Developments…

Hi guys I am back, couple days I was busy so I couldn’t post anything! I hope you missed my postings!!! Just kidding!

Okay lets move on to major developments happened in these couple of days.

--> Last week all major economies reduced their interest rates including US, China, Japan, and Hong Kong & Australia in cue. Presently US is maintaining 1% interest rate. And there is possibility to reduce further if needed. I don’t know how they are going to handle if LIQUIDITY TRAP situation arises about which I have written previously.

--> Since Friday was the closing day of the October month, I have to tell you about the stock market also. This was the worst October and Diwali for Dalal street participants. In October only market fell nearly 30%.

--> Inflation came down to 10.68%. But I don’t think common man is getting benefit from this. Since ours is WPI (Wholesale Price Index) measurement and in addition to that, I believe this reduction in inflation rate is mainly due to BASE EFFECT. Since common man like BAKERIWALA outside our college feels that prices are still in BULLISH in nature. Anyway I don’t want to go deep into that.

--> Friday’s call money rate (rate at which inter-bank lending takes place for overnight) touched a peak level of 21% due to lack of liquidity in the banking system and economy. Ideally call money rate should be same or below the CRR (Cash Reserve Ratio) which was 6.5% on Friday.

--> Central government thinking to raise the FDI stake in Insurance sector from presently 26% to 49%.

--> Taking cue from its other counterparts from rest of the world RBI on Saturday reduced the CRR, repo rate and SLR to increase the liquidity in the economy. RBI cut CRR, the amount which banks have to park with the reserve bank India, has been brought down to 5.5% from 6.5% to infuse liquidity of Rs 40,000 crore into the system. The RBI also cut the repo rate, the rate at which it lends to banks, by 0.5% to 7.5%. The central bank has also reduced the SLR (statutory liquidity ratio), the amount which banks are mandated to park in government securities, by 100 basis points to 24%, which inject about Rs 40,000 crore into the banking system.

--> Due to this rate cuts, stock market participants got some relief as market end above 10000 mark. Due to some relief in stock market and weakness in Dollar Rupee ended at 48.64/65 per dollar, its strongest since October 17 and gaining 1.6 per cent from 49.44/46 at close on Friday.