Markets have been irrational for a while now because key dynamics such as liquidity, credit spreads, and risks have been driven solely by central banks, says London-based investment advisor Ajay Marwaha. "I think, markets have really been driven by central banks, not by market forces."
The proposal by an RBI panel to allow corporate houses into the banking sector seemingly puts its future at risk. The proposal may still be rejected, unless the central bank is open to a few foxes ruling the roost.
Lakshmi Vilas Bank's decision to write down its tier-II debt before the merger will not just hurt bondholders, but also capital-starved banks that were keen to tap this market to raise funds without diluting equity.
Lakshmi Vilas Bank is a case of missed opportunities. Its forced merger with DBS Bank India has lessons for the RBI, investors and other banks. The central bank may feel it has salvaged a bad situation, but it could have acted sooner.
FIIs have started the December F&O series with bullishness at a multi-year high but this sentiment is a cause of concern for domestic investors, as such levels of optimism in the past have been a signal of impending market correction.
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