Monetary Policy reaction: HDFC Securities

10 Feb 2022 , 04:10 PM

“The MPC of the RBI decided to keep key rates unchanged at its meet on Feb 08-10 and maintained accommodative policy stance. The outcome was more dovish than most economists expected. Though the intent of the RBI to support the recovery in economy in the face of disruption due to Omicron variant is commendable, economists will now  fear whether the RBI will fall behind the curve, having maintained the easy monetary stance longer than most other Central Banks had.

The RBI has projected 4.5% CPI in FY23 (vs 5.3% for FY22), with CPI expected to fall sustainably below 5% in Q3FY23. One hopes that the inflation trajectory will soon come under control and the bet of the RBI pays off. Quarterly GDP growth projections remain volatile due to base effect with 4.5% growth projected for Q4FY23 compared to 7.8% for the whole of FY23.

Equity markets may temporarily welcome this decision but will be largely driven by the balance Q3 Corporate results, outcome of state elections and changes in global risk appetite.”

The author of this article is Mr. Dhiraj Relli, MD & CEO, HDFC Securities.

The views and opinions expressed are not of IIFL Capital Services, indiainfoline.com