Let’s begin with the news that made headlines this week. The Reserve Bank of India’s monetary policy committee met in an off-cycle meeting on November 3, laying down an official explanation to the central government as to why it failed to keep inflation within the tolerable target band of 2-6 per cent for three consecutive quarters. The committee discussed the draft report that will be sent to the central government. The consumer-based inflation for the month of September spiked to a five-month high of 7.41 per cent. The six-member committee, chaired by RBI governor Shaktikanta Das, held the additional, off-cycle meeting for the first time since its establishment in 2016.
In some more economy news, Shaktikanta Das this week said the global economy is going through a period of churning. He, however, expressed confidence in the Indian economy saying that private consumption, especially urban demand has been quite healthy. “With monetary policy actions and stances undergoing a regime shift in advanced economies, financial conditions have tightened across markets and accentuated financial stability risks. In an uncertain environment, the Indian economy has been growing steadily drawing strength from its macroeconomic indicators, buffers,” Das said in his inaugural address at the FICCI Banking Conference-FIBAC 2022, adding that considerable improvement is seen in sales of white goods in the festive season. Talking about inflation, Shaktikanta Das said that RBI’s constant endeavour is to keep “Arjun’s eye” on inflation. He noted that RBI is closely monitoring inflation trends, impact of previous actions.
In another major update, Central Bank Digital Currency has finally come to India with the start of the pilot phase of the Digital Rupee rollout from November 1. However, the Reserve Bank of India has launched the first pilot of the Digital Rupee for the wholesale segment (e₹-W) only. Experts believe that CBDC is one of the biggest developments in the financial world, the full impact of which will be visible in near future. India already has a stellar record as an early adopter of technology with the rapid adoption of UPI and QR-based payments across the country. With CBDC, it is expected that India will take giant strides in the world rapidly progressing towards the adoption of digital currencies.
Now, on to Musk-Twitter Saga. Twitter Inc will charge $8 a month for its Blue service, which includes its sought-after “verified” badge, new boss Elon Musk said this week as he seeks to boost subscriptions and make the social media network less reliant on ads. IN a tweet, Musk said, ”Twitter’s current lords & peasants system for who has or doesn’t have a blue checkmark is bullshit. Power to the people! Blue for $8/month.” He added that the price will be adjusted by “country proportionate to purchasing power parity.” A blue check mark next to a person’s user name on the social media platform means Twitter has confirmed that the account belongs to the person or company claiming it. Twitter is currently free for most users. Billionaire Musk bought Twitter for $44 billion last week. Since the takeover, he has moved quickly to put his stamp on the company, firing its previous chief and other top officials.
Meanwhile, European banks operating in India may soon find it difficult to operate viably unless the Reserve Bank of India and Securities and Exchange Board of India are able to negotiate fresh terms with the European Securities and Markets Authority on oversight of counter-party institutions. Earlier this week ESMA, the EU’s financial markets regulator and supervisor, said six of India’s central counterparties would be de-recognised in accordance with the European Market Infrastructure Regulation, following an assessment conducted by it. However, to mitigate the adverse impact on EU market participants, it has deferred implementing the decisions until April 30, 2023. Should the discussions fail, European banks may need to operate with levels of capital that are 40-50 times higher than what is required today.
Now moving on to the last news segment. Foreign portfolio investors are on tenterhooks as a number of mid- and large-cap stocks start moving to the T+1 settlement cycle from the end of this month. So far, about 4,000 stocks have been made part of the T+1 cycle. However, FPIs have not been impacted by this because they do not participate aggressively in the trading of such stocks. Things are set to change significantly when the last 1,000-plus stocks, which include large and mid-caps, are moved into the T+1 cycle. The turmoil in global equities, actions of central banks worldwide and geopolitical tensions have added to the volatility in FPI flows this year. FPIs have net sold equities in the last two months, according to data from NSDL.