MPC keeps repo rate unchanged at 6.5%; FY24 GDP growth forecast is retained at 6.5%
Sooraj Singh Gurjar Founder and Managing Director, Get Together Finance (GTF):
RBI maintains its realistic approach of balancing growth and inflation dynamics and decoupling from the global economy. Moreover, inflation over the past two months CPI is below the RBI's tolerance level, which encourages the RBI to keep the repo rate and the exchange rate unchanged. The sharp change in the spread between WPI and CPI from positive 880 basis points in May 22 to negative 560 basis points in April 23 will benefit the gross margins of the consumer-related sectors. Although, as expected, the interest rate decision and the MPC rate represent a pause and a withdrawal of accommodation, respectively, the Governor's comment can be interpreted as positive. The central bank's projection for inflation in FY24 CPI is 5.1%, lower than the 5.2% forecast at the last meeting. This suggests that the MPC has reached the end of the rate hike cycle. If the monsoon turns out to be normal and the global scenario is favourable, the MPC could consider a rate cut in late CY2023 or early 2024. From an equity market perspective, this is positive. The Governor's comment that "India's economic and financial sectors remain resilient amid global turmoil" reflects India's strong and improving fundamentals.
Amit Gupta, MD, SAG Infotech:
Equity benchmarks, the Sensex and Nifty, surged towards their all-time highs as the RBI maintained its policy rates and stance. The Sensex hit an intraday high of 63,317.16, with the Nifty reaching 18,775.60. The repo rate remained unchanged at 6.5%, given concerns about inflation exceeding the 4% target. Analysts predict a higher likelihood of rate cuts due to robust economic growth and easing inflation. While the Nifty Bank index rose by 0.30%, the Realty and Auto indices saw declines. The RBI's decision aligns with expectations, reflecting caution towards inflation, with a GDP growth forecast of 6.5%. However, downside risks to growth persist, and rate cuts hinge on growth-inflation prospects. Market experts anticipate an extended pause by the RBI, as uncertainties in the global market and the influx of ?2000 notes into the banking system affect liquidity and yield dynamics.
Gurmit Singh Arora, National President, Indian Plumbing Association:
The recent move to keep the REPO rate unchanged is on the expected lines. The Indian economic outlook looks promising with most leading agencies predicting a GDP growth rate in the range of 6-7%. The inflation pressure is within control. In April Indian inflation dipped to 4.7%, one of the lowest in the past 18 months. This is a positive sign not just for the economy but also for the real estate and allied industries. A strong economic outlook coupled with lowered inflation will drive growth in consumer spending. Meanwhile, there are threats from international geopolitical tensions and fragile global financial markets. This has led the government to keep the rate unchanged like previous times and further evaluate the situation.
Nidhi Aggarwal, Founder, SpaceMantra:
The rate pause decision and Governor’s commentary can be interpreted as positive for the market. His statement that India’s economic and financial sector remains resilient amidst global headwinds is a testament to the country's strong and improving fundamentals. Today's decision is an indication that the MPC has come to the end of the rate hiking cycle that started in May 2022. If monsoon and agri output remain normal and the global scenario is favourable, the RBI may consider a rate cut by end of 2023. From the stock market perspective, this is a positive development.
Ravi Singhal, CEO, GCL Broking:
As we can see, the RBI maintains its current stance, despite Canada raising interest rates yesterday. This will encourage additional investment in banking stocks. Inflation TGT is still higher than projected owing to the El Nino impact, but we believe that after Diwali policy interest rates will be reduced, and the market will go in a favourable path from here.
Subhash Goel, MD, Goel Ganga Developments:
As expected, RBI has decided to keep the repo rates unchanged for second time in a row. This is a good news for the real estate sector and the outlook for homebuyers who are looing to buy a property via a home loan in near future remains favourable. This announcement can provide a booster in maintaining the momentum in housing sector which has so far been firing on all cylinders.
Suren Goel, Partner RPS Group:
RBI’s keeping the repo rate unchanged despite a lowered inflation is on expected lines. The regulatory body will further evaluate the economy before taking a major step. This is more to do with the international slowdown and muted demand in the global markets rather than the Indian economy. However, RBI has to think about other means to boost realty demand in the country. Incentives such as lowered stamp duty, higher income tax exemption slabs on home loans, and reduced capital gain taxes can give a further positive push to the industry, which is looking upbeat at the moment. This won’t just drive demand but also create more employment & support other industries. A healthy real estate and a robust economy feed into each other and all the stakeholders have to understand this.