Indian Economy faces high inflation amid uncertainity

RBI’s move to increase 25 basis point is a step ahead to control inflation especially food inflation. Inflation may be brought down to 7.7% if oil price remains same and a good rabi harvest is expected ahead. There is major concern about the liquidity solution as RBI has given a clear indication that individual banks need to find out solution on liquidity problem as in the near future liquidity may remain tight. Concern is majorly the gap between deposit and credit. Deposit growth has slowed drastically to 10.7%  while the demand for credit has gone up to 16%. A clear message has been conveyed to all banks to maintain their ALM (asset liability management and liquidity well in advance.
Amid all these economic activities Indian stock market recently showed signs of negativity with NIFTY closing below 5700, majorly FIIs are the major sellers while equally DIIs bridged the gap with almost equal buying moves. January expiry is just a day behind while option traders can majorly trade on two fronts by buying NIFTY 5800 call and sell 5600 Nifty put. Profit can be made from the spread.
Credit growth is seen in retail, SME and corporate side which is a healthy sign as long as the demand for credit is met. It is still expected that the country will grow with a rate of 8.5% to 9% where as there will be mounting pressure for credit, external borrowing is one solution where as encouraging deposit is a key move to keep a balance between credit vs deposit.
By Dipti Prasad Padhi

By : | Category : Business and Economy| Date : November 10,2011

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