SensexUpdates: The BSE Sensex quoted at 54,540 levels, up 52 points while the Nifty50 held 16,300-mark, up 27 points, as the RBI kept the monetary policy rate unchanged at 4 per cent and continued with the “accommodative” policy stance.
Sensex Down 100 Points
The central bank pegged real GDP growth forecast for FY22 at 9.5 per cent and at 17.2 per cent for FY23. Over 100 companies are slated to post their numbers on Friday including M&M, Voltas, Ujjivan SFB, Tata Power, Torrent Power, SAIL, Hindalco, Indigo Paints, BEML and BEL. Further, on Saturday Divis Labs, Bank of Baroda, Dodla Dairy, Indiabulls Real Estate and VRL Logistics will release quarterly earnings.
RBI remains supportive of getting the economic growth on track, continuing with a soft interest rate regime and maintaining liquidity conditions in the system. On expected lines, the RBI kept policy rates unchanged for the seventh consecutive time and maintained its accommodative stance. The higher inflation trends over the past few months led to upward revision in CPI inflation from 5.1% to 5.7%.
However, GDP forecasts for FY22 were maintained at 9.5%, indicating that the focus is clearly on growth. While there were no big bang announcements today, extension given to the earlier measures announced is positive since some sectors are yet to fully recover from the second wave of Covid-19 impact.
We believe Housing Finance Companies such as HDFC, CanFin Homes and Large banks such as SBI, ICICI Bank are comfortably placed as interest rates remain in a sweet spot.
Sensex Down 100 Points
The MPC took cognizance of the fact that the last two inflation readings for May and June at 6.3% were well above higher end of the RBIs comfort zone 6.0% Moreover the RBI has observed that inflationary pressures are exogenous and largely temporary due to supply shocks.
We expect the RBI will continue to maintain their accommodative monetary policy given that the high inflation levels are transitory in nature and should start coming off in the second half of the year.
Moreover the recovery from the second Covid wave is still nascent and needs to be nurtured and we expect the RBI will continue to use all tools available including OMOs, G-SAP, TLTRO, operation twist etc. to ensure that longer term interest rates are well anchored and there is adequate credit flows to the most stressed sectors.