Bhoomika Singh
Not belying the expectations, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) did not change the repo rate from 6.50 per cent while projecting gross domestic product (GDP) and inflation at 6.5 per cent and 5.1 per cent respectively.
Announcing the decision of the MPC after its three-day deliberations, RBI Governor Shaktikanta Das said on Thursday that the committee unanimously decided to keep the repo rate at 6.5 per cent.
Das said taking into account the economic factors, the MPC has predicted GDP growth at 6.5 per cent in FY24.
As regards the inflation rate, the MPC forecast was 5.1 per cent for 2023-24 taking into account the rabi crop harvest/monsoon projections and favourable near-term inflation trend.
Das also said uncertainty exists due to geopolitical situations, monsoons and others. The MPC met on June 6th, 7th and 8th.
Reacting to this recent move by RBI on keeping the repo rate unchanged, various industry stakeholders are expressing themselves, the Founder of Wright Research an investment advisory firm, Sonam Srivastava said, “The RBI’s decision to hold rates steady is a sensible choice given the current global and local economic conditions. India’s economic rebound, as indicated by surpassing pre-pandemic GDP levels by over 10 per cent, and easing inflation are promising signs.”
“Looking ahead, we expect the market momentum to remain largely unimpacted by these announcements with a potential for the broader markets to outperform,” she added.
Speaking on RBI’s GDP growth projections, Weighing in, “The GDP growth and inflation projections have been announced based on the assumption of a normal monsoon which seems to be an area of uncertainty as the actual position will pan subsequently and the kharif output will determine the price situation,” said Jyoti Prakash Gadia, Managing Director at Resurgent India.
Gadia added, “Maintaining the GDP growth rate projection at the existing level of 6.5 per cent with a marginal reduction in inflation to 5.1 per cent may therefore undergo a change depending upon the actual circumstances.”
Weighing in, Ritika Chhabra, Quant Macro Strategist at Prabhudas Lilladher PMS, reacted as she said, “There were no surprises on the policy front as we were expecting RBI to hold the rates at 6.5%. The central bank kept its stance unchanged to ‘withdrawal of accommodation’ as it maintains its focus on inflation, citing delay in the monsoon, El Nino impact and geopolitical uncertainties as upside risks to inflation. We expect FY24 inflation at 4.9 per cent slightly lower than RBI’s estimate of 5.1 per cent, as base effect turns favourable and imported inflation eases.”
Talking about how it has impacted the stock market, the MD of SAG Infotech, Amit Gupta emphasised, “Equity benchmarks, the Sensex and Nifty, surged towards their all-time highs as the RBI maintained its policy rates and stance. The Sensex hit an intraday high of 63,317.16, with the Nifty reaching 18,775.60.”
“Analysts predict a higher likelihood of rate cuts due to robust economic growth and easing inflation. While the Nifty Bank index rose by 0.30 per cent, the Realty and Auto indices saw declines. Market experts anticipate an extended pause by the RBI, as uncertainties in the global market and the influx of Rs. 2000 notes into the banking system affect liquidity and yield dynamics,” he continued.
Speaking on behalf of real estate-related industries, Gurmit Singh Arora, the National President of the Indian Plumbing Association, noted, “This is a positive sign not just for the economy but also for the real estate and allied industries. A strong economic outlook coupled with lowered inflation will drive growth in consumer spending.”
“Meanwhile, there are threats from international geopolitical tensions and fragile global financial markets. This has led the government to keep the rate unchanged like in previous times and further evaluate the situation,” he added.
“This is good news for the real estate sector and the outlook for homebuyers who are looking to buy a property via a home loan in the near future remains favourable. This announcement can provide a booster in maintaining the momentum in the housing sector which has so far been firing on all cylinders,” expressed Subhash Goel, MD at Goel Ganga Developments.
