Will petrol price and CRR cut help

Long awaited petrol price and CRR cut has been declared.But they were expected.Govt has not slashed the rates more than what the market has been expecting.So its almost sure that there may not be a rally on Monday morning reacting to these steps by government.

With inflation already coming down and seen at 8.2% this week,it can cool down to still lower levels once the impact of reduced petrol is felt.That will give flexibility for the government to reduce the interest rates further.With elections in few months ,government would try max to please the public by reducing the petrol prices and interest rates further.

But effects of all these cuts would not be seen immediate.It would take time for CRR cut to be reflected in the banks liquidity and then the business.The exact time frame may not be guessed but it might be around two quarters.Till which we would see all the companies facing tight liquidity problem and hence would end up reporting poor and poorer results for the coming months.

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