Indian Investors Run For The Exits As Central Bank Plans Yet Another Rate Hike

Duvvuri SubbaraoRBI Governor, Duvvuri Subbarao

Photo: AP

China’s not the only BRIC with a serious inflation problem. India’s is out of control, with both food and fuel prices soaring. Now the government has to act to tame the country’s 7.5% inflation rate.The Reserve Bank of India is expected to increase its key rate by 0.25% on January 25 pushing the figure to 6.50% by the end of the month, according to CNBC TV-18. Analysts believe the rate could jump another 50 basis points over the year, sending rates to 7% in 2011.

The RBI already tightened control through 2010, increasing rates by 1.5% to curb inflation but future rate hikes have spooked investors.

India’s stock market took a hit on Wednesday in anticipation of rate hikes. The BSE Sensex dropped 197 points, while the NSE Nifty index reflected a 66.55 point drop, after investors sold stocks likely to be affected by interest rate hikes according to the Economic Times. Realty, auto, bank and capital good stocks weighed the markets down.

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