RBI MPC Highlights: Sensex, Nifty Close In Red As RBI Keep Repo Rate Unchanged At 6.5%
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Parijat Agrawal, Head of Fixed Income at Union Asset Management, said that the Monetary Policy Committee’s decision to keep the Repo Rate steady while reducing the Cash Reserve Ratio (CRR) by 50 basis points to ease tight liquidity conditions was in accordance with our expectations. “The moderation in growth and the persistence of headline inflation are concerning factors that may necessitate timely policy support,” he added.
Pankaj Sharma, CEO of Religare Finvest, said, "The RBI stance of maintaining the repo rate at 6.50 per cent demonstrates a nuanced approach to our current economic challenges. While we would have welcomed a rate cut, we understand the delicate balancing act of managing inflation against economic growth and recognise the RBI's cautious approach."
"The current economic indicators present a complex landscape. With inflation rates climbing to 6.2 per cent - significantly above the RBI's 4 per cent target - and our GDP growth decelerating to 5.4 per cent in the second quarter, we're navigating turbulent economic waters," he added.
Indian benchmark indices ended the volatile session on Friday with slight losses, as the Nifty closed just below 24,700. The RBI's decision to keep the repo rate unchanged and reduce the CRR to enhance liquidity aligned with expectations. At the close, the Sensex was down 56.74 points, or 0.07 per cent, at 81,709.12, while the Nifty declined by 30.60 points, or 0.12 per cent, to finish at 24,677.80.
“In order to achieve a $1 trillion real estate economy, radical reforms on the fiscal and monetary fronts must be initiated, including making home loans both accessible and affordable in order to tap into the huge housing demand and thereby unleash the full potential of the Indian economy,” said Samir Jasuja, Founder and CEO, PropEquity.
"The cut in CRR by the RBI today will shore up the liquidity in the economy and help developers borrow more as there is an unlimited requirement for fund in this sector. However, a cut in repo rate would have given a fillip to consumption and helped boost housing demand," he added.
Murthy Nagarajan, Head-Fixed Income, Tata Asset Management, said, “Debt market has taken no rate cut or change in stance as negative and 10 year yields have moved up from 7.72 to 7.75 levels. The market is expected to stabilise in the next few days as traders' positions get offloaded. Till that time, the ten year is expected to trade in the range of 6.72 to 6.78 levels. RBI may have to cut more than 50 basis points in the coming months as the rate cut cycle is getting delayed and GDP growth in trending towards 6 per cent levels. Investors should add to their duration portfolio to take advantage of high accrual and expected price appreciation in the coming months.”
Amit Somani, Senior Fund Manager - Fixed Income, Tata Asset Management, said, “RBI kept the policy rate on hold with four MPC members out of six voting in favor of the decision. The policy stance was unanimously maintained as “Neutral”. RBI took a practical approach in calibrating balance between unexpected higher Inflation as well as lower Growth, even as Rupee remained under pressure due to global USD strength.”
Manju Yagnik, Vice Chairperson of Nahar Group and Senior VP, NAREDCO, Maharashtra, said, "The RBI's decision to retain the repo rate at 6.5 per cent for the 11th consecutive time is a balanced approach to manage growth and inflation. With India's GDP expected to grow at 6.5–7 per cent in FY 2024-25 and the real estate sector contributing 7 per cent to the economy, this stability is vital for maintaining economic momentum.”
Sahil Agarwal, CBO, Nimbus Projects, said that while the central bank kept the repo rate unchanged, it decided to reduce the Cash Reserve Ratio (CRR) that banks must maintain. This move will free up more funds for banks to lend. “With more liquidity available, we anticipate that banks may pass on some of the benefits to borrowers through lower interest rates,” he added.
Raoul Kapoor, Co-CEO of Andromeda Sales and Distribution, said, “The central bank has kept the repo rate unchanged for the 11th consecutive time since February 2023. However, the good news is the reduction of the Cash Reserve Ratio (CRR) from 4.5 per cent to 4 per cent, reflecting the RBI’s careful approach to balancing mixed economic signals. While inflation remains above the comfort zone, the RBI continues to prioritize price stability alongside economic growth.
Governor Shaktikanta Das clarified in a press conference after the Monetary policy announcements that no decision had been made regarding a BRICS currency, which was initially proposed by one of the member countries. He emphasised that the idea is still under discussion, but no concrete steps have been taken yet.
Aman Sarin, Director and CEO of Anant Raj, expressed optimism following the RBI's latest monetary policy announcement. After a prolonged period of stability, the central bank's decision to maintain the repo rate while reducing the Cash Reserve Ratio (CRR) is seen as a positive move. This reduction in CRR will release additional funds for banks, allowing them to increase lending to retail and institutional borrowers. “A lower CRR also reduces banks’ costs, potentially leading to decreased interest rates. The housing market, particularly the luxury segment, continues to exhibit strong demand, and this reduction in CRR is expected to further boost momentum,” Sarin added.
RBI Governor Shaktikanta Das highlighted expectations of tight liquidity in the coming months, noting that currency circulation is likely to rise during this period. He further pointed out that the main challenge lies in investment on the demand side of the economy. However, he also acknowledged a recovery following the slowdown observed in the second quarter, suggesting that the economy is showing signs of improvement despite these challenges.
“The RBI’s decision to keep the repo rate steady reflects its stance to balance economic growth with inflation concerns,” said Anshuman Magazine, Chairman and CEO - India, South-East Asia, Middle East & Africa, CBRE. “Stable interest rates provide much-needed predictability for homebuyers and developers, fostering market confidence. With steady borrowing costs, we anticipate sustained demand for housing, particularly in the affordable and mid-segment categories, “ he added.
Pradeep Aggarwal, Founder and Chairman of Signature Global (India), said, "The Apex Bank’s decision to maintain the repo rate at 6.5 per cent while reducing cash reserve requirement by 50 basis points, reflects a balanced and prudent approach to sustaining economic stability while fostering growth. This continuity provides a stable environment for the real estate sector, enabling developers to plan with confidence and homebuyers to benefit from favourable borrowing costs."
Manju Yagnik, Vice Chairperson of Nahar Group and Senior VP, NAREDCO, Maharashtra, said, "The RBI's decision to retain the repo rate at 6.5 per cent for the 11th consecutive time is a balanced approach to manage growth and inflation. With India's GDP expected to grow at 6.5–7 per cent in FY 2024-25 and the real estate sector contributing 7 per cent to the economy, this stability is vital for maintaining economic momentum. A steady rate ensures consistent repayment terms, which increases the confidence of homebuyers and encourages investments in the sector. With property prices rising, stable lending conditions and a steady market make real estate a key driver of economic growth, boosting demand and contributing significantly to India's economic progress."
The Reserve Bank of India has raised the collateral limit for agricultural loans from Rs 1.6 lakh crore to Rs 2 lakh crore per borrower. This move is designed to enhance financial support and stability for farmers while ensuring greater access to credit in the agricultural sector.
Governor Shaktikanta Das announced during the monetary policy statement that the Reserve Bank of India has decided to raise the interest rate ceilings on foreign currency non-resident bank deposits (FCNRB), effective immediately, to attract more capital inflows. Under the new guidelines, banks are now allowed to raise FCNRB deposits with maturities between one and three years at rates not exceeding the overnight alternate reference rate (ARR) plus 400 basis points, up from the previous 200 bps limit.
The Reserve Bank of India (RBI) Governor Shaktikanta Das says the RBI will introduce podcasts as part of its communication strategy.
The Reserve Bank of India Governor Shaktikanta Das reiterated during the MPC announcement that the country's exchange rate policy remains consistent and market-determined. He emphasised that foreign exchange reserves are being deployed judiciously, and efforts to deepen and modernize the forex market have delivered significant results.
Das highlighted that this approach ensures that foreign exchange acts as a shock absorber, with a flexible, market-determined exchange rate regime playing a crucial role in maintaining both market and macroeconomic stability.
The Reserve Bank of India (RBI) Governor Shaktikanta Das announced a 50 basis point cut in the Cash Reserve Ratio (CRR) to 4 per cent, marking the first such reduction since March 2020. The CRR will be reduced in two tranches, with a 25 basis point cut each, to ease liquidity in the banking system.
The Reserve Bank of India has projected inflation for FY25 at 4.8 per cent, with expectations of 5.7 per cent in Q3 and 4.5 per cent in Q4. For FY26, inflation is forecasted at 4.6 per cent in Q1 and 4 per cent in Q2. The RBI noted that the risks to inflation are evenly balanced, reflecting a stable outlook in the near term.
The Deposit Facility (DF) remains at 6.25 per cent, while the Marginal Standing Facility (MSF) and bank rate are set at 6.75 per cent. The Monetary Policy Committee (MPC) has decided to maintain a neutral stance, emphasising that durable price stability is crucial for establishing strong foundations for sustainable high growth. Inflation is gradually moving toward target levels after reaching multi-decade highs. However, the global economic outlook remains uncertain, with rising protectionism posing a risk of driving inflation higher.
The Reserve Bank of India governor said on Friday that real GDP growth for the financial year 2024-25 is projected at 6.6 per cent, for Q3 at 6.8 per cent, and Q4 at 7.2 per cent.
RBI Governor Shaktikanta Das said during the Monetary Policy Committee (MPC) announcements that monetary policy plays a crucial role in shaping the economy, impacting every segment, from vegetable vendors to the middle class and large corporations. He emphasised that the MPC works within a flexible inflation targeting framework to ensure balanced economic growth.
The Reserve Bank of India (RBI) announced on Friday that it would maintain the benchmark interest rate at 6.5 per cent, marking the eleventh consecutive meeting without any changes. After evaluating the current macroeconomic conditions and the future outlook, the Monetary Policy Committee (MPC) voted to keep the policy rate unchanged.
RBI Governor Shaktikanta Das, who chairs the Monetary Policy Committee, is scheduled to announce the outcomes of the three-day discussions by 10 am. The repo rate decision will be broadcast live on the RBI's YouTube channel and X (formerly Twitter) page. ABP Live will also provide real-time updates from the press conference, offering insights into the potential implications for various sectors and the broader Indian economy.
The majority of economists surveyed by Bloomberg expect the RBI to keep the repo rate at 6.5 per cent, citing persistent inflation and a neutral stance from the October meeting. However, some analysts foresee a 50-basis-point cut in the Cash Reserve Ratio (CRR), which could infuse Rs 1-1.25 lakh crore into the banking system, aimed at stimulating credit growth and investments.
BofA Securities anticipates that the Reserve Bank of India (RBI) will keep interest rates unchanged, noting that while economic growth remains sluggish, currency exchange dynamics will be a key factor influencing future policy decisions. "The recent outflows from equity markets and pressure on the rupee have added a new dimension to the policy framework, prompting significant intervention by the RBI," BofA noted.
Amid mixed global cues, Indian benchmark indices opened flat on Friday ahead of the Reserve Bank of India’s (RBI) policy announcement. The Sensex was down by 24.88 points, or 0.03 per cent, at 81,740.98, while the Nifty declined by 16.25 points, or 0.07 per cent, at 24,692.15. Of the stocks traded, 1,679 advanced, 827 declined, and 128 remained unchanged.
"In our base case, we factor in 50 basis points cumulative rate cuts in 2025, though the effective rate cut could turn out to be 75 basis points, with the central bank at some stage likely allowing short-term rates to settle closer to the SDF rate, which is 25 basis points lower than the repo rate," said Kaushik Das, chief economist at Deutsche Bank.
HDFC Bank predicts that the Reserve Bank of India (RBI) will keep the repo rate at 6.5 per cent during its final Monetary Policy Committee (MPC) meeting of the year, scheduled for next week, according to a report by the country's largest private sector bank. “We anticipate that the RBI will maintain the current policy rate at its meeting next week, although the likelihood of a rate cut in the February policy has increased post this weaker-than-expected data,” the bank said.
In its latest report, Kotak highlighted that the slowdown in GDP growth increases the likelihood of early policy interventions. The firm anticipates a staggered 50-basis-point cut in the Cash Reserve Ratio (CRR) by the Reserve Bank of India (RBI) during the MPC meeting, which could inject Rs 1.2 lakh crore into the economy, signalling the start of a monetary easing cycle. However, Kotak Equities expects the RBI to maintain the repo rate, given the high inflation in October-November and ongoing global economic challenges.
Kirang Gandhi, Personal Financial Mentor, believes that as the market braces for an anticipated rate cut by the RBI, it presents a prime opportunity for investors to adjust their debt portfolios accordingly. Long-duration funds, including gilt funds, are susceptible to interest rate changes and typically see a significant rise in NAV when bond yields decline.
Background
Business News Highlights: Hello and welcome to ABP Live's Business LIVE blog. Please follow this space for all the breaking news and latest updates from the stock market, economy, and the corporate world.
The Reserve Bank of India (RBI) is set to announce the results of its Monetary Policy Committee (MPC) meeting on Friday. The MPC will convene to assess the benchmark interest rate and discuss the future economic direction for India. The meeting, chaired by RBI Governor Shaktikanta Das, was originally scheduled for December 4-6, 2024. The central bank last raised the repo rate in February 2023 and has maintained the key rates unchanged since then.
The MPC's decision will be announced at approximately 10 am on Friday. For official updates, including press releases, meeting minutes, and related documents, visit the RBI's official website. Key announcements will also be shared on the RBI's social media platforms, including X and LinkedIn.
In the last MPC meeting, held from October 7-9, the committee decided to keep the benchmark interest rate at 6.5 per cent, marking the tenth consecutive meeting with no change in rates. Experts anticipate that the RBI will maintain the same stance on rates in this upcoming meeting as well.
However, Nomura predicts a 25 basis point repo rate cut by the RBI in this Monetary Policy Committee meeting, as outlined in its latest report. If correct, this would lower the benchmark repo rate to 6.25 per cent.
While 42 out of 49 economists surveyed by Bloomberg anticipate no change, Nomura assigns a 75 per cent probability to its forecast, reflecting strong confidence in a move toward rate easing. Additionally, the brokerage expects a total of 100 basis points in rate cuts by mid-2025, which would bring the repo rate down to 5.50 per cent.
Nomura's expectation of a rate cut is driven by a significant slowdown in India’s GDP growth and a subdued inflation outlook. The country’s GDP growth for the second quarter of this fiscal year dropped to 5.4 per cent year-on-year, down from 6.7 per cent in the first quarter, indicating a notable decline in private demand.
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