Nvidia’s 10-for-1 Stock Split, RBI’s GDP Growth Upgrade, India’s Energy Policy Continuity, and More.

Nvidia’s 10-for-1 Stock Split Set to Lower Share Price to $120

Nvidia will implement a 10-for-1 stock split on June 10, 2024, reducing its share price to around $120 from $1,200. Shareholders as of June 6, 2024, will receive nine additional shares per share owned. This move, aimed at making shares more accessible, comes as Nvidia’s stock has surged 200% in the last year. Nvidia’s market cap now stands at $2.86 trillion, closely trailing Apple’s $2.98 trillion.

Stock Split Explanation

A stock split increases the number of shares while reducing the share price proportionally, without changing the company’s overall market value. For example, in a 10-for-1 split, one share priced at $1,200 becomes ten shares priced at $120 each. This makes shares more affordable for investors but does not affect the company’s market capitalization or the total value of an investor’s holdings.

Source: Financial Express

RBI’s GDP Growth Upgrade Boosts Confidence Among Bankers

Bankers praised the Reserve Bank of India’s decision to maintain interest rates and revise the GDP growth estimate upward. The unchanged repo rate and the new 7.2% GDP growth forecast for FY25 reflect confidence in India’s economic prospects. Industry leaders highlighted the importance of regulatory measures and collaboration for financial sector growth. The RBI’s focus on inflation, rural consumption, and digital payments is seen as supportive for continued economic stability and growth.

Repo Rate and GDP Growth Explanation

The repo rate is the interest rate at which the central bank lends money to commercial banks. Maintaining the repo rate can help control inflation and stimulate economic growth. An upward revision in GDP growth estimate indicates stronger economic performance and prospects. For FY25, the RBI’s forecast of 7.2% reflects optimism about India’s economic resilience and recovery.

Source: Economic Times

Energy Policy Continuity Expected Amid Regulatory Concerns for PSUs

Analysts anticipate policy continuity in India’s energy sector under the new coalition government, with a focus on the energy transition and the 2070 net-zero target. However, a lower seat share for BJP has raised regulatory risk concerns for PSU-dominated oil and gas sectors. Potential changes in pricing policies for state-owned oil marketing companies may reduce petrol and diesel prices by ₹3 per litre. Investment opportunities are expected to grow as demand for oil, gas, and renewables rises.

Net Zero by 2070 Explanation

Net zero refers to balancing the amount of greenhouse gases emitted with the amount removed from the atmosphere. Achieving net zero by 2070 means India aims to significantly reduce emissions through renewable energy, increased energy efficiency, and other measures to offset any remaining emissions by 2070. This long-term goal is crucial for combating climate change and fostering sustainable development.

Source: Financial Express

India’s Fiscal Consolidation Faces Challenges with New Coalition Government

Fitch Ratings warns that India’s medium-term fiscal consolidation efforts, crucial for a ratings upgrade, will become more challenging under the new coalition government. The BJP’s lack of a simple majority increases reliance on regional parties, complicating fiscal policy. Fitch expects the government to aim for a 4.5% fiscal deficit by 2025-26 but expresses uncertainty beyond FY26. Maintaining fiscal prudence while balancing capital expenditure and social spending will be crucial for India’s economic stability.

Fiscal Deficit Explanation

A fiscal deficit occurs when a government’s total expenditures exceed its total revenues, excluding money from borrowings. It is an important indicator of a government’s financial health. A lower fiscal deficit is generally seen as positive, indicating better fiscal management. India’s target of a 4.5% fiscal deficit by 2025-26 aims to reduce the gap between spending and revenue, helping to lower the debt-to-GDP ratio and ensure long-term economic stability.

Source: Reuters

CDSL Implements Two-Factor Authentication to Prevent Demat Fraud

Central Depository Services Limited (CDSL) has introduced two-factor authentication (2FA) for its EASI and EASIEST portals, enhancing security for demat account holders with brokers like Zerodha, Groww, and Mirae. This new feature requires users to enter a one-time password (OTP) sent to their registered mobile and email, significantly reducing unauthorized access and fraud risks. The 2FA will be mandatory for accessing account details and conducting transactions.

Two-Factor Authentication (2FA)

Two-factor authentication (2FA) adds an extra layer of security by requiring not only a password and username but also something that only the user has on them, such as a piece of information only they should know or have immediately to hand – like a physical token. For CDSL’s EASI/EASIEST, this is implemented via an OTP sent to the user’s mobile and email, ensuring higher security for demat accounts.

Source: Economic Times

India’s Forex Reserves Hit Record $651.5 Billion

India’s foreign exchange reserves surged by $4.84 billion to a new all-time high of $651.5 billion as of May 31, announced RBI Governor Shaktikanta Das during the bimonthly policy review. The rise was primarily driven by an increase of $5.06 billion in foreign currency assets. However, gold reserves fell by $212 million to $56.5 billion. The reserves serve as a critical buffer against external economic shocks.

Foreign Exchange Reserves

Foreign exchange reserves are assets held by central banks in foreign currencies, which can include bonds, treasury bills, and other government securities. These reserves are crucial for ensuring a country can meet its international financial obligations, stabilize its currency, and provide confidence to investors about its economic stability. They also serve as a buffer during economic crises or sudden capital outflows.

Source: Live Mint

RBI Offers Key Guidance for NDA’s Next Finance Minister in Upcoming Union Budget

RBI Governor Shaktikanta Das has outlined four crucial areas for the next finance minister to address in the Union Budget 2024-25. The focus should be on boosting nominal GDP beyond the current 10.5% estimate, implementing fiscal measures to combat persistent food inflation, enhancing private consumption in rural areas, and maintaining robust government capital expenditure. These steps are essential to sustain economic growth and address electoral feedback on rural distress and unemployment.

Nominal GDP and Fiscal Deficit

Nominal GDP is the market value of all final goods and services produced in a country in a given period, not adjusted for inflation. It’s crucial for setting fiscal targets because it influences the government’s revenue collection through taxes and the fiscal deficit, which is the difference between government spending and revenue. A higher nominal GDP allows for more fiscal space, helping the government manage debts and fund various programs.

Source: Business Today

Gold Prices Drop Over 2% Amid Strong US Jobs Report and China Data

Gold prices fell 2.7% to $2,312.20 per ounce, marking a weekly loss due to a strong US jobs report and China halting bullion purchases in May. Silver dropped 5.8% to $29.50 per ounce. The robust US job market reduced expectations for near-term interest rate cuts, while a stronger dollar made gold more expensive for foreign buyers. Domestic gold futures also dipped, trading at ₹71,341 per 10 grams.

Impact of Strong US Jobs Report on Gold Prices

A strong US jobs report indicates robust economic growth, which can lead to expectations of higher interest rates. Higher rates increase the opportunity cost of holding non-yielding assets like gold, often causing a decline in gold prices. Additionally, a strong jobs report can boost the US dollar, making gold more expensive for foreign investors, further pressuring gold prices downward.

Source: Live Mint

India’s GDP Growth Revised Upwards to 7.2% for FY25, Interest Rates Steady

India’s GDP growth projection for FY25 has been revised from 7% to 7.2%, while the Reserve Bank of India (RBI) maintains interest rates. Industry leaders and economists praised this decision, highlighting its benefits for borrowers and its reflection of India’s strong economic momentum. Experts see this as a precursor to future policy shifts, though rising food inflation remains a concern. Real estate leaders urge further rate cuts and incentives to stimulate the sector.

Understanding GDP Growth Projections

Gross Domestic Product (GDP) measures the total value of all goods and services produced in a country over a specific period. GDP growth projection indicates how much the economy is expected to grow in the future. It is crucial for policy makers, investors, and businesses as it helps guide economic planning and investment decisions.

Interest Rates are set by the central bank (like the RBI in India) and influence borrowing costs for individuals and businesses. When interest rates are kept steady, it can help maintain affordable loan rates, stimulating economic activity. Changes in interest rates can impact inflation, spending, and overall economic growth. Keeping rates unchanged suggests stability and confidence in the current economic trajectory.

Source: Economic Times

RBI Warns Micro Lenders and NBFCs Against High ‘Usurious’ Interest Rates

RBI Governor Shaktikanta Das cautioned microfinance institutions (MFIs) and non-banking financial companies (NBFCs) against charging high interest rates on small-value loans. This follows the removal of pricing caps on MFI loans in 2022, urging lenders to adopt board-approved policies. Das emphasized customer protection and warned that regulatory scrutiny will ensure fair and transparent lending practices. Experts highlight that smaller MFIs often face higher borrowing costs, impacting their lending rates.

Understanding Usurious Interest Rates

Usurious interest rates refer to excessively high interest rates that lenders charge borrowers, often deemed unethical and exploitative. These rates can burden borrowers, especially those taking small-value loans, leading to a cycle of debt. Regulators like the RBI implement guidelines to protect consumers from such practices, ensuring that lending rates are fair and transparent. This protection is crucial for maintaining trust and stability in the financial system.

Source: Live Mint

Elon Musk Congratulates PM Modi, Anticipates “Exciting Work” in India

Elon Musk congratulated Narendra Modi on his re-election as India’s Prime Minister after BJP and its allies secured 240 seats in the 2024 Lok Sabha elections. Musk expressed his enthusiasm for future ventures in India via his X timeline. Modi’s oath ceremony is set for June 09, 2024, at Rashtrapati Bhavan. Musk had planned to visit India in April but postponed due to Tesla commitments, with plans to explore the Indian EV market.

Understanding Lok Sabha Elections

Lok Sabha elections are held every five years in India to elect members to the lower house of Parliament. With 543 seats, a party or coalition needs a majority (272 seats) to form the government. The elections are significant as they determine the country’s leadership and policy direction. In 2024, BJP and allies won 240 seats, allowing Narendra Modi to secure his third term as Prime Minister. The results influence India’s domestic and international policies, including economic and technological advancements.

Source: Economic Times

Rising Food Inflation Challenges Indian Economy Amid Hot Summer and Low Reservoirs

RBI Governor Shaktikanta Das announced a rise in food inflation to 8.7% in April 2024, with rural areas experiencing an uptick to 8.75%. The exceptionally hot summer and low reservoir levels are straining vegetable and fruit crops. While fuel inflation dropped to -4.2%, food prices, particularly vegetables and pulses, continue to soar. The monsoon’s performance will be crucial in determining future relief from inflation pressures.

Understanding Food Inflation

Food inflation refers to the rising prices of food products over time. It impacts the cost of living and can erode purchasing power, particularly for low-income households. Factors contributing to food inflation include adverse weather conditions, supply chain disruptions, and increased production costs. In India, climate-related shocks and low reservoir levels have recently driven up vegetable and fruit prices. Effective management of these factors, including a good monsoon season, is essential to stabilizing food prices.

Source: LiveMint