RBI Mitigation to keep all policy rates unchanged to support a fragile economic recovery, support sufficient liquidity, and keep borrowing costs low to encourage investment by both states and businesses Repeated the attitude.
Analysts, however, saw some signs of tightening earlier Shakti Cantadas‘speech.
“The RBI has marked the beginning of a gradual” tapering “of liquidity by extending the VRR auction period, which is a widely expected measure in the market. The RBI has refrained from committing to GSAP amounts to support bond yields, but it should provide comfort to the bond market by focusing on “the orderly evolution of the yield curve,” Kotakuma Hindra said. EVP Churchill Bat, EVP Debt Investment Officer for Life Insurance, said.
He expects a 10-year G-Sec to trade in the short-term range of 6.20-6.40 percent.
The stock market supported RBI’s stance and bought according to policy statements, but the bond market did not buy RBI’s inflation forecast. India’s 10-year bond yield reached 6.32%, the highest in 18 months.
The RBI said it expects inflation to fall within the mandatory 4 ± 2 percent in the coming months. CPI inflation is projected to be 5.7% between 2021 and 22. With 5.1% in the second quarter, 4.5% in the third quarter and 5.8% in the fourth quarter, the risks are almost balanced. CPI inflation for the first quarter of 2022-23 is projected to be 5.2%. We also maintained the GDP growth guidance for FY2010 at 9.5%.
“As we further curtailed the front line of inflation, MPC decided to support growth by maintaining the status quo,” said M Govinda Rao, Chief Economic Advisor at Brickwork Ratings.
However, some are looking to raise rates by the February meeting. Morgan Stanley also predicts at least four rate hikes in the 2022 calendar starting in February.
“In the short term, we don’t think the RBI is in a hurry to normalize liquidity conditions and reverse reporate,” said Sbodyp Laxit, senior economist at Kotak Institute Equity. increase.
What should investors do?
Does RBI’s MPC omission require action from debt fund investors? not much. Analysts and fund managers believe they need to stick to short-term and medium-term products.
“Investors seeking asset allocation to fixed income are advised to maintain short / mid products. Corporate bond and bank and PSU fund categories. Dynamic bond category, depending on willingness to handle yield volatility. There may be some allocations to. Investors with short term (up to 1 year) should allocate to ultra-short term and low duration funds. ” Says.
On the equity side, Naveen Kulkarni, chief investment officer of Axis Securities, said low interest rates during the holiday season should boost consumption in housing and its auxiliary sectors. “We remain positive about equities such as HDFC and CanFin Homes, and major banks such as SBI and ICICI Bank,” he said.
How others evaluated the policy announcement
Kotak Mahindra AMC, Group President and MD, Nile Shusher
It aimed to achieve multiple objectives, including supporting growth, curbing inflation expectations, stabilizing financial markets, appropriate and appropriate liquidity, forming a yield curve, and smooth passage of government borrowing programs. It is a “main hooner” policy.
Amit Tripathi, CIO-Bond Investment, Japan Indian Mutual Fund
NS RBI policy Focused on the absorption of liquidity as the first step in normalization, it is driven primarily by domestic considerations, a gradual and non-stop approach. Some disappointments with the complete withdrawal of the G-Sap calendar. Repeating the yield curve as a public good gives a sense of security to support through twists and OMOs. A curve to stay within range and maintain a steep slope in the short term.
YES Ambani, Senior President and Institutional Equity Officer, Securities
The termination of RBI’s GSAP is in line with the global central bank’s policy normalization process. A gradual decline in bond purchases could be followed by a rate hike. In fact, at the December policy meeting, we believe the reverse repo rate is likely to rise by 15-20 bps. The repo rate movement will probably dominate by the end of this year, and the RBI purchase period will continue until supply and demand stabilizes.
HDFC Securities, Head of Retail Research, Deepak Jasani
The RBI has not suggested raising interest rates, but a reverse repo rate could be raised in December, indicating the start of policy normalization. The stock market will be temporarily eased by the dovish tone, but we recognize the possibility of future rate hikes.
YES Bank, Chief Economist, Indranil Pan
That way, I think the RBI will be open to adjusting the reverse repo rate to reduce the size of the corridor. Overall, the RBI believes it leaves room for an increase in reverse rate repo in its upcoming December policy. Changes in the repo rate for the current fiscal year are not expected and can only be addressed during the 22-23 year.
The RBI’s “main hooner” policy suggests a rate hike. What should investors do?
https://economictimes.indiatimes.com/markets/stocks/news/rbis-main-hoon-naa-policy-hints-at-rate-hike-ahead-what-should-investors-do/articleshow/86864178.cms The RBI’s “main hooner” policy suggests a rate hike. What should investors do?