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RBI Hikes Repo Rate by 50bps,CRR by 25bps

The RBI has tightened money supply in the Indian markets by raising the CRR by 25 bps and in a surprise move raised the repo rate by 50 bps taking it to 9.0% [This is the rate at which banks will borrow from RBI] We had expected a 25bps repo rate hike.

GDP growth projection for 2008-09 revised from the range of 8.0-8.5 per cent to around 8.0 per cent, barring domestic or external shocks. While the policy actions would aim to bring down the current intolerable level of inflation to a tolerable level of below 5.0% as soon as possible and around 3.0 per cent over the medium-term, at this juncture a realistic policy endeavour would be to bring down inflation from the current level of about 11.0-12.0 per cent to a level close to 7.0% by March 31, 2009.

The Indian Stockmarket has reacted sharply to the news and the BSE SENSEX was down 500 points. Banking and Real Estate Stocks are the worst Hit.
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