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Fixed Income

RBI Cuts CRR by 100 bps again

From last Friday’s move to cut CRR by 1.5%, another 1% has been taken off today. From RBI:

The cash reserve ratio (CRR) of scheduled banks is currently at 7.5 per cent of their net demand and time liabilities (NDTL). On a review of the evolving liquidity situation, it has been decided to reduce the CRR by 100 basis points to 6.5 per cent of NDTL with effect from the current reporting fortnight that began on October 11, 2008. This measure will release additional liquidity into the system of the order of Rs.40,000 crore.

Time also for a repo rate cut? What are they waiting for? It’s time to buy gilt funds I think. There is less than 3000 cr. in gilt funds most of whom invest in things like corporate deposits (I don’t know why!). I’ve moved out of my liquid plan (did that a week back, before this drama) and will likely move into gilts.

  • Anonymous says:

    >Hi Deepak,

    Sir i have a personal question for you,i just hope that you will answer,i bought 6 lot of mini nifty (120) quantity at an average prize of 3520,what will be a prudent strategy for me,i am in big loss considering i have never earnt this big from market.

    Please suggest what shud i do ,should i add more of nifty at gap down or shud i exit alltogether.

    Please help sir.
    thanks

  • Px says:

    >Can u please elucidate why one should enter gilts, and what the correlation is between additional liquidity and gilts is ?

    Being new to debt mkts i would like to get the logic behind ur reasoning

  • Px says:

    >Secondly please suggest me any books for reading

  • Anonymous says:

    >long gilts will be the place to make some profit in the coming year.

    During the last down turn, I have seem some good gains when the rates started falling. With inflation fears vanishing and economy in trouble, we can sure expect some rate cuts from RBI soon.

    -Nagarajan

  • Anonymous says:

    >I am really enjoying this ride. As I am in Gilts and only 10% in Equity Funds. Long term bottom for DOW will be 7000 and that time NIFTY will be around 1700. That will be the time to enter the market when all the bulls will slaughtered and new bull market will emerge. This may happen within the next 3 months to 6 months or even early as events are suggesting.

  • Anonymous says:

    >For those interested in Global Picture please read the following;

    http://globaleconomicanalysis.blogspot.com/2008/10/s-500-crash-count.html

    If you believe in this Global Consumer led recession then expect Sensex to come to down to 4000 levels.

  • Anonymous says:

    >Simple (foolish) question.

    Are Banks suffering from Liquidity or Solvency ?

    i.e. Have Banks already lent to such borrowers that money cannot be recovered (solvency) or it is because of sudden demand from it’s customers for money that it need temporary financing Loan from RBI/Governement so that assets can be sold in due time and the temporary loan can be paid back (liquidity).

    My suspicion is it is solvency issue. How to recover money from Paan Wala, House Speculators/Builders, Credit Card Defaulters etc.

  • Anonymous says:

    >Hi deepak, have you done any write-ups on gilt funds? if so where? possible to fill us in a bit on these funds and your reasons for looking at them?

    Thanks

    Mark

  • Anonymous says:

    >Three best Gilt Funds are
    1. Templeton India Government Security Fund – Long Term

    2. Birla Sunlife Gilt Plus

    3. ICICI-Prudential Gilt Investment Fund

    For further details log on to http://www.valueresearchonline.com

  • hari says:

    >Hi Deepak,

    I have also moved out of all the Liquid plans to a monthly FMP. I am too scared to even lock in the amount in a long term FMP.
    Also I was checking out the Factsheets the Gilt funds have not given decent returns (8% or more)
    Could you highlight why GILT funds are better at the moment, anything specific behind the move to Gilt funds ?

    Thanks
    Hari

  • Anonymous says:

    >If one looks at the Gilt Funds return for one week, One Month, 3 months, 6 Months and one year, one will notice that in the last 3 months the NAVs of Gilt Funds have risen considerably. One should not get misled by looking at one year returns but see the dynamics. It is clear that Gilt Funds have started rising.

  • Anonymous says:

    >Most of my savings are in HDFC cash management fund (savings fund, not savings plus fund)
    Do you think this fund may loose my money or have issues liquidating?
    Can anyone please advise?

    Thanks.