What does RBI’s MPC meet outcome spell for banking and housing loan sectors?
At the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) meeting on December 08, 2023, the RBI Governor Shaktikanta Das announced the MPC’s decision to maintain the repo rate at 6.5 per cent. After a three-day bi-monthly meeting, the committee emphasized its dedication to maintaining its existing policy stance. It was evident from the announcement that the RBI has no intent to withdraw its accommodation stance regarding its decision on repo rates.
The choice by the RBI to keep the repo rate seems grounded in two crucial factors:
Lauding RBI’s decision, Umeshkumar Mehta, CIO, SAMCO Mutual Fund explains, “The Central Bank positioned its prudent stance keeping the repo rate unchanged at 6.25 per cent and signalled to remain focused on the withdrawal of accommodation. This certainly is music to investors’ ears by subtlety communicating the peaking of the interest rate cycle, with no increase in interest rate in sight. Further, balance sheet moderation as a percentage of GDP is applauded and shows strength in the independent thought leadership of RBI."
Does the RBI’s view on maintaining the repo rate hold good for the market? Palka Arora Chopra, Director, Master Capital Services explains, “The RBI’s policy announcement is largely based on market expectations and will not have a major impact on the domestic market. Interest rate-sensitive sectors such as autos and real estate will benefit as consumers will now spend more taking into account borrowing cost forecasts. RBI has revised its FY2024 growth forecast from 6.5 per cent to 7 per cent which will boost investor confidence."
Akhil Mittal, Senior Fund Manager, Tata Asset Management adds, “As expected, the policy was a non-event with no change in rates or stance.
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