RBI announced the hike in CRR by 75 basis points in order to combat rising inflation. This will make banks exercise restrain while lending. However they are not expected to increase the rates straightaway due to extra liquidity in the system. The industry does not predict the interest rates to increase in the immediate future due to the anticipated inflows and the liquidity situation at present.
But this will keep on increasing the demand, thus relieving anxiety if the government will revoke the numerous stimulus steps. But by keeping the rates unchanged, the industry seems relieved.
This development is not expected to affect the stock markets. The increase in the GDP growth estimates, the industry demand is also predicted to rise. Moreover with the interest rates believed to remain constant as of now, the business plans of the companies will not be severely affected.
All this might not affect the stock markets in the negative way. Particularly this true, as those sectors vulnerable to the interest rates might not be drastically affected, as any change in the interest rates would be minimal, if and when it occurs.
But this is just a short-term measure as the RBI is prone to hike the rates again if the inflation does not ease.
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