Repo Rate hike, has come at the most inappropriate time. Some observers were unperturbed as the hike was only marginal – 25 bps – and the market had foreseen this as coming. But, I feel, investors would take it negatively as there is no certainty that there would be no further monetary tightening. From whatever economic data we are getting, it is becoming clear there would be more monetary plugging to tame inflation.
RBI has surprised the market in the past. And, this makes it difficult to take a call on whether the next move would come in the form of a CRR hike or Repo Rate hike. In a nutshell, looking at the current scenario, the prospects are not very encouraging – at least in the near term.
Thursday, June 12, 2008
RBI always likes to surprise
The Reserve Bank of India (RBI) has lent another blow by increasing the Repo Rate by 25 basis points (bps).
This will lead to further increase the interest rate which, in turn, will accentuate the industrial slump, more markedly in certain loan-dependent sectors like realty and automobile.
RBI traditionally likes to surprise, particularly with the timing of its rate changes, and the latest move is no exception. I thought it would tighten its policy this month, and it will perhaps link it with a particular growth or inflation release. But the hike in the Repo Rate has taken the market by a bit of surprise as it was anticipating an increase in the cash reserve ratio (CRR).
This will lead to further increase the interest rate which, in turn, will accentuate the industrial slump, more markedly in certain loan-dependent sectors like realty and automobile.
RBI traditionally likes to surprise, particularly with the timing of its rate changes, and the latest move is no exception. I thought it would tighten its policy this month, and it will perhaps link it with a particular growth or inflation release. But the hike in the Repo Rate has taken the market by a bit of surprise as it was anticipating an increase in the cash reserve ratio (CRR).
Indian Stock Market in Unenviable Position
The Indian stock market finds itself in an unenviable position, where nothing is going right – be it the heavy FII offloading, mounting oil prices, creeping inflation or the unmistakable signs of a growth slump.
As a result, the sensitive index is responding to every bit of unwelcome news, leaving investors and market watchers in a fix on when this uncertain phase would end and indices would resume a rational and a more predictable course. The groping market has sunk so much of late that it is now among the worst performers within the brackets of emerging markets.
As a result, the sensitive index is responding to every bit of unwelcome news, leaving investors and market watchers in a fix on when this uncertain phase would end and indices would resume a rational and a more predictable course. The groping market has sunk so much of late that it is now among the worst performers within the brackets of emerging markets.
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