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RBI hikes CRR by 75 bps; repo rates untouched

RBI GOVERNER

The Reserve Bank of India, in its Monetary Policy review today has hiked the Cash Reserve Ratio (CRR) by 75 basis points (bps) to 5.75 per cent, while holding the repo and reverse repo rates steady in line with market expectations.

The CRR hike will be done in two tranches. The first one will be for 50 bps with effect from February 13, 2010, and the balance 25 bps will be effective from February 27, 2010. Eventually, this will drain out Rs 36,000 crore from the system.

Repo rate is the rate at which the banks can borrow money from RBI in order to avoid scarcity of funds.

The move comes on the back of spiraling inflation. Food inflation touched 17.4 per cent for the week ended 16 January 2010, slightly higher than previous week’s 16.81 per cent. Fuel price index rose to 5.7 per cent while primary articles price index touched 14.66 per cent for the week ended 16 January 2010.

A median forecast released by the Reserve Bank of India (RBI) in the pre-policy ‘Macroeconomic and Monetary Developments: Third Quarter Review 2009-10’ yesterday raised the economic growth projection to 6.9 per cent from the 6 per cent projected three months ago.

NIFTY Future :In panic low of 4757 was made and now trading at 4801.My Support and expected target was of 4724-4676 in panic.

-Don’t panic @ lower levels.

-If not breaks 4757 & trades above 4812 with volumes will take to 4845-4856 & there after watch unexpected buying upto 4889-4900 level.

Updated at 11:25/29th Dec/Baroda