Sensex falls due to fed stimulus withdrawal fear

The BSE Sensex slumped over 300 points, while the Indian rupee traded with over 0.5 per cent cut on Monday as investors feared further rate hikes by the Reserve Bank following Friday's surprise. Analysts said RBI governor Raghuram Rajan may raise policy rates again after shocking markets by increasing them in only his first meeting, signaling he is willing to risk prolonging what is already the lowest economic growth in years in order to quash persistent inflation. "If he goes ahead and hikes further, which I think he might, then it might affect growth. But ultimately, if you have to bring down inflation, there is no other option," said A. Prasanna, economist at ICICI Securities Primary Dealership Ltd in Mumbai. Global brokerage Nomura now expects the RBI to raise the repo rate by another 50 basis points in 2013-14 to take it to 8 per cent. Not surprisingly, bank stocks led the declines, with the NSE banking index falling around 4 per cent. Other rate sensitive stocks such as realty, down 2.5 per cent, and auto, down 1 per cent, also pressured markets. PSU lenders like Bank of Baroda (down 5.5 per cent), Punjab National Bank (down 4.8 per cent) and SBI (down 4.4 per cent) were the top three losers on the 50-share Nifty benchmark. Private lenders Axis Bank and ICICI Bank also dropped around 4 per cent. Realty major DLF extended losses and traded down 4 per cent. DLF shares had plunged 12 per cent on Friday. Market analyst Sarvendra Srivastava said Friday's session was a minor setback for bulls and 6,150-6,200 is still in reckoning. Deven Choksey, managing director of KR Choksey told NDTV that this is a corrective phase, but it's unlikely that markets will fall beyond 5,750-5,800. "I don't see the rupee depreciating beyond a point. So, there's little risk of withdrawal of money from the system, especially after Fed's surprise move last week." As of 10.50 a.m., the Sensex traded 289 points lower at 19,975, while the broader Nifty declined 91 points to 5,921. The rupee traded down 0.5 per cent at 62.54 after earlier slipping to 62.60 per dollar.

Gold-Silvers Falls

Advertisement Gold prices eased in listless trade at the domestic bullion market on reduced off-take from stockists and traders as well as lack of local buying interest at the existing levels. Silver also declined owing to speculative selling. Standard gold of 99.5% purity moved down Rs. 20 to close at Rs. 30,260 per 10 gm from Thursday's level of Rs. 30,280. Pure gold of 99.9% purity went down by Rs. 25 to finish at Rs. 30,405 per 10 gm from Rs. 30,430. Silver ready (.999 fineness) slipped by Rs. 220 to conclude at Rs. 51,595 per kg from Rs. 51,815 on Thursday. "Trading in gold was dull as global cues were also not supportive. Traders are resorting to a wait-and-watch approach," dealers said. At the overseas front, gold fell on investors profit taking as the rally after the Federal Reserve's surprise decision to maintain monetary stimulus ran out of steam. In London, spot gold was bid lower at $1,357.71 an ounce in early trade, while spot silver bid down at $22.72 an ounce.

Corporates dislike Rajan's first gift to Economy

India Inc today said a rate cut by the bank would have helped ameliorate sentiments as businesses are "reeling" under a tight liquidity crunch due to high cost of capital. "High interest rate has been identified as a major barrier to boosting growth. The increase in the repo rate has come as a surprise to us. While industry is disappointed, reduction of interest rates charged and availability of credit remain a plea and we are confident RBI will keep this in their sights going forward," Ficci President Naina Lal Kidwai said. Maintaining its hawkish stance, RBI today unexpectedly raised the policy rate by 0.25 per cent as it kept its focus on controlling inflation, which it felt would be above the expected levels in the current fiscal. "The increase in repo rate could have been avoided as industry is already reeling under pressures of high cost of capital and low availability in a tight liquidity situation. Industry would have liked reduction in headline rates," CII Director General Chandrajit Banerjee said. The repo rate or the short term lending rate has been increased by 25 basis points to 7.5 per cent from 7.25 per cent with immediate effect. "Contrary to expectations, the RBI has chosen to further tighten the monetary stance giving a clear signal that fighting inflation is its core priority. RBI Governor Raghuram Rajan has acted in a cautious manner, the financial markets were perhaps expecting too much from him," Assocham President Rana Kapoor said. Rajan, in his maiden policy review, however, eased liquidity though a reduction in the marginal standing facility rate, at which banks borrow from the central bank, by 0.75 per cent to 9.5 per cent. "The reduction in MSF by 75 bps is encouraging as this is working as the short term interest rate," Banerjee said. Rajan kept the cash reserve ratio (CRR), the portion of deposits that banks are required to maintain with the RBI in cash, unchanged at 4 per cent. "The RBI has admitted that industrial activity continues to remain sluggish and even consumption demand is now starting to weaken in the economy. In such a scenario, a positive signal by way of a cut in the repo rate would have helped perk up sentiments," Kidwai said. At the same time, the RBI reduced the minimum daily maintenance of CRR from 99 per cent of the requirement to 95 per cent effective from September 21, a move aimed at inducing liquidity into the system. "More worrisome is a liquidity crunch which is being witnessed and which may lead to further hardening of interest rates. State Bank of India has already done it and our worry is that more banks may follow suit," Kapoor said.

Reserve Bank of India raised repo rate by 25 bps to 7.5 percent in its mid-quarter policy review. The move sent shockwaves through the investor community which culminated into sharp sell-off in the equity market. The policy, however, reduced the marginal standing facility (MSF) rate by 75 basis points from 10.25 per cent to 9.5 percent and lowered the minimum daily maintenance of the cash reserve ratio (CRR) from 99 percent to 95 percent of the requirement, effective from the fortnight beginning September 21, 2013. Consequently, the reverse repo and Bank Rate rates stand adjusted to 6.5 percent and 9.5 percent, respectively. The RBI ruled out additional change in minimum daily maintenance of the CRR but clarified that further actions need not be announced only on policy dates. Reacting to the policy announcement, the rupee fell 1 percent, bond yield rose to 8.3 percent, and share prices of banking stocks witnessed a sharp decline . Benchmark indices gave up all the gains accumulated in anticipation of a growth-oriented RBI policy and the positive outlook post Fed's no-taper policy on September 18 . Contrary to market expectations, the new governor Raghuram Rajan's maiden policy came in as hawkish, primarily because it maintained the traditional apex bank's views on (controlling) inflation. The RBI noted that WPI inflation, which had eased in Q1 of 2013-14, has started rising again as the pass-through of fuel price increases has been compounded by the sharp depreciation of the rupee and rising international commodity prices. "What is equally worrisome is that inflation at the retail level, measured by the CPI, has been high for a number of years, entrenching inflation expectations at elevated levels and eroding consumer and business confidence," Rajan's policy stated. Most of the economists polled by CNBC-TV18 were expecting the RBI to bring down the daily requirement to 90 percent of CRR, while a few expected it to come down below 90 percent. Jahangir Aziz of JPMorgan had opined that MSF should be brought back to its old level and instead repo rate should be hiked by about 50 bps. In a bid to control liquidity, the RBI had last month restricted banks from borrowing at 7.25 percent from the repo window. It had forced them to borrow at a higher rate of 10.25 percent from MSF.

Read more at: http://www.moneycontrol.com/news/economy/rbi-ups-repo-rate-by-25-bpsinflation-concerns-cuts-msf_953423.html?utm_source=ref_article

the Reserve Bank of India raised repo rate by 25 bps to 7.5 percent in its mid-quarter policy review. The move sent shockwaves through the investor community which culminated into sharp sell-off in the equity market. The policy, however, reduced the marginal standing facility (MSF) rate by 75 basis points from 10.25 per cent to 9.5 percent and lowered the minimum daily maintenance of the cash reserve ratio (CRR) from 99 percent to 95 percent of the requirement, effective from the fortnight beginning September 21, 2013. Consequently, the reverse repo and Bank Rate rates stand adjusted to 6.5 percent and 9.5 percent, respectively. The RBI ruled out additional change in minimum daily maintenance of the CRR but clarified that further actions need not be announced only on policy dates. Reacting to the policy announcement, the rupee fell 1 percent, bond yield rose to 8.3 percent, and share prices of banking stocks witnessed a sharp decline . Benchmark indices gave up all the gains accumulated in anticipation of a growth-oriented RBI policy and the positive outlook post Fed's no-taper policy on September 18 . Contrary to market expectations, the new governor Raghuram Rajan's maiden policy came in as hawkish, primarily because it maintained the traditional apex bank's views on (controlling) inflation. The RBI noted that WPI inflation, which had eased in Q1 of 2013-14, has started rising again as the pass-through of fuel price increases has been compounded by the sharp depreciation of the rupee and rising international commodity prices. "What is equally worrisome is that inflation at the retail level, measured by the CPI, has been high for a number of years, entrenching inflation expectations at elevated levels and eroding consumer and business confidence," Rajan's policy stated. Most of the economists polled by CNBC-TV18 were expecting the RBI to bring down the daily requirement to 90 percent of CRR, while a few expected it to come down below 90 percent. Jahangir Aziz of JPMorgan had opined that MSF should be brought back to its old level and instead repo rate should be hiked by about 50 bps. In a bid to control liquidity, the RBI had last month restricted banks from borrowing at 7.25 percent from the repo window. It had forced them to borrow at a higher rate of 10.25 percent from MSF.

Read more at: http://www.moneycontrol.com/news/economy/rbi-ups-repo-rate-by-25-bpsinflation-concerns-cuts-msf_953423.html?utm_source=ref_article

Reserve Bank of India raised repo rate by 25 bps to 7.5 percent in its mid-quarter policy review. The move sent shockwaves through the investor community which culminated into sharp sell-off in the equity market. The policy, however, reduced the marginal standing facility (MSF) rate by 75 basis points from 10.25 per cent to 9.5 percent and lowered the minimum daily maintenance of the cash reserve ratio (CRR) from 99 percent to 95 percent of the requirement, effective from the fortnight beginning September 21, 2013. Consequently, the reverse repo and Bank Rate rates stand adjusted to 6.5 percent and 9.5 percent, respectively. The RBI ruled out additional change in minimum daily maintenance of the CRR but clarified that further actions need not be announced only on policy dates. Reacting to the policy announcement, the rupee fell 1 percent, bond yield rose to 8.3 percent, and share prices of banking stocks witnessed a sharp decline . Benchmark indices gave up all the gains accumulated in anticipation of a growth-oriented RBI policy and the positive outlook post Fed's no-taper policy on September 18 . Contrary to market expectations, the new governor Raghuram Rajan's maiden policy came in as hawkish, primarily because it maintained the traditional apex bank's views on (controlling) inflation. The RBI noted that WPI inflation, which had eased in Q1 of 2013-14, has started rising again as the pass-through of fuel price increases has been compounded by the sharp depreciation of the rupee and rising international commodity prices. "What is equally worrisome is that inflation at the retail level, measured by the CPI, has been high for a number of years, entrenching inflation expectations at elevated levels and eroding consumer and business confidence," Rajan's policy stated. Most of the economists polled by CNBC-TV18 were expecting the RBI to bring down the daily requirement to 90 percent of CRR, while a few expected it to come down below 90 percent. Jahangir Aziz of JPMorgan had opined that MSF should be brought back to its old level and instead repo rate should be hiked by about 50 bps. In a bid to control liquidity, the RBI had last month restricted banks from borrowing at 7.25 percent from the repo window. It had forced them to borrow at a higher rate of 10.25 percent from MSF. jhini.phira@network18online.com Watch Video Source: CNBC-TV18 1 0 inShare Share on Tumblr SHARE . EMAIL Coolpix for every occasion - Sponsored Ad It's smart to save money. It's smarter to save energy. - Sponsored Ad Related News No revival till 2014 polls; rate hike to hit infra: Gammon Short term rates will continue to stay high: SBI chairman Ship is safe in harbour, but it is made to sail in the sea Free Commodity tips ways2capital.com/free-trial/ Free Commodity tips 2 days trial. Call now 08962000225 Product Suppliers www.hktdc.com Connect with over 120,000 suppliers from Hong Kong, China and Taiwan Ads by Google More from Moneycontrol Buy YES Bank, says Sudarshan Sukhani (Moneycontrol) Prefer IDFC, Tata Global Beverage: SP Tulsian - Moneycontrol.com (Moneycontrol) L&T a long term bet: Rakesh Tarway (Moneycontrol) Nifty may slip to 5550, says Mohit Gaba (Moneycontrol) Arttd'inox gives steel products the designer edge (Moneycontrol) More from the web The Best Way to Optimize Your Retirement Portfolio (Compare 429 Credit Cards - Apply for the Best Credit Cards) LinkedIn Part 3 – How to set up a great LinkedIn profile! (Author Marketing Experts, Inc.) MACAU – A day of high life in Macau (TTGmice) Who’s Winning ‘Mobile Wars’ (Beyond the Book) Modern slavery generates profit of over $32 billion (WALK FREE) Recommended by Set email alert for SBI Yes Bank HDFC Bank ICICI Bank Tags: CRR, RBI , MSF, inflation, liquidity, repo rate Expect no fireworks from RBI today; may ease MSF: JPMorgan Cannot let guard on rupee, inflation slip: C Rangarajan Post Your Comments Comments 28 Is Raghuram Rajan's policy following the same hawkish stance as his predecessor? Type your message here DILEE New Member 0 Follower Overall it is a good policy stance taken by Rajan, Market is poised to go down and it was expected that any thing comes out of the meet would be taken negativeley. Neverthless banks will never go back to the level we have seen in July and expect they will recover sooner that later. 4 hrs 5 min 25 sec ago vuppala194 8 Platinum Member 386 Followers The upping of Repo Rate is meaningless, as it cannot and never did influence FOOD INFLATION in last 2 1/2 years of Subba Rao`s hawkish Policy. But, that said, during these 2 1/2 years, Banks` profitability continued to remain when interest rates were going up almost every 2 months once. So, Banks` profitability will not be affected at all by Repo Rate Hike. They will maintain their present margins. The easing of liquidity will only add to their loanable funds and loans - and therefore, adds to their Profits. Hence, the adverse market reaction especially towards banking sector is meaningless. Banks will be healthy wherever NPAs are less. Only NPAs and not Repo rate will be the criterion. Thus, all private sector Banks will continue to do well - even better - after this Monetary Policy review. 5 hrs 57 min 56 sec ago Show all messages GET QUOTE Most Popular Top News Sensex, Nifty flat ahead of RBI policy; Ranbaxy loses 5% Sensex, Nifty off day's low on Raghuram Rajan's comments Fed move may have set stage for deeper correction Buffett lauds Ben but laments lack of investment bargains Govt must return Air India to Tatas: Jitendra Bhargava DIPP tells Walmart to invest in India before 2014 elections RBI ups repo rate by 25 bps on inflation concerns, cuts MSF Sensex falls; RBI cuts MSF rate by 0.75%, ups repo by 0.25% The party's on in emerging markets-here's why Why is India's healthcare system in such a sorry state? How technology can save India's vanishing generation Embrace Innovations founder on keeping Indian infants warm MOST RECENT India's primary health care needs quick reform What does it take to make healthcare more accessible? Click Here! Action in State Bank of India News Short term rates will continue to stay high: SBI chairman Sep 20, 15:30 Views Exit SBI, says Prakash Diwan Sep 20, 14:15 News Continue to see extreme liquidity tightness: SBI head Sep 20, 10:30 Technicals SBI closes above 50-Day Moving Average of 1679.39 today. Sep 19 News SBI ups lending rate to 9.8%, makes loans costlier Sep 19, 14:45 Views Book profits in SBI, says Rajesh Agarwal Sep 19, 14:30 Announcements SBI to revise rates upward Sep 19, 08:45 Views Hold SBI with a long term view: Phani Sekhar Sep 16, 18:00 Views Exit SBI around Rs 1800-1900, advises Nooresh Mirani Sep 16, 18:00 Views Shardul Kulkarni positive on L&T, SBI, ICICI Bank Sep 06, 19:00 Views Bet on SBI, may rise 8-10%: Atul Badkar Sep 06, 12:00 Technicals SBI closes above 30-Day Moving Average of 1616.23 today. Sep 05 Views Buy SBI; target Rs 1700: Shardul Kulkarni Sep 05, 16:00 Views Exit SBI, says SP Tulsian Sep 05, 14:30 Views Hold State Bank of India; target Rs 134: Firstcall Research Sep 05, 13:15 News Rajan talks about deepening mkts, plugging leakages: SBI Sep 04, 20:30 Views Sell SBI around Rs 1500, advises Sanjeev Agarwal Sep 04, 17:30 Views Stay away from banking stocks: Gautam Chhaochharia Sep 04, 10:45 News SBI raises stake in Indonesian subsidiary to 99% Sep 03, 08:00 News New banks: RBI zeroes on 5 for panel to screen applications Sep 02, 19:00 Set SMS Alerts on SBI Related Stories More from Find out: India's property trends for April-June 2013 7 important reasons to review your financial plan Other Headlines Exit SBI, says Prakash Diwan SBI, ICICI, HDFC twins fall 5-7% on RBI's surprise move Video of the day News Videos Sep 20 2013, 17:24 No revival till 2014 polls; rate hike to hit infra: Gammon - in Business Sep 20 2013, 12:35 Continue to see extreme liquidity tightness: SBI head - in Business Follow moneycontrol.com Facebook Twitter Google Plus RSS Wap SMS SMS Alert iPad iPhone Blackberry OVI Android Window Explore Moneycontrol STOCKS A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Others MUTUAL FUNDS A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Live Sensex Public Sector Banks Market Statistics Plan Insurance Global Market Business News Mutual Fund Best Portfolio Manager Bse Sensex Nse Nifty Share Market Live Commodities Price Silver Price/Rate in India Gold Price/Rate in India Crude Oil USD to INR Bank Fixed Deposits Company Fixed Deposits Small Savings Schemes Bonds Budget: 2011, 2012, 2013 RBI Credit Policy News Archive Financial Glossary Message Board Moneybhai Latest Movie Songs India`s Premiere Technology Guide History India Latest News IBNLive News News in Hindi Cricket News Latest Videos Business Technology News & Videos MTV India Online Study Material Restaurants in Delhi Online Shopping in India Singapore Airlines Onions Ranbaxy Laboratories Gold Fitch Group Attari Eveready Industries India MCX Stock Exchange Mergers and acquisitions Heavy Engineering Corporation Rss Feeds Site Map | About Us | Contact Us | Feedback | Advertise | Bookmark | Disclaimer | Privacy Statement | Terms of Use | Careers Copyright © e-Eighteen.com Ltd. 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Rajan effect: EMI increases,market falls

The EMIs on your home, car and personal loans are likely to increase, as a hawkish Reserve Bank of India governor Raghuram Rajan belied expectations on Friday by raising the repo rate, on which banks base their lending rates, by 0.25 percentage points to 7.50%.Soon after, Pratip Chaudhuri, chairman of State Bank of India, India's largest commercial bank, said he expected lending and deposit rates to go up.
This will greatly disappoint consumers, especially as it comes just ahead of the festival season when many buy cars, two-wheelers, TVs and other consumer durables with bank loans.
But Rajan, like his predecessor D Subbarao, is determined to rein in inflation, which, at the wholesale level, rose to 6.1% in August, above the RBI's comfort level of 5.5%.
At the retail level, it was at the still high level of 9.52% last month.
The stock markets had been hoping for a rate cut to generate demand and spur growth, which had fallen to a new low of 4.4% in the April-June 2013 quarter.
Hope belied, the benchmark BSE Sensex crashed 600 points within minutes of the RBI announcement after 11am before regaining some lost ground. But it still closed 382.93 points down at 20,263.71.
The rupee, which had rallied smartly to 61.77 per dollar on Thursday after falling to an all-time low of 68.85 on August 28, ended the day 46 paise down at 62.23 per dollar.
Sanjay Bhargava, general secretary of the Chandni Chowk Sarv Vyapar Mandal, a traders' association, said the RBI move to increase rates would definitely hit spending during the festive season.
"We will have to offer deeper discounts to woo buyers. But how can discounts help when buyers don't have money?"
Justifying the decision to hike the repo rate, Rajan said, "Inflation is high and household financial savings are lower than desirable." 

the Reserve Bank of India raised repo rate by 25 bps to 7.5 percent in its mid-quarter policy review. The move sent shockwaves through the investor community which culminated into sharp sell-off in the equity market. The policy, however, reduced the marginal standing facility (MSF) rate by 75 basis points from 10.25 per cent to 9.5 percent and lowered the minimum daily maintenance of the cash reserve ratio (CRR) from 99 percent to 95 percent of the requirement, effective from the fortnight beginning September 21, 2013. Consequently, the reverse repo and Bank Rate rates stand adjusted to 6.5 percent and 9.5 percent, respectively. The RBI ruled out additional change in minimum daily maintenance of the CRR but clarified that further actions need not be announced only on policy dates. Reacting to the policy announcement, the rupee fell 1 percent, bond yield rose to 8.3 percent, and share prices of banking stocks witnessed a sharp decline . Benchmark indices gave up all the gains accumulated in anticipation of a growth-oriented RBI policy and the positive outlook post Fed's no-taper policy on September 18 . Contrary to market expectations, the new governor Raghuram Rajan's maiden policy came in as hawkish, primarily because it maintained the traditional apex bank's views on (controlling) inflation. The RBI noted that WPI inflation, which had eased in Q1 of 2013-14, has started rising again as the pass-through of fuel price increases has been compounded by the sharp depreciation of the rupee and rising international commodity prices. "What is equally worrisome is that inflation at the retail level, measured by the CPI, has been high for a number of years, entrenching inflation expectations at elevated levels and eroding consumer and business confidence," Rajan's policy stated. Most of the economists polled by CNBC-TV18 were expecting the RBI to bring down the daily requirement to 90 percent of CRR, while a few expected it to come down below 90 percent. Jahangir Aziz of JPMorgan had opined that MSF should be brought back to its old level and instead repo rate should be hiked by about 50 bps. In a bid to control liquidity, the RBI had last month restricted banks from borrowing at 7.25 percent from the repo window. It had forced them to borrow at a higher rate of 10.25 percent from MSF.

Read more at: http://www.moneycontrol.com/news/economy/rbi-ups-repo-rate-by-25-bpsinflation-concerns-cuts-msf_953423.html?utm_source=ref_articleThe EMIs on your home, car and personal loans are likely to increase, as a hawkish Reserve Bank of India governor Raghuram Rajan belied expectations on Friday by raising the repo rate, on which banks base their lending rates, by 0.25 percentage points to 7.50%.

the Reserve Bank of India raised repo rate by 25 bps to 7.5 percent in its mid-quarter policy review. The move sent shockwaves through the investor community which culminated into sharp sell-off in the equity market. The policy, however, reduced the marginal standing facility (MSF) rate by 75 basis points from 10.25 per cent to 9.5 percent and lowered the minimum daily maintenance of the cash reserve ratio (CRR) from 99 percent to 95 percent of the requirement, effective from the fortnight beginning September 21, 2013. Consequently, the reverse repo and Bank Rate rates stand adjusted to 6.5 percent and 9.5 percent, respectively. The RBI ruled out additional change in minimum daily maintenance of the CRR but clarified that further actions need not be announced only on policy dates. Reacting to the policy announcement, the rupee fell 1 percent, bond yield rose to 8.3 percent, and share prices of banking stocks witnessed a sharp decline . Benchmark indices gave up all the gains accumulated in anticipation of a growth-oriented RBI policy and the positive outlook post Fed's no-taper policy on September 18 . Contrary to market expectations, the new governor Raghuram Rajan's maiden policy came in as hawkish, primarily because it maintained the traditional apex bank's views on (controlling) inflation. The RBI noted that WPI inflation, which had eased in Q1 of 2013-14, has started rising again as the pass-through of fuel price increases has been compounded by the sharp depreciation of the rupee and rising international commodity prices. "What is equally worrisome is that inflation at the retail level, measured by the CPI, has been high for a number of years, entrenching inflation expectations at elevated levels and eroding consumer and business confidence," Rajan's policy stated. Most of the economists polled by CNBC-TV18 were expecting the RBI to bring down the daily requirement to 90 percent of CRR, while a few expected it to come down below 90 percent. Jahangir Aziz of JPMorgan had opined that MSF should be brought back to its old level and instead repo rate should be hiked by about 50 bps. In a bid to control liquidity, the RBI had last month restricted banks from borrowing at 7.25 percent from the repo window. It had forced them to borrow at a higher rate of 10.25 percent from MSF.

Read more at: http://www.moneycontrol.com/news/economy/rbi-ups-repo-rate-by-25-bpsinflation-concerns-cuts-msf_953423.html?utm_source=ref_article

GANESH CHATURTHI

Ganpati Bappa Moraya

Trai recommends cut in mobile spectrum floor price

The telecom regulator today recommended sharp cuts in reserve prices for the next round of spectrum auctions after previous efforts at selling the airwaves failed.

The Telecom Regulatory Authority of India (TRAI) also said no spectrum would be reserved for existing players when their licences expire and suggested that airwaves can be traded.

TRAI slashed the combined spectrum auction reserve price in the premium 900 MHz band in the circles of Delhi, Mumbai and Kolkata by about 79 per cent to Rs 650 crore per MHz against Rs 3,074.18 crore per MHz earlier.

The maximum reduction of 81.38 per cent is in the Mumbai circle, where the floor price has been reduced to Rs 262 crore per MHz compared with Rs 1,404.28 crore per MHz of spectrum, as per the regulator's previous recommendation.

It recommended an about 60 per cent cut in the pan-India reserve price for the third round of 2G spectrum (1800 MHz) auctions compared to its previous suggestions.

TRAI has proposed Rs 1,496 crore per megahertz of airwave frequencies in the 1800 Mhz band in a minimum lot of 5 MHz for new players, which comes to Rs 7,480 crore, compared with its earlier suggestion of Rs 18,200 crore.

The government is required to conduct the third round of spectrum auction for 1800 Mhz to comply with a Supreme Court order. The entire spectrum freed from the cancellation of 122 licences in February 2012 in the 2G spectrum allocation case has to be auctioned.

Asked if the reserve price was too high last time, TRAI Chairman Rahul Khullar said, "Yes...please understand the approach has completely changed from the previous pricing regime."

The regulator has suggested a lower reserve price even in service areas where spectrum was sold in November 2012.

When asked about the relief, if any, for telecom service providers that bid in the November auction, Khullar said, "We are only recommending reserve price and it is not the final price. Let market-determined price come through auction then we will decide what to do."

The regulator has denied any reservation of spectrum for existing players Airtel, Vodafoneand Loop Mobile in the auction of 900 Mhz, as proposed by the Empowered Group of Ministers on spectrum, headed by Finance Minister P Chidambaram.

The government has to auction the premium 900 Mhz band being held Airtel, Vodafone and Loop in some circles as their licences expire in the second half of 2014. No priority will be accorded to these licensees, the regulator said.

TRAI has not recommended auction for CDMA spectrum. The regulator has proposed allowing trading of spectrum by those who buy airwaves through auction.