RBI Rate Cut Neutral For Stocks But Lower GDP Negative – The 25 basis-point cut in the policy rate by the country’s central bank will have little impact as stocks had priced in the quantum of reduction, Bloomberg reported quoting Dharmesh Kant, head of retail research.
However, RBI lowering its growth forecast for the current fiscal is a key negative.
As was widely expected, the Reserve Bank of India (RBI) today cut the repo rate or key lending rate by 25 basis points while maintaining an accomodative stance. This is the fifth consecutive rate cut by the apex bank this year, aggregating to 135 bps.
After a three-day meeting, the Monetary Policy Committee (MPC) of the apex bank also cuts GDP growth forecast for the current fiscal year 2019-20 to 6.1% from 6.9% earlier.
Highlights of RBI’s fourth MPC statement
It is the fifth-rate cut in 2019;
GDP growth forecast lowered for current fiscal to 6.1 percent from 6.9 percent earlier;
RBI continues with its accommodative monetary stance to revive economic growth;
Government stimulus measures to help strengthen private consumption and spur investments;
Continuing slowdown warrants intensified efforts to restore growth momentum;
Retains retail inflation projection for second half of year at 3.5-3.7 percent;
RBI notes monetary transmission has been staggered and incomplete;
Foreign exchange reserves stood at $434.6 bn on 1 October, up $21.7 bn over March-end 2019;
Next monetary policy review meet scheduled during 3-5 December, 2019.