RBI has again slashed the Cash Reserve Ratio and Statutory Liquidity Ratio by 1 percent and Repo Rate by 0.5%. RBI is taking measures in order to ensure that there is enough liquidity in the financial system. This move by RBI will add around Rs. 85,000 crore into the financial system.
RBI in the month of October has made several announcements to ensure there is much needed liquidity in the system. Around Rs. 270,000 crore has been pumped into the system. Most of the pundits feel that it is a good move but still they are not sure about this move. As you are aware that the global financial system is in mess and all the nations around the world are trying their level best to keep things afloat. None of them are certain about the outcome and all that they are doing is to ensure that the economy of their nation does not get into recession.
There is a lot of pressure from many corners to the RBI to ensure there is much needed liquidity in the system. The stock market was in a bad state. The investors lost money big time. This is one of the biggest losses that the Indian market has witnessed. There is a report which claims that investors on an average lost Rs. 15,500 crores daily from January 2008 till October 18, 2008. I am sure that investors would have lost much more than that in the last two weeks of October but I did not get substantial information to support my views. I do remember reading that there was a loss of tune to Rs. 1.46 Lakh crores in the month of October alone but I don’t remember where I had read that information.
On one end the investors are losing money and the liquidity is decreasing and on the other hand RBI is pumping in loads of money. I just wish that the investors start making money and they don’t lose huge chunks just as the way it was happening. I really don’t understand how and why the RBI just pumps in money and why analyst and others say this move is not so very good. I don’t know what other moves RBI has to make in order to boost the confidence of the investors.
I have noticed a very strange thing. Whenever Finance Minister P. Chidambaram makes an announcement about the Indian economy and banking system being very stable and there is nothing to worry the market goes way too down. Does that mean Chidambaram is not giving the clear picture or does it mean the investors have lost the hopes in the Indian market? Whatever is the reason stock market looks gloomy for time being. Hope everything clears and brightens up.
Engineer's Finance 