CRR hike to have no impact across sectors: Experts

25241 Investors following Bank of Baroda. Share this News with them.

0

Like this story, share it with millions of investors on M3

CRR hike to have no impact across sectors: Experts

Reacting to the hike, bankers said that despite the CRR hike, they had no leeway to raise rates because nobody was demanding money much these days.

Post your opinion here

 

0

Tweet

Share on Tumblr

RELATED NEWS Credit policy will not affect bond mkt: Kotak Mah Bk Complete statement: RBI's Q3 2009-10 Monetary Policy review RBI hikes CRR by 75 bps to 5.75% in two stages Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news JK Paper | Era Infra Engineering | DLF | Yes Bank | Housing Development Finance Corporation | Patel Engineering Company | Shree Cements | Puravankara Projects | Anant Raj Industries | JSW ISPAT Steel | Kinetic Motor Company | ICICI Bank |

Fund managers react

Parijat Agrawal, Head-Fixed Income, SBI Mutual Fund: "The RBI is really concerned about the food inflation spilling out. This is the first sign that the RBI is concerned about the loose monetary policy.Short-term rates will move up immediately. We already see the CP/CD levels move up by 10-15 basis points. Going forward, by March-April, if things don't slow down, then the RBI might hike the reverse repo rate."

N Sethuram, CIO, Shinsei Asset Management: "RBI, very clearly, is looking at mopping up the surplus liquidity in the system. This is more than what e market expected. The only worry is that at a time when the credit off take is picking up, a simultaneous action of mopping up liquidity may lead to a situation where the liquidity in the system becomes tight, which could push up the short-term interest rates."

Ashish Nigam, Head-Fixed Income, Religare Asset Management: "75 basis points (hike in CRR) was definitely more than expected but most of it was factored in so I don't see too much of a reaction in the (long-term) bond prices. On the short-end, markets should remain at these levels. A Rs 36,000 crore of liquidity suction over a month, I don't think it will adversely impact the short-end also. They have already increased their inflation target. So my sense is that they are taking cognizance of the fact that inflation is more supply side driven and monetary tools may not be really effective. So right now they will be more skewed towards growth than inflation."

Arvind Chari, Debt Fund Manager, Quantum Asset Management: "There will not be major impact on long rates as of now. Inflation target upward revision is a thing to note. The central bank will have to hike rates in February/March. Short term rates will tighten upwards as 75 bps hike is quite high. Liquidity will tighten more than what people expect."

Rajiv Anand, Chief Executive Officer, Axis Asset Management: "I think one doesn't have to get over bearish on the fact that we got an extra 25 basis points, or about Rs 12,000 crore odds of liquidity being sucked out. I would also look at it from the perspective of the fact that growth has now been up to 7.5% and the probability of large foreign inflows in that sort of environment is likely and a 75 basis points in a sense kills two birds with one stone; its preemption of liquidity that is forthcoming in next few months in terms of foreign inflows and also very clearly articulates the inflation fighting credibility of the RBI."

"I think if you look at the yield curve itself, clearly what we are going to see is the short end of the yield curve, given the fact that the curve is so steep today, I think the short end of the yield curve will begin to move up. But long end at about 7.75 or there abouts maybe move another 25 basis points from here, but that fully prices in the fact that liquidity will tighten and there is a probability of rates moving up. Remember that the markets are already pricing a 5% average call rate going forward as shown by the one overnight swap rate at about 5%. So the markets are already pricing in the fact that liquidity will tighten and you will get a rate hike. So to that extent the impact on the long end of the yield curve will be minimal, but you could see some reaction at the shorter end of the yield curve."

(With inputs from agencies)