Analysts View: How will RBI repo rate hold, stance change affect markets?
Source: Business Standard
RBI meeting today: The Reserve Bank of India’s (RBI) today, October 9, in its policy decision kept the repo rate unchanged at 6.5 per cent but changed its stance to ‘Neutral’ from ‘Accommodative’ which is largely assumed as a signal for rate cuts soon. As per thr RBI Governor Shaktikanta Das, the growth-inflation matrix is well balanced and conditions are favourable for attaining the goal of durable low inflation in the near future.
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Meanwhile, the MPC has cut its Consumer Price Index (CPI) inflation forecast for the first quarter of fiscal year 2025-26 (Q1FY26) to 4.3 per cent from 4.4 earlier.
Market participants are largely anticipating a rate cut soon after RBI’s change in stance. Experts expect banking stocks to benefit from the rate cut going ahead and bond yields to ease.
Arsh Mogre, Economist Institutional Equities, PL Capital – Prabhudas Lilladher
Vaibhav Porwal, Co-founder, Dezerv
The MPC’s decision to keep rates unchanged aligned with our outlook and expectations. There is no immediate risk to growth, which is positive for the equity markets. While geopolitical tensions could affect inflation through commodity price fluctuations, overall liquidity remains stable, the shift from an accommodative stance to ‘Neutral’ opens up the chances of rate cut in the next MPC meeting in December. This outlook is favourable for equity markets, the next policy meeting will be crucial, with a strong possibility of rate cuts that may bring big changes.
Apurva Sheth, Head of Market Perspectives & Research, SAMCO Securities
The decision to keep the repo rate unchanged is a prudent move, aimed at stabilising inflationary pressures and supporting economic stability. With one uncertainty out of the way, the market participants will now start focusing on earnings season. We continue to have a bullish stance on the markets and expect the markets to reach the previous highs going forward.
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services
Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS
The RBI has maintained its growth and inflation estimates with minor tweaks. We believe a potential rate cut could be expected in Feb ’25. Given the increasing anticipation of a rate cut in the upcoming meetings, margin pressures could act as a dampener for the bank’s return on assets (RoAs).
Vipul Bhowar, Senior Director, Listed Investments, Waterfield Advisors
Lakshmi Iyer, CEO-Investment & Strategy, Kotak Alternate Asset Managers Limited
The RBI has tried to maintain a balanced tone, which means it’s not a given that we see a rate cut in December policy – looks like it will be more data dependent. With inflation well within RBI’s contours, and growth fumbling a tad, the outlook on rates remains constructive. We expect bond yields to ease in the coming months and would continue to urge investors to enhance fixed income duration.
First Published: Oct 09 2024 | 1:34 PM IST
