‘Positive’ Commentary by RBI Governor, MPC Rate Hiking Cycle Nears End?

By Malvika Gurung

Investing.com -- The Monetary Policy Committee (MPC) of India’s central bank Reserve Bank of India (RBI) has left the repo rate unchanged at 6.5% in its June policy meeting, for the second time in a row, in line with Investing.com’s estimates.

The domestic market remains steady following the MPC’s decision at 10 am on Thursday.

Read Also: RBI MPC Leaves Repo Rate Unchanged at 6.5%, Holds Accommodation Withdrawal

In a note sent to Investing.com, Deepak Agrawal, CIO - Fixed Income, Kotak Mahindra (NS: KTKM ) Asset Management Company, said that RBI did the right thing by keeping the monetary policy stance unchanged as “withdrawal of accommodation”, given that global central banks are still in hiking mode and future path of Fed Fund rate is unclear.

“India is in a sweet spot, based on the RBI GDP growth estimate of 6.5% and inflation estimate of 5.10% for FY24,” he added.

RBI will have more clarity on the El Nino risk on inflation by August 2023, along with the future path of the Fed Fund rate, and can then change the monetary policy stance to ‘Neutral’ in August, Agarwal believes.

Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, interprets RBI Governor Shaktikanta Das’ commentary as positive, stating that the central bank’s lower FY24 CPI inflation projection indicates that the MPC has come to the end of this rate hiking cycle.

“If the monsoon is normal and the global scenario is favourable, the MPC may think about a rate cut by the end of CY2023 or early 2024. From the stock market perspective, this is positive,” Vijayakumar stated.

The Governor’s remark that ‘India’s economic and financial sector remains resilient amidst global turmoil’ is a reflection of India’s strong and improving fundamentals, the market expert said.