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RBI steps may hit home sales, cement, steel volume growth

RBI steps may hit home sales, cement, steel volume growth
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In a research note, rating agency CRISIL said new home sales may decline 400 basis points (bps) and volume growth for steel and cement may shrink about 100 bps owing to the liquidity tightening measures of the Reserve Bank of India (RBI).

In order to stabilise rupee exchange rate against dollar, RBI raised short-term interest rates and restricted amount that banks can borrow under the daily LAF window.

It may be recalled that the Indian rupee depreciated considerably against dollar. On July 8, rupee touched a record low of 61.21 to the dollar.

In the research note, CRISIL said the RBI’s measures would adversely impact car and home sales, while also reducing volume growth for steel and cement companies.

The agency also expects refinancing to be a challenge for companies due to tighter cash conditions, which could prompt more rating downgrades than upgrades in the near term.

Given the challenging environment, CRISIL expects credit quality pressures on corporates to continue. It also lowered India’s growth forecast by 50 basis points to 5.5 percent for the financial year ending March 2014.

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