As end users are ultimate bearers of the action, banks will be left with no choice but to pass on the hike to borrowers i.e. making loans more expensive.
Currently, repo rate is around 7.5% and reverse repo rate is at 6.5%.
Analysts and bankers expect at least another 25 basis point hike in lending rates around this time.
Though food inflation came down to an over two-year low for the week ended July 9, overall inflation is still hovering close to double digits.
Automobile companies have already witnessed a slowdown, as shown by its first quarter results. Analysts expect that another round of hike may hurt corporate' figures further.
Analysts expect that banks will witness a slow growth home credit. This will hurt the existing home loan borrowers as their interest rate will also increase.
Investors and traders will keep an eye out on policy review. Interest rate-linked sectors such as banking, automobile, property may have an impact. Investors are more cautious about shares of property developers, but are more bullish about banks.
First quarter results of some biggies RIL, HCL, ICICI Bank, Maruti Suzuki, ITC, NTPC, ACC and HUL are still in pipeline. Investors will closely watch results and policy outcome for diversification of their portfolio.