NEW DELHI: In market veteran Nilesh Shah’s words, the RBI on Friday delivered a “Mai Hoon Na” policy, as the central bank assured the market that it is in safe hands despite the prevailing global storm.
A host of economists and market analysts gave thumbs up to Governor Shaktikanta Das’ commentary, sending the BSE Sensex soaring over 1,000 points and Nifty50 past the 17,100 mark.
Shah, who is Group President & MD at Kotak Mahindra AMC, said the RBI has been proactive and data driven to deal with the rapidly evolving situation, adding that the MPC has assured the market that it is in safe hands in the global storm.
“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 forex 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,” Shah said.
The RBI on Friday raised the repo rate by 50 basis points, in line with the market expectations. It cut FY23 GDP forecast by 20 basis points to 7 per cent from 7.2 per cent earlier but retained its inflation projection for the financial year at 6.7 per cent.
Battered banking and financial shares were leading the Sensex rally, with five stocks namely HDFC Bank, HDFC, ICICI Bank, Kotak Mahindra Bank and Bajaj Finance alone contributing nearly half of the index gains by 1.15 pm.
The dominant theme in the stock market discussions these days is India’s resilience and outperformance amid weakening of global economy, said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Vijayakumar said the RBI governor’s comments on Friday is a reaffirmation of this ‘India resilient’ theme.
“It was this positive commentary on India’s growth impulses and projection of 7 per cent GDP growth with 6.7 per cen t inflation for FY23 that has come as a positive even while the policy announcements relating to rates were on totally expected lines. The governor’s confident statement that CAD can be financed comfortably even with crude at $100 for the rest of the year is reassuring. In brief the positive commentary is market positive,” he said.
Niraj Kumar, CIO at Future Generali India Life Insurance Company said the RBI has stuck to its overarching focus of nurturing the nascent recovery of growth and has avoided any sort of collateral damage so far and continues to bubble wrap the economy.
“Clearly, with today’s front-loading of rate hikes, the future course of rate hikes appears to be very shallow, given the imminent softer patches of global growth and receding Inflation trajectory. Overall it was a well-thought out and a balanced policy,” he said. Bajaj Finserv was the top index gainer, rising 3.38 per cent to Rs 1,690.95. HDFC Bank climbed 3.1 per cent to Rs 1,425.95. Kotak Mahindra Bank advaned 3.03 per cent to Rs 1,818. HDFC, Bharti Airtel and IndusInd Bank were some other index gainers, adding up to 2.8 per cent.
Nomura’s Vice-President and India Economist Aurodeep Nandi said the 50 basis points repo rate hike by the RBI was in line with market expectations.
“Very importantly, with the RBI retaining the policy stance of “withdrawal of accommodation”, the implicit message is that rates are yet to reach neutral territory, and that more rate hikes are warranted – a view that we agree with,” Nandi said.
The Nomura analyst said the RBI continues to signal that all options are on the table, which is a prudent strategy given the elevated levels of uncertainties on both, growth as well as inflation.
“The relatively unchanged growth and inflation outlook by the RBI indicates that the policy arithmetic hasn’t materially changed for it, and the reluctance to change stance from ‘withdrawal of accommodation’ indicates that more monetary policy tightening is likely to be in the pipeline,” he added.