Anil Rego

Founder and Fund Manager at Right Horizons

In December 2023, the annual retail price inflation in India increased to 5.7%, as opposed to the 4.9% recorded in October. Headline inflation is still impacted by food price uncertainty. The MPC is still committed to keeping inflation within the 4 percent target range.

The Gross Domestic Product (GDP) increased by 7.3%, marking the third successive year in a row. The Monetary Policy Committee has maintained the status quo on the repo rate as inflation moderates in a resilient growing economy.

Since inflation is moderating, economic activity is steady and oil prices are lower and India is poised to be the growth engine for the global economy the markets were expecting the repo rate to be unchanged at 6.5%. We believe markets in the near term will now be driven by upcoming earnings season and 2024 elections.

Markets have touched new highs, especially with earnings for the Q3FY24 coming healthy supporting the trajectory. Investors are bullish as they are favouring rate cuts in 2024 which will unanimously boost the equity markets. The banking sector is the most sensitive to changes in rate cycles and has been a major reason for incremental earnings in FY23 and in H1 of FY24 benefitting from the hikes and credit growth being robust and persistent. Prolonged rate cuts will eventually lead to narrowing NIM but we expect rate cuts to begin in the last quarter and hence the trend in the banking sector is likely to continue in FY24. NBFCs will be best positioned to benefit from cuts in rates as credit growth will improve followed by banks. Also, credit-sensitive sectors like auto and real estate will see higher demand.

Divam Sharma

Founder and Fund Manager at Green Portfolio

As we had expected, the central bank has kept the repo rate unchanged maintaining the status quo. This has come following the global cues as food inflation stays high but overall inflation remains stable.

The GDP forecast has been raised for the first quarter of FY25 to 7.2% following how the Indian economy has been growing beyond expectations.

An unchanged repo gave way for some fleeting enthusiasm for the markets but we don’t see much significant impact, particularly in the long run. Equity investors should remain cautious as markets are volatile and this volatility is expected to continue.

Sonam Srivastava

Founder and Fund Manager at Wright Research

With the decision to keep interest rates unchanged, the RBI aims to strike a balance between controlling inflation and supporting economic growth. This steady stance provides clarity and stability for investors and businesses, fostering an environment conducive to investment and planning.

For the financial markets, particularly the bond and equity markets, the unchanged interest rates signal continuity in borrowing costs, influencing investor sentiments. Equity markets may experience a boost as lower borrowing costs encourage corporate investments and consumer spending, potentially leading to higher stock valuations. However, bond markets might exhibit a subdued reaction as expectations for rate cuts are postponed.

In sectors sensitive to interest rate movements, such as real estate and automobiles, the unchanged policy could offer relief by maintaining affordability for borrowers. Additionally, sectors reliant on consumer spending, like retail and hospitality, may benefit from sustained consumer confidence resulting from stable borrowing costs.

Overall, the RBI’s policy decisions are anticipated to provide stability and support economic recovery, although the exact impact may vary across different segments of the economy. Investors and businesses alike will closely monitor subsequent developments to navigate their strategies in response to evolving market dynamics.

Anirudh Garg

Partner and Fund Manager at Invasset

In today’s monetary policy announcement, the Governor of the Reserve Bank of India emphasized two critical points. First, he highlighted the optimistic outlook for India, with robust growth projections and inflation being effectively managed. The decision to maintain a steady monetary stance is driven by a couple of strategic considerations. Firstly, with upcoming elections, it’s imperative to avoid inflationary pressures to ensure economic stability. Secondly, in light of the US Federal Reserve’s decision to maintain its current interest rates, any reduction in rates by India could lead to significant depreciation of the Indian Rupee. This careful approach underscores the RBI’s commitment to balancing growth aspirations with macroeconomic stability, particularly in the context of global financial dynamics.

Chandresh Vithalani

Director Palladian Partners Advisory LLP

“The Reserve Bank of India’s decision to maintain the Repo rate at 6.5% for the sixth consecutive time, alongside the moderation of inflation to 5.5% from April to December 2023, serves as a cornerstone for reducing market volatility and enhancing affordability within the real estate sector.

“This move reflects a deep understanding of the need for economic stability, which is paramount for the growth and confidence of both developers and investors. By keeping the Repo rate steady in the face of global uncertainties, the RBI has provided a predictable financial environment, allowing for more strategic planning and investment in real estate projects.

“Furthermore, the decrease in inflation rates brings into focus the critical aspect of affordability, making home ownership more accessible to a larger segment of the population. With CPI inflation projected to stabilize at 5.4% for FY24, and an even more optimistic projection of 4-5% for the current quarter, we are looking at a robust real estate year ahead.

This environment not only boosts buyer confidence but also stimulates sustainable growth in the real estate market, ensuring that investments made today will yield positive outcomes in the future”

Sunil Nyati

Managing Director of Swastika Investmart

The RBI keeps interest rates unchanged, as expected, but the tone is still cautious about inflation, and there are no indications of an interest rate cut in the near term, while the market was expecting a dovish stance after the government kept the fiscal deficit at 5.1% in the budget. The market didn’t react much to it, but the bias is bullish, so we can expect the banknifty to catch up in the medium term.

Technically, 22125 is acting as an immediate hurdle; above this, we can expect a rally towards 22222 and 22350 levels. On the downside, a 20-DMA of 21670 is a strong support level.

Banknifty has formed a bottom 45500–44800 zone; however, a 20-DMA of 46300 is an immediate resistance; above this, we can expect a rally towards the 46800–47000 zone.

RBI asks lenders to issue a ‘Key Fact Statement’ to all retail & MSME borrowers disclosing processing fees & additional charges, said Das.

Atul Parakh

CEO of Bigul

Following the MPC meeting on February 8th, the repo rate has been kept unchanged at 6.5%. This decision surprised economists, who had expected the MPC to raise rates in order to combat inflation. However, the MPC stated that it is concerned about the impact of higher rates on economic growth. There might not be a significant reaction from the market, and investors may adopt a wait-and-watch approach. Banking, Finance, and Consumer durables are likely to benefit from unchanged rates, whereas technology, healthcare and utilities will be less affected.

Dharmendra Raichura

VP & Head of Finance at Ashar Group

The consistent maintenance of the repo rate at 6.5% for the sixth consecutive time reflects the central bank’s commitment to achieving the 4% Consumer Price Index (CPI) target. This stability in monetary policy is crucial for fostering economic predictability and sustaining investor confidence. An unchanged rate may seem static, signals a strategic approach to balance inflation control with economic growth. As a real estate developer, we acknowledge the importance of a steady interest rate environment, as it influences borrowing costs and subsequently impacts the property market. The resilience in the repo rate provides a conducive atmosphere for sustainable development.

India’s services exports remained resilient from October to December this year driven by software business and travel services.

The net balance under services and remittances is expected to remain in large surplus, partly offsetting the trade deficit.

India’s current account deficit declined to 1% of GDP in the second quarter of 2023-24 from 3.8% in the same quarter a year ago, said Das

The domestic financial system remained resilient with healthy balance sheets of banks and financial institutions, said Das.

RBI Governor: The governance from NBFCs improving while the financial system is resilient.

Indian rupee has remained stable compared to both its emerging market peers and even a few advanced economies, said Das. In terms of the coefficient of variation, the Indian rupee exhibited the lowest volatility in 2023-24 as per the data available between April to January of the current financial year.

The RBI remains nimble and flexible in its liquidity management through two-way main and fine-tuning operations in both repo and reverse repo, said RBI’s Das.

Although retail inflation in India currently falls within the Reserve Bank of India’s (RBI) comfort range of 2-6 per cent, it exceeds the ideal scenario of 4 per cent. As of December, it stood at 5.69 per cent. Das stated that the Monetary Policy Committee (MPC) also decided, with a majority of 5 out of 6 members, to prioritise the withdrawal of accommodation to gradually bring inflation in line with the target while still supporting growth.

RBI took six VRRR auctions from February 02 to February 07 in FY24 to absorb surplus liquidity, said RBi Governor Shaktikanta Das.

After the Interim Budget 2024-25 on February 1, 2024, this is the first bi-monthly policy. Das mentioned that Indian rupee saw lowest volatility in 2023-24, exchange rate has remained fairly stable.

Mukesh Kochar

National Head of Wealth at AUM Capital

The MPC outcome is on expected lines only. RBI will continue to focus on aligning inflation towards its target of 4% which is expected to be attained by the June-August quarter. Inflation expectations for Q4 and Q1 have also been reduced. So the market may discount a rate cut possibility during the end of the 2nd quarter or 3rd quarter. The tight liquidity in the banking system may continue for some more time as the focus is on bringing down inflation towards 4%. Increased public debt globally has been cited as a concern and which is very important.

“The CPI Inflation target is yet to be reached,” said Das

Inflation has seen a significant moderation from the highs of the summer of 2022. In the last two years, the MOC has prioritised inflation over growth, said Das.

RBI Governor Shaktikanta Das said that monetary policy has to remain vigilant to successfully navigate last mile of disinflation and also specified that Monetary Policy Committee will carefully monitor any sign of pressure on food prices.

“Increasing geo-political tensions are also leading to supply chain disruptions and price volatility in key commodities, especially crude oil,” said Das

Core Inflation moderated to a four-year low of 3.8% in December, said Das.

• Real GDP growth for FY2024-25 is projected at 7.0 percent (unchanged) Come from Sports betting site VPbet

• Inflation for FY2024-25 is projected at 4.7 percent (versus 5.2 percent)

GDP Growth for FY25 in

Q1: 7.2% from 6.8%

Q2: 6.8% from 6.5%

Q3: 7% from 6.4%

Q4: at 6.9%

FY25 CPI to be seen at 4.5%, said Das

RBI Governor MPC to carefully monitor any signs of generalisation of food inflation. Global growth is expected to remain steady in 2024. Financial markets are volatile as participants adjust expectations