PremiumThe RBI monetary policy committee (MPC) decided to keep the policy repo rate unchanged at 6.50 per cent and other policy rates were also kept unchanged. "The monetary policy committee decided unanimously at 6..50 per cent with a readiness to act if the situation so warrants," Das said. The RBI Governor also said that the withdrawal of accommodation and that the repo rate hike has been paused only for this meeting.
Ram Raheja, Managing Director at S Raheja Realty said, “RBI's prudent choice to hold off on raising rates is a welcome move after consistent raise in repo rate in the last few cycles. The realty sector was hoping for a pause as the cost of construction has been consistent. The consumer sentiment within the residential real estate segment will witness a further uptick. While the industry has been witnessing growing demand, further hike in rates could dampen the deal within few segments. Luxury homes will see even better demand with this move as it will give high-ticket buyers and investors increased confidence and incentive to buy."
Divam Sharma- Founder at Green Portfolio PMS said, "Banking sector will witness some short-term relief rallies as the global banking crisis fears wane. Now on a macro level, we could see FPI’s unwinding short-sell position over the coming months. Subsequently, we should also start seeing FPI money flowing back to Indian markets as the US fed rates peak and rate cuts get priced into the markets. The RBI mentioned the stability of the Indian rupee as a focus area along with a relatively bullish current account deficit forecast for FY24 – this bodes well for our currency. Secondly, let’s not forget that the RBI now sits on a comfortable USD 600 Billion+ forex reserves despite the fall in US treasuries."
Uday Kotak said, “Focus on Financial Stability. Rate pause without change in stance. Global banking fragility on every Central Bank’s mind in this viral digital world. While Indian financial system is in good shape, let’s 'be not slack and be diligent'!"
Indian shares reversed early losses today, after the RBI kept key policy rates unchanged "to assess the progress made so far" in tackling inflation. The Nifty 50 was up 0.30% at 17,610.20 as of 11:01 am, while the S&P BSE Sensex rose 0.32% to 59,882.93. Both the benchmarks had fallen 0.3% ahead of the RBI's rate decision.
On the MPC Repo rate decision, Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA Ltd said, "Financial stability concerns appear to have pre-empted a pause as the MPC assesses the impact of its cumulative 250 bps of rate hikes. If inflation does not fall in line with the MPC's assessment for Q1 FY2024, another hike could be in the offing, especially if the financial stability situation stabilises."
RBI governor Shaktikanta Das has proposed to expand scope of United Payments Interface (UPI) by permitting operations of pre-sanctioned credit lines by banks through UPI. This initiative will encourage innovations, he said while announcing the bi-monthly monetary policy.
The RBI MPC surprised with a pause on Thursday but emphasised that the path ahead will be nimble to address evolving inflationary risks and maintained its hawkish stance. Tone on growth was upbeat, validated by a small upward revision to the FY24 growth target. Oil projection was cut, besides factoring in the assumption of a normal monsoon. With policymakers highlighting risks to global financial stability, the tightening cycle has likely slipped into an extended pause, barring unexpected shocks. Beyond anchoring inflationary expectations, the impact of tighter monetary policy on supply-side shocks, especially poor weather conditions, is limited, instead requiring administrative measures and fiscal support.
The central bank said its policy stance remains focused on "withdrawal of accommodation", signalling it could consider further rate hikes if necessary. The pause in rate hikes is "for this meeting only", said RBI Governor Shaktikanta Das.
Indian shares reversed early losses on Thursday, after the Reserve Bank of India kept key policy rates unchanged "to assess the progress made so far" in tackling inflation. The Nifty 50 was up 0.15% at 17,582.95 as of 10:14 a.m. IST, while the S&P BSE Sensex rose 0.18% to 59,795.93. Both the benchmarks had fallen 0.3% ahead of the RBI's rate decision.
“The RBI Governor's announcement regarding the projection of inflation and GDP growth for FY24 shows a cautious approach towards the country's economic recovery. The focus on the gradual and sustainable ‘withdrawal of accommodation’ is essential for ensuring that the current growth momentum is maintained in the long run. The decision to maintain the repo rate unchanged is a positive sign for the banking and NBFC sectors, and it is expected to benefit other sectors such as real estate and infrastructure. However, the persistent inflation and global banking crisis remain areas of concern, and it is crucial to monitor the overall impact of the past rate hikes," said Sonam Srivastava- Founder at Wright Research- an investment advisory firm.
The rupee declined against the US dollar after the RBI unexpectedly kept the repo rate unchanged. The rupee declined to an intraday low of at 82.06 per US dollar versus 81.88 before the RBI policy announcement.
RBI marginally raises GDP growth projection for FY24 to 6.5 per cent from earlier estimate of 6.4 per cent.
India government bond yields dropped today, with the benchmark bond yield crashing to its lowest in nearly seven months after the RBI maintained status quo on policy rates. The 10-year benchmark bond yield dropped to 7.1469%, its lowest since Sept. 15, immediately after the policy decision. It was ay 7.2857% before the decision. Yields however were off their day's low, after Governor Das said the pause in rates was for this policy meeting only.
Nifty, Sensex trade in the green with marginal gains after RBI decided to hit the pause button on rate hikes.
Governor Das said that the GDP grew 7 per cent in 2022-23, indicating the economic conditions were resilient.
Global economy facing renewed phase of turbulence, says RBI Governor Shaktikanta Das.
“We are witnessing unprecedented uncertainties in geopolitics and economy," said Governor Das.
RBI to remain focused on withdrawal of monetary policy accommodation, says Governor Das.
2023 began on a good note, says RBI Governor Das.
With inflation continuing to remain sticky, the RBI on Thursday decided to keep repo rate unchaged. The central bank has already increased repo rate by a total of 250 bps since May 2022.
Equity benchmark indices declined in early trade on Thursday as investors remained cautious ahead of the Reserve Bank of India's monetary policy review and weak trend in global markets. The 30-share BSE Sensex fell 165.16 points to 59,524.15 after a weak beginning. The broader NSE Nifty declined 45.5 points to 17,511.55.
The RBI's Monetary Policy Committee meeting will conclude, and the decision will be announced by RBI Governor Shaktikanta Das on Thursday. Read full report here
The rupee was on the stronger side of 82 per US dollar with mild gains today ahead of the RBI's monetary policy decision. The rupee traded at 81.9075 per dollar by 9:27 am, compared to its previous close of 82.
Indian government bond yields were largely unchanged early today, as market participants awaited the RBI's monetary policy decision as well as guidance on the interest rate trajectory. The 10-year benchmark 7.26% 2032 bond yield was at 7.2850% as of 9:35 am, after closing at 7.2750% on Wednesday.
Eight of the 13 major sectoral indexes declined, with the heavyweight financials and information technology (IT) sectors shedding 0.3% and 0.5%, respectively.
Among individual stocks, Equitas Small Finance Bank rose over 2% after reporting a 36% YoY jump in gross advances for the March quarter.
Experts are of the view that the RBI will raise the key policy rate (repo) by 25 basis points today, and it would probably be the last in the current monetary policy tightening cycle that began in May. The RBI has so far raised repo rate six times including the off-cycle surprise increase of 40 basis points in May 2022.
Indian shares opened on Thursday with Nifty around 17500. At 9:16 am, the Sensex was down 123.63 points or 0.21 per cent at 59,565.68, and the Nifty was down 31.40 points or 0.18 per cent at 17,525.60.
India’s offshore swap curve beyond April and up to the nine-month segment is very flat, which points to market expectations for peaking of the policy rate after a hike in April, said Jennifer Kusuma, a senior Asia rates strategist at Australia & New Zealand Banking Group Ltd. in Singapore. Any rate-cut expectations beyond this point appear to be minimal, she said.
Policy decisions this week from some of the Reserve Bank of India’s global peers offer a good reason for the split. While Australia’s central bank bolstered the case for global doves by calling a halt to its tightening cycle, its New Zealand counterpart emboldened hawks by opting for a larger-than-expected hike.
The monetary policy statement, which will be presented at 10 am on the same day, will include the decision on the repo rate hike, reverser repo rate, and other related decisions. Read more
The Indian rupee is likely to open little-changed against the U.S. dollar on Thursday amid losses in Asian peers and as traders await the Reserve Bank of India's policy decision.
Non-deliverable forwards indicated the rupee will open at around Wednesday's level of 82 to the dollar or a tad higher. The local currency managed to climb past the psychological 82 level on Wednesday, reaching an over-three-week high of 81.90.
Indian government bond yields are expected to be little changed in the early session on Thursday, as market participants await the Reserve Bank of India's monetary policy decision and commentary.
The 10-year benchmark 7.26% 2032 bond yield is expected to be in the 7.26 to 7.30% range till the policy decision, after closing at 7.2750% on Wednesday. India's financial markets will remain shut on Friday.
"The RBI will hold on to its 'withdrawal of accommodation' stance. A change to neutral at a time of global volatility and no clear signs of slowing inflation momentum could be risky", said Pranjul Bhandari, Chief Economist India at HSBC Securities and Capital Markets
Indian shares are poised to open lower on Thursday, ahead of what many expect to be the Reserve Bank of India's final interest rate hike in the current cycle. India's NSE stock futures listed on the Singapore exchange were down 0.12% at 17,603 as of 7:59 a.m. IST.
A large majority of economists, 49 of 62, said the Reserve Bank of India (RBI) would lift its repo rate by 25 basis points to a seven-year high of 6.75% at the conclusion of its three-day meeting on April 6. The central bank has already raised rates by 250 basis points since May last year.
Core inflation, which excludes volatile food and energy components, was also expected to have stayed high between 6.05%-6.12% in February, according to estimates from economists.
Banking system liquidity has improved in recent days after having been in deficit towards the end of March. Liquidity surplus stood at 2.11 trillion rupees on Wednesday, its highest since Sept. 5 and more than double the 1.04 trillion rupees surplus in the previous session.
The central bank has already increased repo rate by a total of 250 basis points since May in a bid to contain inflation, though it has continued to remain above the RBI's comfort zone of 6 per cent most of the time.
The need for another rate hike is driven by elevated level of core inflation which has remained near or above 6% since middle of 2021," said Gaura Sen Gupta, an economist with IDFC FIRST Bank.
The Reuters Poll showed that a majority of respondents, 20 of 36, expect the central bank would maintain its 'withdrawal of accommodation' stance while the remaining 16 said it would shift to neutral.
Unseasonal rains could keep food prices high and a surprise decision by OPEC and its allies to cut output recently has also pushed up oil prices which could add to imported inflation.Unseasonal rains could keep food prices high and a surprise decision by OPEC and its allies to cut output recently has also pushed up oil prices which could add to imported inflation.
Retail inflation rose 6.44% year-on-year in February, easing from 6.52% in January but has remained above the central bank's mandated target range of 2%-6% for 10 out of the last 12 readings.
India's central bank is widely expected to raise its benchmark rate on Thursday for the seventh consecutive meeting and leave the door open for more increases to bring inflation back within its target range, economists said.
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