Mixed reaction to CRR hike

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Mumbai, Jun 11 (UNI) With the Reserve Bank of India announcing hike in CRR by 25 bps, there was a mixed reaction to it from the corporate and banking sectors.

Jaiprakash Sinha of Ambit Capital said the market sentiment would definitely be weak. ''The sentiments are definitely on the weaker side, so even the good global cues may not be taken up in the morning itself.'' However, he said this would be a short-lived reaction, which the market will absorb quickly. The liquidity concerns had led to this hike, he averred.

Sinha said there would be a correction in real estate stocks, but pointed out that this is a good stage for accumulation of construction stocks. ''What we are looking at in the infrastructure and the construction space is that the fall may not go from here and we will see some amount of rebound. But particularly in terms of real estate, yes, we may see some amount of correction because even if the prices stabilise at the current level, let alone, it come down by 5-10 per cent, that also does not leave too much room for the price appreciation in the stock at this point of time. So, they may see some more correction going forward. But on the construction side, our opinion is that at this level it looks like a good accumulation stage,'' he explained.

The central bank has hiked the reverse repo and repo rate by 25 bps each. However, it has left CRR, Bank Rate, inflation target and GDP target unchanged at five per cent, six pc, 5-5.5 pc and 7.5-8 pc respectively.

In response to the latest credit policy news, Ajay Mahajan of Yes Bank said the rupee is likely to strengthen further to USD 46.75.

According to him, the policy suggests that the RBI would be pre-emptive. Also, the bond markets will view the credit policy in a positive light, he said.

Saumitra Chaudhary, member of the Prime Minister's Economic Advisory Council, said a further hike would depend on the RBI's assessment. He said high interest rates will not impact growth rate.

Kalpana Morparia, joint Managing Director of ICICI Bank, said the RBI rate hike was largely expected.

She said there could be further hike in Sub-PLR and PLR. The credit policy hike will have little impact on credit off take.

Also, she expected retail loan growth at around 25 per cent in FY-07.

Kotak MF said ''The RBI statement is hawkish and inflation can increase above the RBI's band.'' MORE UNI AR SSS VKG2100

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