On a positive note, the CRR was unexpectedly reduced to 4%, providing relief to liquidity pressures. This move triggered a positive reaction in banking sector stocks.
Anurag Mittal, Head of Fixed Income at UTI AMC
FinTech BizNews Service
Mumbai, 6 December, 2024: Here are interesting views of experts from MFs, AMCs, brokerages, other important stakeholders of the economy on decisions, announced by the RBI after today’s MPC meeting:
Anurag Mittal, Head of Fixed Income at UTI AMC:
“The RBI did not let the temporary spike in inflation deviate from monetary easing. The CRR cut is constructive for liquidity and paves the way for rate cut in February once there is better clarity on inflation. We continue to expect 50-75bps of rate cuts in this cycle and remain constructive on duration.”
Siddharth Chaudhary, Senior Fund Manager - Fixed Income, Bajaj Finserv AMC:
“RBI retained its policy repo rate on hold at 6.5% for an 11th straight time. The CRR cut announced was in line with liquidity conditions and market expectations. This will ease deposits rates in coming days.
RBI continues to have optimistic growth target even though it has revised FY 25 forecast down to 6.6%. This assumes Q3 at 6.8 per cent and Q4 at 7.2 per cent, which are still steep targets.
Second, CPI inflation for 2024-25 is revised upwards at 4.8 per cent though Q2 FY 25 forecast is just at 4%.
An increased trade-off between growth and inflation is now faced by the RBI. While growth is being moderated, headline inflation is yet to show significant signs of cooling due to food inflation. The comforting number is lower core CPI which also indicates that there is slack in demand in economy.
So, in the coming quarters, as growth slack becomes more apparent, we continue to expect that policy priorities will be shifted from controlling inflation to supporting growth.”
Gaurav Garg, Research Analyst at Lemonn Market Desk: "The MPC has kept the repo rate steady at 6.5%, meeting our expectation. On a positive note, the CRR was unexpectedly reduced to 4%, providing relief to liquidity pressures. This move triggered a positive reaction in banking sector stocks.
Looking ahead, if inflation comes under control, we could see the beginning of rate cuts in the coming months. Additionally, the energy and infrastructure sectors, which faced challenges in the first half of the year due to an extended monsoon, are likely to experience strong recovery in the latter half."
Akhil Puri, Partner, Financial Advisory, Forvis Mazars in India (the international audit, tax and advisory firm): The RBI's latest monetary policy decisions reflect a careful and strategic approach to navigating the current economic environment. By keeping the repo rate steady at 6.5% and reducing the Cash Reserve Ratio (CRR) by 50 basis points to 4%, the central bank is boosting liquidity and supporting credit flow, which will help sustain economic momentum. The MPC's projection of 6.6% real GDP growth for FY25 reflects optimism, with recovery in H2FY25 driven by strong festive demand and improving rural activity. Despite geopolitical tensions and financial uncertainties, the global economy has shown resilience, which adds a layer of optimism. The RBI's neutral stance highlights its commitment to achieving inflation targets while fostering long-term economic stability.”
Parijat Agrawal, Head of Fixed Income at Union AMC: “The Monetary Policy Committee’s decision to keep the Repo Rate steady while reducing the Cash Reserve Ratio (CRR) by 50 basis points to ease tight liquidity conditions was in accordance with our expectations. The moderation in growth and the persistence of headline inflation are concerning factors that may necessitate timely policy support. Addressing the challenge of stimulating growth is critical and should not be overlooked. Core inflation has consistently remained below the 4% target for nearly a year. Looking ahead, food inflation is expected to ease due to lower commodity prices, a slowdown in demand as seen in GDP numbers, comfortable reservoir levels, seasonal drops in vegetable prices, and higher Kharif harvest. We anticipate a 25 basis points rate reduction in the upcoming February policy.”
