China rate hike impact

The People's bank of China raises the reserve ratio again by 50 bps to be effective 20th June 2011.

The reserve requirement ratio (RRR) is the percentage of money parked by the banks and lending institutions with the reserve bank (People's Bank of China). The measure was taken to curb the lending further and cool down the overheated economy & inflation by bringing down the demand in the system.

　

From Indian Stock Market perspective Tata Steel, Hindalco, Sterlite and other ferrous - non ferrous counters could be under pressure going forward. Gold and silver could also see marginal pressure on stock prices.

However commodity consumers could benefit from softening in the commodity prices.

The hawkish instance of the Chinese reserve bank will have negative impact on the commodity prices and hence could impact the commodity producers.