CRR Cut by RBI Before the Policy Meet

The tight liquidity conditions have warranted RBI to announce the CRR cut by 75bps yesterday and this releases Rs48000 crs into the system with a lot of gain for the banks to have increased profits. It had become imperative as the financing window of RBI had touched daily short term funding facility of RS 180,000 crs on average. The advance tax payable by March 15th would have sucked up Rs 15000 crs. My previous reports have already mentioned that March is a tough month for liquidity always and this time more so. There would however much easing in liquidity in April as always. These are the clear indicators that market will maintain an upward bias. So, my advice for not shying away from investing in equities must have kept you on right track.

The Greek default has been more or less taken care of by the provision of 130 billion Euros which have enabled the Greek govt to reduce debt by almost 53%. So the trouble has been warded off unless more of such demands rise up and the burden of it is refused by the mightier economies of Europe. Let’s hope that the situation is pretty long time away if at all it has to come. The Greek bondholders had 206 billion Euro worth of securities and now have sigh of relief that precipitous outcome has been averted. If you recall , I have maintained throughout that the European crisis will have to be tackled by infusion of money artificially created. It suits everybody as it spreads the burden all over. But this also indicates that the wiser ones will resort to ways that they never ever encounter a situation where they have to make sacrifices along with the majority. This will cast tension in relations between the nations and will make some powerful groups to device means to take advantage of the brewing troubles or to keep at least themselves immune.

In light of above I expect some concrete moves in the in the International fora to take up the issue for discussion . The monetary system which allows creation of money without an obligation to have assets to back is bound to collapse when every nation on the earth has been compromising . Before a rational and just system is brought into place or even preparatory moves are made , there would be great turmoil in the financial and economic spheres around the world . The asset pricing , the financial flows and the investment priorities will change so fast as to give very jittery times to all players and even to the ordinary people. Please just not take all this as prompting you to take any action just now. Its going to be the same as has been going on for quite some more time and there would be enough warning before the shelters becomes necessary.



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