The busy-season monetary and credit policy signals a switch from soft to neutral stance, an "immediate hardening" of interest rates and upward momentum of rupee in the short-term due to absence of measures to stem its appreciation, according to rating agency Crisil.

The absence of any liquidity enhancement measures marks the inflection point of interest rate cycle and rates are likely to harden immediately, Crisil said in a release in Mumbai on Monday.

The last five policies had some measures to shore-up liquidity, it said, adding the latest policy would have an important implication on interest rate.

A large section of the market had priced in a cut in cash reserve ratio and bank rate and an absence of these measures is likely to see a sell-off in bonds, it said.

The fact that overvaluation of bonds was more at the long-end, the yield curve being flat, the correction was likely to be more at this end, it said and added a rise in yield spread of 15-20 basis points was expected in the immediate term.

The policy's emphasis that RBI does not have an explicit exchange rate target is likely to be construed as a signal that it is comfortable with the recent appreciation and could add to the upward momentum of rupee in the short-term.

The absence of measures to greater convertibility would also have a same effect. However, it makes hedging of forex borrowings over $10 million mandatory and this would affect arbitrage margins for corporate treasuries adversely, it said.

Meanwhile, credit rating agency ICRA said the credit policy reinforces the "feel-good factor" and evokes optimism for fiscal 2004 on certain micro-fundamentals, mainly due to a growth in the agricultural sector.

According to the meteorological department, rainfall in the country for the period ended September 30, 2003, was around two per cent above normal levels. Due to the monsoon, there has been a spate of upward revisions in growth rate, with GDP projected to grow beyond six per cent, it said.

The inflation, for the week ended October 18, shows the wholesale price index-based average inflation at 5.22 per cent, it said, adding, industrial growth in the five months of

FY-04 rose to 5.6 per cent from 5.2 per cent posted in FY-03.

The country's foreign exchange reserves continue to increase and had touched $90 billion, while exports had posted a 10 per cent rise in the first half of FY-04, it said.