We feel a 25-basis-point hike in the repo and
reverse repo rates may be on the cards. All the current indicators,
which the Reserve Bank of India (RBI) normally considers, are above
their target zone or rate. This increases the likelihood of another
rate hike. In a recent poll conducted by Reuters among the top
Indian banks and investment companies, almost all voted for a hike
in both the repo and the reverse repo rate in the forthcoming policy
review meet on January 31, 2007. The market looks to be ready for a
25-basis-point hike in the key rates. However any higher measure of
hike could come as a surprise and affect market
sentiments.
