On the domestic front, economic slowdown is expected toaccelerate, with higher lending rates pulling down demand for goods andservices further.

The central bank hiked key policy (repo) rate by 25 basis points to 8.25 per cent. This is the 12th straight rate hike effected by the monetary authority since March 2010, in its frustrating war against high inflation. The market, meanwhile, had factored the rate hike in. Most observers stated they expected it.

The first quarter GDP number cloaks faultlines in the economy, especially in construction activity.

SBI rules out re-launching teaser rate loans, days after its private sector rivals HDFC and ICICI introduced special home loan schemes with interest rates fixed for initial few years.

RBI has emphatically staked its claim to lead the fight against inflation by reminding everyone that it is the only institution in the country with a formal mandate to deal with it. The result has been 11 policy rate increases since March 2010, and a strong chance of one more on September 16, when the next policy announcement is due.

Final guidelines will be issued and the process of inviting applications for setting up of new banks in the private sector will be initiated after receiving feedback, comments and suggestions on the draft guidelines.

Monetary policy's biggest impact tends to be on core inflation by compressing demand, and the upward movement over the last few months in core inflation is what RBI has been trying to check through interest increases.

The more-than-expected rise in June IIP data comes on the heels of largely negative global developments that threaten to eventually affect the Indian economy. Despite the adverse implications of global factors on India, RBI is likely to continue with its policy of increasing rates in the near future as the domestic inflation rate will increase for a while longer.

The government on Tuesday allowed foreign investors, in its newly created QFI category, to invest up to $13 billion in equity and debt schemes of mutual funds, a move aimed at enhancing depth in the capital market.

Prime Minister Manmohan Singh gives a two-year extension to RBI Governor D Subbarao beyond September.

Banking stocks bore the brunt of a steep hike in key rates: SBI, the country's largest bank, plunged 2.86 per cent, largest private lender ICICI Bank fell 3.13 per cent, HDFC Bank 1.44 per cent, Yes Bank 3.98 per cent and PNB 2.70 per cent.

Loans are set to get costlier as the Reserve Bank of India hikes the short-term lending and borrowing rates sharply by 50 basis points for the third time in three months to tame high inflation.

The Reserve Bank on Monday said it expects the farm sector growth to stay \"broadly on track\", though it underlined some concerns about the weakening trends in the monsoon pattern.

The banking sector may not be the hottest spot at present, but watch out for cues on when to invest in it.

Despite domestic macro economic headwinds, the markets took clues from global developments. Apart from the Sensex and Nifty, most of the other indices also gained around 2-3 per cent on Friday.

The banking sector may not be the hot spot to be in right now, but watch out for cues on when to get in.

Though there may be some rough patches in the near-future, the long-term prospects for the MONEY TODAY-Value Research Lifestage Portfolios remain strong.

Headline inflation went up to 9.06 per cent in May on the back of rising manufactured products and petrol prices.

Though the rate hike will pinch your pocket, the RBI's decision to increase interest rate on savings bank deposits from 3.5% to 4% should come as a relief.

The 30-share Bombay Stock Exchange barometer, which shed 186.25 points in the previous session, fell further by 207.68 points to 18,137.35 on Tuesday.