The fundamentals of Money Market in India

RBI announced its annual Monetary Policy yesterday. There's a lot of talk on CRR, repo rates, reverse repo rates, market stabilization schemes, Dollar buying, etc. I have been trying to make sense out of the jargons and thought it a good idea to understand the framework in which all these jargons are used.

I made 23 slides on the fundamentals of Money Market in India which I'm uploading below.

A few things :

• CRR (Cash Reserve Ratio) is the amount of cash that commercial Banks have to keep with the RBI. This has been raised by over 175 basis points over the year. The idea is to drain excess liquidity. This in turn should work to contain inflation.
• Reverse repo rate(6%) is the rate at which RBI absorbs liquidity and the repo rate(7.75%) is the rate at which it injects liquidity.
• The call money market should theoretically operate between these two rates.
• The other ways of soaking liquidity from the market is Market Stabilization scheme (MSS) and buying Dollars.

Best Business Blog Posts in India: Weekly Edition 3

The weekly edition is helping me learn so many new things and I'm sure it would be the same for you.

You can see the earlier editions here.

• Vijay Anand on why Indian startups need to factor in the environment, understand the chaos and find a holistic way!

• Rajesh Lalwani on how companies offering pro-biotic products in India are under-utilizing the Internet in general, and social media in particular

• Atanu Dey brings in new perspectives on the dot-corn food versus fuel debate

• Sudhakar Ram, CMD of Mastek, writes on wave three of Indian outsourcing

• Kamla Bhatt writes on the state of corporate blogging in India

You can find the weekly edition cross posted herer too: Gautam Ghosh, Gaurav Mishra , Rajesh Lalwani

Primer on Exchange Traded Funds (ETFs) and Mutual Funds

PersonalFn has an article they take a look at what an ETF is and how it is different from Mutual Funds.

In India, the first ETF was Benchmark's Nifty BeES, listed in 2001. Not yet popular because of the demat requirement and also the fact that no agent this product.

But for a disciplined, long term investor, I recommend ETFs all the time. Reason 1: Low cost structure, Reason 2: As good a return as the benchmarks (Nifty in the Benchmark's BeES)

Read the entire article on my website