Watch for RBI meet, GoAir IPO, Nobel ceremony this week

1. RBI Meet

The Reserve Bank of India’s monetary policy committee (MPC) meets this week, with an announcement due on Wednesday. Economic recovery is well underway, and should encourage the panel to strengthen its noises around monetary policy normalization. Economists at Nomura and Barclays expect a hike in the reverse repo rate this week itself.

However, members will be wary of the new risks posed by the Omicron variant. This could reflect in the guidance that the committee gives on growth trends. Despite the risks, an upgrade to full-year forecast is likely as data released last week showed the economy had grown more than expected in Q2.

Headline inflation has moderated in past two months and the excise duty cut on fuel could also offer comfort. However, price pressures haven’t quite gone away: global commodity prices are elevated, and firms are hiking prices to offset input costs. This means MPC could keep the normalization path gradual for now.

2. GoAir IPO

GoAir, the ultra-low-cost-carrier owned by the Wadia Group, will launch its initial public offer (IPO) on Wednesday, becoming the country’s third listed airline after IndiGo and SpiceJet. After hitting roadblocks for over six months, the firm is finally on track to hit stock exchanges to raise ₹3,600 crore after its promoters were able to address a pending inquiry with the market regulator.

The company plans to use the proceeds to settle debt obligations, pay oil companies and make rental payments to aircraft lessors, which had been delayed as air travel took a severe hit due to the pandemic. The company made a net loss of ₹923 crore in the six months ending in September, worse than the loss posted during the same period a year earlier.

Passenger traffic is gradually improving thanks to the festive season push, but rising fuel costs and risk of Omicron variant may further disrupt the firms prospects in the coming months.

3. Mutual Funds

Despite remaining positive, flows into equity mutual funds (MFs) moderated for the third straight month in October with net investments of ₹5,079 crore. Part of it can be attributed to some profit-booking as markets traded near all-time highs. Expensive valuations also forced investors to stay on sidelines.

This ensured the rise in average assets under management was marginal for open-ended equity funds: it rose to 13.1 trillion from ₹12.7 trillion in September. Meanwhile, momentum of inflows into SIPs continued, and has been rising every month.

With a 3.8% drop in November, Indian equities witnessed their first significant correction since the pandemic-induced lows of 2020. The MF inflows data for the month, due from Association of Mutual Funds in India this week, will provide cues about the extent of support that markets got from domestic MF inflows.

4. US Trade

The US trade deficit reached a record high of $80.9 billion in September on account of declining exports and surging imports. This comprised a goods trade deficit of $98.2 billion, with services recording a surplus of $17.2 billion. Data for October will be released on Tuesday. An advance release on goods trade showed that the deficit in that segment had moderated to $82.9 billion.

Imports in the US have been consistently on rise throughout the pandemic as domestic businesses are yet to rebuild depleted inventories. In September, exports declined largely because of congestion at ports and warehouses, which slowed down the movement of goods out of the country.  

The decline was led by industrial supplies, including crude oil and capital goods. The dip in petroleum exports is expected to reverse as production recovers following Hurricane Ida. But an overall recovery in exports may still be some time away.

5. Nobel Prize Ceremony

The Nobel Prize will be presented to this year’s winners on 10 December, the death anniversary of Alfred Nobel. The prizes in physics, chemistry, literature, physiology or medicine and economics are awarded in Stockholm, whereas the Peace Prize is given away in Oslo.

The prize money has been set at 10 million kronor (about $1.1 million) per discipline, 11% more than last year’s amount. Nobel, in his famous will, had stipulated that his estate be converted into a fund and invested in “safe securities”. The income from this investment is awarded in the form of prizes, whose amount varies each year with the changing valuation of the invested capital. Today, its value has reached 5.2 billion kronor.

So far, the winners have spent their prize money in a variety of ways: starting new fellowships, building museums or cathedrals and in one case even buying a high-end motorbike. Let’s wait to see what this year’s laureates have in mind!