RBI keep repo rates unchanged, here is how fund managers decode the policy

New Delhi: The Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday announced the first monetary policy of the financial year 2024-25 which kept the repo rate unchanged for the seventh time in a row.

The two-day meeting of the MPC, which commenced on April 3, concluded with the decision to retain the repo rate at its current level. Governor Das reiterated the central bank's stance, highlighting the need for stability amidst evolving economic conditions both domestically and globally.

Also read | Here are the key takeaways from the address by RBI

Reacting to the announcement, fund managers offered insights into the implications of the monetary policy decision on various market sectors.

Deepak Ramaraju, Senior Fund Manager, Shriram AMC said,"As expected, the committee decided to keep the interest rates unchanged. However, it's important to note that the timing of the rate cut is linked to the inflation rate reaching 4%. This creates some uncertainty about when the rate cut will happen. Currently, we are in a deflationary zone, but there are upward pressures from food prices (due to the El Nino factor) and crude oil shocks that can add to the uncertainty. The market is concerned about a potential delay in the rate cut, which could cause it to remain range-bound in the near term."

Similarly, Siddarth Bhamre, Head of Institutional Research at Asit C Mehta Investment Interrmediates said, “Domestic factors influencing inflation are projecting that inflation may remain on downward trajectory. However, concerns related to volatility in food prices, geo-political tensions and disruption in supply channels remain the challenges to deal with."

"As far as GDP growth is concerned, projections remain at 7.0% for 2024-25. Global factors are weighing high on governor's mind. In advanced economies inflation remains sticky because of tight labour markets. Significantly higher Debt to GDP ratio may pose financial threat in adverse situations."

"We believe with inflation firmly under control, RBI is keeping eye on FED and global risk parameters. Also till the time GDP growth rate remain above 6%, RBI may not blink first to reduce interest rates.”

Sandeep Yadav, Head - Fixed Income at DSP Mutual Fund, said,"The monetary policy was quite uneventful, as expected. RBI maintained the status quo in rates, as well as its tone. While the inflation and growth projections did change, the difference was not meaningful. In such a scenario, we believe that the Indian bonds markets will be tracking global markets for a while. Thus the US treasury yields and oil should remain near term drivers. For the longer term, we expect the favorable demand supply dynamics to bring yields lower."

As the Indian economy navigates through evolving challenges, the RBI's decision to maintain status quo reflects a cautious optimism, aimed at fostering sustainable growth while ensuring price stability. Market participants will closely monitor future developments, both within the country and abroad, for cues on the trajectory of monetary policy in the coming months.