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What RBI policy means for the economy and markets?

The monetary policy committee of the Reserve Bank of India kept the repo rate unchanged at 4 per cent, on expected line, for the ninth straight policy meeting on Wednesday.

It also maintained an accommodative stance, and ensured enough liquidity support, amid the threat surrounding Omicron coronavirus variant.

In his policy statement, RBI governor Shaktikanta Das said that given the slack in the economy and the ongoing catching up of activity, which is still below its pre-pandemic levels, continued policy support is warranted for a durable and broad-based recovery.
He also said the MPC regarded the accentuation of headwinds emanating from global developments as the main risk to the domestic outlook.

And even though the Indian economy is relatively well-positioned on the path of recovery, it cannot be immune to global spillovers, Das said.

Overall, the RBI maintained its FY22 GDP and inflation projections at 9.5 per cent and 5.3 per cent, respectively.

For Aurodeep Nandi, who is India Economist & Vice-President at Nomura, RBI’s latest policy announcement showed that the economic growth is gaining traction, but it still needs policy support.

He says, while the RBI is likely to continue remaining behind the curve for now, the upside risks on inflation make an inflection in monetary policy trajectory inevitable. He sees a 100bp policy rate hike in 2022.

Post the announcement, benchmark indices vaulted nearly 2 per cent with all the sectoral indices ending the day with a bullish bias.
The BSE Sensex index sprinted 1,016 points to end at 58,650. The NSE Nifty, on the other hand, reclaimed the 17,450-mark and settled at 17,469, up 293 points.

Among rate sensitive sectors, the Nifty Bank and Auto indices gained up to 2.5 per cent while the Nifty Realty index climbed 1.7 per cent. Individual shares, meanwhile, rallied up to 4 per cent on the BSE.

Among other financials, Manappuram Finance can rally 7 per cent to Rs 190 levels while DLF, from the realty pack, can jump 9 per cent to Rs 431.

Now, with a major event behind us, equities will yet again track global cues for further market direction.

Weekly F&O expiry, stock-specific action and primary market activity will also guide the investment sentiment on Thursday.
Today is the last day to apply for RateGain’s initial public offer.

So far, the issue has been subscribed over 60 per cent backed by strong retail interest.

That apart, the IPO of Shriram Properties will enter its second day today. The Rs 600-crore public offer nearly sailed through on the first day of the issue.

Lastly, CE Info Systems, which operates MapmyIndia, will hit the primary market today. The price band for the initial stake sale has been fixed at Rs 1,000-1,033. The issue is open for subscription till December 13.
Source: Business Standard

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