Just out news: RBI has just hiked repo and reverse rates by 25 basis points (.25%), but leaves CRR unchanged at 6%. It also keeps FY11 GDP forecast unchanged at 8.5%.
I see this rate hike to be good for the markets because this measure will bring down inflation to some extent and thus try to keep prices of raw materials on control; otherwise profits of the companies will just be eaten up by soaring raw materials price.
Market was jittery from today morning in anticipation; however, they should react favorably to the news. But keep in mind that a single factor does not influence the market behaviour. Global events, FII driven liquidity, Q2 earnings of important companies, economic indicators like sale figures all play a role. So far, not much negative is expected in each of these and these I have dealt with in details in my previous market outlook emails.
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