Reacting to the CRR cut, Mr Pramit Brahmbhatt, CEO, Alpari Financial Services (India), said: "A cut in the CRR would ease banking system liquidity that has been far tighter for the whole of last year. More liquidity in the system would result in more savings, investment and spending, which is better for economic growth.

"It’s positive news for the equity markets and the rupee which has seen terrible pain since last 6 months. The recent developments in global markets and good economic data from the US lately would add further steam to asset classes.

"Today’s policy decision will surely have a positive impact on the equity markets as approximately Rs 32,000 crore of liquidity has been infused into the system, positive equity market markets would definitely help the money markets in a short term. In the long term, economic growth and inflation remains a problem for the Indian economy, we expect rupee to strengthen for a while but the long term trend would depend on global fundamentals and economic health of the country."

Dr Arun Singh, Senior Economist, Dun & Bradstreet India, said: "In view of the rising downside risks to growth and upside risks to inflation, the RBI kept the repo rate unchanged as widely anticipated. The downward revision to growth for FY12 from 7.6 per cent to 7 per cent by the RBI highlights the concerns to growth. The RBI is likely to continue to hold the repo rate until April 2012 as upside risks to inflation still persists.

"While the cut in the CRR would ease the flow of credit to the productive sectors, it might add to the inflationary pressures as the growth in money supply still remains in line with the RBI’s indicative trajectory.

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