nine months.

"Backed by relaxation in repo and CRR...and contained inflation, institutions are expected to offer better rate of interest on loans and may also increase deployment in infrastructure and development projects," C&W executive MD (South Asia) Sanjay Dutt said.

CBRE South Asia chairman & MD Anshuman Magazine said: "This reduction in the CRR and repo rate will bring in some liquidity into the banking sector. This is a positive move and hopefully will reduce interest rates marginally, which will help the real estate industry."

The industry expects more such steps to improve liquidity and reduce interest rates to increase investments, he added.

Raheja Developers director Manoj Goyal said with the reduction of CRR and the repo rate, the developer community now expects banks to pass on the advantage to end-users.

Knight Frank India's chairman Pranab Datta hoped today's decision is the start of a series of rate cuts to be followed over several quarters in future.

"The consequential drop in home loan rates will greatly benefit consumers and stimulate demand for new housing. Considering the sharp drop in housing demand, a 50 basis point reduction would obviously have been more desirable and would have also sent a powerful signal towards a more facilitative environment," he added.

Assotech MD Sanjeev Srivastva said the much awaited relief, although small in percentage, is going to decide the trend in the coming months. Royal Institution of Chartered Surveyors South Asia advisor S. Sridhar termed the RBI's action as being on expected lines and an overall sentiment lifter. — PTI

Banks to pass on benefit to customers, cut lending rates

Mumbai, January 29
Banks will cut lending rates after the Reserve Bank of India reduced its key interest rate by 25 basis points on Tuesday, the head of industry body Indian Banks' Association, K.R. Kamath, said in a post-policy conference.

Borrowers could as a result see better days ahead as lending rates will come down. State Bank of India chairman Pratip Chaudhuri also said banks are likely to cut lending rates. Commenting on the RBI's action, SBI MD A. Krishna Kumar said "a rate cut is likely. Rates on advances and deposits could come down simultaneously. The RBI's action is positive".

Keki Mistry of HDFC said the CRR cut, which has come as a pleasant surprise will benefit banks. "The repo and CRR rate cut will help lenders lower rates," he told a news channel.

Indian Overseas Bank executive director A.K. Bansal said the RBI's action will result in moderation of interest rates in the coming days. Both lending and deposit rates are expected to see a downward revision which will improve growth prospects, he added.

According to Canara Bank executive director A.K. Gupta, the bank would consider interest rate cut in the light of RBI policy action. If the interest rate on a 20-year housing loan of Rs 50 lakh home is cut to 11% from 11.25%, it will translate into a saving of Rs 853 per month in the EMI.

With more rate cuts by the central bank on the horizon this year, new borrowers stand to gain as banks pass on the benefit to them. If they also cut their benchmark base rates (to which home loan rates are linked), it will benefit the existing borrowers as well. — Agencies

RBI wants deposit rates as high as possible

RBI governor D. Subarao said the bank wants deposit rates to stay as high as possible to generate savings even as it wants lenders to lower lending rates. He said inflation might go up a little bit after March.

Gems, jewellery exports set to rise in 2013

Mumbai, January 29
Steep growth in India's silver exports is outpacing its other trade in precious metals as world demand picks up, albeit for cheaper jewellery options. Shipments are likely ro rise by up to 30% this year, trade body officials said on Tuesday.

"At such high prices, gold is going out of budget for many youngsters ... a wrist bracelet of white gold is now replaced with sterling silver as it is cheaper," said Pankaj Kumar Parekh, vice-chairman of the Gems & Jewellery Export Promotion Council (GJEPC).

Shipments of gems and jewellery constituted 14% of India's total exports, and employ 3.4 million workers, with the Middle East taking most of the market.

Silver exports are likely to to go up by 25-30% this year against $797 million a year ago while gems and jewellery exports are expected to rise 15% against $38.28 billion worth of overseas shipments in the previous year.

The GJEPC expects robust sales from the United States, which contributed to 11% of exports. "From the US, demand and consumer confidence are very encouraging... this market will play a major role in gems and jewellery exports," said GJEPC chairman Vipul Shah, adding they have been focussing in other growth areas like the United States, China, Russia and Australia.

The body, which represents more than 5,000 members, also hoped the government will reduce import duty on refined gold bars in the next budget.

Exporters generally take duty free gold from lending banks, but they need to give margin money, which includes import duty and value added tax to take a gold loan from banks. The margin money, which is blocked for a maximum of 90 days until payment from importers is proved, has risen more than threefold after the duty hike was implemented.

"Increase in import has an impact on export transaction cost," said Parekh, adding "hand to mouth exporters will have to restrict their business due to additional requirement of margin money to take care of additional import duty."

The trade body wants the federal government to allow a duty free import quota of 15% of the previous year's exports. — Reuters

Aircel debuts free national roaming
Tribune News Service

New Delhi/Chandigarh, Jan 29
In an indication of the things to come in the telecom sector, mobile phone operator Aircel has removed roaming charges for its users across its network. In line with the national telecom policy 2011-12 recommendations, Aircel has announced a tariff plan that offers one rate for voice, SMS and data across its network. The plan is the first for the industry and comes at a time when other telecom players have opposed a government policy aimed at waiving roaming charges.

Under the ‘One nation, one rate’ plan, Aircel customers will be able to make voice calls at 1 paisa per second even while roaming. Incoming calls while on roaming on the Aircel network will be free. Local and national SMS will be charged at Re 1.

Subscribers will also be able to carry the home circle rate while on roaming for both 2G and 3G-based data services. To make use of this plan, users will have to pay a monthly fee that ranges between Rs 21 and Rs 59 depending on the circle. The tariff will be applicable as long as the subscriber remains within the Aircel network while roaming.

BULLISH ON PUNJAB: Meanwhile, Aircel is targeting young subscribers in Punjab to raise its customer base and revenues. Focusing on mobile data users, the firm is launching special tariff plans and data packages for the youth and students.

In order to increase its base here, the company is looking at making investments to increase its BTS sites and strengthen its 2G as well as 3G services here.

With the company expecting future revenues to come from mobile data services, the company is looking at offering special deals to its young subscribers in Punjab.

Anil Gupta, Aircel business head for North India, said the firm has been mainly targeting the ‘internet through mobile’ users — youth and SMEs — to gain a share of the mobile users in Punjab, since Aircel’s entry in Punjab in August 2010. “Though we’re very new in the Punjab circle, we’re already covering 59% of the population by setting up 2,300 BTS sites”, Gupta added.

LIC Housing Fin to lower rates on home loans
Tribune News Service

Chandigarh, January 29
Following the RBI’s rate cuts on Tuesday, LIC Housing Finance will also be lowering its interest rates, thereby benefiting its consumers who will have to pay smaller EMIs. This was stated by VK Sharma, director and CEO of the company, during an interaction with reporters here on Tuesday. In town to launch a credit appraisal office for the firm, he said the decision to cut the rate of interest charged by the company on housing loans will be taken by the asset liability management committee at its next meeting.

“The central bank has cut down the repo rate by 25 bps, which will bring down the cost of borrowing for us. But how much of the benefit we’ll be able to pass on to customers will be decided by the panel,” he said.

Presently, LIC Housing Finance charges interest at the rate of 10.25 per cent.

Sharma said though there is a slowdown in the real estate sector the company was still aiming at a growth of 20%.