The Reserve Bank of India (RBI) on Friday left the repo rate unchanged at 6.5% for the 7th straight time, while remaining focused on the withdrawal of accommodation to ensure that inflation progressively aligns to the target while supporting the growth.
The policy was on expected lines and turned out to be a non-event for the markets barring the realty sector with stocks gaining up to 7%. Following the policy experts came out with their views on the policy and its impact on equity and bond markets. ETMarkets has collated a few responses as follows:
Santosh Meena, Head of Research at Swastika Investmart
The RBI’s policy decision was unsurprising, as expected, with no adjustments to interest rates, policy stance, or GDP and inflation forecasts. The market response has been muted, shifting its focus to global developments like the evolving likelihood of a US Federal Reserve rate cut in June and fluctuations in commodity prices. Despite this volatility, the Indian market appears to be holding its ground, possibly in anticipation of a pre-election rally.Nifty is currently trading within a range of 22,200 and 22,600. We believe a breakout above 22,600 could signal a move towards 22,800 or even 23,000. Bank Nifty is facing immediate resistance in the 48,200 to 48,600 zone. Overcoming this hurdle could lead to a rise towards 50,000. On the downside, the 47,700 to 47,200 zone is considered a potential support level.
Gaurav Dua, Sr VP & Head – Capital Market Strategy, Sharekhan by BNP Paribas
RBI remained cautious against premature easing as it remains watchful on inflation due to volatile food inflation and higher crude prices but takes comfort from benign core inflation trends. This is a balanced outcome for the equity market. The review of the LCR (Liquidity Coverage Ratio) framework for banks to have strong liquidity management would only strengthen the system. We remain positive on equity markets in the near-to-medium term with real estate, banks, consumer, and engineering/capital goods as preferred sectors.
Deepak Ramaraju, Senior Fund Manager, Shriram AMC
It’s important to note that the timing of the rate cut is linked to the inflation rate reaching 4%. This creates some uncertainty about when the rate cut will happen. The market is concerned about a potential delay in the rate cut, which could cause it to remain range-bound in the near term.
Parijat Agrawal, Head – Fixed Income, Union Mutual Fund
We expect rate cuts in the 3rd quarter of FY 2025, possibly after the US FOMC starts the rate cut cycle. RBI is expected to keep liquidity neutral so that further transmission of higher rates can continue. There is a possibility of modification of the LCR framework going forward which may augur well for bonds.
Esha Khanna, Assistant, Sarla Anil Modi School of Economics, NMIMS Mumbai
The current decision will help manage the seasonal variation of liquidity conditions in the domestic market through a mix of policy instruments viz VRR and VRRR auctions and rupee-dollar movements amid enhanced expectations of the rate cut by the Fed in coming quarters. Bond yield and equity premiums are expected to remain stable in the near term amid anticipation of strong FII flows and reduction in government borrowings in coming quarters.(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)
