Kedar Deshpande, Head (Retail Broking), Edelweiss, tells Rahul Oberoi why the Reserve Bank of India (RBI) could further tighten policy rates in the next few months.
How do you see the current rate hike by the apex bank?
The RBI has been facing challenging times with weak trends in the Index of Industrial Production (IIP) and slow down in growth on one side and continued rise in inflation on the other. The apex bank has clearly stated that price stability is the priority and hence further tightening is expected in another three to four months.
Since Diwali, all major banking stocks have dipped. How do you see banking stocks performing in the next four to five months given that you expect further rate hikes?
The banking sector has been one of the biggest losers in this correction. There are concerns with regard to the impact on net interest margins on account of rising interest rates. Going forward, we expect banking stocks to move sideways as the impact of rate hikes would be visible in the results over the next two quarters. We are underweight on banking in our model portfolio.
Where do you see the stock market by the end of 2011? Do you think the stock market could give double-digit return by the end of this year?
Foreign institutional investors (FIIs) have been net sellers since the very start of the year. We expect the second half of 2011 to be a better time for the markets with the sentiment getting better at that time.
|"The RBI has clearly stated that price stability is the priority and further tightening is expected."|