RBI to auction Rs 14,030 cr under special repo window

The Reserve Bank on Friday said Rs 14,030 crore are available under the special lending window set up by the central bank to deal with the redemption pressures of mutual funds.


On 14th October, the RBI had decided to conduct a special 14-day repo auction at 9 per cent per annum for Rs 20,000 crore, with a view to enable banks to meet the liquidity requirement of mutual funds.


Despite offering funds at a reasonable rate to lenders, only a few banks participated in the window, owing to their limited headroom on the first day.



Following the poor response from banks, the RBI decided to keep the facility open till banks cumulatively avail Rs 20,000 crore.


Welcoming the decision on the special window, Finance Minister P Chidambaram had said, "Government has been informed by the mutual fund industry that against their borrowings from the banks they will give as security mainly certificates of deposits of the bank themselves."



Mutual fund industry had sought a facility for accessing funds and "consequently, the government requested SEBI and RBI to meet on Friday and address the issue," he had said.



The settlement for the special repo would be conducted separately and on gross basis, RBI had said.


The RBI further said that this facility would be in addition to repo/reverse repo auctions conducted under Liquidity Adjustment Facility and Second Liquidity Adjustment Facility.

Sensex ends below 10k level, touch over 2-year lows

The Bombay Stock Exchange benchmark Sensex on Friday sank to more than two-year lows under 10,000 points on panic selling by funds and general investors.


After a promising start, the Sensex dropped by 606.14 points, or 5.73 per cent, to 9,975.35, a level last seen in June 2006.

The key-index dipped to 9,911.32 during the day and a high of 10,786.93.

Similarly, the wide-based National Stock Exchange index Nifty tumbled by 194.95, or 5.96 per cent, to 3074.35 after touching the day's low of 3046.60 and a high of 3335.95 points.

Marketmen said the Sensex dipped to the lowest level in over two years on concerns of a sharp global economic slowdown and sluggish corporate earning.

They said a series of measures announced by the government and the Reserve Bank of India failed to check rising capital outflow by foreign funds.

The market barometer turned significantly down as market major Reliance Industries dropped by 6.58 percent, DLF Ltd. by 10.34 per cent, Bharti Airtel by 7.47 per cent, ICICI Bank by 5.61 per cent and State Bank of India by 8.42 per cent.

Sector-wise, Realty stocks suffered the most as segment index meltdown by 10.25 per cent at 2,524.89 followed by Power sector index by 8.09 per cent at 1,712.27.

US Home building at 17 year Low

Construction of new US homes fell more than expected last month to reach its lowest level in almost 18 years, Commerce Department figures have shown.

The number of new houses and apartments being built in September declined 6.3% compared with the same month in 2007.

This fall was much more severe than the 1.6% dip that analysts had expected.

Analysts predict that housing construction will fall throughout 2009, and only grow again when the banking sector and wider economy recover.

Until then, would-be new homeowners are finding that they either cannot afford to get their first mortgage, or that banks are reluctant to lend.

Without these would-be customers, homebuilders are cutting back on the number of new houses they build.

'Slide continuing'

The report showed that 817,000 new homes were built across the country last month on a seasonally adjusted basis, the slowest pace since January, 1991.

The fall in the construction of one-room apartments was even more pronounced, falling 11% from a year earlier to 544,000, the lowest figure since August 1982.

The study added that the downturn in construction was most notable in the north-east of the country.

Mark Zandi, chief economist at Moody's Economy.com said the fall in construction was "a significant weight on the economy".

"Not only is housing demand falling, but builders can't get credit to build homes," he added.

"The slide in construction will continue into next year."

Fellow analyst, Peter Kenny of Knight Equity Markets, added that construction levels will not rise again until the current glut of unsold properties is sold.

"The housing inventory overhang needs to be digested in order for us to move forward," he said.

Early falls for New York shares

US shares opened 200 points lower on Friday, after official figures showed a sharper-than-expected fall in the number of new homes being built.

The Dow Jones industrial average recovered slightly to trade down 90 points or 1.0%.

European share indexes have fluctuated throughout the day and were trading higher by the early afternoon.

The FTSE 100 was up 2.6%, while Germany's Dax index was up 0.9% and France's Cac 40 had risen 1.8%.

It comes at the end of a week of rallies and slumps, unseen since the crash of 1987.

Rallies and slumps

Stock markets have been rising and falling all week as investors try to decide how severe the global economic downturn will be.

"This is the most volatile week we've seen," said Thierry Lacraz, strategist at Swiss bank Pictet in Geneva.

"The sole intelligent thing is to remain on the sidelines and not make any huge bets."

In his latest effort to reassure the markets, US President George W Bush told the US Chamber of Commerce it would take time for his administration's financial rescue plan to work.

"It took a while for the credit system to freeze up, it's going to take a while for the credit system to thaw," he said, adding that the rescue moves were "big enough and bold enough to work".

Among other developments:

Credit rating agency Fitch downgraded Hungary's outlook from "stable" to "negative" as it considered that the global financial crisis had increased the country's credit risk
The Prague stock exchange fell 10.2% to 842.8 points, its lowest point for four years
Oil prices rose above $72 a barrel on expectations that Opec would decide to cut production at its upcoming meeting
Share indexes in South Korea and Australia fell back slightly, though markets were relatively stable compared with recent gyrations
The Nikkei index climbed 235.37 points or 2.8% to end at 8,693.8, having lost more than 11% on Thursday
The Hang Seng in Hong Kong closed barely changed
German bank shares were helped by news that the German parliament had passed a 500bn euro ($672bn; £389bn) bank rescue package
Bombay's Sensex closed down 5.7% or 606.14 points at 9,975.35