Published on Fri, Oct 10, 2008 at 11:25 | Source : CNBC-TV18
Updated at Fri, Oct 10, 2008 at 13:26
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CRR cut not a big alleviation for markets
CRR cuts aids market little bit but it is not a very big alleviation for the markets. As one can see in US, rates have fallen quite significantly but that has not helped the market at all.
Here is a verbatim transcript of Udayan Mukherjee's comments on CNBC-TV18. Also see the accompanying video.
This market's problem is not to do with a little bit of Cash Reserve Ratio (CRR) cut. It aids the money market and injects a bit of liquidity to the system and 150 bps is a fairly meaningful chunk of money which is coming in but what you need right now from a stock market perspective, the basic economic problems are not going to go away regardless of what you do in a hurry over the interest rate front because the damage has been done already. It will add liquidity to the money market and to the system. I don't think from a stock market perspective this is very big alleviated as you have seen over the US, where rates have fallen quite significantly but that has not helped the market at all. So you will get a little bit of a pop back.
I think the savvy bears will pounce on the back of this kind of an upmove in the market again and try and hammer it down. This market's problem is not about short-term liquidity in the system. You worry about stock market liquidity and you worry about fundamentals and global newsflow. So this is very welcome not to take anything away from it the Reserve Bank of India is doing that right thing. It will do the right thing again if it moves and cuts repo rates again at the end of October but I doubt if that will stem the rot in this case.
