RBI Monetary Policy: Industry Outlook

The policy clearly focuses on managing inflation and reviving the economy: George Alexander Muthoot, Muthoot Finance Limited

With the overall economy showing acceptable levels of inflation, the second consecutive rate cut of 25 bps is in line with our expectations. The policy clearly focuses on managing inflation and reviving the economy.

India Inc has been patient equally with the regulator and the relief on the cost of funds would help them to improve financial health and plan for the next leg of growth.”

There was space for a further cut down in the rates: Rohit Poddar, Joint Secretary , NAREDCO West / Poddar Housing and Development Limited

The actual inflation has stayed below than projected since February so there was a space for a further cut down in the rates. This is an election year and we can expect transient policies by the authorities due to the ambiguity over the possible policy changes by the newly elected government. This rate cut will affect the buying sentiments in a roundabout way as it is likely to make home loans cheaper. It will be a buoyant Gudipadwa for the sector.”

Repo rate cut in line with expectations: Lakshmi Iyer, Kotak Mahindra Asset Management Company-

The benchmark repo rate cut (6% from 6.25%) at the India RBI MPC meeting is broadly in line with expectations. The RBI also seems concerned on likely impact of global slowdown on domestic growth. In line with this thought, the RBI has revised the GDP growth outlook for FY 2020 from 7.4% to 7.20%. The CPI inflation forecast also has been lowered to 2.9-3.0 % in H1:2019-20 and 3.5-3.8 % in H2-2019-20,with risks broadly balanced. The bond markets had already baked in such an outcome and hence the response post policy was quite tepid. Another key factor influencing markets is the liquidity in the banking system. The RBI had announced a $5bn INR USD FX swap wherein banks would get INR in lieu of swapping USD with the RBI for a period of 3 years. This we believe is a masterstroke from a liquidity injection perspective and such continued measures would certainly augur well for the fixed income markets. Going forward, the general elections in India would assume significance and markets would continue to watch out for cues emanating thereof. As such, India fixed income yields currently are offering a compelling carry to be availed of by domestic and foreign investors alike.