What does the Reserve Bank of India’s policies entail for the economy and markets?
The main interest rates were left unchanged in the RBI's bi-monthly monetary policy announcement yesterday. The move, according to economists, underlines the economy's rocky road ahead. Learn what this implies for the markets.
On Wednesday, the Reserve Bank of India’s monetary policy committee held the repo rate at 4%, as expected, for the ninth consecutive policy meeting.
In the face of the threat posed by the Omicron coronavirus strain, it also maintained an accommodating approach and offered enough liquidity assistance.
What RBI policy means for the economy and markets?
— Business Standard (@bsindia) December 9, 2021
RBI governor Shaktikanta Das stated in his policy statement that given the slack in the economy and the ongoing catching up of activity, which is still below pre-pandemic levels, continuous policy assistance is necessary for a long-term and broad-based recovery.
He also stated that the MPC saw the biggest risk to the domestic outlook as the intensification of headwinds arising from global developments.
And, despite the fact that the Indian economy is on the mend, it cannot remain immune to global spillovers, according to Das. Overall, the RBI kept its GDP and inflation forecasts for FY22 unchanged at 9.5 percent and 5.3 percent, respectively.
RBI’s latest policy statement, according to Aurodeep Nandi, India Economist & Vice-President at Nomura, shows that economic development is gaining steam, but it still needs policy assistance.
While the RBI is likely to remain behind the curve, for the time being, he claims that the upside risks to inflation make a monetary policy inflection probable. In 2022, he expects a 100 basis point rise in the policy rate.
Benchmark indexes jumped over 2% after the news, with all sectoral indices closing the day with a positive tilt. The BSE Sensex index closed at 58,650, up 1,016 points.
The NSE Nifty, on the other hand, rose 293 points to 17,469, reclaiming the 17,450 level. The Nifty Bank and Auto indexes rose up to 2.5 percent among rate-sensitive sectors, while the Nifty Realty index rose 1.7 percent.
Individual stocks on the BSE, however, soared up to 4%. Manappuram Finance, among other financials, might rise 7% to Rs 190, while DLF, from the realty sector, could rise 9% to Rs 431.
Now that a big event has passed, equities will once again be guided by global indications for future market direction. On Thursday, investors will be guided by weekly F&O expiration, stock-specific movement, and primary market activity.
The deadline to apply for RateGain’s initial public offering is today. So far, over 60% of the offer has been subscribed, indicating substantial retail demand. Apart from that, Shriram Properties’ initial public offering (IPO) will enter its second day today.
On the first day of the issuance, the Rs 600-crore public offer virtually sailed through. Finally, today is the first day of the primary market for CE Info Systems, which operates MapmyIndia. The initial stake sale price range has been set at Rs 1,000-1,033. The issue will be available for subscription until December 13th.