Interest Rates At Peak?
The Reserve Bank of India’s decision yesterday to hold interest rates steady has triggered a mini-rally in the Sensex, as well as made economists think that we are close to the end: India’s Rates May Be Approaching Peak, Economists Say.
The Reserve Bank’s policy rates may be “close” to a peak or have already reached that level, according to nine of 11 economists in a Bloomberg survey.
Overseas funds have bought a net $2.65 billion of stocks and $316.8 million of bonds this year. They invested a net $8.94 billion in stocks and bonds in 2006, compared with a record $9.46 billion in 2005.
Singh’s government plans to increase infrastructure spending by 40 percent to 1.34 trillion rupees ($32.7 billion) in the year that started on April 1. Singh is also seeking investments of $320 billion by 2012 to improve roads, airports, power, railways and seaports.
With such large amounts needed for infrastructure development, and the possibility that most of this will be raised via FDI, the bullish case for the Indian rupee can only get stronger.
FYI, here is how the different rates look over the past few years (chart via UTI Bank):
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