50bps rate by MPC is slightly negative from market perspective
The MPC's decision to hike rates by 50bps is seen as slightly negative by the market, signaling tighter monetary policy and potential pressure on growth and liquidity.
50bps rate by MPC is slightly negative from market perspective
Mumbai, June 06
The RBI, post its monetary policy committee meet, has cut its repo rate by 50 basis points. Now, the repo rate stands at 5.5 per cent from 6 per cent earlier. Moreover, it brought down cash reserve ratio by 100 basis points. It is all set to boost up the country’s economy, feel experts.
A section of people believethat the higher-than-expected 50bp rate cut decision by the MPC, though positive for growth is slightly negative from the market perspective for the near-term.
Talking to Bizz Buzz, VK Vijayakumar, Chief Investment Strategist, Geojit Investments says, “This big rate cut is, as the RBI Governor remarked, front-loading of the rate cut. The change in monetary stance from accommodative to neutral also indicates that more rate cuts are unlikely unless the situation warrants.”
This big rate cut will impact the margins of the banks and, therefore, bank stocks will be under pressure in the near-term. However, the credit growth that this rate cut will hopefully stimulate will compensate for the dip in margins.
The announcement of CRR rate by 1 per cent is further illustrative of the seriousness of RBI to boost credit growth by providing adequate availability of funds with banks with expected release of 2.5 lac crore.
Jyoti Prakash Gadia- Managing Director at Resurgent India says, “This is a very welcome and huge step to prompt the banks for Faster transmission of the rate cut while continuing with fresh lending to boost both retail consumption and fresh capital expenditure.”
The housing sector and as also auto sector will grow faster with the rate cut and reduced EMIs Infrastructure sector is also likely to be benefited with the rate cut. Adequate provision of liquidity in future too has been assured by the governor to maintain stability, she said.
Overall today’s announcements are considered a bold step towards boosting the growth of the economy by seizing the current opportunities available because of a favourable scenario of low inflation, good monsoon prospects for agriculture sector and positive outlook for both consumption and investment. All credit to RBI for this proactive policy.
EoM.
