InvestorQ : Can you explain the impact in the Indian markets of the RBI keeping the Repo Rate unchanged?
priya Shah made post

Can you explain the impact in the Indian markets of the RBI keeping the Repo Rate unchanged?

Tanya Mehta answered.
2 years ago
From the last few days, the markets were showing a sideways trend as investors were peculiar about the upcoming RBI policy, with the MPC (Monetary Policy Committee) set to announce various rates. Today, the committee announced its decision to keep the Repo Rate and the Key Lending Rate unchanged at 4 percent. They also held its monetary stance as ‘accommodative’, referring to a willingness to either cut or keep the rates unchained.

It is the eighth consecutive time that the MPC has maintained a status quo in the market rates. The status quo is on the expected lines of experts as they believed that the rates should remain unchanged given the growth-inflation scenario. As India is on a path of recovery from the recent economic repercussions of COVID-19, the inflation rate is still tagged as high. In a case like this, the only thing to ensure the V-shaped recovery is to give utmost liquidity to the citizens.

A statement by the RBI governor Das stated, “Let there be no concern about the adequacy of liquidity; RBI will ensure adequate liquidity to support growth”. Furthermore, Das shared the RBI’s forecast for the GDP growth at 9.5%, indicating a further recovery in the Indian Economy.

As for the Indian markets, the policy announcements come as welcome news as the unchanged rates will infuse more liquidity. With the RBI being optimistic on the growth recovery and Moody hiking India’s sovereign credit rating outlook to stable from negative, investors can hope to see the present bull run continuing.

However, owing to elevated core inflation, a surge in crude oil prices, the looming energy crisis, and China’s crisis, investors are advised to trade with caution. As far as the policy announcements are concerned, they won’t have a major impact on the Indian market, which is expected to continue with high investor sentiments and a host of IPOs lined up.