RBI Monetary Policy - September 2022 - Views from Kotak Mahindra Group

Shanti Ekambaram, Wholetime Director - Designate and Group President, Kotak Mahindra Bank.

"In line with market expectations, the MPC increased repo rate by 50 bps, estimated GDP growth for this fiscal at 7% and inflation unchanged at 6.7%. Their stance remained "withdrawal of accommodation" while supporting growth. Indian macroeconomic metrics and growth continued to be resilient amidst volatility in the global economic and financial markets due to aggressive tightening by global central banks. Private consumption and investment demand in India continued to be strong, service exports are at an all-time high and capacity utilisation in the manufacturing sector has been increasing. Overall, RBI will continue a calibrated strategy of ensuring price and financial stability while supporting growth. While the central bank will go by emerging data on inflation and growth, we expect further rate hikes".

Nilesh Shah, Group President & MD, Kotak Mahindra Asset Management Company

"The RBI gave a "Mai Hoon Na" policy doing a fine tight rope walking between Inflation, Growth and Stability. The RBI is batting on a difficult pitch against a hostile bowling. Rapidly deteriorating global situation, drawdown of systematic liquidity and FX reserves, inflationary pressure and Growth concern are testing the RBI. The RBI has so far batted with few misses. Most important thing is that they haven't lost the wicket and kept score board moving. The RBI has been proactive and data driven to deal with rapidly evolving situation. They have assured the market that they are in safe hands in the global storm."

Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank said,

"Repo policy rate hike of 50bps is in line with our expectations. Given the global adverse conditions we remain wary on the pressure on INR and hence the need for continued rate hikes. We expect the MPC to hike 35bps in the December policy. However, with inflation expected to fall within 6% threshold in 4QFY23, we expect the MPC to probably pause and assess the lagged impact of monetary tightening."Anu Aggarwal, President & Head of Corporate Banking, Kotak Mahindra Bank said,

"The 50 basis points (bps) hike in policy rates has been in line with market expectation. The current stand by the Reserve Bank of India (RBI) is partly driven by the US Federal Reserve which is going aggresive in order to bring down inflation. RBI had to do this instead of a 30-35 bps to control Rupee depreciation and therefore imported inflation. Meanwhile the rise in rates will slowdown Capex plans of Corporate India which were just about kicking off".

Lakshmi Iyer, Chief Investment Officer (Debt) & Head Products, Kotak Mahindra Asset Management Company

"50 bps repo rate hike delivered was in line with expectation. Growth forecast was lowered marginally and CPI forecasts unchanged, which is what we had estimated. Key concerns seem to emanating from global factors and to a lesser extent domestic events. The RBI also is mindful of the currency movements given USD strength. We view the policy as neutral and ready to act in response to incoming data, both global and domestic. Bond yields could see some respite buying in the near term, but would continue to closely monitor global yields, especially UST for way forward. Also weighing in on bond markets would be the likelyhood of India bonds' inclusion in Index, which May not culminate anytime soon"

Churchil Bhatt, Executive Vice President & Debt Fund Manager, Kotak Mahindra Life Insurance Company Limited,

"With a 50bps policy rate hike, the MPC has delivered just what was expected by financial markets. Inflation projection for FY23 was kept unchanged at 6.7%, while GDP growth projection was revised marginally lower to 7%. However, in spite of the policy rate hike, the stance of policy remains as "withdrawal of accommodation". This leads us to believe that in light of domestic inflation situation, the MPC will continue with further policy rate tightening. However, India's inflation problem is far more benign and manageable in comparison to what most of the world is facing. Hence, markets may take comfort in the fact that the future policy tightening by RBI will be relatively unhurried. While RBI remains vigilant on the currency front, it expressed comfort on the external front owing to India' stable macros and comfortable forex reserves. With the no-surprise policy out of the way, domestic rates market will now focus on global factors and prospects of India's inclusion into Global Bond Index. We expect 10Y Government Bond to trade in 7.25%-7.50% band in the near term."

Source : Equity Bulls

Keywords

RBIMonetaryPolicy September2022 RateHike Inflation KotakMahindraGroup