Blog for Stock tips, Equity tips, Commodity tips, Forex tips: Sharetipsinfo.com

India’s currency in circulation has increased by only around Rs 500 billion in the first four months of this financial year, which is nearly half the pace of the same period a year ago.

“Economic activity is completely back to pre-pandemic levels, and hence there is hardly any need for panic-driven cash withdrawals, which is leading to a drop in cash in circulation,” a trader with a state-run bank said.

The rise in the cash in circulation for April-July stood at Rs 508 billion ($6.38 billion), as compared to Rs 928 billion for the similar period last year and a mammoth Rs 2.25 trillion in 2020-21, the peak of lockdown, data from the Reserve Bank of India showed. The currency in circulation had jumped by over Rs 4 trillion in 2020-21, while the increase tapered to Rs 2.80 trillion in the last financial year, and market participants ex­pect another drop in the current year.

Meanwhile, India’s banking system liquidity surplus remains around Rs 2 trillion, and Kotak Mahindra Bank expects the surplus to ease to around Rs 1.50 trillion by the end of this week.

The Standing Deposit Facility (SDF) rate is now at 5.15 per cent, while the Marginal Standing Facility (MSF) Rate stands at 5.65 per cent. The SDF represents the lower band of the interest rate corridor and the MSF the higher.

A 'Business Standard' poll on Monday predicted a 35-50 basis-point increase in the repo rate at this week’s policy statement. The benchmark policy repo rate is now at the highest since August 2019.

As in its June policy statement, the MPC said this morning the rate-setting panel was focused on the withdrawal of accommodation. Given that the MPC is on a policy-tightening path, some economists had called for a shift in stance to neutral or calibrated tightening.

The latest rate action takes the total tally of rate hikes since May to 140 basis points. Accounting for the introduction of the SDF at a higher rate than the reverse repo rate in April, effective rate hikes stand at 180 bps so far in 2022.

“Spillovers from geopolitical shocks are imparting considerable uncertainty to the inflation trajectory. More recently, food and metal prices have come off their peaks,” said the MPC’s statement.

“International crude oil prices have eased in recent weeks but remain elevated and volatile on supply concerns even as the global demand outlook is weakening. The appreciation of the US dollar can feed into imported inflation pressures.”

Consumer Price Index (CPI) inflation has remained above the upper band of the RBI’s mandated 2-6 per cent range for six straight months up to June 2022.

The June inflation print was at 7.01 per cent. The RBI’s medium-term target for CPI inflation is 4 per cent.

Upside risks to domestic inflation increased significantly after Russia’s invasion of Ukraine in late February led to a sharp rise in global commodity prices.

ALSO READ: Rate sensitive shares trade firm as RBI hikes repo rate by 50 bps to 5.4%

The RBI retained its CPI inflation forecast of 6.7 per cent for the current financial year, with risks evenly balanced. The CPI forecast assumes the average price of crude oil for the Indian basket at $105 per barrel.

CPI inflation is seen at 7.1 per cent in July-September, 6.4 per cent in October-December and 5.8 per cent in January-March. The price gauge is seen at 5 per cent in the first quarter of 2023-24.

The RBI’s forecast point to the likelihood of the MPC failing to meet the mandate of ensuring that average inflation does not sustain above the target band for more than three successive quarters. In the event of failure, the RBI must provide an explanation to the government.

The MPC on Friday retained the real GDP growth forecast of 7.2 per cent for the current financial year. GDP growth for the first quarter of the next financial year is seen at 6.7 per cent.

Bond prices fell sharply after the policy statement with the yield on the 10-year benchmark bond climbing 10 basis points to 7.26 per cent. The bond market had hoped for a rate hike of 35 bps along with signals that the RBI may temper future rate hikes.

The rupee appreciated sharply versus the US dollar and was last at 79.07 per dollar compared to 79.47 per dollar at the previous close on Thursday.

Click Here:- Get Live Stock Market Trading View

Petrol and diesel prices held steady on August 5, the latest price notification issued by fuel retailers showed. Fuel prices have stayed unchanged for more than a month.

Petrol in Mumbai is being sold for Rs 106.31 per litre and diesel for Rs 94.27. Petrol in Delhi costs Rs 96.72 and diesel Rs 89.62 a litre. Petrol and diesel are priced at Rs 102.63 and Rs 94.24 in Chennai and at Rs 106.03 and Rs 92.76 in Kolkata respectively.

Oil marketing companies are reportedly incurring a loss of Rs 13.08 a litre on petrol and Rs 24.09 on diesel. India meets 80 percent of its fuel needs through imports.

Oil prices extend losses on demand worries

Oil prices extended losses on Friday, after hitting their lowest since before Russia's February invasion of Ukraine in the previous session, as the market fretted over the impact of inflation on global economic growth and demand.