RBI policy stance reminds analysts of Sunil Gavaskar as stock market's wait for rate cut gets longer
RBI policy review: The RBI Governor Shaktikanta Das stressed on moving towards the primary target of 4 per cent inflation. In this backdrop, expectation of rate cut in this calendar year seems to be faded said Dhiraj Relli of HDFC Securities.
- Jun 8, 2023,
- Updated Jun 8, 2023 2:17 PM IST
The RBI's six-member monetary policy committee (MPC) stayed status quo on the policy rate, the second time in a row, much inline with the Street expectations. But it did increase Dalal Street's wait for a rate cut. By 12.30 pm, rate-sensitive indices such as the BSE Auto and the BSE Realty were down up to 1.6 per cent, with the BSE barometer Sensex slipping into the red.
The RBI Governor Shaktikanta Das stressed on moving towards the primary target of 4 per cent inflation. In this backdrop, expectation of rate cut in this calendar year seems to be faded said Dhiraj Relli, MD and CEO, HDFC securities, who sees first rate cut perhaps in February 2024.
To recall, S&P Global expects the US Fed to cut only from mid-2024, and end at 4 by the end this year. This could keep external financing conditions challenging for emerging markets like India in 2023, said Dharmakirti Joshi, Chief Economist at Crisil.
Joshi said all this means that while the phase of aggressive rate hikes may be behind us, the aftereffects on financial conditions, along with any upside to inflation, would be among risks to watch out for.
The RBI kept repo rate, the rate at which the central bank lends money to commercial banks, constant at 6.5 per cent.
"Essentially the policy meet has turned out to be a non-event, with the consensus expectations of rate cut timelines seem to have extended now. We retain our positive bias on the equity markets in the medium term," said Gaurav Dua, Head Capital Market Strategy, Sharekhan.
The RBI projected FY24 GDP growth at 6.5 per cent, unchanged. It sees headline inflation averaging 5.1 per cent, a tad lower than the earlier estimate of 5.2 per cent. Both growth and inflation is likely to undershoot the RBI’s projections in FY24, said Aurodeep Nandi, India Economist and Vice President at Nomura India.
"We believe inflation is on a sustained decline with lag impact of RBI rate hikes and prices of commodities declining drastically. Our reading is that disrupted supply across the world is back on stream and therefore fall in price of coal, natural gas, oil, steel, wheat, lumber, palm oil, milk etc are sustainable. The RBI is bound to change stance in time to come,” said Amar Ambani, Head Institutional Equities at YES Securities.
Nilesh Shah, Managing Director at Kotak Mahindra Asset Management said the RBI reminded him of India's once opening batsman Sunil Gavaskar -- standing without fear in front of a challenging global environment.
"Taking a fresh stance after scoring a century on a challenging wicket to reassure everyone that Mai Hoon Na. Indian economy is ideally balanced between growth and inflation under the RBI’s navigation. Market will be pleasantly surprised if the GDP growth for FY 24 comes as per the expectations of the RBI at 6.5 per cent,” he said.
Also read: Buzzing stocks on June 8, 2023: PAYTM, Yes Bank, NIIT, GATI, Spicejet, others
The RBI's six-member monetary policy committee (MPC) stayed status quo on the policy rate, the second time in a row, much inline with the Street expectations. But it did increase Dalal Street's wait for a rate cut. By 12.30 pm, rate-sensitive indices such as the BSE Auto and the BSE Realty were down up to 1.6 per cent, with the BSE barometer Sensex slipping into the red.
The RBI Governor Shaktikanta Das stressed on moving towards the primary target of 4 per cent inflation. In this backdrop, expectation of rate cut in this calendar year seems to be faded said Dhiraj Relli, MD and CEO, HDFC securities, who sees first rate cut perhaps in February 2024.
To recall, S&P Global expects the US Fed to cut only from mid-2024, and end at 4 by the end this year. This could keep external financing conditions challenging for emerging markets like India in 2023, said Dharmakirti Joshi, Chief Economist at Crisil.
Joshi said all this means that while the phase of aggressive rate hikes may be behind us, the aftereffects on financial conditions, along with any upside to inflation, would be among risks to watch out for.
The RBI kept repo rate, the rate at which the central bank lends money to commercial banks, constant at 6.5 per cent.
"Essentially the policy meet has turned out to be a non-event, with the consensus expectations of rate cut timelines seem to have extended now. We retain our positive bias on the equity markets in the medium term," said Gaurav Dua, Head Capital Market Strategy, Sharekhan.
The RBI projected FY24 GDP growth at 6.5 per cent, unchanged. It sees headline inflation averaging 5.1 per cent, a tad lower than the earlier estimate of 5.2 per cent. Both growth and inflation is likely to undershoot the RBI’s projections in FY24, said Aurodeep Nandi, India Economist and Vice President at Nomura India.
"We believe inflation is on a sustained decline with lag impact of RBI rate hikes and prices of commodities declining drastically. Our reading is that disrupted supply across the world is back on stream and therefore fall in price of coal, natural gas, oil, steel, wheat, lumber, palm oil, milk etc are sustainable. The RBI is bound to change stance in time to come,” said Amar Ambani, Head Institutional Equities at YES Securities.
Nilesh Shah, Managing Director at Kotak Mahindra Asset Management said the RBI reminded him of India's once opening batsman Sunil Gavaskar -- standing without fear in front of a challenging global environment.
"Taking a fresh stance after scoring a century on a challenging wicket to reassure everyone that Mai Hoon Na. Indian economy is ideally balanced between growth and inflation under the RBI’s navigation. Market will be pleasantly surprised if the GDP growth for FY 24 comes as per the expectations of the RBI at 6.5 per cent,” he said.
Also read: Buzzing stocks on June 8, 2023: PAYTM, Yes Bank, NIIT, GATI, Spicejet, others