FUND VIEW - Fund managers react to monetary policy                                     

Tue, 27 Oct 2009 07:02:12 GMT

 MUMBAI – The Reserve Bank of India (RBI) on Tuesday began the first phase of its exit from expansionary policy by ending some liquidity support measures taken when the global crisis hit Asia's third-largest economy harder than expected, but left key policy rates unchanged.

It raised the statutory liquidity ratio of commercial banks to 25 percent from 24 percent effective Nov. 7, and said the collateralised borrowing and lending obligation liabilities of banks would be subject to cash reserve ratio requirements from Nov. 21.

As expected, the RBI left the repo rate at 4.75 percent and the reverse repo rate at 3.25 percent. The cash reserve ratio was held steady at 5.0 percent.

Following are reactions from fund managers to the policy:

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MAHHENDRA JAJOO, HEAD-FIXED INCOME, TATA ASSET MANAGEMENT

"This is broadly in-line with expectation. The SLR hike is a little bit of an unexpected surprise. But most of the banks are anyway holding excess SLR, so on the ground, we don't know if it is going to make a sustainable difference.

"But it is a first move towards normalising the situation. To that extent, banks will also have some bit of pressure on their balance sheet because they will need to buy more bonds at lower rates".

"We expect the markets to be range bound. Today we are booking profits and will look to re-accumulate once the market settles down".

BEKXY KURIAKOSE, HEAD OF FIXED INCOME, DBS CHOLAMANDALAM ASSETMANAGEMENT

"RBI is trying to exit from the certain stimulus measures they had introduced last time, which they feel are not relevant right now because now the liquidity situation is quite good".

"I think the RBI is having this dilemma about when to start increasing rates. Probably early next year onwards we might start seeing the hike in rates."

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Reserve Bank of India Web site : www.rbi.org.in

(Reporting by Bharghavi Nagaraju and Aditya Kalra; Editing by Prem Udayabhanu)




(Reuters)

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