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Weekly Wrap: MPC Holds Rate; Business Activity Improves, Metal Stocks Rally 

Here’s what happened in the business world and across the globe between Feb. 3 and Feb. 7...

Traffic and pedestrians pass the Bombay Stock Exchange (BSE) building, center, in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)
Traffic and pedestrians pass the Bombay Stock Exchange (BSE) building, center, in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

The Reserve Bank of India’s Monetary Policy Committee kept rates unchanged amid a “highly uncertain” inflation outlook. India’s manufacturing activity hit a near eight-year high in January, while the services sector activity rose at its fastest pace in seven years. And metal shares posted their best week in nearly four years.

Here’s what happened in the business world and across the globe between Feb. 3 and Feb. 7...

RBI Stealth Move To Bring Down Rates

Concluding its three-day meet, the India’s Monetary Policy Committee voted to keep the repo rate unchanged at 5.15 percent. The central bank also decided to introduce long-term repo operations into its liquidity toolkit—a measure that market participants expect will bring down short-term rates sharply and prompt increased investment in corporate bonds.

  • These LTROs, together with the RBI’s earlier introduced ‘Operation Twist’, are an attempt by the central bank to manage bond yields and push transmission of already announced interest rate cuts.
  • The RBI shall conduct term repos of one-year and three-year tenors of appropriate sizes for up to a total amount of Rs 1 lakh crore at the policy repo rate.
  • These operations will be conducted at the prevailing repo rate of 5.15 percent.

Here’s how this plan will work.

India Shaking Off A Slump?

Activity in India’s manufacturing and services sector—that together contribute more than 80 percent to gross domestic product—rose for the third straight month in January as new business orders increased. That led to job creation and business optimism amid a rebound in demand conditions.

  • The IHS Markit India Manufacturing PMI rose to 55.3 in January from 52.7 in December.
  • The services business activity Index rose to 55.5 in January from 53.3 in December.
  • The Markit India Composite PMI Output Index rose to 56.3 in January from 53.7 in the previous month.
  • A reading below 50 indicates contraction in activity, while a number above it signals expansion.

Metal Stocks Rally

The NSE Nifty Metal Index clocked its best week since March 2016. The 15-share gauge has gained 9.3 percent this week, led by a rally in Welspun Corp Ltd., Jindal Steel & Power Ltd. and JSW Steel Ltd.

How Indian Markets Performed

Indian equities snapped their two-week losing streak, mirroring a rally in global peers.

The Sensex gained 2.54 percent this week to close at 41,141.85 and the Nifty 50 Index rose 3.74 percent at 12,0998.35.

“Market participants turned optimistic on hopes that coronavirus related damage will be contained and that the Union budget can arrest the domestic economic slowdown,” Sanjeev Zarbade, analyst at Kotak Securities, said in an emailed statement. “The fall in crude prices was also taken as a positive for the Indian economy.”

The broader market represented by the NSE Nifty 500 Index, too, gained 4.1 percent this week, led by a rally in Welspun Corp Ltd., Shilpa Medicare Ltd. and Caplin Point Laboratories Ltd.

Big Talking Points This Week

  • Anil Ambani says he’s now worth nothing.
  • Supreme Court agrees to hear plea on IHH open offer for Fortis Healthcare.
  • Automakers that defied the slump in 2019.
  • Hedge funds Cerberus, SSG compete over Altico.
  • Gold imports by India halve after record prices curb demand.
  • Two-wheeler firms start pushing BS-VI inventory as carmakers wait.
  • Cabinet clears amendments to ensure greater RBI control over cooperative banks.
  • Reliance Group NBFCs seek to split loan book as part of restructuring plan.
  • Russia’s Rosneft said to be keen to bid For BPCL.
  • D-Mart’s parent looks to raise almost Rs 4,000 crore through QIP.
  • India’s Gen Z consumers are not big borrowers...yet.
  • Cognizant Board Changes: Francisco D’Souza to step down, Vinita Bali to join as independent director.
  • PM Modi says CAA will not impact any Indian citizen.
  • Senate acquits Trump and ends divisive impeachment trial.
  • Behind Amazon’s HQ2 Fiasco: Jeff Bezos was jealous of Elon Musk

Key Results Announced This Week

Key Earnings To Watch Next Week

Key Events To Watch Next Week

  • Feb. 12: India to release CPI Inflation data for January.
  • Feb. 12: India to release Industrial output data for December.
  • Feb. 12: Indian to release trade deficit data for January.
  • Feb. 14: India to release WPI Inflation data for January.