Nifty ignores RBI move, ends up as banks rule out rate hike
29 Jan 2010
The benchmark Nifty has seen significant recovery in the last couple of hours and closed marginally in the green. It has completely discounted the 75 bps CRR hike move of Reserve Bank of India (RBI) while banks also ruled out the rate hike post the RBI move.
Keki Mistry, Vice Chairman and Managing Director, Housing Development Finance Corp (HDFC): "Actual interest rates, in terms of banks hiking rates, I personally don't see that happening immediately. I think banks will start exercising a little more caution keeping in mind the fact that RBI is so concerned about inflation and therefore will start acting. But I don't see them immediately hiking the rates because they are sitting on a lot of liquidity."
Chairman of SBI, OP Bhatt also says SBI lending rates may not change in next 6 months. Chanda Kochhar, Managing Director and Chief Executive Officer of ICICI Bank says it is a great balance between maintaining growth & inflation. "No immediate impact on rates", she added.
During announcement of CRR hike, the Sensex broke the 16000 mark by slipping over 300 points and Nifty dipped below the 4800 but indices immediately retraced from the same levels.
Banking and realty stocks led this recovery along with capital goods and select auto stocks post easing concerns of rising interest rates. These stocks helped the Sensex to recover 376 points and the Nifty 116 points from day's low. However, consistent selling in technology post Obama's comments on outsourcing, telecom, FMCG post cut in product prices by HUL and metal stocks on fall in international prices of base metals limited the gains to major extent.
The RBI has hiked the Cash Reserve Ratio, the amount of funds that the banks have to keep with RBI, by 75 bps to 5.75% from 5%. The central bank has taken this move to curb excess liquidity available in the markets, which will help in controlling the rising inflation. The move will be implemented in two stages; 50 bps hike w.e.f February 13 and 25 bps hike w.e.f February 27. This CRR hike will absorb Rs 36,000 crore of excess liquidity from the markets. However, the RBI kept Repo and Reverse Repo rate unchanged. The revision in GDP forecast to 7.5% from 6% was a surpise to the markets.
