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Below is the Views on 7th Bi-Monthly Monetary Policy by Mr. Vijay Chandok, MD & CEO, ICICI Securities
The RBI has gone all out to fight the economic fallout of Covid-19. Although the rate cut is big, we believe the economy will benefit more from the liquidity and regulatory actions. The RBI has pumped liquidity into the system through targeted long term operations and CRR cut. They have also taken a series of measures to nudge banks to lend to the productive sectors of the economy. Moreover, regulatory measures such as relaxing debt servicing burden and working capital financing till June 2020 are likely to help business during this crisis.
RBI has shown clear intent to support businesses and use a variety of instruments to support growth. These moves provide the right tailwind for the economy once the lockdown is complete and will boost sentiments which is a big positive. We expect sharp reduction in economic activity at least in Q1FY21. Consequently, full year GDP growth for FY21 could also be significantly lower. The market will however still expect newer triggers to boost the sentiment further.
All these measures we believe are positive for the markets. It is also encouraging to hear the governor state that they are constantly monitoring the situation and will take further appropriate actions if needed.
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