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Steps for the equity markets
October 24, 2008
Domestic Developments
Money supply (M3) growth increased by 20.3 per cent on a year-on-year basis up to October 10, 2008, lower than 21.9 per cent a year ago but above the indicative projection of 17.0 per cent set out in the Annual Policy Statement of April 2008.
Aggregate deposits of scheduled commercial banks (SCBs) increased by 21.6 per cent (Rs 6,15,263 crore) on a year-on-year basis up to October 10, 2008 as compared with 24.7 per cent (Rs 5,65,124 crore) a year ago.
Credit extended by SCBs increased by 29.4 per cent (Rs 5,91,935 crore) on a year-on-year basis up to October 10, 2008 as compared with an increase of 23.1 per cent (Rs 3,77,628 crore) a year ago.
The year-on-year growth in total resource flow from SCBs to the commercial sector was 28.9 per cent up to October 10, 2008 over and above the growth of 21.9 per cent a year ago.
Inclusive of LAF collateral securities on an outstanding basis, SCBs holdings of SLR securities amounted to Rs 10,72,416 crore or 28.2 per cent of net demand and time liabilities (NDTL) on October 10, 2008 implying an excess of Rs 1,20,870 crore or 3.2 per cent of NDTL over the prescribed SLR of 25 per cent of NDTL.
The total overhang of liquidity as reflected in the balances under the LAF, the MSS and the Central Government's cash balances taken together declined from a daily average of Rs 1,93,726 crore in June 2008 to Rs 1,53,863 crore in September 2008 and further to Rs 1,22,182 crore on October 5, 2008. The total overhang of liquidity increased to Rs 2,17,415 crore on October 20, 2008.
Gross market borrowings of the Central Government through dated securities at Rs 1,06,000 crore (Rs 1,07,000 crore a year ago) during 2008-09 so far (up to October 22, 2008) constituted 60.3 per cent of the BE. Net market borrowings at Rs 61,972 crore (Rs 74,875 crore a year ago) constituted 67.6 per cent of the BE.
An amount of Rs 38,500 crore has been mobilised by the Central Government through issuance of additional treasury bills to finance the expenditure on the farmers' debt waiver scheme during the current year up to October 17, 2008.
Financial markets reflected the changes in liquidity conditions during the second quarter of 2008-09. The inter-bank money market has been working well throughout the period.
During April-October 22, 2008 SCBs increased their deposit rates for various maturities by 50-175 basis points.
On the lending side, the benchmark prime lending rates (BPLRs) of PSBs increased by 125-150 basis points in April-October to a range of 13.75-14.75 per cent by October 22, 2008.
The private sector banks and foreign banks also increased their BPLR from the range of 13.00-16.50 per cent and 10.00-15.50 per cent to the range of 13.75-17.75 per cent and to 10.00-17.00 per cent, respectively, during the same period.
Equity markets experienced a downturn in both the primary and secondary segments during the current financial year so far. In the secondary market, the BSE Sensex (1978-79=100) was volatile with large two-way movements in response largely to movements in global equity markets.
Image: A farmer works in a paddy field. | Photograph: Parthajit Dutta/AFP/Getty Images
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