RBI Credit Policy Updates : Effect on Indian Share Market

"RBI Credit Policy Update"

Very unexpected yet good move from the RBI. Mr D (Subbarao) kept the prices unchanged and this brought a relief rally in the Indian Share market. Cash reserve ratio (CRR) has been kept unchanged at 6%, repo rate unchanged at 8.5%, reverse repo at 7.5% while SLR is at 24%. Consequently, the marginal standing facility (MSF) too remains at 9.5%

Effect of RBI Policy on Indian Share Market

Inflation risks remain high, rupee remains under stress and industrial growth moderating is a serious concern. On the Daily chart, we are observing that prices intraday breached the crucial support of 4700 level, but have managed to stay close above it. Further, on the hourly chart we are witnessing a positive divergence in the momentum oscillator which suggests continuation of up move.

RBI's CREDIT POLICY>>RAISES REPO & REVERSE REPO RATES

Statement by Dr. D. Subbarao, Governor, Reserve Bank of India on the Third Quarter Review of Monetary Policy for the Year 2010-11

As widely expected the Reserve Bank of India raised repo (rate at which it lends to banks) and reverse repo (rate at which it borrows) rates by 25 basis points each, taking repo to 6.75% and reverse repo to 5.75%. However, the CRR has been left unchanged at 6%.

The bank also raised March-end inflation forecast to 8% from 7% earlier, leaving GDP growth forecast unchanged at 8.6%. RBI, in its mid-term credit policy said that rising commodity prices was adding to GDP and inflation risk.