RBI’s ‘no surprise’ repo rate cut unimpressive for markets: Analysts
Mumbai: The markets were largely unmoved by the Reserve Bank of India (RBI) repo rate cut on Wednesday, as analysts said the move was on expected lines. The RBI’s monetary policy committee reduced the policy rate to 6%, a six-and-a-half-year low, but maintained a neutral policy stance citing several uncertainties to the inflation trajectory.
On Wednesday, BSE Sensex ended at 32,476.74, down 98.43 points, while Nifty closed 33 points lower at 10,081.50 points. The Indian rupee strengthened past 64-mark to hit over two-year high against the US dollar. The 10-year bond yield was at 6.47%, compared to its previous close of 6.442%.
Rate sensitive indices like auto, banking and real estate indices were also moderately lower.
Here are few market analysts’ views on the RBI repo rate cut:
Motilal Oswal, CMD, Motilal Oswal Financial Services Ltd: “This was almost a copybook event where street expected 25 bps and RBI governor delivered 25 bps cut on the policy front. Markets are overheated but reluctant to fall, a huge pile of cash getting built in the system and waiting to be deployed, that will act as a shock absorber at every weakness. We think long-term money should be committed at these levels as well. Barring any global event, the outlook is positive.”
Anand James, chief market strategist, Geojit Financial Services Ltd: “Given the soft PMI numbers and concerns over goods and service tax (GST) hassles, markets have been expecting a deeper cut, especially as inflation expectations had eased. So it was not surprise that markets looked underwhelmed after RBI’s 25 bps rate cut. Rise in volatility index and FII’s (foreign institutional investors’) restrained approach over last few trading sessions have also been testing investor sentiments.”
Bekxy Kuriakose, Head (fixed income), Principal PNB Asset Management Co.: “To some extent the rate cut was factored in money market, bond and gilt yields. We expect prices to be supported in the backdrop of ample banking system liquidity and overall benign macro environment. In the near term, the 10-year benchmark may trade in a range of 6.30 - 6.50%.”
Jimeet Modi, CEO, Samco Securities: “The rate cut of 0.25% by MPC of RBI was disappointing. On one hand there is an acknowledgment that private sector investments are lacking and on the other hand the solution in the form of 0.25% rate cut do not wholeheartedly address the burning issue of anaemic private investments. Because there is lack of incremental private sector investments, job creation is being hampered. The concerns of 7th Pay Commission and impact of farm loan waivers pales when private capex and employment generation, the larger good are compromised. Globally the world is marching ahead with zero to negative real interest rates, while in India it is one of the highest thereby keeping rupee at alleviated levels impacting exports. With the blessings from monsoon, there was an opportunity to aggressively cut rates in the interest of accelerated growth for the Indian economy.”
Mustafa Nadeem, CEO, Epic Research: “We have seen positive built up in interest rate sensitive sectors like automobile, banking, reality and non-banking financial companies (NBFC). So liquidity was already present for a while and with this boost we may see further momentum. We expect realty stocks to pick some momentum while private banks will do well due to their better return on deposits as compared to PSU banks. Bank Nifty may set the tone towards 25800 while base is seen at 24800.”