The Hindu Business Line : Pru ICICI expects interest rates to tighten

Prudential ICICI Asset Management Company, a private sector fund house, expects interest rates to increase a little further from now to February or March next year, as liquidity gets tighter.

"The Reserve Bank of India has raised repo by quarter percentage point. It has kept reverse repo unchanged. The widening of corridor will succeed only if liquidity gets tighter. You will see a scenario, where RBI will run tight liquidity in second half," Mr Nilesh Shah, Chief Investment Officer, Prudential ICICI told reporters.

He was here to announce the launch of the Prudential ICICI Equity and Derivatives fund.

This is an open-ended equity scheme that aims to generate low volatility returns through investments in mix of cash equities, equity derivatives and debt instruments.

Mr Shah pointed out that credit was becoming difficult to obtain and that banks are lending more than what they were raising as deposits.

"If we put these together, there should be little bit of tightening in interest rates from here to February or March 2007. After that, interest rates will start declining," he said.

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