In line with consensus expectations RBI kept all rates
unchanged in its credit policy review. Thus the repo rate stays at 6.5% while
the reverse repo rate stays at 6% and the Cash Reserve Ratio (CRR) also remains
unchanged at 4% of net demand & time liability (NDTL).
The RBI has retained its GVA (Gross Value Added) growth
projection for FY17 at 7.6%. The inflation projections given in the April’16
policy statement have also been retained but with an upside bias. Retail
inflation in April’16 raised more than expected largely due to food prices and
as per RBI, makes the future trajectory of inflation somewhat more uncertain.
However, the expectations of normal monsoon and various supply management
measures of the govt. should moderate unanticipated firming up of food prices.
In its forward guidance RBI has stated that “given the uncertainties,
the RBI will stay on hold, but the stance of monetary policy remains
accommodative. The RBI will monitor macro-economic & financial developments
for any further scope for policy action.
We maintain our views on participating in equities via SIP
with long term objective & pure debt for tenure less than two years.
Regards
