RBI’s Monetory Policy, What to expect today?

The crucial Reserve Bank of India (RBI)’s monetary policy review scheduled at noon today, 29 July 2008, will provide the irection to the market in second half.

Marketmen opine that RBI may further hike short-term interest rates or the repo rate as well as statutory deposit requirements or the cash reserve ratio (CRR). RBI had increased short-term lending rates for banks and CRR by 0.5% each on 24 June 2008 to control surging inflation. However, experts are contradicting with this view. Corroborating Godrej’s view, HDFC Bank’s Managing Director Keki Mistry and IDBI Chairman, Yogesh Agarawal said it is unlikely that the apex bank would hike rates as it would be detrimental to the industry, already affected by high interest rates.

In the near term, the market trend is likely to dictated by slew of events like expiry of futures & options contracts on Thursday, 31 July 2008. Besides, the progress of the monsoon and corporates quarterly numbers will also be keenly watched.

Volatility may remain high ahead of the expiry of futures & options contracts for July 2008 series on Thursday, 31 July 2008. As per reports, marketwide rollover of positions from July 2008 series to August 2008 series stood at 30%, while that of Nifty was 35%, as of Monday 28 July 2008.

US crude gained $1.47 to settle at $124.73 a barrel yesterday, 28 July 2008 after militant attacks slashed Nigerian oil production and Iran stirred geopolitical tensions by suggesting it was rapidly expanding its nuclear program.

Foreign brokerage house Goldman Sachs reduced India’s growth forecast for fiscal year 2010 to 7.2% from 8.2% earlier due to a weak investment outlook on account of rising interest rates. However, the growth forecast for FY09 remains unchanged at 7.8%.