CRR,Repo Rate Hike - Bad Days Ahead..As Crude Could Become Rude..

It seems that the government is getting ready for the next general election after surviving a trust vote .Reserve Bank on Tuesday announcing tough policy measures to contain high inflation, a move bankers say would lead to hike of up to one per cent in interest rates.The move is directed at cooling inflation that is running at nearly 12 per cent on an annual basis by containing demand.

The RBI has raised repo rate by 50 basis point to 9 per cent from the existing 8.5 per cent. This short-term rate at which the RBI lends cash to banks was last raised on June 24 by 50 basis points to 8.5 per cent.

The central bank has also raised the CRR ( percentage of banks' deposits which they must keep with the central bank) by 25 basis points from the existing 8.75 per cent. This will come into effect from August 30.

The reverse repo rate ( The short-term rate at which the central bank absorbs cash from the market) remains unchanged at 6 per cent. It has also held the Bank Rate (rates used to price long-term loans to firms and individuals) steady at 6.0 per cent.

This news is bad for the stock market ,perticularly to the banks and real estate sector.Although crude has been corrected to 121 level zone after reaching near 148 dollars per barrel mark,I fear crude will become more rude in coming days and it will worsen the stock market scenario worldwide.