Explained: How RBI policy meeting outcome may impact your portfolio
2 min read 06 Apr 2023, 12:01 PM ISTRBI policy meeting outcome is going to have positive impact on Indian bond yield, believe investment experts
PremiumPortfolio management: After the surprise outcome from RBI policy meeting to pause interest rate hike, investors are busy calculating how it would impact their portfolio return in short term. While stock market cheered the RBI MPC meeting announcements, India's 5-year bond yield surged over 7 per cent. However, Indian National Rupee (INR) further weakened and came close to 82 levels.
According to investment experts, equity market is expected to gain momentum after this RBI policy meeting decision to keep interest rate unchanged. But, bond yield is expected to outperform bank fixed deposit (FD) and other debt instrument return in short term. They said that Indian bonds may generate capital gains over and above the coupon rates.
RBI policy impact on equities
The decision to maintain the repo rate unchanged is a positive sign for the banking and NBFC sectors, and it is expected to benefit other sectors such as real estate and infrastructure. However, the persistent inflation and global banking crisis remain areas of concern, and it is crucial to monitor the overall impact of the past rate hikes.
On impact of RBI MPC meeting outcome on equities, Sonam Srivastava, Founder at Wright Research said, "From a stock market perspective, the RBI MPC meeting's decision to maintain the repo rate unchanged is expected to create a positive momentum, especially for the banking sector. The focus on the gradual "withdrawal of accommodation" is also reassuring for the market, as it ensures the sustainability of the economic recovery in the long run. However, the market will be closely monitoring any future announcements by the Governor regarding inflation and global banking instability, as they may impact the market's momentum."
Sonam Srivastava went on to add that other sectors such as real estate and infrastructure are also expected to benefit from the current economic growth trajectory.
Impact on gold return
RBI's decision to keep repo rate unchanged at 6.50 per cent is going to fuel demand for gold and other precious metals. Experts are predicting bounce back in gold and silver prices after the recent retracement from record highs in the precious metal prices.
Expecting positive impact of the RBI's MPC meeting outcome on gold, silver and other precious metals, Colin Shah, MD at Kama Jewelry said, "The RBI taking a pause in their rate hike cycle was a prudent step. The development will be a big positive for most sectors. It will help push the prices of precious metals to the higher side. The move will help them assess the impact of the previous rate actions."
Impact on bond and debt instruments
On how RBI policy meeting outcome will impact bond yield, bank FD and other debt instrument returns, Sandeep Bagla, CEO at Trust Mutual Funds said, "Nothing hawkish about the policy - RBI/MPC has, take a pause, kept the repo rates unchanged, against majority market view. The stance remains unchanged at the enigmatic 'withdrawal of accommodation’. We expect both GDP and inflation to be significantly below RBI year end estimate of 6.5% and 5.2% respectively. Interest rates are likely to soften considerably from current levels. Bonds will perform well this year generating capital gains over and above the coupon rates. Passive investments like fixed deposits will underperform debt funds."
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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