Blogs from Our Experts | April 16, 2018 RBI credit policy was in –line with market expectation in terms of maintaining
status quo on policy rates. What made the policy eventful was
sharp reduction in inflation forecast for FY19.Though stance on policy rate was as anticipated given the backdrop of government assertion that both fiscal deficit and revenue shortfall in FY18 would be lower than
revised budget estimate and that market borrowing would be only Rs 2.88 lakh crore in 1HFY19 as against Rs 3.72 lakh crore in 1HFY18. Falling food inflation was hinting at lower inflation as far as
first half of FY19 is concerned but the way RBI has lowered inflation forecast for the full financial year 2018-19 hints that there would be a long pause in RBI policy rate and there would not be any rate raise this calendar year. Though we believe there remain three key uncertainties - fiscal deficit in FY19, inflation particularly food in second half and pace of normalization of US monetary policy. But today’s RBI policy surely soothes nerves of Indian investors in an immediate sense.
10 year bond yield falling by almost 2% today to 7.15% augurs very well for
10 year bond yield approaching 7.7% in February this year was one of the key
trigger for sharp losses on Indian bourses. Now, falling bond yield should surely help
earning multiple to increase. Nifty has already been in the process of bottoming out over last one month trading around its
200 day moving average. It surely will get a positive boost from today’s RBI policy.