Lowering rates at this time also carry the risk of affecting deposits, as banks will have to rework their deposit rates considering that the lending rates have already been affected.
Even as market rates have fully reflected the rate cuts, companies are not necessarily in the mood for borrowing, as they face a slump in consumption demand and investment in the country
Global slowdown adds to the worries, as any improvement in Indian economy is only expected to start after 4-6 months, say experts
The lowering of rates by the Reserve Bank of India (RBI) failed to lift the markets, with benchmark indices ending 0.3 per cent lower. Experts said the market had alrerady priced in a 25 basis points (bps) cut in the policy rate and the central bank maintaining a neutral stance did little to cheer investors. The benchmark Sensex on the BSE closed at 32,476.74, down 98.4 points or 0.3 per cent. On the National Stock Exchange, the Nifty 50 index fell 33.15 points or 0.3 per cent to end at 10,081.5. A day earlier, both indices had closed at all-time highs."This was almost a copybook event, where the Street expected 25 bps and the RBI governor delivered a 25 bps cut," said Motilal Oswal, chairman, Motilal Oswal Financial Services. "The markets are overheated but reluctant to fall, with a huge pile of cash getting built in the system and waiting to be deployed, that will act as a shock absorber at every weakness. We think long-term money should be committed at these levels as well. Barring