what is Repo? hw it influence the stock market?

Question

what is Repo? hw it influence the stock market?

Answer 1

I second that about people providing clueless answers...perhaps, close seconds would be not actually answering the question and copy-and-pastes without editing.



A repurchase agreement/option is a right but not an obligation by a company to buy-back its outstanding stock for stated amounts or values.



When a company buys back its stock, it reduces the amount of that stock outstanding. Usually, the company repurchases/redeems the stock at amounts higher than the market value. It is a way for the shareholders to receive funds from the company on their stock without reducing the trading/market value of the stock. [Dividend payments immediately reduce the trade value of a stock on the Exchange].



Also, since the shareholders before the repo are the same shareholders after the repo, ownership of the corporation is undiluted.



There is also another reason to avoid dividend payments. Ordinarily, dividends have a higher tax rate than the rate on capital gains/sales/exchanges of property - especially for corporations. A repo is a sale/exchange and is taxed at 15% for individuals/corporations. A dividend would ordinarily be taxed at a 35% rate [ignoring the divideds received deduction provision.].

Answer 2

Repo

stands for Re-Purchase Option



It means a person sells a security, .... with an option buy back the same in a future date.



example



abc bank sells a security to xyz bank for 100 million, say at a price of 97.90 per 100 today ............ with a option to repurchase or buy back ... the same at 97.95 after a week.



This is called a Repo for abc bank.



for xyz bank the same deal is called a revrse repo, i.e. buying now to sell forward after a week.





Repo is primarily a money market instrument for banks.



For a Central Bank it is a monetary instrument.





As money market instrument, ...... repos are actively used by the banks for their temporary liquidity adjustments.



Take the same example of abc bank and xyz bank.



abc bank, seeing that the call money rate is higher, resorts to repo for 100 mio securities at 97.90 sell now & buy after a week at 97.95

This means that abc sells securities and gets 97.90 million now and uses the cash for its immediate uses like paying depositors, meeting reserve requirements, etc.

after a week, it gets back the 100 mio securities from xyz bank by paying 97.95 million.

i.e. it pays 0.05 million (97.95 - 97.90) for using the money for a week.

the 0.05 million is nothing but the interest for a week for 97.90. the abc bank has resorted to this, because in call money market, it would have to pay more than 0.05 million.



This repo or reverse repo are called collateralised lending, because the lender (xyz bank) gets the security for a week.

This is how a repo is operated in the interbank money market.



$$$ [you might have heard about call money market. here banks lend and borrow for their daily requirements. this lending and borrowing is purely unsecured.] $$$





How repo is used by a central bank



$$$$ Before that let us learn about Inflation

[ A Central bank's main concern is to maintain price stability in the system.

If there is excess money in the country or system, then it will result in too much money chasing too few goods. Automatically people will offer more for goods and the process will increase.

This condition is called inflation.



On the other hand ....... if there is shortage in liquidity, then the system will have less money than required.

This will result in people postponing their decision to buy or reducing their needs

and ultimately, the goods will remain unsold. The prices will come down and factors of production will suffer.



Both the conditions are not good for the country.

If the prices remain at constant level, then economy will not grow. .... A Central bank always tries to maintain a balance between the two, by trying to maintain a low inflation level of 2 to 3 % every year. $$$$$$



What is bank rate? ......... Bank rate is the rate at which the RBI will give demand loans to banks or discount the eligible bills of banks.



back to the repo subject



For a central bank, its a monetary instrument (instrument to guide, control and correct the market). how?



Repo rates and bank rates are not the same.





When the system has excess liquidity (i.e. when there is excess money in the system) the central bank will hike the repo rate. As a result, the banks will come to central bank I and buy the securities and give the money. (since it is attractive than the call rate). The central bank, thus, will absorb the excess liquidity in the system as and when required.



On the other hand, if there is tightness in the liquidity in the system, then central bank will lower the reverse repo rates. As a result, the banks will come to the central bank and sell securities and get the money at rates cheaper than call money rates. Thus the shortage in the system is set right by infusion of money in the system.





Thats why repo and reverse repo rates are called the guiding rates to the call money market.





You can now appreciate that the repo has a sacred link with the inflation control in a country.





As regards the influence of repo in the stock market,

I dont think there is any direct link .......



except that ...



the change in repo rates by the central bank send immediate signals in the market for tightening of liquidity.

This will render the investible sources lesser

and hence the stock market will undergo some downward corrections.







!!!

Answer 3

I really wish people would not answer questions that they have no idea what it means.



A repo is a repurchase agreement. A repurchase agreement is the sale of securities with a commitment to buy them back at a specified date and at a specific price.



The federal reserve uses them in open market operations to finance their inventory of bonds.

Answer 4

i think it is a RBI tool control economy or liquidity in money markets

it is called repo rate and there is also reverse repo rate

Answer 5

if you mean repo "reputation" then my answer will be that repo is the opinion of the people about a particular person. and it also called our personality and thus it effects everything related to us.

Answer 6

Repo may refer to:



Repurchase agreement, financial instruments used in the money markets and capital markets

Repossession, a financial institution taking back an object that was either used as collateral or rented or leased in a transaction

Repository, disambiguation page



[edit] Entertainment

Repo Man, a 1984 cult film directed by Alex Cox

Repo Man (X-Men episode), an episode from the X-Men animated series



[edit] People

Eino S. Repo (1919–2002), Finnish president of Yleisradio (1965-1969), head of the radio station (1969-1974)

Repo Man, the ring name of Barry Darsow, a former American professional wrestler in the 1980s and 1990s

Answer 7

Gilt funds, as they are conveniently called, are mutual fund schemes floated by asset management companies with exclusive investments in government securities. The schemes are also referred to as mutual funds dedicated exclusively to investments in government securities. Government securities mean and include central government dated securities, state government securities and treasury bills. The gilt funds provide to the investors the safety of investments made in government securities and better returns than direct investments in these securities through investing in a variety of government securities yielding varying rate of returns gilt funds, however, do run the risk.. The first gilt fund in India was set up in December 1998.



Facilities from Reserve Bank of India



The Reserve Bank provides liquidity support and other facilities, such as, SGL and current accounts, transfer of funds through the Reserve Bank's Remittance Facility Scheme and access to call money market to dedicated gilt funds. These facilities are provided to encourage gilt funds to create a wider investor base for government securities market. The facilities provided to gilt funds include:



1. Liquidity support: The objective of extending liquidity support to dedicated gilt funds is to support short-term liquidity requirements of such mutual funds. The Reserve Bank of India provides liquidity support to gilt funds by way of reverse repurchase agreements (reverse repos). Reverse repos are done in government of India dated securities eligible for repo transactions and treasury bills of all maturities. The quantum of liquidity support on any day is up to 20 per cent of the outstanding stock of government securities, including treasury bills, held by the gilt funds as at the end of the previous working day.



2. SGL and current accounts: The Reserve Bank opens one subsidiary general ledger (SGL) account and one current account for gilt funds' own transactions at all centers of the Reserve Bank wherever desired by the gilt funds.



3. Funds transfer facility: The gilt funds are given the facility of transfer of funds from one center to another under the Remittance Facility Scheme of the Reserve Bank. The gilt funds are also given the facility of clearing of cheques arising out of government securities transactions, tendered at the Reserve Bank counters.



4. Access to call market: Gilt funds can access the call money market as lenders.



5. Ready forwards: The Reserve Bank of India will also recommend to the Government of India to permit the gilt funds to undertake ready forward transactions in Government securities market.



Liquidity Support



Eligibility



All gilt funds - public and private sector, open-ended or close- ended - are eligible to avail liquidity support and other facilities from the Reserve Bank of India. The gilt funds schemes should, however, have the approval of the Securities and Exchange Board of India. It would be prudent for the gilt funds to submit an advance copy of the draft offer document to the Reserve Bank of India for preliminary scrutiny at the time of submitting the draft offer document to the Securities and Exchange Board of India. This is to enable the Reserve Bank to satisfy itself that the scheme proposed to be floated by the gilt funds is in conformity with the Reserve Bank's guidelines for availing liquidity support from the Reserve Bank of India.



Conditions



The Reserve Bank of India provides liquidity support by way of reverse repos subject to the following terms and conditions:



1. Re-purchase agreements (reverse repos) with the Reserve Bank are in eligible central government dated securities and treasury bills of all maturities.



2. The prices of the securities for reverse repo transactions are determined by the Reserve Bank of India, at its discretion.



3. The securities tendered by the gilt funds for reverse repos by the Reserve Bank are in multiples of Rs. 10 lakh (face value).



4. Gilt funds can avail the reverse repo facility for a maximum period of 14 days at a time.



5. The repo rate is the Bank Rate.



6. Liquidity support is made available at Mumbai only. The gilt funds, however, are free to transmit the funds to other centers of the Reserve Bank under its Remittance Facility Scheme.



7. The gilt funds cannot use the funds raised through the reverse repos facility for on-lending in the call/notice money market.



8. The Reserve Bank reserves the right to partially accept or reject any application for liquidity support without assigning any reason.



9. The Reserve Bank can call for all relevant information from gilt funds in regard to their operations and the gilt funds are required to provide it.



Drawal



For drawing the liquidity support from the Reserve Bank, gilt funds are required to:



1. make an application to the Chief General Manager, Internal Debt Management Cell, Reserve Bank of India, Central Office, Mumbai.



2. submit the filled up form to the Internal Debt Management Cell before noon on the day the liquidity support is desired to be availed.



3. return the duplicate copy of the acceptance-***-deal confirmation advice issued by the Reserve Bank duly signed in token of having accepted the deal and also arrange to lodge the SGL transfer form with the Securities Department of the Reserve Bank, Mumbai Office.



4. authorise the Reserve Bank of India to debit its current account on the expiry of the repo period, by the amount indicated in the acceptance-***-deal confirmation advice; and



5. arrange to lodge SGL transfer form for repurchase of securities.



6. receive, the amount of liquidity support as direct credit to its current account maintained at the Reserve Bank, Mumbai, on the day of the drawal.



A form of short-term borrowing for dealers in government securities. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day.



For the party selling the security (and agreeing to repurchase it in the future) it is a repo; for the party on the other end of the transaction, (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement.



Investopedia Says... Repos are classified as a money-market instrument. They are usually used to raise short-term capital.

Answer 8

what market is the symbol "repo"

????

i couldn't find it in N.America??

unless you did a typo and mean "rep" and oil and gas company.



try using www.street.com they can usually give a good forcast if you don't want to do your homework..

the street uses 5 different successful investors for a stock.tip.

personally i prefer other oil and gas companys..

good luck