The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Wednesday stored the repo fee unchanged at 4 per cent whereas sustaining an ‘accommodative stance’. The reverse repo fee was additionally stored unchanged at 3.35 per cent following a unanimous determination by the six-member committee headed by RBI Governor Shaktikanta Das.
Following the RBI MPC consequence, the benchmark fairness indices ended larger with the S&P BSE Sensex rallying 460.37 factors (0.94 per cent) to complete at 49,661.76 and the broader Nifty 50 advancing 135.55 factors (0.92 per cent) to finish at 14,819.05.
The central financial institution’s determination to maintain charges unchanged for the fifth consecutive time is consistent with the financial must encourage development, specialists stated.
Here’s what numerous economists and market specialists needed to say in regards to the RBI MPC assembly consequence:
Bekxy Kuriakose, Head – Fixed Income at Principal Asset Management, stated: “All members of RBI MPC determined to maintain key charges unchanged and stance as accommodative and pledged to proceed to maintain development on sturdy foundation. Some concern has been expressed on enter price pressures which may feed into inflation significantly commodity costs and logistic dangers. However general RBI indicated that there are each downward and upward pressures on inflation reflecting their stance that they probably don’t see inflation as a serious concern. In this backdrop, the continuation of the FIT (versatile Inflation focusing on) Regime for subsequent 5 years can also be seen as a validation of its success for the reason that previous 5 years and provides a superb measure of coverage continuity.
For the markets, probably the most constructive announcement from the Policy was the announcement of G-SAP 1.0 signalling a transfer in direction of a extra structured and orderly method of conducting open market secondary purchases of presidency securities. For the primary quarter of FY 22, Rs 1 lakh crore value of purchases has been introduced and an quantity of Rs 25,000 cr subsequent week itself. Thus market is now assured of standard open market operations. This bodes properly for medium to lengthy finish authorities securities which has already seen some softening in yields right now put up the announcement. Other measures together with extension of TLTRO on Tap scheme, Liquidity facility for all India Financial establishments, extending the PSL classification for lending by banks to NBFCs for onward lending to sure sectors and continuation of enhanced WMA (methods and means advances) restrict for State governments will assist to proceed to offer aid in wake of renewed issues on development amid a surge in COVID circumstances.
Overall the coverage is dovish and stays targeted on sustaining orderly yield curve circumstances in addition to extending help to needy sectors. We advocate traders to proceed to have a balanced asset allocation combine in high-quality brief time period and medium period debt funds.”
Ram Raheja, Director at S Raheja Realty, stated: “RBI expectedly kept the key rates unchanged and reiterated its accommodative stance on rates to achieve sustainable growth of the economy and its determination for control over inflation. This will continue to further foster the demand for housing. Housing markets have responded well in the past to lower home loan rates, stamp duty reduction and other rebates. With inflation set to be high and economic recovery slow due to surge of COVID, residential real estate will continue to attract investment as it is a safe-haven asset.”
Sanjay Palve, Senior Managing Director at Essar Capital, stated: “As we witness the second wave of Covid-19 and its implications on the economic growth and inflation, the decision to hold the accommodative stance and keep repo rate at 4% was anticipated. The country’s economic recovery is still fragile and as the external demand continues to be uncertain, RBI’s continuous support, proactive and balanced approach is what is needed to ensure liquidity. A strong vaccination and distribution programme will gradually churn the wheels of business growth and economic revival.”
Lakshmi Iyer, CIO (Debt) & Head Products at Kotak Mutual Fund, stated: “The RBI MPC voted for a status quo in line with our and market expectations. The move to introduce G-SAP – secondary market GSec acquisition program is a master stroke by the RBI. This would reign in sharp spike in GSec bond yields. Introduction of long term VRRR (variable rate reverse repo) is an extension towards normalising liquidity. Liquidity surplus however will and is likely continue. We expect yield curve to flatten from the current levels with the longer end of the yield curve compressing faster than the short end.”
Rajani Sinha, Chief Economist & National Director – Research at Knight Frank India, stated: “The RBI has taken reassuring steps to infuse extra liquidity into the housing sector by the interventions of elevated financing to National Housing Bank and extension of precedence sector tag for financial institution funding to NBFCs for housing loans.
However, given the inflationary issues in current months, RBI has maintained the established order on key coverage charges. At a time when rising second wave of COVID infections and subsequent lockdowns are derailing financial momentum, RBI interventions will assist preserve sufficient liquidity in addition to forestall hardening of yields in bond market. These measures will guarantee financial stability in addition to maintain actual property sector keep afloat throughout such precarious instances. Hopefully, benign retail inflation on account of higher monsoon and easing of crude oil costs, coupled with accommodative stance would translate into decreasing of coverage fee in close to future.”
Anuj Khetan, Director at Vijay Khetan Group, stated: “Keeping in mind the recent surge in the COVID-19 cases and the restrictions imposed, the monetary policy committee’s decision to keep key rates unchanged at 4% was on expected lines. This move is a much-appreciated step recognizing the role of the real estate sector in generating employment and economic activity. The Union Budget 2021-22 also has provided a strong impetus in favour of the real estate sector. With the interest rates at a record low, the Government will continue taking affirmative measures as long as it is necessary to revive the economy and mitigate Covid-19 impact. With stamp duty reversed back to 5% and real estate sales on the upside, it would boost the banks to further transmit interest rate reduction to end-users to provide further more incentive to renters to eventually turn into homeowners.”
Dhiraj Relli, MD & CEO at HDFC Securities, stated: “The consequence of the MPC meet was on anticipated strains so far as repo charges and stance are involved. However, the announcement of secondary market G-sec acquisition programme (G-SAP 1.0), the place the RBI will commit upfront to a certain amount of open market purchases of presidency securities with a view to allow a secure and orderly evolution of the yield curve amidst comfy liquidity circumstances, was a constructive shock. This reveals the resolve of the RBI to maintain Gsec charges below test regardless of the big borrowing program. The endeavour will likely be to make sure congenial monetary circumstances for the restoration to achieve traction. The massive quantities dedicated in Q1 and in April present the seriousness of the RBI in implementing the Gsec program.
The markets have reacted properly to this measure as it will end in charges not rising and, in reality, easing down for companies. The influence of the MPC bulletins nevertheless will wither away in a few days time and the markets will maintain responding to different triggers together with Covid progress and company outcomes.”
Bhushan Nemlekar, Director at Sumit Woods Limited, stated: “The RBI’s decision to maintain its accommodative stance was on the expected lines in light of the recent resurgence of Covid-19 infections and its potential to cause the on-going economic recovery to stumble. The prevailing low home loan rates are already enticing for homebuyers. It’s a high time bank needs to pass on the benefits to the homebuyers. With auspicious occasions like Gudi Padwa and Akshaya Tritiya already round the corner, the real estate sales are expected to be further driven by developer discounts and flexible payment plans.”
Amar Ambani, Senior President and Head of Research – Institutional Equities at YES Securities, stated: “With Bond markets pricing in a established order properly prematurely, MPC barely shocked when it comes to accommodative stance. All the members of the MPC unanimously voted for no change in coverage charges. The central financial institution reiterated its FY22 actual GDP development projection of +10.5%, whereas sees inflation trajectory to hover round 5% in H1 FY22. RBI vehemently articulated that that absorption of extra liquidity by reverse repo shouldn’t be construed as reversal of accommodative coverage stance. RBI governor expressed the necessity for orderly evolution of yields and can provoke 1 trillion of OMOs throughout Q1 FY22 to fight excessive volatility. RBI’s liquidity help will definitely assist in assuaging market apprehensions given that provide of G-Sec paper will stay elevated on the again of frontloading of market borrowing. For FY22 as an entire, OMO operations are anticipated to be above INR 3 trillion, just like FY21 stage. Possibility of inclusion of Indian G-secs within the world bond indices can even soak up the availability. Nevertheless, we anticipate 10year yields to inch larger, presumably commerce within the vary of 6.2-6.25% within the close to time period, as there are issues over cussed core inflation, resurgent COVID infections, renewed localized lockdowns and comparatively larger sovereign yields in US.
Additional measures introduced which can be constructive for smaller HFCs, NBFCs and MFIs had been on-tap TLTRO scheme prolonged by 6 months and extra liquidity help of 500 billion to AIFIs. Key beneficiaries of those measures could possibly be Can Fin, Repco, Home First, Shriram City and MFIs like CREDAG and Spandana.”
Abheek Barua, Chief Economist at HDFC Bank, stated: “The RBI coverage was extra dovish than anticipated with the central financial institution recognising the dangers related to the rising an infection circumstances within the county and persevering with its help for development by a lot of measures together with its dedication to maintain liquidity in surplus and an extension of measures just like the on-tap TLTRO. Fears of any pre-mature tightening both by charges or liquidity administration by some sections of the market have been put to relaxation by RBI’s dovish tone right now. The governor was as an example categorical that the modifications in liquidity measures introduced right now doesn’t represent tightening.
The focus of the coverage was clearly on yield administration and the announcement of the G-sec acquisition program (GSAP 1.0) is more likely to stabilise and help long run yields. Although, the extension of tenures for the VRRR (variable fee reverse repo auctions) may result in some hardening on the short-end of the curve. The upward revision of the inflation forecast by the RBI is justifiable given rising commodity costs, though we see additional upside dangers to the present forecast vary. That stated, inflation is unlikely to be an space of concern for the RBI for the approaching months and development is more likely to stay the coverage precedence.”
Sandeep Bagla, CEO at TRUST Mutual Fund, stated: “Interest rates are likely to remain range bound going forward as RBI is committed to ensure easy liquidity and low repo rates. The increase in Government borrowings are likely to be partially offset by RBI OMOs and secondary market purchases of Government securities. Inclusion of government securities global bond indices will add to the demand. Corporate bond spreads are likely to remain at moderate levels on back of restrained supply and continued demand from institutional investors. Unless inflation expectations start increasing in the future, fixed income investors will do well to remain invested in Indian bonds”
Nitin Shanbhag, Head – Investment Products at Motilal Oswal Private Wealth Management, stated: “While a status quo in terms of policy rates was factored in, the big positive has come in terms of the transparency of the OMO calendar through the G-sec acquisition programme (GSAP), which is likely to support and stabilize long term yields. In this regard, RBI has announced GSAP of Rs. 1 lakh cr in 1Q FY22, of which Rs. 25,000 cr would be conducted on 15th April’21. This has provided some relief to the 10-year g-sec yield.”
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, stated: “The monetary policy announcement is on expected lines without changes in policy rates and stance. However, reading between the lines, one can conclude that the stance is more dovish than expected with the governor reinforcing the central bank’s commitment “to remain accommodative to support & nurture the recovery as long as necessary”. The bond market has taken the announcement positively with the 10-year yield transferring to six.12%. The governor’s assurance to make sure an orderly evolution of the yield curve is also confidence-inspiring”
S Ranganathan, Head of Research at LKP Securities, stated: “RBI kept rates unchanged as expected and will continue with its accommodative stance to mitigate the impact of the Pandemic. An increase in the pace of vaccination and rural demand would in our view help growth”
Deepthi Mathew, Economist at Geojit Financial Services, stated: “It was in the expected line as the MPC kept the rates unchanged. Though the governor assured of maintaining the accommodative stance as long as the economy recovers, he also cautioned about the factors that could push up prices. One of the highlights in today’s statement was the announcement of G-sec acquisition program 1.0, which the bond market needed the most. It could help in the cool off in bond yields and support the government’s market borrowing program”
