Indian financial market largely remained orderly: RBI

MUMBAI: The Reserve Bank today said the Indian financial market largely remained orderly despite global uncertainties and challenges posed by persistent inflation.

"Global uncertainties as well as domestic developments impacted Indian financial markets. The Indian markets, however, remained largely orderly, despite the challenges posed by persistent inflation and high current account deficit," RBI said in its report 'Macroeconomic and Monetary Developments in 2010-11' released today.

Asset prices generally remained range bound. Equity markets witnessed good buying interest from FIIs during July- November 2010 followed by some correction along with greater volatility, it said.

The apex bank further said that interest rates firmed up responding to monetary signals and banks progressively passed on the increased costs in the form of higher lending rates.

It further predicted that with the rise in global equity market there may be shift in investors' preference away from the Emerging Markets Economies (EMEs) to those of the advanced economies, particularly the US.

Taking note of geopolitical risk in the Middle East and North America (MENA), RBI further said, "the financial markets need to brace up to the geopolitical risks in MENA, default risks in the Euro zone and movements in cross-border capital flows."