RBI Monetary Policy Review - Destimoney Securities Ltd.

- RBI has cut Repo rate by 50 bps to 8%. Reverse Repo and marginal standing facility (MSF) rate now stand at 7% and 9% respectively. Cash RR is kept unchanged at 4.75%

- The prolonged euro zone sovereign debt problem continues to weigh on global economy. While the U.S. has shown some signs of recovery, emerging economies continue to witness pressure on GDP growth, especially with crude prices remaining high.

- Money supply (M3) growth, which was 17% at the beginning of the financial year 2011-12, reflecting strong growth in time deposits, moderated during the course of the year to about 13% by end-March 2012.

- RBI expects the GDP growth to be around 7.3% in FY13, leaving little room for monetary policy easing without aggravating inflation risks.

- Rising crude prices and volatility in INR-USD movement remain key risks currently.

- We expect weak demand environment to continue over the short term. Inflation is expected to fall further helping RBI to cut the interest rate in FY13.

Source : Equity Bulls

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