Indialends economic times forex
This bond has the highest liquidity amongst similar maturity bonds. Once fixed, the coupon rate remains constant throughout the term of the bond. Only the yield changes commensurate with the interest rates and accordingly the price of the bond changes.
There exists an inverse relationship between the bond yield and its price. These assets include foreign marketable securities, monetary gold, special drawing rights SDRs and reserve position in the IMF. The main purpose of holding foreign exchange reserves is to make international payments and hedge against exchange rate risks. External debt has to be paid back in the currency in which it is borrowed. External debt can be obtained from foreign commercial banks, international financial institutions like IMF, World Bank, ADB etc and from the government of foreign nations.
Government and corporations are eligible to raise loans from abroad. These are in the form of external commercial borrowings. It is calculated as ratio of working expenses to gross earnings. It indicates how efficiently railways are able to earn with every rupee spent on development. There are three main components of current account — Trade of goods and services, Net Income from abroad and Net transfers from abroad. If the export of goods and services is more than imports, the country has trade surplus whereas if the imports are more than exports, the country is said to have trade deficit.
Repo rate is used by monetary authorities to control inflation. Due to Covid, followed by the Russia Ukraine war, inflation is a matter of concern across the entire globe, and it is expected to keep rising for some more time. However, the investor sentiment is still positive across the globe, in India, people are looking at investment options in the country.
Added with the festive season, this is a good time for investments. In the housing real estate sector, it will lead to a rise in EMIs for home buyers, however, despite the growing price rise, there is a clear demand in the housing real estate. Similarly in the commercial real estate sector and in fractional ownership, there is a growing demand. This is a great time for investors to invest in something like fractional ownership.
The stock market is already volatile and is expected to go through a hit in the coming times. Gold prices are also fluctuating. Though gold ETF is expected to give some good returns, but it equally driven by market volatility. This is the best time to invest in fractional ownership, as it can help investors beat inflation and have a steady income.
The fast-evolving world order and consistent repricing hikes by major central banks globally did not miss attention of RBI. Addressing the spill over from it, MPC delivered 50bps rate hike. Though inflation projections were retained notwithstanding softer commodity and oil prices, growth forecast was lowered by 20bps to 7. While the dissenting voice from one member for just a 35bp hike does seem to leave an early message for a slowdown in pace of rate hikes going forward, incoming data remains the key focus area.
A further rate hike in next policy may be effected if the global inflation level remains elevated. It was in line with market expectation with no surprises. The Policy Repo rate was hiked by 50 bps which was in line with market expectation though some sections of the market were expecting a hawkish commentary from RBI, which did not materialise.
The decision to raise rates by 50 bps was with majority. We expect rate hikes to continue going ahead though expect some steepening of the curve given that currently it is pretty flat. We recommend that investors should increase their investments in actively managed short duration products, while selectively looking at dynamic bond funds as per their risk appetite. It makes sense for borrowers to carefully plan their borrowings taking into account increased rates in the loans.
This rate increase may make FD rate attractive for depositors while the pass on by the banks on their liability side may be flat. One expects RBI to maintain this stance of increased rate regime till macros on inflation numbers are stabilised. While cost of capex is likely to increase, i don't believe this will impede the capex cycle as Indian industry especially MSMEs has the capacity to absorb this.
Home loans linked to repo rates would have the quickest transmission of increased policy rates. The transmission of the increased policy rates to fresh home loan borrowers would depend on the interest rate reset dates fixed by their banks as per their lending guidelines. The interest rates for existing home loan borrowers would be increased from the interest reset dates set by their lenders.
Till then, they would continue to repay their home loans at existing interest rates. Lenders would increase the interest rates of existing floating rate home loans linked to MCLR or other rate-setting benchmarks as and when the increased repo rates starts increasing the cost of funds for the lenders.
The 50 bps repo rate hike by the RBI should eventually lead the banks and deposit-taking NBFCs to further increase their deposit rates. Moreover, the widening gap between credit growth rate and deposit growth rate may also force the banks to opt for steeper deposit rate hikes to meet increasing credit demand. The MPC has also stated its desire to exit the accommodative stance in order to keep inflation within target while boosting growth. The increase will have an impact on new home buyers because mortgage loans will rise increasing the EMIs and reducing eligibility for new loans.
This coupled with economic uncertainty may cause some delay in the decision making process of home buyers but we believe the overall demand will continue to remain robust. This move might impact the home loan category, which may influence the buying sentiments of affordable to mid-segment home buyers.
While we may not witness a great upward trend given the current scenario, we have seen good business in recent times, which is likely to continue. Though inflation is high, with the government's initiatives to control it, our industry should be able to move forward. Overall, in comparison to the global trend of inflation, the real estate sector is hopeful that this rate hike will not completely dampen the buying sentiment. Additionally, the ongoing festive season is likely to bring in some positive movement as homeownership remains important for home buyers and will eventually result in sales, especially in the luxury and premium categories.
With developers offering various schemes, we believe that now is the time for homebuyers to take advantage of these benefits. This in my view will keep the Indian currency insulated from high volatility while keeping inflation expectations well anchored. Central banks in all major economies have taken up aggressive monetary policy measures to combat inflation.
Continuing withdrawal of its accommodative stance, the RBI has hiked the repo rate today by 50 basis points to 5. Emerging markets too are facing the brunt of this, in addition to a strong dollar, a slowdown in global growth, elevated food and energy prices and debt crisis. However, the RBI governor is of the opinion that India remains comparatively more resilient than its peers. Given the commentary in the speech, it does appear that we could expect a further bps increase in rates in the coming months that can take the terminal rate to 6.
The fact that inflation will be high will be the chief driving factor as there are some upside risks to the number of 6. The RBI does appear to be more confident on growth, where the target has been lowered marginally which appears to be more due to statistical reasons. All the high frequency indicators show that growth will be stable this year with limited downside risk. The stance remains withdrawal of accommodation indicating that there is scope for further reduction in surplus liquidity in the system.
The RBI has merged the 14 and 28 days variable rate reverse repo auctions, which is more to ensure that liquidity does not get locked in for a longer period of time creating spikes in the money market rates. Above statement continues to instil our belief that India may continue to outshine other economies during the challenging global scenario and despite the Governor mentioning the sharp rise in interest rates by FED as a third shock after COVID and Ukraine scenario.
He also made an interesting comparison between June and the current state of policy. Inflation and interest rates numbers then and now indicate, despite MPCs stance being that of withdrawal its policy is still accommodative which leaves more room for further hike in interest rates with less impact on growth. The RBI commentary has been a finely balanced one — while global risks are discussed extensively, the RBI appears confident on the growth momentum in the Indian economy in the coming months.
However since the growth is positive and strong it will have little impact in medium and long term. While curbing inflation is a long and slow process, next months are important. Real estate has remained strong post covid and we are positive about its growth in future too. In a growing economy certain corrections are bound to happen however our growth and progress are closely watched by the world for good business. External factors holding well as of now but needs to be monitored closely.
Re-assurance on ample systemic liquidity provides relief to the shorter segment. Overall, in line with market expectations as of now but we expect market volatility to remain high with fast evolving global backdrop. Central banks globally have resorted to monetary tightening as they walk the tightrope of balancing inflation transmitted by global dollar strength with domestic growth aspirations.
As supply side inflation driven by higher borrowing costs starts to rear its head, the central bank will see its headroom for future policy rate hikes keep reducing. Although inflation projection for the current fiscal year has been retained at 6.
Rising interest rates are likely to translate into higher equated installments and put more pressure on the final demographic unit at the household level. On the brighter side for real estate sector, office markets have signaled the beginning of a growth stage. The warehousing and logistics sector stands to benefit from the recently launched National Logistics Policy, which aims to streamline shipping, and lower logistics costs throughout the country.
The current environment is quite challenging for emerging markets with the rising price of energy and agricultural commodities, currency depreciation, ongoing military conflicts and the looming threat of global recession. It has done quite well on the inflation front with inflation in Q3 expected to be at 6. INR has depreciated against the US dollar as all other major currencies and here also the depreciation in INR is lower than most of the major currencies. Right now, the domestic situation looks under control but risks are rising.
The RBI is batting on a difficult pitch against a hostile bowling. Rapidly deteriorating global situation, drawdown of systematic liquidity and FX reserves, inflationary pressure and Growth concern are testing the RBI. The RBI has so far batted with few misses. The RBI has been proactive and data driven to deal with rapidly evolving situation. They have assured the market that they are in safe hands in the global storm. Growth forecast was lowered marginally and CPI forecasts unchanged, which is what we had estimated.
Key concerns seem to emanating from global factors and to a lesser extent domestic events. We view the policy as neutral and ready to act in response to incoming data, both global and domestic. Bond yields could see some respite buying in the near term, but would continue to closely monitor global yields, especially UST for way forward. Inflation projection for FY23 was kept unchanged at 6.
This leads us to believe that in light of domestic inflation situation, the MPC will continue with further policy rate tightening. Hence, markets may take comfort in the fact that the future policy tightening by RBI will be relatively unhurried. We expect 10Y Government Bond to trade in 7. Given that the global environment remains challenging with financial conditions tightening and fears of recession mounting, RBI stated that all segments of the financial markets are in turmoil globally and emerging market economies are also confronted with challenges of slowing growth, higher food and energy prices, spillovers from advanced economy policies, debt distress and sharp currency depreciation.
Moreover, despite the recent correction in commodity prices, CPI inflation target for FY23 has been kept unchanged at 6. On the liquidity front, excess liquidity has moderated with LAF moving to deficit. Overall, the policy was largely in line and macro-economic stability remains the key focus area.
Moreover, the rate move was in response to continued domestic inflationary risks and growth that broadly continues to hold up. The central bank kept its inflation forecast unchanged at 6. The central bank drew a comparison with when the stance was last neutral, and liquidity was in a deficit mode while the policy rate was higher than inflation — indirectly alluding to real positive rates in the economy. On liquidity, the RBI continued to re-iterate that it would conduct fine tuning operations to manage liquidity conditions.
The central bank could gradually move towards maintaining liquidity conditions that are consistent with the operating rate becoming the repo rate, implying further upside for short-term rates in the economy. On the rupee, the RBI emphasized that their strategy would be focussed on maintaining investor confidence and anchoring expectations and that their FX reserves remained comfortable, signalling that FX interventions are likely to continue and be focussed towards defending any extreme volatility in the rupee.
Currently, we do not see an impact on the business, as demand for new properties remains buoyant during the festive season that extends over the next two quarters. While we are in a good position, we have to see the sustainability of continued rate hikes, especially from Q1 If this rate hike sustains, then we will have to be careful and watch for the impact it will have on economy and business from next year.
The Government and the RBI will have to be cautious about not compromising growth while managing inflation. There are mixed impulses for inflation with international commodity prices moderating even as manufacturers start to pass on earlier increases as demand remains robust. However, inflation may slow down as such hikes subdue demand, which would create room for the RBI to pause. We believe that we are close to a peak in terms of policy rates and the possibility of further hikes appears to be low.
The repo rate now stands at 5. The move was necessary to balance the economy hampered due to geopolitical tensions. The real estate sector will have a marginal impact on the real estate sector as it is going strong post-pandemic and growth momentum has been maintained with buyers looking for quality homes and developers offering variety to them.
Buyers can look at long-term home loan tenures and one of the best competitive interest rates offered by banks and financial institutions. Although the surge was necessary, it can be termed as short term impact which will stabilize soon. With the festive period going on, the buyers who have made up their minds to buy consider the property appreciation of the future.
However it may cause a slight slowing down of GDP growth currently overheating at RBI has acknowledged that the policy is still accommodative. Rates would have to hiked more to reach a neutral situation. Bond markets had already built in the 50 bp hike and are likely to remain range bound. In the medium term, inflation is likely to keep rates high. A higher rate hike is justified in the backdrop of inflation remaining at elevated levels with the projected trajectory being above RBI's target during the entire forecast horizon.
Economic growth has remained resilient in the face of an adverse global environment. Unchanged inflation forecast at 6. FY23 GDP projection was lowered marginally from 7. Overall, it was a prudent policy announcement with no negative surprises which is reflected in the impact on the year yield and stock markets. The next stage of response could be calibrated; we expect the terminal repo rate would be 6. However, considering the ongoing festive season combined with high market sentiments affordable and mid segment housing is going to witness a huge spike in demand.
Such a move was largely anticipated as global central banks have been raising rates aggressively in last 6 months to fight high inflation in developed economies, not seen in decades. However, inflation has been on downtrend after touching 7. The MPC was in a backdrop of continued headwinds from geo-political tensions, tightening financial conditions, volatile currency markets as well as reversal of portfolio flows.
Indian macro conditions have been relatively better with sound GDP growth, and moderating inflation, though external sector has been under pressure due to high commodity prices, and portfolio outflows. However, the Indian currency has fared much better in comparison to some emerging market currencies as well as developed market currencies.
Drop in crude oil prices has been a welcome development for India as it will help stabilizing the external sector as well likely will reduce inflation going forward. The most important point in the Governor's speech was the statement that forward guidance "may even destabilise financial markets".
However, the RBI is quite optimistic about the Indian economy and is fully in control in terms of inflation, currency, and Forex reserves. RBI is also very careful to not destabilize the financial markets. It is clear that while the future rate hikes could have been indicated, the Governor believes, based on the actual impact of Fed's guidance on the US and global financial markets that such a guidance would destabilize the Indian financial markets.
The RBI Governor has clearly given a clue. It is a given that if the Fed will hike rates and RBI will have to follow suit. It becomes likely that RBI will do an out of turn meeting and rate hike in November. Therefore, the November meeting and rate hike cannot be ruled out. At one level it reflects the confidence in the economy and future growth outlook at another level it was necessitated by the recent global developments such as the Russia-Ukraine conflict including aggressive monetary policies pursued by global central banks.
Even though it will have a marginal impact on the real estate sector but I wish RBI had deferred this increase for the post-festive season. The buyers sentiments so far has remained buoyant towards residential real estate signalling the preference for real estate as an asset class. We are confident the buoyancy will remain intact. This could have a direct impact on homebuyers in the affordable segment. Mid-tier developers may suffer margin and cash flow pressures due to higher debt servicing requirements on their corporate debts unless they endeavor to minimize their debt by being conservative and decreasing discretionary costs.
This will lead to lower credit originations from banks with limited fresh capital in circulation for marginal real estate developers. The first and foremost impact of this decision would be the rise in interest rates for home loans. This would be a setback for the middle-income-group homebuyers as it would again cost them more than the previous annum. However, this is an efficient step to curb inflation as there is an overall increase in Input costs across the globe.
We look forward to avoiding any major gap between builders and buyers due to this hike. This is a good measure to curb inflation in various segments that lead to an increase in the overall cost of projects. The increasing prices of real estate projects, both plots and built-up setups, have led to a rise in prices. This will help the realtors incur the input costs quite conveniently and make the projects efficient enough.
Even though the quantum at present is still 5. The hike is marginal and would not have any major impact on buyers as the rates would increase minimally. This was quite expected with the global scenario prevailing in real estate. Developers would witness a convenient method of coping with input costs with the help of this decision by RBI. Across the world, major economies such as USA and UK are hiking the rates to cool the economy and cut inflation.
However, the overall housing demand is robust and it will be able to absorb any shock emanating from the rise in rates. Real estate demand is a complex socio- economic phenomenon, which is a by-product of a complex process. To a great extent, these factors are signaling a robust recovery in Real estate and despite not so favorable home loan rates and a surge in raw material prices, FY 22 is set to be a record year for real estate sales.
Middle-income groups or homebuyers from the affordable segment may suffer a minor hurdle, but there would not be any major difference in the overall growth of the sector. The real estate sector has already been doing quite well as per the recent trends, and this decision by the government would bring it more growth. In the current fiscal year, the repo rate has increased four times.
Home loans are still quite affordable in pricing. Thus, consumer lenders continue to be in a favorable position overall with regard to the Instalments they should pay.
Equity market What role does RBI play?
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| How to train yourself to run longer distances between places | This was quite expected with the global scenario prevailing in real estate. It gives a detailed report on revenue collected from different items like corporation tax, income tax, wealth tax, customs, union excise, service, taxes on Union Territories like land revenue, stamp registration etc. Rates would have to hiked more to reach a neutral situation. The cost of borrowing for both developers and buyers will be impacted and this will result in undesired rate hikes across the spectrum. Chinese Foreign Ministry spokesman Wang Wenbin announced on the 16th that China has announced that it will provide Sri Lanka with million yuan 74 million US dollars of emergency humanitarian assistance, but Sri Lanka hopes that China will delay the aid but has not been agreed. The fast-evolving world order and consistent repricing hikes by major central banks globally did not miss attention of RBI. |
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IndiaLends is an online marketplace for credit products, insurance and offer free credit reports. These were two of several findings that captured the current mood of the nation during the festive season," IndiaLends said in a release. Also, 22 per cent of those surveyed said they expect a revival in the next three to six months, while 28 per cent felt it could take anywhere between six months to a year, an indication that people were still weighing in on the pandemic. Further, as many as 71 per cent of the respondents said they were planning to take a personal loan in the next three to six months.
They cited two-and four-wheelers, business startups, household durables, electronic gadgets and home renovation as the mains reasons for personal loans. At least 7 per cent of the respondents said they would opt for a loan to pay for upskilling courses, which points to the impact of COVID on jobs and the need to utilise free time to acquire new skills; while 31 per cent of those surveyed said they would use the loan to start their own business, IndiaLends added.
There are clear signs of a business revival and consumer confidence. This is evident in the uptick in loan applications from enterprises such as MSMEs as well as individuals, including millennials, and the many reasons they are taking those loans. For getting the best-in-class-interest rates, the individual must be having a good credit score which is , or above.
Representative Example: With a representative It is up to the borrower, he or she can choose the tenure as per the affordability and loan requirement, be it short term or long term. The major effect of repayment tenure will be reflected on your equated monthly instalment and the total interest payable. Choosing the longer tenure will make your EMI amount higher but saves you from paying higher interest.
Opting for a longer tenure would also mean that you will be paying a higher interest over the loan tenure. Prefer to go with short tenure. Documents required to apply for a Personal loan A loan applicant at the time of filing a loan application has to provide the financial institutions including banks and NBFCs a certain document like identity proof, address proof, PAN Card, Aadhaar Card, Salary slips, latest bank statements, ECS mandates, and post-dated cheques.
Post verification of the documents, the loan disbursement will take place. Personal Loan With Zero Pre-Payment Fee Mostly the banks or financial institutions are allowed to prepay o part pre-pay the principal on the loan just after 06 months. Most of the bank or financial institution is charging 2.
Part prepayment can only be done once a year. However, this varies from product to product and should be clarified by your lender before disbursal. Low-Interest Personal Loan We have collaborated with the top banks and financial institutions to offer you the lowest interest rates. Here the interest rates start from IndiaLends algorithms will try to help the applicants in getting the lowest possible interest rate.
Personal Loan From Banks Earlier only the banks are the registered organizations that are responsible for handling activities like lending, deposit taking, etc. The reason is that they always follow a fair practice in terms of collection perspectives, offering tenure, or interest rates. It makes the whole process more transparent. But still, there is a vast majority, who have never applied for credit from any of the RBI-regulated financial institution.
Such section faces difficulty and even drawbacks of loan rejections from the financial institutions like banks or NBFCs without having any credit history.
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