Tag: RBIs

Sensex opens with losses; investors wait for RBI’s rate hike decision

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Mumbai: Domestic key indices of equity markets made marginal losses during the early trading hours on Thursday.
Investors were in wait-and-watch mode as the outcome of the Reserve Bank of India’s three-day deliberations will be announced by the central bank’s governor in the morning. Global cues seemed weak as central banks across the world remained cautious about the bank crisis.
BSE’s 50-share Sensex lost 86 points to 59,603.20 while NSE’s Nifty dipped 25 points to 17,532.15 during the morning trade on Thursday.

In Asian markets, Hong Kong’s Hang Seng index was down 0.48 per cent, Japan’s Nikkei declined 1.07 per cent, China’s Shanghai dropped 0.28 per cent and S&P ASX dipped 0.26 per cent on Thursday’s morning.
In American markets, Nasdaq 100 dropped 1.01 per cent, S&P declined 0.25 per cent and Dow Jones gained 0.24 per cent.
In European markets, Deutsche Borse dipped 0.53 per cent, FTSE 100 gained 0.37 per cent, and Amsterdam Exchange was trading in the positive territory, as Asian markets opened on Thursday morning.
The Reserve Bank of India (RBI) started its monetary policy meeting on April 3, 2023. The outcome of the meeting will be announced today at 10 am by Governor Shaktikanta Das. All stakeholders and investors would be watching the outcome keenly which might influence how they buy or sell their stocks in these few days. The RBI’s monetary policy committee (MPC) is widely expected to hike the repo rate by 25 basis points (bps) in order to combat rising inflation.
On Wednesday, key equity benchmarks extended their rising streak for a fourth straight session. Sensex jumped 582.87 points or 0.99 per cent to 59,689.31. The Nifty of NSE rose 159 points or 0.91 per cent to 17,557.05. Both the indices have climbed 3.6 per cent in four sessions.

In the broader market, the S&P BSE Mid-Cap index added 0.11 per cent while the S&P BSE Small-Cap index gained 0.95 per cent.
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( With inputs from www.siasat.com )

April 6, 2023
RBI’s repo rate hike decision may not be unanimous

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Chennai: With economic experts expecting the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) to increase the repo rate further by 25 basis points (bps), whether it will be unanimous or not will have to be seen.
The MPC’s first meeting of FY24 is being held between Monday to Thursday. The decision on the repo rate hike will be announced on Thursday.
At the recent MPC meetings, the rate hike decisions were not unanimous with two external members — Dr. Ashima Goyal, Emeritus Professor, Indira Gandhi Institute of Development Research, Mumbai; and Prof. Jayanth R. Varma, Professor, Indian Institute of Management, Ahmedabad, voting against the hikes.

For instance, at the February 6-8 MPC meeting, Goyal and Varma had voted against the move to hike the repo rate by 25 bps to 6.50 per cent.
On the other hand, Dr. Shashanka Bhide, Honorary Senior Advisor, National Council of Applied Economic Research, Delhi; Dr. Rajiv Ranjan, Executive Director, RBI; Dr. Michael Debabrata Patra, Deputy Governor in charge of monetary policy; and RBI Governor Shaktikanta Das voted for the rate hike.
The resolution was passed by a majority of 4:2.
Commenting on the February 6-8 MPC meeting, Emkay Global Financial Services in a report said the minutes depicted a cautious and data dependent tone with most members anchoring their arguments to the risk of sustained high inflation and their second-round effects.
“The divergence in views became even more acute this time. The internal members of the RBI MPC were significantly hawkish, while Dr. Bhide seemed cautiously neutral. Prof. Varma and Prof. Goyal sounded dovish, arguing that there is a likely case of excessive frontloading of hikes, overshooting what is needed to achieve price stability, and further tightening is not desirable as one has to account for policy transmission lags,” Emkay Global said.

So, if the MPC decides on a rate hike, then it may not be unanimous.
Meanwhile, differing views are being expressed by experts on the interest rate with one saying the MPC may hike the repo rate by 25 bps and hit the pause button. The other view is that the MPC may hit the pause button on the rate hike for now.
However, the latter is slightly remote as the inflation continues to be sticky — the rate hikes are made to control the inflation.
Further the RBI had recently written to the central government on the steps it would take to control inflation/price rise.
“The RBI’s decision in April is likely to be influenced by the unexpectedly high consumer price index (CPI) inflation numbers recorded in the last two months,” said CARE Ratings in a report.
“The January and February spike in CPI inflation, combined with core inflation remaining above 6 per cent, may push the policy outcome in favour of one more rate hike. Moreover, the latest inflationary expectations data does not suggest a significant relief,” the report notes.
The credit rating agency expects the RBI to hike the repo rate by 25 bps to 6.75 per cent. With the real rate turning positive and tight liquidity conditions, CARE Ratings also expect a change of stance from ‘withdrawal of accommodation’ to neutral.
According to Lakshmi Iyer, CEO-Investment & Strategy Kotak Investment Advisors Limited, the CPI remains above the 6 per cent threshold, including core inflation which remains sticky. Though CPI is likely to trend lower in the coming months, the probability of a 25 bps rate hike in the upcoming MPC seems high.
“To hike or not to hike could be the most discussed agenda as the clamour for a pause seems to be only growing,” Iyer added.
Giving a different view, India’s largest commercial bank, the State Bank of India (SBI) expects the MPC to hit the pause button this time around.
“We expect the RBI to pause in April policya It has enough reasons to pause in April. There are concerns of a material slowdown in affordable housing loan market and financial stability concerns taking centre stage,” said SBI’s research report titled, “Prelude to MPC Meeting”.
Agreeing on the inflation concerns is justified the SBI report said the average core inflation is at 5.8 per cent over the last decade and it is almost unlikely that core inflation could decline materially to 5.5 per cent and below as post pandemic shifts in expenditure on health and education and the sticky component of transport inflation with fuel prices staying at elevated levels will act as the constraint.
By this logic, the RBI may then have to go for more rounds of rate hikes.
Churchil Bhatt, Executive Vice President & Debt Fund Manager, Kotak Mahindra Life Insurance Company, said that the MPC members are facing a catch-22 situation — a turbulent global economic landscape versus a healthy and reasonably insulated economy.
“We expect a pause in the April 23 MPC meeting with no change in stance. Forward guidance by the MPC, if any, may be open ended, leaving room for deft manoeuvrability depending on evolving circumstances in the global and domestic economy,” Bhatt said.
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( With inputs from www.siasat.com )

April 3, 2023
India’s retail inflation above RBI’s target level for second month

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New Delhi: Retail inflation in India remained above RBI’s 6 per cent upper tolerance band for the second straight month in February 2023, with the Consumer Price Index pegged at 6.44 per cent, government data released on Monday showed.
The retail inflation in rural and urban India was 6.72 per cent and 6.1 per cent, respectively. Among groups, cereals and products, and fruits, among others, contributed to the elevation in retail inflation in February.
Further, Consumer Food Price Index in February was 5.95 per cent, data showed.
Retail inflation on vegetables, however, declined 11.61 per cent.
Notably, India’s retail inflation, based on Consumer Price Index, during the month of December was at 5.72 per cent, versus 5.88 per cent in November and 6.77 per cent during October.
India’s retail inflation was above RBI’s 6 per cent target for three consecutive quarters and had managed to fall back to the RBI’s comfort zone only in November 2022.
Under the flexible inflation targeting framework, the RBI is deemed to have failed in managing price rises if the CPI-based inflation is outside the 2-6 per cent range for three quarters in a row.
Since May last year, the RBI has increased the short-term lending rate by 250 basis points, including the latest 25 bps hike, to tame inflation. Raising repo rate helps in cooling demand in the economy and thus helps in managing inflation.

Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
Meanwhile, average retail inflation in India is projected to be at 5.3 during the next financial year 2023-24, the Reserve Bank of India Governor Shaktikanta Das said last month while announcing monetary policy outcomes.
The projection, he had said, was based on the assumption of a normal monsoon.
The average inflation in Q1 2023-24 is expected at 5.0 per cent, Q2 at 5.4 per cent, Q3 at 5.4 per cent, and Q4 at 5.6 per cent, respectively.
For the current financial year 2022-23 ending March, inflation was projected at 6.5 per cent, with an average of 5.7 per cent in the January-March 2023 quarter.
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( With inputs from www.siasat.com )

March 14, 2023