GetPaidIndia.com

Markets dips into deep red following CRR hike

April 2nd, 2007

Blame it the Reserve Bank of India’s decision to do a upward revision of the CRR hike – the Indian stock markets took a serious note and with traders going into panic selling, the fire caught up from Banking stocks then passed on Auto and then to other sectors such as the Capital goods and in no time, the Sensex is in deep red – about 560 points down in the noon.

While some experts say that the CRR hike is a temporary thing, having already seen CRR hikes in the past few days and yet another CRR round the corner when RBI would use it as a weapon again during April, a large number of traders have decided to do partial selling of their holdings or even temporary exit from the sector or even better by staying away from the Banking sector.

Every time a big CRR hike comes up, banks would have to consider revision of their Prime Lending Rate (PLR) which makes loans dearer to customers (such as Industries or even retail individual customers like us. This will make customers to stay away from taking newer loans. Some may even begin to consider repaying a part of the loans they have taken.

The case now is not just to do with the Banking sector. Todays downfall has made stocks from many other sectors to become cherry picks. The broad indices loosing 5% would wake up long term investors to take a view on taking fresh position of the stocks or even building up their portfolios.

While a +100/-100 points trading sessions became a bit common, todays session is more like the February 28 trading session – the day on which Chinese stock market cracked the fire followed by a lackluster Indian Union budget day when the stock markets closed down by about 550 points.

Some experts say that this huge ups and downs will continue for few more days and could even spread till May 07. Keeping these calls, few doubt if the Indian long term story is still in tact?

Entry Filed under: Equity Markets, Banks & NBFC