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Our Bureau

Mumbai, July 28 Equity analysts feel there could be a modest hike in the interest rate in the Reserve Bank of India’s (RBI) quarterly review of the monetary policy on Tuesday and the equity market has already absorbed it.

Rate-sensitive sectors such as bank, realty, which had taken a beating towards the close last week closed in the positive zone on Monday expecting no major changes in the monetary policy to be announced on July 29.

“It looks like there will be a modest hike in the interest rate and the market has already factored in, if its not more than 25 per cent then the market will take it positively,” said Mr Raamdeo Agrawal, Director, Motilal Oswal Financial Services.

“Credit policy, quarterly numbers and future & options (F&O) closing are weighing the market, a direction for the market will emerge only after these events take place until then we may see choppiness,” said Mr Alex Mathew Head, Research, Geojit Financial Services Ltd.

The central bank’s medium-term lending rate called Bank Rate has remained at 6 per cent since April 2003.

It is the repo rate at which the RBI lends to the banks in the short-term that has been raised by 75 basis point to 8.5 per cent since April this year and the cash reserve ratio (CRR) i.e., percentage of the banks’ cash to be parked with the RBI that has been raised by 125 basis point to 8.75 per cent.

“Do not expect much changes, the RBI has already raised the repo rate and CRR rate, after the policy is announced tomorrow the market will move in a positive direction,” said Mr Mahesh Thakkar, an equity market analyst.

“We do anticipate tightening of the monetary policy over this quarter as the RBI will clearly target inflation over growth this year and a 25 basis point hike in the repo rate is expected,” said Mr Arindam Ghosh, Chief Executive officer, Mirae Asset Global Investment Management (India) Pvt Ltd.

“Market has already priced in the hike, we have seen some buying in the market today,” said Mr Ghosh when asked how the equity market would to any rate hike by the RBI.

“It s a mixed feeling, rate hike is not likely in the light of the drop in the crude oil prices, inflation also has been stabilising and not moving up, so I don’t see a situation where they might raise the rate,” said Mr Waqar Naqvi, Chief Executive, Taurus Asset Management Co Ltd.

“Market won’t react to the RBI’s monetary policy even if there is a 25 basis point hike in the rate, it has already factored in the impact,” said Mr Naqvi.

“We expect the RBI to raise the repo rate by 25 basis point and the CRR of banks by 25 basis point in its quarterly policy meeting on July 29. Our expectations are in line with consensus. Inflation and money supply growth continue to run significantly ahead of the RBI’s comfort zone,” said Mr Tushar Poddar, Vice-President Asia Economic Research, Goldman Sachs.

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