Janak Desai of ING Vysya says that the credit policy is in line with the expectations and the bond market reaction was a knee-jerk reaction.

He adds that if one looks at the last couple of policy statements, there have been concerns on the kind of growth that one has seen in this sector and the question is how are the will react to it. CNBC-TV18 shares excerpts of its exclusive interview with Janak Desai with domain-b:

Give us a quick reaction on the policy and the fact that bond prices have inched down after the policy.
I think that it is in line with the expectations. It is a knee-jerk reaction as far as the bond markets are concerned. I think 830 clearly tops as far as I see it. In fact, I would think that there should be a rally from here because clearly the next three months are based on whatever one is hearing and uncertainties are out of the way.

There is a pre-emptive action, so really there is no reason to believe that there is another hike around the corner unless there are some developments on the commodity front, so that is clearly positive news.

How do you read this policy? Do you think that you will see a lot of rate hikes, maybe sub-PLR hikes at least if not PLR hikes?
I do not think that this is going to really cause any hike in the lending rates. One thing, which is there in the statement is, it refers to the home loan growth of 115 per cent and retail lending, which is up by 74 per cent.

If one looks at the last couple of policy statements, there have been concerns on the kind of growth that we have seen in this sector and the question is how are the banks going to react to that. The statement also refers to ensuring credit quality within the financial system. So one will need to see what further steps the Reserve Bank takes to persuade banks to contain the increase in credit in this sector.

Are you also getting the impression that we are somewhere near the end of the tightening cycle, given the present indicators that you have?
In the current situation, market participants have learned to live from quarter-to-quarter. So, is this a last hike over the next quarter? Yes, we will have to wait and see what will happen in the global economy.

We keep on looking at Bernanke's statement and the fact that we probably are at the top as far as the US interest rates are concerned.

But side by side, there are also Japanese Central Banks hiking rates, China is hiking rates and China is probably much more closer in terms of economic performance with India. Therefore, it is difficult to say whether this is the last hike, but for the coming quarter clearly there are no surprises.