How inflation effect Indian Stock Market, including Mutual Fund Investments?


Analysts at NriInvestIndia.com feel that the RBI can make a further cut in the prevailing repo rate as well as the reverse repo rate without waiting any further cut in the gas prices from the Indian. Keeping into consideration, the way that other price baskets both CPI & PPI have been going down, probably then all this would get reflect in the domestic prices sometime soon.

Many economists sees the repo rate more in terms of being phased out and feel that we should probably look for a instant target of around 7.50% in the close ten-year within few days and then we look at medium-term which could probably translate into a 7.45% figure or even lower than this. Mostly a repo rate cut possibly in December would bring in more liquidity to the banks that would intrun be coming into the market through spending.

However on the other side many brokers from various investment companies that are helping non resident Indians with investing into Indian mutual funds and stocks, believe that even if the RBI reduce the repo rate, there wouldn’t be a significant affect immediately seen for the borrowing cost of the corporate world. Thus, the the lower inflationary numbers definitely provide that much of chance for RBI to react properly given the fact that world’s financial conditions are also not conducive enough.

All in all, the Indian economy is expected to do well, with such an action, as money would flood properly into the supply system, thus giving more leverage to the banks on cash side. Thus, we primarily expect the inflation to take a continue downturn in the coming few months.

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