RBI hikes repo, reverse repo rates & CRR by 25 bps

The Reserve Bank of India on Tuesday raised key interest rates by 25 basis points, as expected, tightening policy for the second month in a row as inflation heads towards double digits.

The Reserve Bank of India also raised its cash reserve ratio (CRR) requirement for banks by 25 basis points, as expected, in a move to drain further liquidity from the financial system. The hike in CRR will suck out Rs 12,500 crore from the banking system. The CRR increase will come into effect from April 24.

India last month became the second Group of 20 economy after Australia, to raise policy interest rates as the world economy recovers from it worst downturn in decades. The central bank surprised markets by raising rates by 25 basis points ahead of this month's scheduled quarterly policy review.

Asia's third-largest economy is set to grow at 8.5 percent in the current financial year and 9 percent the following year, and inflation is spreading beyond food to fuel and manufactured goods such as cars. March annual inflation reached 9.9 percent, its highest in 17 months.

The central bank lifted the reverse repo rate, at which it absorbs excess cash from the banking system, by 25 basis points to 3.75 percent. It increased the repo rate, at which it lends to banks, by 25 basis points to 5.25 percent.

It raised the reserve requirement for banks by 25 basis points to 6.00 percent.

"With the recovery now firmly in place, we need to move in a calibrated manner in the direction of normalising our policy instruments," RBI Gov. Duvvuri Subbarao said in the policy statement.

Malaysia and China are among the developing nations that have begun to use monetary tools to cool their economies. India also raised policy rates unexpectedly on March 19 by 25 basis points as food price increases spilled over to manufacturing that could set off an inflationary spiral.

Industrial output has risen more than 15% for three straight months, wholesale price inflation is at 9.9%, much above the central bank’s raised target of 8.5%, and loan demand is rising, indicating acceleration in economic growth. That has prompted many to forecast a 9% economic expansion this fiscal.

Source: http://economictimes.indiatimes.com/news/economy/policy/RBI-hikes-repo-reverse-repo-rates--CRR-by-25-bps/articleshow/5834930.cms

Religare MF unveils two monthly income schemes

Religare Mutual Fund has come up with two new funds, including Religare Monthly Income Plan (MIP) Plus, which will come with an exposure to gold. The other fund is a traditional monthly income plan. Both the new fund offers will close on May 11. Under MIP Plus, investments will be made in gold through gold exchange-traded funds (ETF), in addition to fixed-income instruments and equities.

The fund will invest a minimum of 65% of its assets in debt and money market instruments, while at least 10% of the assets will be invested in Gold ETFs (exposure in the range of 10-35%). The fund, which seeks to generate moderate capital growth, will invest up to 25% in equity and equity-related assets. The fund is benchmarked against Crisil MIP Blended Index and price of gold.

The stated investment objective of the traditional MIP is to generate regular income through a portfolio of predominantly fixed-income securities, with a small exposure to equity and equity related instruments. For both the schemes, the minimum application amount during NFO under the growth option is Rs 5,000, while it is Rs 25,000 under the dividend option.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Religare-MF-unveils-two-monthly-income-schemes/articleshow/5833933.cms

Credit Opportunities Fund from Kotak Mutual

has announced the launch of Credit Opportunities Fund, an open-ended income scheme. As per its scheme information document, the investment objective of the scheme is to generate income by investing in debt and money market securities across the yield curve and credit spectrum.

The new fund offer, which opened for subscription on April 12, will close on April 30. Exit load specified under the scheme is 2%, if the investor redeems/switches-out within one year from date of allotment, and nil after one year. The minimum application amount prescribed by the fund house is Rs 5,000.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Credit-Opportunities-Fund-from-Kotak-Mutual/articleshow/5833942.cms