...Capital inflows likely to be strong, may push up asset prices

Capital inflows are expected to be strong, which may push up asset prices, the Reserve Bank said.

"Reflecting easy global liquidity conditions and both interest rate and growth differentials in favour of India, capital inflows are expected to be strong, which may put pressure on asset prices," the Apex Bank said in its Macroeconomic and Monetary Developments in 2009-10, released here today.

During 2009-10, there was a sharp growth in key asset prices in the country, it said.

This was particularly so in the domestic equity market which registered a phenomenal increase of 81 per cent in prices outperforming many emerging market economies, it said.

"There has (also) been a general upward pressure on housing prices in the recent period," the RBI noted.

Prices in the important segment of residential housing has important implications for the behaviour of general prices and overall macroeconomic and financial stability, it said.

The upward pressure on housing prices...Broadly co-terminates with the rise in stock prices, thus, indicating a generalised asset price pressures," it said.