Top global brokerages appear satisfied with the Reserve Bank of India (RBI) staying away from tweaking the policy rates and instead announcing measures to push growth in real estate, automobile as well as micro, small and medium enterprises (MSMEs).
They also exhibit hope that the central bank will go for rate cuts in the later part of FY21 when the inflation eases.
The MPC meet outcome on February 6 indicated that the RBI seems to have realised its role is not only to regulate liquidity in the market and keep the inflation under check, but also to push growth through the methods it can apply.
Removal of CRR requirement on incremental credit to retail loans for automobiles, residential housing and loans to MSMEs, extension of one-time restructuring scheme for MSME advances, and 1-year extension allowed for date of commencement of commercial operations of project loans to commercial real estate are expected to help alleviate funding woes of these crucial segments of the economy.
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The policy outcome should hopefully help start the virtuous cycle to pull the Indian economy out of its current morass, said Piyush Baranwal, Executive Vice President and Senior Fund Manager (Fixed Income) at YES AMC.
Here is what top brokerages and financial firms have to say about the RBI’s MPC meet outcome:
Nomura
RBI’s supply-side boosters are pragmatic & positive for financials, the Japanese brokerage firm said.
The measures will aid in accelerating monetary transmission and extending commercial operations (DCCO) of project loans is a positive for housing finance companies with higher builder exposure, it said.
Morgan Stanley
MPC kept the policy rates unchanged, which was on the expected lines.
The foreign wealth management firm sees scope for some easing of 15-25 bps after inflation eases in the second half of FY21. It, however, added that the risks are skewed to downside from slower response from policy actions.
Morgan Stanley expects inflation to remain above the 7 percent mark over the next 2-3 months.
Government securities and corporate bonds rallied after RBI’s announcement of long-term repo operations of 1 to 3-year tenor and Morgan Stanley believes the rally in bonds may continue given the divergence in credit perception in NBFCs.
Deutsche Bank
RBI delivered a ‘stealth easing’, while holding repo rate steady, but the central bank is not done with easing and will wait for an appropriate time to ease repo rate further, said Deutsche Bank.
It sees room for one last 25 bps cut in August, by which time CPI inflation is likely to reduce.
JPMorgan
JP expects more easing, but the inflation dynamics will determine the timing, it said.
It sees MPC’s commentary as guidance for more rate cuts on the anvil.
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