Stock market analysts on Tuesday termed the RBI decision to hike policy rates by 0.25 per cent as in line with expectations and said they expect another hike in March review of the monetary policy."The 25 basis points hike in key policy rates was on-the -expected-lines. There was a fear in market that RBI may raise rates by up to 0.50 per cent. The hike was welcomed by all," Karvy Stock Broking VP Ambareesh Baliga said.
He, however, added that a spurt in the benchmark Sensex minutes after the RBI announced the rate hike was just a knee-jerk reaction.
The benchmark Sensex on the Bombay Stock Exchange climbed nearly 190 points to an intra-day peak of 19,340.99.
Experts also said that with the inflation, particularly the food inflation, being at high levels the Reserve Bank of India (RBI) may opt for another 25 basis points hike in the March policy meeting.
"The 25 bps rate hike today is in-line with our hopes. While we see significant softening of WPI inflation, from 8.4 per cent in December 2010 to 7 per cent by January 2011 and 6 per cent by March 2011 We expect the RBI to hike rates (repo & reverse-repo) by 25 bps once more in fourth quarter of the current fiscal and another time in the first quarter of fiscal 2012," Anand Rathi Financial Services Chief Economist Sujan Hajra said.
Echoing Hajra's opinion, IIFL Economist Ashutosh Datar said, "Going forward we expect the RBI to continue to tighten monetary policy given the sustained high inflationary pressures due to high food and international commodity prices, even as growth remains reasonably strong. "We expect a 25 bps hike in the March policy meeting and a cumulative 100bps hike in policy rates in calendar year 2011."
"Monetary policy tightening along with sustained high inflation will result in domestic demand momentum moderating a bit in FY12, which will create the much needed slack in the economy for inflation to moderate. We expect GDP growth of 7.7 per cent in FY12, slower than 8.6 per cent in FY11," Datar added.
