Views on RBI Policy - April 7, 2021 - Mr. Dhiraj Relli, MD &CEO, HDFC Securities

"The outcome of the MPC meet was on expected lines as far as repo rates and stance are concerned. However, the announcement of secondary market G-sec acquisition programme (G-SAP 1.0), where the RBI will commit upfront to a specific amount of open market purchases of government securities with a view to enable a stable and orderly evolution of the yield curve amidst comfortable liquidity conditions, was a positive surprise. This shows the resolve of the RBI to keep Gsec rates under check despite the large borrowing program. The endeavour will be to ensure congenial financial conditions for the recovery to gain traction. The large amounts committed in Q1 and in April show the seriousness of the RBI in implementing the Gsec program.

The markets have reacted well to this measure as this will result in rates not rising and, in fact, easing down for businesses. The impact of the MPC announcements however will wither away in a couple of days time and the markets will keep responding to other triggers including Covid progress and corporate results."

Source : Equity Bulls

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