Investors require confidence boost

Notwithstanding the several measures by the Government to stabilise the economy and boost confidence among the people, the market seems to be unfazed by these efforts and continues to remain turbulent. The periodic crashes in the stock market, combined with the fact that our GDP, growing at only 5.3 per cent, registered a six-year low in the third quarter of the current financial year, have had a profound psychological impact on the people. As a result of which many have already pressed the panic button and the sentiment of the market is anything but jolly.As a measure to induce fresh impetus and to maintain liquidity in the system, the Reserve Bank of India has slashed the Repo Rate and Reverse Repo Rate by 50 basis points to five per cent and 3.5 per cent respectively with immediate effect. But how much the customer will benefit from the reduction in the borrowing cost of banks remains a debatable issue, unless the banks individually decide to pass on the benefits. Also, it remains to be seen how the reduction in these financial rates will fuel demand in an economy which is reeling under the impact of the global financial meltdown. This is the third time in the current fiscal that the Reserve Bank of India has slashed the Repo Rate, twice by 100 basis points from 7.5 per cent to 6.5 per cent and then to 5.5 per cent. The Reverse Repo Rate was lowered from six to five per cent, and then to 4 per cent, 100 basis points each time.It wasn’t long ago that the real estate market was booming, and despite the soaring prices, people never hesitated in investing in property. But now, even with home loans becoming cheaper, investing in property is the last thing on the minds of investors. This is essentially because of the fact that even though India has fared the onslaught of the global economic crisis relatively well, there have been lay-offs in certain sectors, especially those dependent on the fortunes of the export market. And it is this that has created a fear in the minds of the people, which in turn is being reflected in the stock market with investors tightening their belts. Adequate steps can be taken by the Government and the RBI to mitigate the present liquidity and credit crunch, but to remedy the confidence crunch among investors will require much more than just slashing of lending rates. Until then, the status quo will remain undisturbed and the volatility or the non-volatility of the market will do precious little for the investor.