The Reserve Bank’s announcement cooled down tensed heads in the industry and the markets. Widespread expectation of an interest rate hike was quashed when the central bank decided to increase the cash reserve ratio left key rates untouched. ?Despite severe inflationary pressure on the economy, RBI has refrained from any rate hikes which is indeed a welcome move,? said Rajeev Chandrasekhar, MP and president, FICCI
?This will have a minimal impact on corporate borrowing, and this was a major concern? said K Ramnathan head of fixed income at ING Vysya Asset Management. Little wonder then the market reacted positively and Banking and Realty sectors also posted handsome gains. After the key rates were kept unchanged, the BSE Bankex shot up 147.91 points (1.68%) to close at 8,964.75 points.
Niranjan Hiranandani, managing director, Hiranandani Constructions said,
?What RBI has done will bode positive for the real estate market. The risk weightage in respect of loans to real estate has been reduced for home loans up to Rs 30 lakh which was earlier up to Rs 20 lakh. Hence, interest rates on loans upto Rs 30 lakh will be lower by virtue of the fact that the risk weightage is reduced.?
There is cause for cheer in the consumer durables segment as well, as it was facing the heat of high consumer credit and were expecting a direct rise would hurt sales further. VN Dhoot, chairman, Videocon Group reckons that they can now expect the rising inflation to be controlled.
Another leading industry chamber, CII said that the decision to introduce currency futures will create a formal hedging mechanism for corporations to take positions on foreign currencies.
However, the markets would be tracking overseas developments carefully. Sunil Godhwani, CEO & MD, Religare Enterprises says, ?With US rates likely to be cut in the Fed meeting on Thursday, the RBI treaded the path of caution by not increasing the policy rate in India now, postponing the decision, if the situation warrants, to a later date?
There is also an air of caution and fund managers will also be looking at what inflation numbers reveal. Devendra Nevgi, CEO of Quantum Asset Management reckons, ?RBI will keep its window open on further tightening if the prevailing situation warrants and its inflation tolerance is expected to be very low in coming months?.
For the moment there is a temporary reprieve.
