The Reserve Bank of India has moved swiftly to “maintain the domestic macroeconomic and financial stability in the context of the global financial crisis”. First, by slashing the cash reserve ratio by 150 basis points to 6.50 per cent on Oct 11 and today, by reducing the repo rate by 100 bps to 8 per cent.

The move comes just three days ahead of half-yearly monetary policy review on Oct 24.

The Indian central bank has already taken a number of measures over the last one month to augment domestic and forex liquidity.

However, the global financial situation continues to be uncertain, and India too is experiencing the indirect impact as reflected by some signs of strain in our credit markets in recent weeks, the RBI said.

On Sunday, the South Korean government announced a rescue package for its financial system by assuring $100 billion of lenders' foreign-currency debts and providing $30 billion in US dollars to banks.

Markets are reacting positively as and when authorities announce financial relief packages, but the positive effect is always short-lived