RBI MPC: Experts decode policy impact on markets, sectors

Top voices on the Street reacted to the MPC outcome and here's what they said:

Palka Arora Chopra, Master Capital Services

As anticipated, the Indian central bank maintained its benchmark , focusing on in the face of ambiguous policy following an unexpected election outcome. The will view an increase in GDP trajectory and a maintenance of the 4.5% inflation prediction for FY25 as good signs. Stable interest rates are expected to benefit banking, finance, and consumer durables, but they would have less of an impact on utilities, healthcare, and technology.

Santosh Meena, Swastika Investmart

The RBI policy aligns with expectations and is not expected to have a major impact on the market. Attention will now shift to the formation of the new cabinet and global cues. Currently, the market appears strong, and there is a good chance that the bullish momentum will continue. The 20-DMA of 22,600 is likely to provide support to the Nifty, while the high of 23,338 is a key hurdle.

Amar Ambani, YES Securities

With major global central banks like ECB and BoC cutting interest rates, it was expected that RBI would change its stance at the June policy meeting, before deciding on the interest rate cuts later this year. However, the central bank amply stated that although it monitors the Global Interest Rate Trajectory, it does not blindly follow it, with India’s monetary policy rates being primarily driven by domestic conditions.

Adhil Shetty, Bankbazaar.com

Overall, the market remains positive due to the absence of any negative surprises in the policy announcement. With the major events of the election and the repo rate policy now behind us, the market is likely to experience more stability moving forward.

Keeping the repo rate unchanged amidst declining inflation shows the RBI's commitment to controlling inflation, which can help maintain consumer purchasing power over time. This decision also stabilises market sentiments, fostering better economic growth and corporate earnings as the year progresses. Sectors such as banking and financial services stand to benefit from higher net interest margins.

Another positive outcome is the potential for higher yields, which may attract more investment into government and corporate bonds, easing the flow of liquidity. Additionally, interest rates on savings accounts might see some upward adjustment, although not as significantly as FD rates.

Vikas Garg, Invesco Mutual Fund

Non-event policy as MPC maintained status quo on policy rates and stance as “withdrawal of accommodation”. More MPC split appears with 4:2 vote, indicating moving closer to rate cut. Overall, a very balanced policy. Banking liquidity is expected to turn surplus in June/July with government spending post elections and FPIs inflows in debt segment.

Market focus will be now on the new government’s fiscal policies. For now, we expect positive sentiment to continue for debt market driven by favorable demand-supply dynamics.

Naveen Kulkarni, Axis Securities PMS

In its latest policy announcement, the RBI kept the repo rate unchanged at 6.5% and maintained the policy stance of "Withdrawal of Accommodation" with a 4:2 majority, which is lower compared to the previous meeting, which had a majority of 5:1. This suggests that the RBI may be preparing the market for a change in stance in the upcoming meeting. On a positive note, the RBI upgraded the to 7.2% from an earlier projection of 7%, indicating solid prospects for the domestic economy in the future.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)