gfiles magazine

May 10, 2012

Caught in uncertainties

dr gs sood
Caught in uncertainties
The 50 basis point cut in the cash reserve ratio (CRR) by the Reserve Bank of India on April 17 came as surprise and brought widespread cheer to the markets. However, the bullish mood was short-lived and the markets corrected sharply thereafter, pointing to the concerns that remain alive. The latest addition in the long list of such concerns is the confusion with regard to the General Anti Avoidance Rules (GAAR). GAAR has, in fact, dampened the mood of foreign institutional investors (FIIs), especially hedge funds and has led to a significant slowdown of inflows since Budget Day.
There is no denying the fact that the rise in the markets witnessed during the first three months of this calendar year was mainly driven by the liquidity supplied in part by the European Central banks’ long-term refinancing operations. However, it is equally true that the Indian markets have shown great resilience by not correcting sharply to any contagion from Europe or other parts of the world.....

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