RBI eases short-term rates: What you need to know before market opens

Global cues:

The US stocks fell on Monday, extending two weeks of losses, as a lack of progress in ending the partial US government shutdown or the debt-ceiling standoff kept investors nervous.The S&P 500 ended near its lows of the session in a volatile day and dropped for its 10th time in the past 13 sessions.

The dollar skidded to near an eight-month low on Tuesday as the US government shutdown entered its second week, leaving investors on tenterhooks as politicians in Washington made little headway in agreeing a deal to avoid an historic US debt default.

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Japan’s Nikkei share average declined for the fifth straight day to a five-week low on Tuesday morning, with a lack of progress in ending the US government shutdown or the debt-ceiling standoff kept investors on edge. The benchmark Nikkei was down 0.3 percent at 13,808.69, its lowest level since Sept. 3, in midmorning trade, after shedding 4.4 percent in the past four sessions. The index is still up 33 percent this year.

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Business/Stock news:

State Bank of India will be in news today after Arundhati Bhattacharya was yesterday appointed chairperson of SBI, the first woman to head the country’s largest lender in its 207-year history.

British telecom giant Vodafone is learnt to have applied to government for raising its stake in its Indian arm to 100 percent at an estimated USD 2.7 billion (Rs 16,600 crore).

JSW Steel has acquired Heidelberg Cement India’s 0.6 million tonnes per annum (mtpa) cement grinding facility in Raigad, Maharashtra, “as a going concern on slump sale basis” for an undisclosed sum.

Economy news:

The Indian government will have to rein in spending and cut subsidies to meet its fiscal deficit target, finance minister P Chidambaram said on Monday, underlining that an austerity drive will not be blown off course by an election due next year. P Chidambaram told Reuters ahead of a trip to the United States - where one stop will be to woo investors on the West Coast - that he will not allow the deficit to cross a “red line” set at 4.8 percent of gross domestic product this fiscal year.

In a surprise move, the Reserve Bank of India (RBI) reduced the marginal standing facility (MSF) rate by 50 bps to 9 percent from 9.5 percent with immediate effect. The MSF cut will ease short-term rates and companies are likely to borrow from the commercial paper (CP) market instead of banks. The move is part of the calibrated withdrawal of exceptional measures undertaken by the apex bank and is aimed at improving liquidity in the system. The RBI’s 200 bps increase in the MSF rate in July had tightened short-term market liquidity.

The Finance Minister has said that Wal-Mart Stores Inc’s chief executive is in contact with Indian officials about the retailer’s presence in India despite negative comments from its top executive in Asia about Indian regulation.