HEADS UP ON INTEREST RATES

It is being increasingly felt now that the Central Bank (RBI) would perhaps be taking a long hard look at the current Interest Rate regime with an eye on possibly aiming to inject some liquidity in the System. This follows the plummeting GDP growth trajectory and the creeping realisation that the much touted demand-side management of Inflation may perhaps be at the end of a taut tether. The easing off of food-inflation would also have helped this line of thought. In any case it was always a known that the real culprit was the supply side insufficiency as well as the penchant of Polity to hike Minimum Support Prices of food grains beyond reasonable levels since it made good Political sense to do so.

It is now possible that the RBI would take the first steps by easing the CRR (Cash Reserve Ratio) by 25-30 basis points shortly or at the December 16 quarterly review of the monetary Policy. The key take-away for Equity Investors would definitely be to start looking very closely at Rate Sensitives with an eye to start picking up the Scrips in this zone currently available at basement-bargain prices.


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