03 Oct

Axis Bank: Adequate liquidity in the system now

Update on the Indian Equity Market:

Taking the cues from global markets, Nifty opened positive on Tuesday. The gains were wiped out shortly on the back of the weak economic data released on Monday evening.  The index of eight core infrastructure industries declined 0.5% in September, as compared to 2.7% in the month of August. The Nifty closed the day 115 points lower at 11,359. Among the index, YESBANK (-22.2%), ZEEL (-10.8%) and INDUSINDBK (-5.6%) were the top losers while BPCL (4.9%), M&M (2.2%) and HDFCBANK (1.9%) were the top gainers. All the sectoral indices closed the day in red with Media (-4.3%), Realty (-4.1%) PSU Bank (-3.8%) led the chart.

Axis Bank: Adequate liquidity in the system now

Key takeaways from the interview of Mr Amitabh Chaudhry, Chief Executive Officer, Axis Bank; dated 1st October 2019 in Mint:

  • The Government has taken a lot of steps with a series of announcements in the last few months. As a result, the signs of positive sentiment are visible. In terms of auto loans, the bank is witnessing applications rise 15-20% month-on-month. The same thing is also happening on the mortgage side.
  • The next three to four weeks will be very crucial for the economy as the festive season is on. If these weeks can demonstrate positive momentum, it will continue further in the long run as well. The issue is not that money is lacking but whether the bank can find the right people to lend.
  • While the NBFCs (Non-Banking Financial Companies) have been quite vocal and transparent about their asset-liability situation, a lot of NBFCs have not really come out in terms of sharing and being more transparent about the quality of their asset book. There are question marks around that.
  • About the recently completed Qualified Institutional Placement (QIP) worth ₹ 12,500 cr, he mentioned that the bank went to the market with ₹ 10,000 cr plus ₹ 2,500 cr and got demand for ₹ 13,000 cr. It was a gutsy move in this kind of economic environment.  When asked about the quality of investors, he said that the issue was subscribed by long-term long-only investors.
  • With the completion of QIP, he expects the CET-1 (Common Equity Tier 1) ratio to be closed to 14%. This puts the bank in the same zone as some of the best banks.
  • During the 1QFY20, the bank reported slippages more than expected. It was a combination of two-three factors. First, the bank is trying to be more on a conservative side. Second, there were some assets that have been in the BB and below book for a long time. Given what has been happening in the National Company Law Tribunal (NCLT) and the pressure from regulatory agencies and the economic situation in the country, some of the assets did slip. It will take some time to manage this book.

Consensus Estimate (Source: market screener website)

  • The closing price of AXISBANK was ₹ 679/- as of 01-October-19. It traded at 2.2x/1.9x /1.6x the consensus book value for FY20E/ FY21E/ FY22E of ₹ 305/353/412 respectively.
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01 Oct

AU Small Finance Bank (AUBANK): No liquidity issues with the banks or the large NBFCs

Update on the Indian Market:

On Monday, NIFTY closed 0.3% lower at 11,477 points. NIFTY reported September 2019 gains of over 4%. Amongst the NIFTY 50 Stocks, BHARTIARTL (+6.9%), HCLTECH (+3.6%) and UPL (+3.3%) were the top gainers while YESBANK (-14.4%), INDUSINDBK (-6.1%) with other banks dragged the NIFTY down. In the sector-wise performances, IT (+1.9%) and FMCG (+0.3%) were the only gainers while PSU Banks (-3.5%), Private Banks (-2.7%), Financial Services (-2.1%), Media (-2.1%) and Pharma (1.9%) were losers for the day.

AU Small Finance Bank (AUBANK): No liquidity issues with the banks or the large NBFCs

Key takeaways from the interview of Mr Sanjay Agarwal, MD & CEO, AU Small Finance Bank; dated 26th September 2019 on CNBC TV 18:

  • In the meeting with the Smt. Nirmala Sitharaman, Minister of Finance and Minister of Corporate Affairs, India; Mr Agarwal mentioned that the representatives of the banking fraternity accepted that there are no liquidity issues with the banks or the large NBFCs.
  • AUBANK operates in around 150 districts and 10,000 villages. There are no liquidity crises in any of the areas where AUBANK operates.
  • In 1QFY20, AUBANK reported 44% in growth in Assets Under Management (AUM) and 40% in disbursements v/s RBI financial sector growth rate of ~10%. The deposits increased by 100% YoY.
  • AUBANK has been able to deliver the target they had set. Personal vehicle sales have suffered. The commercial vehicle segment is cyclical and will turn around in due time.
  • AUBANK already has a business strategy in line with the Finance minister’s advice of increasing the presence in the field.
  • Mr Agarwal mentioned that the money is available for customers who meet the requirements of eligibility of credibility.
  • Recent tax reforms from 35% to 25% will lead to growth in the margins.  AUBANK is yet to decide on how it is going to utilize the benefit arising from these reforms; whether for Capex or for improving the Return on Assets (ROA).
  • AUBANK has a small presence in the gold loans segment but is growing at ~80% YoY. Consumer durable loans too, form a very small part of the advances and is expected to grow at ~80-90% YoY.

Consensus Estimate (Source: market screener website)

  • The closing price of AUBANK was ₹ 661/- as of 30-September-19. It traded at 4.7x/3.9x /3.2x the consensus book value for FY20E/ FY21E/ FY22E of ₹ 140/168/206 respectively.
  • Consensus target price of ₹ 699/- implies a PE multiple of 3.4x on the FY22E book value of ₹ 206/-
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30 Sep

Blue Star Limited (BLUESTARCO): Will use the extra money from corporate tax cut in capital expenses

Update on the Indian Market:

On Friday, Market was more or less flat. Nifty closed 0.5% lower at Rs 11,512. Bharti Airtel (+2.89%), Bajaj Finance (+1.61%), ITC (1.36%) were among the biggest gainers. IndusInd bank (-4.92%), Yes bank (-5.0%), Vedanta (-5.69%) were the losers. Among the sectoral indices Pharma (-2.06%), Realty (-2.28%), Metal (-2.84) closed lower while there were no gainers.

Excerpts from the interview by Mr. B Thiagarajan, MD – Blue Star

  • Effective tax rate was 32% in FY19 and would have been ~ 31% in FY20. So, setting aside certain concessions they will forego if they move to this regime, they should be gaining around 4.5 percent and 5 percent in terms of EPS.
  • They will pump in this extra money into the capital expenses. They have been on an indigenization mode and they will accelerate indigenization or reduce in-China dependency.
  • In FY20, they are looking at indigenizing deep freezers. So ~ Rs 120 cr is being invested in Vada in Maharashtra. Sri City plant which they had acquired the land there, they would have looked at FY22-23, they may end up accelerating that because the room air conditioner market continues to be good.
  • Plastic injection moulding, compressor manufacturing industry will benefit due to indigenization drive.
  • They will accelerate the capital investment there. So the entire Sri City plant should get frozen sometime in January-February 2020.
  • Unlike many other durables, air conditioners have been witnessing and even during Onam season they witnessed good growth. He thinks that will further grow.
  • The Onam season is an indication because there were floods. He thought Onam season will be a washout, the markets are priced close to around 40% growth over last year, but last year also there were floods. The year before there was around 12% growth.
  • Going forward, the festival season should be ~ 12-15% growth. Having said that, the demand is for lower-end products and 40% of the sales have been through consumer finance schemes.
  • According to him, there is no room for more discounts because the dollar has moved up. They have to keep a close watch on the exchange rates because copper and quite a few components still get imported.
  • The competition is stiff and the reach is becoming very complex; with 65% of the market for them are tier III, tier IV, and tier V.
  • To reach out, they have to pump up the advertising expenses. So, there won’t be price dilution. He expects that they would maintain last year margin levels and marginally improve that.

Consensus Estimate (Source: market screener website)

  • The closing price of BLUESTARCO was ₹ 794/- as of 27-September-19. It traded at 34x / 28x / 22x the consensus EPS for FY20E/ FY21E/ FY22E of ₹ 23.1 / 28.3 / 36.1 respectively.
  • Consensus target price of ₹ 792/- implies a PE multiple of 22x on FY22E EPS of ₹ 36.1/-

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27 Sep

It is a golden opportunity for the global business community to partner with India in its journey: PM Narendra Modi

Update on the Indian Market:

On Thursday, Nifty bounced back after Wednesday’s fall and ended the September F&O series above 11,550 level. Nifty was up 131 points at 11,571.20. All sectoral indices, except IT, traded in the green on NSE, led by Nifty Metal (4.32%), Nifty Media (2.29%) and Nifty Auto (2.43%). Yes Bank, Indiabulls Housing Finance and Infosys were among the biggest losers. Vedanta, M&M and Coal India were the gainers.

It is a golden opportunity for the global business community to partner with India in its journey: PM Narendra Modi

The key takeaways from the interview by PM of India Mr. Narendra Modi at Bloomberg Global Business Forum in New York:

  • Prime Minister Narendra Modi urged global businesses to “come to India” as the current government has set a roadmap to build a $5 trillion economy by 2025.
  • PM Modi has met the energy company CEOs in Houston and has planned to meet more than 40 companies at the forum hosted by Michael R. Bloomberg, the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.
  • The recent move of the corporate tax cut in India is called as a revolutionary movement by PM Modi.
  • The cut in corporate tax will not only help India compete for investments with other destinations in Asia but also help boost private investments and lift economic growth in Asia’s third-largest economy.
  • Attracting investments is key to revive the economic growth and put the nation on the path to becoming a $5-trillion economy by 2025, According to him.
  • Inviting foreign investments in sectors such as infrastructure, start-ups, defense and real estate, the prime minister said his administration has decided to invest $1.3 trillion in modern infrastructure.
  • He added that the Government would be taking necessary modifications on a regular basis on tax-related laws and bring tax on equity investments on a par with global tax regime. This could be referred to as the abolition of term capital tax and dividend distribution tax.
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26 Sep

India should aim to become largest FDI recipient: Ravi Shankar Prasad

Update on the Indian Market:

On Wednesday, Indian stock markets fell sharply. Sensex declined over 500 points (-1.29%) while NIFTY fell nearly 150 points (1.28%) and breached the 11,450 mark. Nifty Midcap and Smallcap indices plunged 2 % each. All sectoral indices, except IT, traded in the red on NSE, led by Nifty Auto (-3.84%) and Nifty Realty (-3.1 per cent). Biggest Nifty losers were SBI and Tata Motors, each of which was down over 6%. Other major losers included Maruti Suzuki, M&M, HDFC and Tata Steel.

India should aim to become largest FDI recipient: Ravi Shankar Prasad

Key takeaways from the interview of Mr Ravi Shankar Prasad, Communications and IT minister

  • Communications and IT minister Ravi Shankar Prasad expressed that India should aim to become the largest foreign direct investment (FDI) recipient globally as the country offers a huge market and investor-friendly policies.
  • With the recent announcements on tax-relief for manufacturing, India is now at par with the tax regime of countries like Vietnam and Thailand.
  • He also mentioned that country offers a huge market for companies like Apple and others to make for India and export while adding that the far-reaching decisions taken by Government of India has also been heard by Apple. Apple has started production in India in a very effective way.
  • He assured that he will make his team open and accessible for foreign investors as we need investments.
  • The minister said India has become the 5th largest economy globally and FDI has seen a jump over the last few years and grossed USD 64 bn in FY19.
  • Telecom sector attracted FDI worth USD 2.67 bn, and in electronics, computer software and hardware, the amount stood at USD 6.4 bn.
  • He further said India has been leveraging technology not just for benefits to economy and commerce but also digital empowerment.
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25 Sep

More needs to be done

Update on the Indian market:

On Tuesday, NIFTY lost its winning streak. It closed -0.10% lower. Among sectoral indices NIFTY PSU Banks (-2.34%), NIFTY BANK (-1.25%), NIFTY Financial services (-1.9%), NIFTY Auto (-0.38%) and NIFTY Metal (-1.63%) closed lower while NIFTY IT (+1.98%), NIFTY Pharma (+0.44%) NIFTY FMCG (+0.62%) ended on a positive note. The biggest gainers were Infosys (+3.88%), Zeel (+3.66%), Tech M (+3.11%) whereas Eicher motors (-3.84%), State Bank of India (-4.06%), JSW steel (-4.19%) ended with high losses.

Excerpts from a panel discussion with R.C. Bhargava, chairman, Maruti Suzuki India Ltd; Pawan Goenka, managing director of Mahindra and Mahindra; and Rajiv Bajaj, managing director of Bajaj Auto Ltd with CNBC TV18.

  • Finance Minister in a totally unexpected move reduced corporate tax on Friday. Effective tax rate now stands at 25.17%, inclusive of surcharge and cess. This move will help companies to increase their profitability. FM quoted that it will lead to revenue loss of ₹1.45tn.
  • Speaking about further discounts in auto sector, Mr Bhargava (Chairman, Maruti Suzuki) rules out the scope of further price cuts out of the tax savings. He says if we take a look at savings from the tax cut it is about one-fifth or one-sixth of total tax payment.
  • Mr Bhargava believes, it is better to pump benefits back in the company in the form of capex, more investments rather than more discounts in an environment where the discounts are at a peak.
  • Mr Bhargava says, Manufacturing in India has never grown at a high rate. The tax cuts will make manufacturing industry competitive. Moreover, customers don’t buy during uncertainty. Now that GST overhang is out of the way, we can see people making decisions.
  • Mr Bhargava believes, coming October will see much better retail sales than in the previous months.
  • Mr Goenka (MD, Mahindra & Mahindra), also praises the corporate tax cut as it will make Indian companies globally competitive.
  • He says, a wrong expectation has been coming out in the last two-three days that because of this, auto companies would be able to reduce prices. Tax cut is a stimulus which will help in mid and long term in the form of higher capacity, increase in employment rate.
  • On discounts he believes that even if entire benefit is transferred, M&M will be able to reduce vehicle price by about 0.5%, which means on a ₹8 lakh car by about ₹3,000.
  • Mr Goenka believes that there is a sentiment boost in the market which was needed in current scenario.
  • Mr Rajiv Bajaj (MD, Bajaj Auto) is also of the same opinion that this will benefit in the long run. Talking about its immediate effect on Bajaj Auto, the heavy investment in consumer offers and media spends that they have undertaken in a quarter will be reimbursed because of the lower tax rate.
  • Taking about reduction in tax for new entities, he says it might help Bajaj as it is about to sign-up with Triumph. How it turns out is a matter to look at.
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24 Sep

HDFC Bank (HDFCBANK): Bank to cash on the festive demand

Update on the Indian market

On Monday, NIFTY continued the rally for the second consecutive trading day after Friday’s announcements of tax measures and revisions in GST rates leading to earnings upgrade of the companies. NIFTY closed 2.9% higher. The sectoral indices’ performance reflected the key beneficiaries of the change in tax rates with NIFTY BANK (+5.4%), NIFTY Financial services (+5.4%) and FMCG (+4.4%) were the biggest gainers while NIFTY IT (-2.9%) and NIFTY Pharma (-2.2%) were the losers. The biggest gainers were BPCL (+13.7%), LT (+9.1%), BAJFINANCE (+9%), EICHERMOT (+9%) while the highest losers were ZEEL (-8%), INFY (-5%).

HDFC Bank (HDFCBANK): Bank to cash on the festive demand

Key takeaways from the interview of Mr Aditya Puri, MD, HDFC Bank; dated 19th September 2019 on CNBC TV 18:

  • HDFC bank has made higher provision for Agri loans but the actual defaults are not high. Agri loan slippages were one-off and will come down post-harvest.
  • HDFC bank created contingency provisions as per RBI norms for NBFCs and for corporates which don’t have unhedged exposure. These provisions are expected to go away this quarter.
  • The cost to income ratio is expected to go down by 5% in the next 5 years for HDFC bank.
  •  Banks are not allowed to lend for land. In the real estate sector, commercial real estate is doing well. The middle, slightly above middle and affordable housing continues to see demand. The concessions announced by the finance minister of India are only for affordable houses. The Luxury flats, are the ones which will not benefit and the prices will eventually be determined by the market.
  •  HDFC Bank is looking ahead to a very good festive season of Diwali. From 27th September 2019 to 31st December 2019; HDFC Bank is coming up with a Diwali Dhamaka offer which will provide lower cost, cashback and discount from the vendor to the customers. HDFC Bank will give ~7-10% cashback over and above the discounts given by the vendor partners. HDFC Bank will maintain NIMS of ~4.3%.
  • On talking about the linking to external benchmark rates, Mr Puri mentioned that HDFC bank doesn’t have many floating loans. He mentioned that floating rate deposits are not feasible. There is a lot of pressure on banks to transmit lower rates, but there is a need for the debt market reforms. 

Consensus Estimate (Source: market screener website)

  •  The closing price of HDFCBANK was Rs 1,255/- as of 23-September-19. It traded at 4.1x / 3.6x / 3.0x the consensus book value for FY20E/ FY21E/ FY22E of Rs 308/ 351/ 413 respectively.
  • Consensus target price of Rs 2,661/- implies a P/B multiple of 6.4x on the FY22E book value of Rs 413/-

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23 Sep

Bajaj Auto: Price hike of 1% across the sports segment, 5% in Dominar 400 and Pulsar 150

Update on Indian Equity Market

A slew of fiscal measures announced by the Finance Minister on Friday morning led to a strong rally in Indian equities. The crown jewel of the fiscal stimulus package was the cut in corporate tax rate from effective 30% to effective 22% plus surcharge (net 25%) for all domestic corporates. The announcement of tax cut led to increased street earnings estimates across sectors. The surcharge on capital gains made on equity that was announced in the Budget has also been withdrawn. Nifty closed 5.3% higher at 11,274. The rally was led by NIFTY AUTO (+9.9%), NIFTY BANK (+8.3%) and NIFTY FINSERV (7.2%). All indices except NIFTY IT (-0.9%) ended in the green.

Bajaj Auto: Price hike of 1% across the sports segment, 5% in Dominar 400 and Pulsar 150

(Highlights from interview hosted on CNBC)

  •  Bajaj Auto has been market leader in the sports segment for the past 15 months and even gained market share. Market share of the sports segment is now between 35-40%.
  •  Bajaj Auto has taken a price hike across SKUs in the sports segment. Price hike across SKUs is about 1% except 2 products. 5% hike each in Pulsar 150 (passed on ABS cost which was absorbed by co. till now) and Dominar 400.
  • Bajaj Auto is 2nd after Hero in terms of market share in the commuter segment. They don’t see pricing power in the commuter segment, hence haven’t been able to take any price hikes there except in one SKU (5% share of total volumes hence negligible impact).
  • The government should clearly convey there is no GST cut on cards as right now there is a detrimental effect on the channel. Some customers are waiting in anticipation of a GST cut which is not helping at all.
  • In terms of discounts, Rajiv Bajaj said, “I expect from Hero a mother of all schemes to start very soon towards the end of this month because unless they liquidate over a million BS-IV vehicles, they are going to have trouble with BS-VI just around the corner. So I think the industry will be shaken up by a huge promotion by the market leader and in anticipation, we have to be ready for that.”
  •  3 years ago when the industry was shifting from BS-III to BS-IV, discounts ranged from Rs. 3,000 to 20,000. Not in such a panic stage this time. But there is a need to be prepared for significant impact as the channel is bursting with stock.

Consensus Estimate (Source: market screener website)

  • The closing price of Bajaj Auto was ₹ 2,739/- as of 20-September-19. It traded at 17x / 15x the consensus EPS for FY20E/ FY21E of ₹ 161 / 178 respectively.
  • Consensus target price of ₹ 2,687/- implies a PE multiple of 15x on FY21E EPS of ₹ 178/-
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21 Sep

Maruti Suzuki India Ltd (MSIL): Youngsters today find shared mobility economical

Dated 20th September 2019
Update on the market:

After the Aramco drone attack, the market sentiment still seems to be negative. Nifty closed 1.3% lower at Rs 10,704. Tata Motors (+2.0%), Coal India (+0.7%), HDFC bank (0.6%) were among the biggest gainers. Indiabulls housing (-4.6%), Zeel (-7.8%), Yes bank (-15.6%) were the losers. Among sectoral indices Pvt Bank (-1.8%), PSU bank (-2.35%), media (-4.4) closed lower while there were no gainers.

We offer research services on the Indian equity market and plan to offer investment advice shortly. For information on our services, please visit our website http://www.assetmultiplier.co.in/ 

Maruti Suzuki India Ltd (MSIL): Youngsters today find shared mobility economical

Excerpts from the interview by R.C. Bhargava, chairman, Maruti Suzuki India Ltd

  • Indian automakers are now on par with Europe and America in terms of quality but the purchasing power of domestic buyers has not grown enough to afford the increased product prices
  • The per capita income in India is almost around $2,200 (per annum) and in Europe, it is approximately $40,000. In terms of all the standards which add to the cost of the product, there is no difference between Europe and India
  • In India, the Goods and Services Tax (GST), road tax and others, are much higher than in Europe or even China for that matter. We can’t expect a country with such a low per capita income to have enough customers to have the capacity to pay this kind of money for a car and grow at 10-15% every year (in terms of vehicle sales).
  • As automobiles are 50% of the manufacturing GDP, then the sector has to grow by 15-16% per year to propel manufacturing sector to reach 25% of GDP.
  • If youngsters buy a car at the beginning of the career then they have to pay the monthly instalments. So, they have to choose what they want to do with the limited amount of money that they get because for buying a car, they may get a loan but have to provide 10% to 20% initial deposit and also pay the EMI.
  • Today, a youngster wants to buy a nice smartphone and wants to meet his friends at a restaurant and have a good time. If he buys a car, then he probably can’t do these things. So, he postpones his car-buying by four or five years or whatever time it takes him to reach a stage where he is comfortable owning a car.
  • Today, a youngster can still get his mobility through a car from Ola and Uber which is much more economical. So, what the finance minister said is 100% correct. That is what the millennial generation is thinking.
  • Regarding Gujarat plant, Company needed the capacity and earlier, they were short of capacity and there were cars on the waiting list all the time. The problem starts with people not buying and doesn’t start with production.
  • Each company has its own strategy. At the moment, Maruti hasn’t invested in any of the sharing platforms. They sell a lot of cars to Uber and Ola. They have no stake in them but they do buy their cars.

Consensus Estimate (Source: market screener website)

  • The closing price of MSIL Ltd was ₹ 5,988/- as of 19-September-19. It traded at 27x / 22x / 19x the consensus EPS for FY20E/ FY21E/ FY22E of ₹ 223 / 273 / 314 respectively.
  • Consensus target price of ₹ 6,095/- implies a PE multiple of 19x on FY22E EPS of ₹ 314/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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21 Sep

Growth decelerating to 5% a surprise, reviving the economy is the top priority- RBI Governor

Dated 19th September 2019

Updates on the market: The stock market traded higher to close the day 0.2% higher at 10,840. This was largely on the back of 5% fall in the price of crude oil, after the historic spike in oil prices following the drone attacks on Aramco’s oil supply. Saudi’s Energy Minister Prince Abdulaziz bin Salman said that 50% of production has already been restored, the Kingdom expects to be at full capacity by the end of September. There is speculation that the Indian government is ready with the 4th fiscal package to boost the economy. This coupled with the fall in crude prices helped the market stay in the positive territory. Among the sectoral indices, Realty (1.5%), Metals (1.1%) and PSU banks (1%) led the index higher. Media (-0.4%), Pharma (-0.1%) and Auto (-0.1%) were the laggards. Within the Nifty stocks, Tata steel (3.7%), BPCL (3.6%) and Vedanta (3.2%) carried the index higher whereas Britannia (-2.9%), Indiabulls Hsg (-2.8%) and Coal India (-2.6%) declined.

We offer research services on the Indian equity market and plan to offer investment advice shortly. For information on our services, please visit our website http://www.assetmultiplier.co.in/

Growth decelerating to 5% a surprise, reviving the economy is the top priority- RBI Governor

Excerpts from an interview with Mr Shaktikanta Das, Governor of the Reserve Bank of India (RBI), printed in Mint dated 17th September 2019

·        Saudi oil production represents roughly about 10% of the world oil production and supply. Roughly 50% of that, which means around 5% of the total global output, is affected because of the drone strikes on the Aramco oil installations. This has impacted the crude prices, which in turn impacted the Indian currency. Depending on how it persists, it will have some impact on the Current Account Deficit. If it lasts longer, it will also have implications on the Fiscal deficit.

·        About the current inflation numbers, he mentioned that food prices are cyclical within a year. There are months when the food prices, particularly the vegetable prices or fruit prices, tend to be higher and then they soften.

·        He was asked about the reasons for having high inflation in urban areas compared to rural areas. He said that urban price inflation is mostly because of the prices of egg, milk, etc. have increased. In rural sector, not much of milk purchase happens. Milk purchase is mostly in the urban sector. Milk prices have gone up across states and in a few more states it is yet to go up. So it is things such as the prices of eggs, milk are impacting urban inflation.

·        In August, RBI worked on the GDP (Gross Domestic Product) number of 6.9% with the downside risk. Especially in the first quarter, they had projected a 5.8% growth in GDP. The actual number of 5% came as a surprise to the apex bank.

·        To revive the economy, he added that all stakeholders, all policymakers, including the private sector players have to play their part. Just monetary policy cannot play its role. However, so far as monetary policy is concerned, they have already articulated growth is a matter of priority.

·        The RBI has given 35 bps rate cut in the last policy. Since then, the 10-year yield is standing at 6.7%. He was asked why the yields have not fallen in line with a rate cut. He answered that this has happened due to international factors. The benchmark yield has gone up 8-9 bps because of the airstrike on Saudi oil facilities.  Especially in last one month, every round of increase in yield by few basis points is linked to an international event. Domestically, nothing different has happened to expect the first-quarter numbers came some time ago.

·        The RBI does not have any specific target for the Rupee. The bank’s role is to manage the volatility of the exchange rate.

·        There is speculation that the owners of Paytm bank may take a stake in Yes bank. He said that under universal banking, anybody can apply for a banking license. RBI has certain criteria. Whoever it is, if he passes the criteria he will get a banking licence.

·        About the weakness in the private sector banks, he mentioned that there are strengths and weaknesses in both public and private sector bank and as the regulator and as the supervisor of the banking sector, they are aware of what is going on in various banks and it is very closely monitored by RBI.

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