Traders expect RBI to raise interest-rates

Mumbai, Jan 30 (UNI) Mixed reactions were reported among the bankers as well as traders about tomorrow's quarterly review by the Reserve Bank of India(RBI).

While the bankers expect the RBI to raise the key reverse repo rate -the rate at which banks lend to RBI- the traders are anticipating a 25-basis-point hike in interest rate during the RBI's quarterly credit review meeting scheduled tomorrow.

A topbrass banker said that a rate hike was possible in view of many banks raising the deposit rates. The review is significant in view of the forthcoming annual budget to be presented by the UPA government on the floor of Parliament next month.

Earlier this month, RBI Governor Dr Y V Reddy had told the media here that the inflation rate hovering around 5.5 per cent was on the expected lines. In a recent media interview, Union Finance Minister P Chidambaram had hinted the present growth rate of eight per cent plus to continue for at least next one decade.

Deven Choksey, Director, K R Choksey Securities, said that the government is clear in its objective to boost growth in the economy.

An interest rate hike will play as a dampener to investor sentiments. As far as rising inflation is concerned, it is primarily out of supply-side constraints from the agricultural sector and the government will take suitable steps to correct it, he added.

''After looking at the third quarter results of various listed companies, I find some stocks trading at attractive prices. Funds will churn and restructure their portfolios in the light of all the new developments, he said.

Companies like Reliance Industries, Tata Steel and Hindalco, having Q3 results, have eclipsed analyst expectations. Value-buying is the order of the day, irrespective of the company falling in the small-cap, mid-cap or large-cap category, Mr choksey added.

Meanwhile, Vishwas Agrawal, Technical Analyst, Bonanza Securities said that investors are anticipating some unfavourable decisions to come out in the forthcoming credit policy review meeting and more correction is on the cards. While banks have raised deposit rates for investors, there has not been a commensurate hike in the PLR. So banks end up incurring a higher cost for procuring funds, while the lending rate remains more or less the same.

UNI