Stock market experts on RBI policy today: The Indian stock markets turned volatile after the Reserve Bank of India’s (RBI’s) monetary policy committee (MPC) interest rate decision today, August 8, 2024.
The benchmarks — BSE Sensex and the NSE Nifty50 — stayed in the negative territory even as they moved in a narrow range.
The BSE Sensex, for instance, hit a low of 78,898 on the exchange, falling 570 points intraday. The Nifty50, on the other hand, hit a low of 24,119, slipping 178 points.
At 11:21 AM, however, the BSE Sensex was down 352 points at 79,115 levels and the Nifty50 was quoting 105 points lower at 24,193.
In the broader markets, the BSE MidCap and SmallCap indices, on the flipside, were trading with gains of 0.05 per cent and 0.5 per cent, respectively.
Here’s how market experts decode RBI MPC August 8 meeting decision:
Aurodeep Nandi, India Economist, Executive Director – Nomura
The guidance remained predictably tilted in favour of focusing on inflation, with comfort on growth outlook, although we note a surprising downgrade to the Q1 FY25 GDP growth forecast in acknowledgment of softer-than-expected data.
Our view remains that the RBI is on the precipice of a policy pivot, and we continue to expect the RBI to begin easing in the next meeting in October, delivering a 25bp cut.
Lakshmi Iyer, CEO – Investments & Strategy, Kotak Alternate Asset Managers
Status quo on rates and policy stance was in-line with our expectations. The RBI does not seem to be under any duress to act just because of global developments. Markets will be guided by the developments on the global policy front, domestic inflation, and monsoon progress.
Bond yields will continue to find an anchor due to FPI buying. We maintain our preference for government bonds over corporate bonds.
Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares and Stock Brokers
A key point to note is the RBI governor Shaktikanta Das’ emphasis on food inflation and the fact that MPC was willing to look through it in case it will transitory but as recent experience has suggested, food prices have remained elevated for too long and given a 46 per cent weight in the CPI basket, this component cannot and should not be ignored.
High food inflation with its tendency to spill over to core inflation and unanchor inflation expectations, as has happened post November 2023, remains the primary concern keeping RBI unhinged.
All this in the backdrop of robust economic growth momentum with Indian PMI’s remaining one of the highest amongst major global economies suggests MPC is not too worried about rates restricting growth. On a net basis we think the policy was nothing out of consensus and hence remains neutral for the markets.
Anitha Rangan, Economist, Equirus
The RBI clarified on the debate around the importance of targeting headline versus core inflation. The RBI has clearly stated that food inflation cannot be ignored as a) food inflation is now persistent and not temporary b) public understands inflation more from food c) high food inflation affects household inflation expectations d) unanchored inflation expectations can have spill overs in wages and cost of living which can result in pass through into services especially if demand is steady e) overall, inflation can become sticky if food inflation is ignored. Therefore, the RBI is not going to ignore food inflation.
Overall, according to the RBI, the pace of inflation is moderating but the moderation is uneven and slow. Therefore patience is required.
Umeshkumar Mehta, CIO, SAMCO Mutual Fund
RBI MPC is in wait and watch mode and has kept the interest rates unchanged, waiting for clues from the largest Central Bank of the world, US Federal Reserve, before acting. Though India’s position today is far more resilient on the economic front which could have allowed a slight rate reduction to test the water on inflation and exchange rates, the RBI has taken a safer bet and decided to wait for rate reduction by the third or the fourth quarter of this year. Stock markets will continue to consolidate in the meanwhile.
Anirudh Garg, Partner and Fund Manager, Invasset
India cannot afford to raise rates significantly before the US Federal Reserve, as this would risk depreciating the Indian rupee. With inflation under control at around 4.5 per cent, which is on the lower end of the RBI’s target band, India is in a relatively strong position compared to other global economies.
However, leading the charge in rate cuts ahead of global peers, especially the Fed, could be premature and risky.
Lower corporate profits this quarter have been a surprise, but we believe that bull markets often thrive on bad news. The recent correction, partly influenced by Japan’s potential rate hikes, has provided a solid foundation for market recovery.
First Published: Aug 08 2024 | 12:06 PM IST
