Bank Policy Tuesday: Nothing can be done for now, Markets react

 

As we mentioned, the markets had decided for the bank last week itself and while it was clear the rate cut was not recommended the market is in position to react unfavorably letting commentary focus on  “hawkishness” of the policy (just listen  to LV on TV18 carrying on live from the dog and pony show) which is unlikely its tone.

Banknifty is down 100, supports for the Rupee sunk in the melee and Nifty don 20 points. SLR has been cut 1% finally after 3 years of dilly dallying. that means with 23% SLR and 4% CRR banks now need only 27.8% in Liquid government deposits and with borrowing from the government already reducing the liquidity will improve albeit slowly as these are sticky deposits. India’s GDP  growth is likely to come below 6.5% and inflation is high according to the policy review.

I am wondering if my short Dollar position will stay in the green in these conditions against the Rupee with markets using every such excuse for running it down and are virtually uncontested in that. The RBI reference rate to the Dollar will move up today. Inflation target is now 7% and credit growth targets are above 18% wiht most of the big four affirming a 20% year

 

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