Wikinvest Wire

Stimulus Package 2

Economy Update: Another Monetary & Fiscal Stimulus Package
• RBI has cut the Cash Reserve Ratio (CRR) by 50 bps from 5.5% to 5.0% with effect from fortnight beginning January 17, 2009.
• RBI also reduced the Repo and Reverse repo rate under LAF window by 100 bps each to 5.5% and 4.0%, respectively with immediate effect.
• The reduction in CRR is likely to inject additional liquidity Rs.200 bn to the financial system.
• The cut in policy rates as well CRR would further enable banks to reduce their lending rates (of course accompanied by reduction in deposit rates!!)
• The government in tandem with the Central Bank has also announced second stimulus package to invigorate the sagging economic activities.

Economy Update: Market Strategy

In January, markets will focus on potential government (fiscal
measures) and RBI actions (further interest rate cuts). A rise in geopolitical tensions in the South Asian region may keep markets nervous. Markets would focus attention on the US as the new President-elect takes office, the third quarter earnings and the management-speak thereof. FII flows will also be closely watched.

On balance,adequate measures and forceful implementation will likely moderate the economy's slide and give us the opportunity of a soft landing. Incremental FII outflows may also continue to moderate and help markets consolidate in the medium term. In the near term, quarterly results will lead to sector specific volatility.
Stimulus Package 2 Stimulus Package 2 Reviewed by admin on 5:43:00 PM Rating: 5
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