RBI monetary policy on expected lines, balanced and calibrated, say economists and market veterans

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Sunil Mehta, CEO of IBA said, “Most of the announcements are on the expected lines. It is a very balanced and calibrated approach. We must compliment RBI for coming out with a very calibrated release on our expected lines. We are happy with it.”

The Monetary Policy Committee of the Reserve Bank of India (RBI) kept the repo rate unchanged at 4 percent for the sixth consecutive policy, maintains an accommodative stance amid uncertainty about the economic fallout of the second COVID-19 wave and rising inflation. The reverse repo rate is also unchanged at 3.35 percent. MSF and Bank rate also maintained at 4.25 percent.
Abheek Barua, Chief Economist at HDFC Bank, Amandeep Chopra, Group President and Head of Fixed Income at UTI Mutual Fund, Lakshmi Iyer, CIO-Debt and Head-Product at Kotak Mahindra AMC, Taimur Baig, Managing Director and Chief Economist at DBS Group Research, Aditya Narain of Edelweiss Securities, Sunil Mehta, CEO of IBA and CS Shetty, Managing Director at State Bank of India shared their views.
“One was expecting a downward revision in gross domestic product (GDP) numbers and we got it. In terms of the spectrum of the forecast, it is possibly on the more optimistic side,” said Barua.
“From a macroeconomic perspective, it is pretty much in line with most expectations, possibly on the growth side a little optimistic. From a macro-management perspective, it is interesting because it is very clearly articulating a construct that it wants to follow in order to manage growth and inflation going forward which is to have absolute control over yields, keep them at a particular level or perhaps at times in a range and coupled with what seems like an indication towards fairly aggressive exchange rate management keeping the exchange rates within a band. This is RBI’s underpinning macro model,” Barua added.
“The enhancement in the restructuring limit Rs 50 crore is definitely a welcome step,” Shetty said.
“The steps taken by the government in terms of expanding the scope of ECLGS and also the support which is provided now by the RBI will provide great support to industries,” Shetty further mentioned.
Taimur Baig believes, “RBI is giving very clear signals to the market as don’t worry about inflation, even if it is going a little bit high. They gave everything that the market wanted - expanding the bond market purchase programme, extending direct support to affected sectors and acknowledging growth risks to some extent and that is the most the RBI can do. You know and I know that the real action is not at the central bank end anymore, it is with vaccination and dealing with the pandemic.”
“The fact that RBI continues to look through inflation, not put up too many red flags around it and the fact that it is generally very accommodative for an extended period of time, plays through very well. As I said, no news is good news and the markets are doing well enough as they are,” Narain shared.
Mehta said, “Most of the announcements are on the expected lines. It is a very balanced and calibrated approach. We must compliment RBI for coming out with a very calibrated release on our expected lines. We are happy with it.”
“Overall it is pretty much what the market had expected. The yields will not move up significantly from here, maybe 1-2 basis points (bps) sort of a correction is more than adequate, said Chopra.
For the entire conversation, watch the accompanying video

Market Movers

CompanyPriceChange%Gain
Asian Paints3,042.20 92.30 3.13
Axis Bank750.90 14.65 1.99
ICICI Bank645.30 10.15 1.60
HDFC Life692.55 10.85 1.59
HUL2,391.95 27.35 1.16
CompanyPriceChange%Gain
Asian Paints3,041.85 93.75 3.18
Axis Bank750.75 14.50 1.97
ICICI Bank645.05 9.95 1.57
HUL2,391.15 26.30 1.11
IndusInd Bank1,033.55 9.35 0.91
CompanyPriceChange%Gain
Asian Paints3,042.20 92.30
Axis Bank750.90 14.65
ICICI Bank645.30 10.15
HDFC Life692.55 10.85
HUL2,391.95 27.35
CompanyPriceChange%Gain
Asian Paints3,041.85 93.75
Axis Bank750.75 14.50
ICICI Bank645.05 9.95
HUL2,391.15 26.30
IndusInd Bank1,033.55 9.35

Currency

CompanyPriceChng%Chng
Dollar-Rupee73.31250.04250.06
Euro-Rupee88.94300.27100.31
Pound-Rupee103.33400.08400.08
Rupee-100 Yen0.66580.00020.02