RBI RATE HIKE AND ITS EFFECTS

In a knee jerk reaction the RBI has increased both the CRR and repo rates by 50 basis points. Now what does it mean for the markets in the short and long term. In the long term it is negative as lending rates will go up, hence making the money available to corporates more expensive, which in turn will increase the cost of production and services and hence lesser profits and hence lesser eps and hence lesser share values. So in order to balance this the markets will go down. But interestingly what is going to happen in the short term. In the short term it is even more disastorous for the markets.
I have been repeatedly saying in my posts, that expiry is near and the market forces sometimes come together and the markets go down. This is another classical case of exactly that. The markets had to end lower in this series, and it has been seen that the last days of the expiry this trend presipitates into major falls. Now the markets have an excuse. Tomorrow is going to be a sea of red, with stocks plummenting anywhere between 5-20%. But remember to look for positives in this one too. Any such fall is a moment of reckoning. If you have been eyeing that elusive stock for some time, in a couple of days you might get that stock for the price you always wanted. All is not lost, it never is, just treading with caution will be the key, and going anything by the market experience, July series might spring up lots of surprises on the positive side....