The Monetary Policy Committee of the Reserve Bank of India is expected to keep the repo rate unchanged and maintain a neutral policy stance in its latest bi-monthly review, according to Nuvama Research.

The three-day meeting of the MPC started on Wednesday. The policy outcome is scheduled to be announced on Friday by RBI Governor Sanjay Malhotra. 

In its December monetary policy meeting, the six-member committee of the RBI reduced the repo rate by 25 basis points to 5.25%. This brought the cumulative cuts to 125 basis points in 2025.

According to Nuvama Research, the central bank is expected to keep the key lending rates unchanged after cumulative easing of 125 basis points from its peak, bringing the policy repo rate down to 5.25%.

Further, the report highlights that transmission of the past rate cuts to bank lending rates is still underway, while bond yields continue to remain relatively sticky. Under this, the central bank is expected to remain focused on liquidity management, ANI reported, citing Nuvama Research.

“In the forthcoming MPC review, we reckon the RBI shall maintain status quo after cumulative easing of 125bp, bringing the repo rate to 5.25 per cent,” the Nuvama Research report said.

Also, Nuvama outlined that the recent trade deal between India and the US might help support foreign capital flows and the Indian rupee, giving the RBI leeway to manage domestic liquidity.

The report mentioned that the Indian economy seems to be bottoming out on the macroeconomic front, though the recovery is yet to become broad-based. Highlighting that growth conditions remain uneven across different sectors, the report points towards the global uncertainty, with elevated levels of market volatility.

Taking all these factors into consideration, the RBI might take a cautious, wait-and-watch approach in the near term, with the policy decisions to remain guided by evolving domestic and global conditions, the report added.

In its recent report, the Yes Bank said there is “little reason” for the RBI to move in with further cuts, with inflation likely to move higher.

“We think we have seen the last of the rate cuts in this cycle and should expect a long pause (difficult to determine the length of the pause), unless growth tends to underperform (not our base case),” said the Yes Bank report.

Representative image
| Photo Credit: Reuters

Image for representational purposes only.
| Photo Credit: REUTERS

Benchmark equity indices Sensex and Nifty pared early gains to settle lower on Wednesday (October 9, 2024) due to late selling in index major Reliance Industries, ITC and HDFC Bank even as the RBI took the first step towards a rate cut in its monetary policy review.

Erasing its early gains, the 30-share BSE Sensex fell 167.71 points or 0.21% to close at 81,467.1. During the day, it surged 684.4 points or 0.83% to hit an intraday high of 82,319.21.

The NSE Nifty dropped 31.20 points or 0.12% to end at 24,981.95. In the intraday trade, it jumped 220.9 points or 0.88% to hit a hit of 25,234.05.

The Reserve Bank of India (RBI) kept its key interest rate unchanged on Wednesday but took the first step towards a rate cut as it eased its relatively hawkish policy stance to ‘neutral’.

The monetary policy committee, which included three RBI officials and an equal number of new external members, voted five-to-one to keep the benchmark repurchase or repo rate – which governs the interest rate of home, auto, corporate and other loans – at 6.5% for a 10th straight policy meeting.

Among the 30 Sensex companies, ITC, Nestle India, Hindustan Unilever, Reliance Industries, Larsen & Toubro and HDFC Bank were among the major laggards.

On the contrary, Tata Motors, Tech Mahindra, State Bank of India, Maruti Suzuki India, Bajaj Finance, Axis Bank, Bajaj Finserv and Bharti Airtel were among the gainers.

European markets were trading higher in mid-session deals.

“An upward revision in Q3FY25 inflation reiterates that the sticky inflation continues to remain a concern for the RBI and led investors to book profit towards the close. The volatility in input prices and the impact on margin dragged the FMCG stocks,” Vinod Nair, Head of Research, Geojit Financial Services said.

The change in RBI’s stance to neutral was favourable and expected, but the commentary is not pointing for a rate cut in the near term, Mr. Nair added.

Foreign Institutional Investors (FIIs) offloaded equities worth ₹5,729.60 crore on Tuesday (October 8, 2024), while Domestic Institutional Investors (DIIs) bought equities worth ₹7,000.68 crore, according to exchange data.

In Asian markets, Shanghai, Hong Kong, and Seoul settled in negative territory while Tokyo quoted in the positive territory.

Global oil benchmark Brent Crude climbed 0.87% to $77.85 a barrel in futures trade.

U.S. markets ended with gains in overnight deals on Tuesday.

On Tuesday, the 30-share BSE Sensex rose by 584.81 points or 0.72% to close at 81,634.81. The NSE Nifty jumped 217.40 points or 0.88% to finish at 25,013.15.

The Reserve Bank of India’s Monetary Policy Committee (MPC) wrapped up its three-day deliberations today, deciding to maintain the repo rate at 6.5 per cent for the fourth consecutive time this fiscal year and the tenth time overall. Despite global market movements and the US Federal Reserve’s recent 50-basis-point rate cut, RBI Governor Shaktikanta Das confirmed the decision to keep the rate unchanged. 

The repo rate is the interest rate at which the RBI lends money to commercial banks. Changes in this rate directly influence the interest rates on loans and deposits offered by banks. A stable repo rate often translates to predictable EMI (Equated Monthly Instalment) payments for borrowers.

Impact on loan EMIs

• Home Loans: For individuals with floating interest rates on home loans, the unchanged repo rate means that EMIs will likely remain stable in the near term. Borrowers can breathe a sigh of relief as there won’t be immediate pressure to adjust their monthly payments. 
• Personal and Auto Loans: Similar to home loans, personal and auto loans linked to the repo rate will also see no immediate changes in EMIs. This stability can help borrowers manage their finances more effectively without the fear of sudden increases.
• Fixed-Rate Loans: For borrowers with fixed-rate loans, the impact of the repo rate remains minimal in the short term.

Key outcomes of the meeting

• The MPC decided to keep the repo rate steady at 6.5 per cent, with a majority of 5 out of 6 members supporting this decision.
• The real GDP growth rate for FY25 is projected at 7.2 per cent.
• RBI Governor Shaktikanta Das mentioned that food inflation pressures may ease due to favourable conditions from the kharif sowing season and good soil moisture.
• Change in Policy Stance: The MPC changed its policy stance from ‘withdrawal of accommodation’ to ‘neutral.’
• The committee noted weaker corporate profitability and government expenditure as factors influencing the growth outlook, leading to a downward revision of growth expectations for the June quarter from 7.3 per cent to 7.1 per cent.
• Governor Das highlighted downside risks to the economy, including geopolitical tensions, particularly in West Asia and financial market volatility.
• The MPC’s discussions included expectations for inflation to remain moderate but acknowledged that moderation might be “slow and uneven”.

New Delhi:

The Reserve Bank of India (RBI) has kept its key interest rate unchanged for the tenth consecutive time, its governor Shaktikanta Das announced today.

A six-member Monetary Policy Committee (MPC) headed by Mr Das kept the repo rate unchanged at 6.5 per cent.

This time three new members were inducted into the MPC, replacing outgoing external members. The new external members included in the MPC are Professor Ram Singh, Director, Delhi School of Economics, University of Delhi, Saugata Bhattacharya, economist; and Dr. Nagesh Kumar, Director and Chief Executive, Institute for Studies in Industrial Development. They replaced Ashima Goyal, who served as the at emeritus professor, Indira Gandhi Institute of Development Research, Shashanka Bhide, honorary senior advisor, National Council of Applied Economic Research and Jayanth R. Varma, professor at Indian Institute of Management, Ahmedabad (IIM-A).

The decision was announced after the RBI’s three-day monetary policy meeting, which began on October 7. 

“Inflation is on a declining path, but still have distance to cover,”Mr Das said in the monetary policy statement.

The repo rate has remained steady since the RBI adopted a cautious stance to balance inflation control and economic growth.

The committee, which consists of three RBI and three external members, voted 5:1 to keep the repo rate unchanged. It had last changed rates in February 2023.

The MPC also kept the growth projection unchanged at 7.2 per cent for the current financial year.
 

Reserve Bank of India (RBI) Governor Shaktikanta Das. File
| Photo Credit: Reuters

The Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday (August 8) announced the bi-monthly monetary policy statement, keeping the repo rate, which is the central bank’s rate for short-term loans to banks, unchanged at 6.5%.

In the Monetary Policy Committee (MPC) meeting, majority members voted to hold the rates. Four voted in favour and two against. Following the policy announcement, Mr. Das will hold a press conference at 12 p.m. on Thursday, which will be streamed live on the RBI’s X handle.

Also read | Policy repo rate unchanged at 6.5%; real GDP growth for FY25 projected at 7%

India’s GDP growth estimates and inflation forecast will be key to watch out for in the RBI policy on Thursday.

Inflation continues to be a significant factor influencing the RBI’s monetary policy stance. Despite core inflation being contained and a noticeable 15-20% drop in commodity prices, especially metals, from their 2024 peak, food inflation remains problematic. Experts emphasize that inflation in India still exceeds the RBI’s target range, making it unlikely for the central bank to cut rates until inflation aligns with the 4% target.

Men watch stock news on a display screen as Sensex opens. File.
| Photo Credit: ANI

Benchmark equity indices jumped in late morning trade on June 7, extending their rally to the third straight session, after the RBI decided to keep the policy rate unchanged for the eighth time in a row, in line with market expectations.

Buying in IT stocks added to the positive trend in markets.

The 30-share BSE Sensex jumped 907.43 points to 75,981.94 during the late morning trade. The NSE Nifty went up by 260.95 points to 23,082.35.

Interest rate-sensitive bank, realty and auto stocks were trading with gains.

In the past two days, the BSE benchmark surged 2,995.46 points or 4.15% after Tuesday’s massive rout.

The Reserve Bank of India (RBI) on Friday decided to keep the policy rate unchanged for the eighth time in a row, saying it will maintain a tight vigil on inflation.

Announcing the second bi-monthly monetary policy for the current financial year, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5%.

Among the 30 Sensex companies, Wipro, Infosys, Tech Mahindra, Bajaj Finserv, Tata Steel and Tata Consultancy Services were among the biggest gainers.

Maruti, IndusInd Bank, Hindustan Unilever and ITC were the laggards.

In Asian markets, Seoul quoted with gains while Tokyo, Shanghai and Hong Kong traded lower.

US markets ended on a mixed note on Thursday.

Global oil benchmark Brent crude climbed 0.26% to $80.08 a barrel.

Foreign Institutional Investors (FIIs) offloaded equities worth Rs 6,867.72 crore on Thursday, according to exchange data.

Regaining the 75,000 level, the BSE benchmark jumped 692.27 points or 0.933% to settle at 75,074.51 on Thursday. The Nifty climbed 201.05 points or 0.89% to 22,821.40.

RBI Governor Shaktikanta Das on June 7, 2024, said the Monetary Policy Committee has decided to keep the repo rate unchanged at 6.5%. File
| Photo Credit: ANI

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 6.5%. The decision, taken at the MPC’s meeting on Friday, marks the eighth time in a row that the policy rate has been put on hold to keep the focus on battling high inflation.

The MPC has revised its GDP growth forecast upwards from the earlier 7% estimate to 7.2% for the financial year 2024-2025. It has also decided to remain focused on withdrawal of accommodation to ensure that inflation does not accelerate, while supporting growth.

“These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2% while supporting growth,” Reserve Bank of India (RBI) governor Shaktikanta Das said after the meeting. 

Divided MPC

Mr. Das, along with MPC members Shashanka Bhide, Rajiv Ranjan, and Michael Debabrata Patra voted to keep the policy repo rate unchanged at 6.5% and to remain focused on the withdrawal of accommodation, while their colleagues Ashima Goyal and Jayanth R. Varma voted to reduce the policy repo rate by 25 basis points and for a change in stance to neutral. 

“There were signs of a more divided policy committee, with one additional member voting for a softening in stance as well as policy direction. The majority retained their cautious stance to guide inflation towards the 4% target on a durable basis, despite recent signs of disinflation,” said Radhika Rao, Executive Director and Senior Economist, DBS Bank, commenting on the decision.

Higher growth forecast

According to the MPC, high frequency indicators of domestic activity are showing resilience in 2024-25. The south-west monsoon is expected to be above normal, which augurs well for agriculture and rural demand, but headwinds from geopolitical tensions, volatility in international commodity prices, and geoeconomic fragmentation pose risks to the outlook. 

Taking various factors into consideration, real GDP growth for 2024-25 was projected at 7.2% as compared with the earlier projection of 7%, with the first quarter (Q1) growth estimate at 7.3%; Q2 at 7.2%; Q3 at 7.3%; and Q4 at 7.2%. The risks are evenly balanced.

Elevated food inflation

Emphasising that inflation has seen sequential moderation since February 2024, albeit in a narrow range from 5.1% in February to 4.8% in April 2024, the RBI Governor said that food inflation, however, remains elevated due to persistence of inflation pressures in vegetables, pulses, cereals, and spices. 

“Looking ahead, overlapping shocks engendered by rising incidence of adverse climate events impart considerable uncertainty to the food inflation trajectory,” he said, while announcing the MPC’s decisions. He added that volatility in crude oil prices and financial markets, along with the firming up of non-energy commodity prices, pose upside risks to inflation. 

Taking various factors into account, CPI inflation for 2024-25 is projected at 4.5%, with Q1 at 4.9%; Q2 at 3.8%; Q3 at 4.6%; and Q4 at 4.5%. The risks are evenly balanced.

Mr. Das emphasised that the path of disinflation has been interrupted by volatile and elevated food inflation due to adverse weather events. “Inflation is expected to temporarily fall below the target during Q2:2024-25 due to favourable base effect, before reversing subsequently. The MPC will remain resolute in its commitment to aligning inflation to the 4% target on a durable basis,” he said. 

The MPC reiterated the need to continue with the disinflationary stance, until a durable alignment of the headline CPI inflation with the target is achieved. 

Governor Das, announcing the Monetary Policy decision, said that CPI inflation for FY25 has been projected at 4.5%. The Committee has maintained its figures from February.

Back in February, CPI inflation was projected at 5.4 per cent for 2023-24 with Q4 at 5.0 per cent.

Food inflation pressures accentuated in February; MPC remains vigilant towards upside risk of inflation, says RBI Governor.

High, persisting food inflation could unhinge anchoring of inflationary expectations, he added. 

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| Photo Credit: Reuters

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