Dhiraj Relli, MD &CEO, HDFC Securities on RBI Policy
To preserve lives and livelihoods and prevent a resurgence in new waves of infections - policy support from all sides – fiscal, monetary and sectoral – is being provided to nurture recovery and expedite return to normalcy. RBI’s MPC decided to retain the rates and continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis. MPC also whittled down macroeconomic growth numbers and upped its inflation projections, completely in line with market expectations. It gives added credibility to RBI’s ability to navigate the country during difficult times.
Relief given to contact intensive industries - special liquidity facility to SDBI for on-lending to MSMEs and enhancing the exposure thresholds under resolution framework augers well to support growth impulses from those severely affected sectors. An increase in the quantum of secondary market purchases under G-SAP 2.0 will keep benchmark yields anchored around 6% levels. Overall, monetary policy is on expected lines and has checked all boxes.
Jimeet Modi, Founder & CEO Samco Group on RBI Policy
The RBI has indeed given a helping hand, in whatever way possible to boost liquidity for MSMEs, the hardest hit space in this pandemic. Support to the contact intensive sectors is definitely a move in the right direction although the relief package could have been higher to hold the bottom of the pyramid from losing ground. Various other decisions in terms of opening the debt markets to FPIs and facilitating a Rs 1.2 lakh crore in Q2FY22 for GSAP2.0 will aid to safeguard our economy from contraction and keep markets buoyant.
Rate-sensitive stocks mixed after RBI policy announcement; banks fall, realty stocks in the green
Shares of rate-sensitive sectors were mixed after the Reserve Bank of India (RBI) kept the repo rate unchanged at 4 percent for the sixth consecutive time. While banks and financial stocks were largely in the red, the realty index rose as much as 1 percent in intra-day deals and the auto sector added around 0.3 percent. In the banking space, most stocks were in the red with Bandhan Bank, IDFC First Bank, Punjab National Bank, HDFC Bank, SBI, and RBL Bank down 1-2 percent. Meanwhile, financials including Power Finance Corporation, REC, HDFC, ICICI Prudential, M&M Finance and Bajaj Finance were trading in the green. In the auto space, M&M, Motherson Sumi, MRF and Hero MotoCorp were up 0.5-1 percent while Phoenix Mills, Brigade Enterprises, Godrej Properties, Sunteck Realty and Prestige Estates from the real estate sector were up in the range of 0.5 percent to 2 percent.
RBI monetary policy on expected lines, balanced and calibrated, say economists and market veterans
Abheek Barua, Chief Economist, HDFC Bank on RBI Policy
"In today’s policy announcement, the RBI ticked all the right boxes in terms of its response to the second wave. The announcement of GSAP 2.0 for INR 1.2 lakh crore and the carve out for SDLs bonds in the program is likely to help ease the pressure in the bond market, especially given the higher state borrowing pressure and increase in Centre borrowings this fiscal. The central bank’s measure to provide liquidity support for contact intensive sectors is likely to aid credit flow to these sectors. That said, a more equitable distribution of credit is likely to be contingent on the whether the assessment of risks is in line with the markup over reverse repo provided by the RBI to banks. Therefore, some form of credit guarantees is perhaps required for de-risking the system."
Shaktikanta Das, RBI Governor says
- We have not made a sectoral differentiation in the resolution framework
- We are intervening wherever we see stress
- Our response going forward will depend on how the situation evolves
Shaktikanta Das, RBI Governor says
- Additional tool deployment will depend on how the situation evolves
- MPC has taken a conscious decision to focus on growth, maintain accommodative guidance
- Our CPI inflation forecast of 5.1% for FY22 is well within target range of 2-6%
Michael Patra, DG, RBI says
- Inflation is not persistent at this time; it will be persistent when it turns demand-pull
- MPC believes inflation is driven by supply pressures at the moment
- As and when demand pressures start feeding into the monetary process, we will act
Shaktikanta Das, RBI Governor says
- Our forex operations are driven by the consideration of maintaining exchange rate stability
- We have been quite successful at maintaining currency stability through the pandemic
- EMEs have to build their own buffers, RBI is no exception
- Surplus transfer is a pure accounting issue, not a policy issue
Shaktikanta Das, RBI Governor on COVID second wave
"Rural and urban demand has been dented in the first wave. Data indicates second wave has moderated. Second wave likely to be confined to Q1FY22. Most businesses have adapted to the new situation . Expect overall demand position to improve from Q2."
Shaktikanta Das, RBI Governor on policy
- There is no thinking at the moment on normalising the policy stance
- Too premature to talk about policy normalistion
Shaktikanta Das, RBI Governor on Inflation
- Inflation print in April gives elbow room and space on liquidity operations
- Inflation forecast revision is not a very significant one
Shaktikanta Das, RBI Governor says:
- Yield curve looks steep because rates are low at the short end due to abundant liquidity
- Bond markets should take signals from our communications, actions, forward guidance
Shaktikanta Das, RBI Governor says:
- We are focused on the entire yield curve across maturities, not just 10-year
- GSAP auctions included bonds of several maturity profiles
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