Markets trade flat in late-noon trades
Wednesday, 3 November 2010
MUMBAI, Nov 2 (Business Standard): Markets turned volatile as the Reserve Bank of India (RBI) raised its key rates today. The Sensex surged to a high of 20,418 as RBI's move signalled a pause in its policy tightening measures.
However, it erased gains in late-noon trades and slipped to a low of 20,282. The index has recovered marginally now and is trading at 20,357.
Nifty is trading flat at 6,117.
The RBI in its policy review raised key lending rate by 25 basis points, the sixth such hike since March 2010, as it looks to achieve its end-March 2011 projection of headline inflation at 6 per cent.
Rate hikes by the RBI have a direct impact on interest rates offered by banks on loans to Indian companies.
RBI has clearly signaled that it would prefer banks to discontinue with teaser schemes, leading to some moderation in demand. BSE bankex is trading flat at 14,529. Rate sensitive - BSE Realty index has shed 2.3 per cent to 6,353 on fears that the loan demands will face a crunch as banks would be reluctant to give out teaser rates.
"Announcement of reduction in loan to value ratio from 95 per cent to 80 per cent, Increase in risk weights for loan of more than Rs.7.5 million from 100 per cent to 125 per cent would only have psychological impact on real estate sectors as most of the loans are within revised limits.
However, it erased gains in late-noon trades and slipped to a low of 20,282. The index has recovered marginally now and is trading at 20,357.
Nifty is trading flat at 6,117.
The RBI in its policy review raised key lending rate by 25 basis points, the sixth such hike since March 2010, as it looks to achieve its end-March 2011 projection of headline inflation at 6 per cent.
Rate hikes by the RBI have a direct impact on interest rates offered by banks on loans to Indian companies.
RBI has clearly signaled that it would prefer banks to discontinue with teaser schemes, leading to some moderation in demand. BSE bankex is trading flat at 14,529. Rate sensitive - BSE Realty index has shed 2.3 per cent to 6,353 on fears that the loan demands will face a crunch as banks would be reluctant to give out teaser rates.
"Announcement of reduction in loan to value ratio from 95 per cent to 80 per cent, Increase in risk weights for loan of more than Rs.7.5 million from 100 per cent to 125 per cent would only have psychological impact on real estate sectors as most of the loans are within revised limits.