ALSO READSensex down 67 points, Nifty ends above 10,100 ahead of RBI policy outcome Sensex ends 174 pts higher, Nifty above 9,900 post RBI policy outcome Sensex trades flat, Nifty below 9,650 ahead of RBI policy outcome Full text of RBI policy: Repo rate unchanged at 6% Sensex ends marginally higher, Nifty above 9,650 after RBI policy outcome
Radhika Rao, India Economist, DBS Bank on RBI policy The guidance was cautious on the near-term inflation outlook, owing to higher oil prices, housing rent allowance increases, rising input prices, fiscal slippage risks and core pressures. However, this was counter-balanced by a negative output gap and the cuts in GST rates which are expected to partly ease price pressures. While the FY18 GVA estimate was maintained and growth has bottomed-out in 2Q, a downward revision remains on the cards. Back on inflation, we expect the headline to settle within a broad 4-5% range, with base effects tempering the headline prints intermittently. While this closes the door for rate cuts, a clear bias towards rate hikes will require faster inflation to be accompanied by a strong turnaround in growth. On this account, we see range-bound inflation whilst growth returns gradually, providing the central bank with the comfort to remain on-hold during this phase, not rushing to tighten policy. A modest fiscal slippage is expected but not a deviation from the consolidation path. Oil prices remain the most uncertain part of the price outlook Nomura on RBI policy The policy outcome was largely in line with expectations. Although there could be some downside risk to the RBI’s FY18 GVA growth projection, we believe that growth is headed higher, supported by ongoing remonetisation, resolution of GST-related issues and large bank recapitalisation. Meanwhile, risks to near-term inflation have risen on higher oil prices and rising vegetable prices, while the cobweb cycle (adverse supply response to low food prices in H1 2017) and higher growth are medium-term risks. Overall, we believe that both growth and inflation are headed higher, but we expect rates to be on hold through 2018 as the RBI has a sufficient real rate cushion to absorb higher inflation Market rundown by Anand James, Chief Market Strategist, Geojit Financial Services "RBI's decision to maintain status quo was widely expected in the market but weakness in global indices meant that there was little impetus to push ahead. With MPC raising inflation expectations while retaining growth estimates for FY 17-18, markets would now keep an eye on budget cues for further direction." Nifty Fin services index also slipped over 1% Source: NSE Nifty Bank index down pver 1% post RBI policy outcome Source: NSE Sectoral trend Source: NSE
Globally, Asian stocks slipped across the board on Wednesday as various factors including weaker metals prices and monetary policy concerns in China soured investor risk sentiment. The fall in the index deepened as Asia's equity markets suffered losses, with Shanghai stocks falling to three-month lows and Hong Kong's Hang Seng dropping to a one-month trough amid fears over central banks tightening liquidity.