Markets likely to firmup on Mon |
Our Mumbai Bureau
The Economic Times
Copyright (C) 2000 The Economic Times; Source: World Reporter (TM)
THE STOCK markets are likely to react positively to the announcement by the Reserve Bank of India (RBI) of a reduction in bank rate by one percentage point from eight per cent to seven per cent from April 1, 00. A cut in bank rate is a signal that interest rates should decline further which will result in industry having access to cheaper capital. Any news of lowering of interest rates is welcomed by the stock markets. Barring bad news from the US markets, the Indian stock markets should firm up on Monday, said marketmen. Calling it a good thing, RH Patil, managing director, National Stock Exchange, said, We need to get into a floating rate regime.
The rate cut was expected but people thought it would be part of a the credit policy. However, it now seems that the credit policy will deal with other issues and a decision on bank rates will be taken as and when necessary, he added.
UR Bhat, chief investment officer with Jardine Fleming India Asset Management said the central banks move will create a positive investment climate in the country. RBIs move is a good signal to economy at lowering interest rates. All this while the bank credit was largely going towards to working capital requirements. Now entrepreneurs who had shelved their projects because of higher of prohibitive interest rates can now start setting up new ventures..
Ajay Srinivasan managing director Prudential ICICI Asset Management said the measures announced by the central bank is expected to lower the interest rates by half-a-per cent. I believe this will facilitate government borrowing without having any pressure on yield. He, however, said this is unlikely to have a severe impact of the economic growth in the country as the rate cut is too small to significantly hamper growth.
Mr Bhat said the government also made an attempt to address the worsening fisc. By making the announcements in the new fiscal, the government has also ensured it is not an effort aimed window dressing the balance sheets of banks, he said. Market observers pointed out that these measures will boost trading sentiments. The market was bereft of any major news and RBIs announcement could have a positive impact on trading sentiments, he said.