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Below are Views on RBI MPC Announcement Ashish Chaturmohta, Director and Head, Advisory Research, JM Financial Services Ltd

Reserve Bank of India raised the policy benchmark rate by 50 basis points to 5.9% in line with consensus expectations. This is the 4th rate hike since May by RBI in a bid to keep inflation under control & re-calibrate rates in comparison to aggressive stance of U.S Fed. While CPI in India continues to hover at 7% as per the latest print it is much above RBI’s comfortable zone of 2%-6%.

Reserve Bank of India on slashed the GDP growth projection to 7% for the current fiscal from the earlier forecast of 7.2%, citing aggressive tightening of monetary policies globally and moderation in demand. However, RBI’s commentary remains strong on fundamentals of Indian economy & they expect growth to re-bound in India ahead of its peers. India’s 10 year Gsec yield cooled off from 7.4% to 7.32% post announcement.

In our view, recent concerns on slowing global growth have weighed heavy on commodity prices across the board. WTI crude have corrected sharply by nearly 30% from 120$ to 82 $ currently. Even non-oil commodities have corrected by more than 20% in past few months, this bodes well for Indian economy & inflation outlook.

As dollar Index climbs towards 111$ to a two-decade high, most emerging market currencies have faced the rout. INR however is relatively better placed as foreign reserves of nearly USD 537.5 Bln is among the highest in the world & provides comfort relative to most other economies. YTD INR has depreciated by nearly 9.5% v/s JPY which has depreciated nearly 25%, Euro has depreciated by nearly 15% against USD. This along with China +1 theme is extremely positive for Indian Economy. The upcoming festive & earnings season is likely to lift market sentiments with consumption stocks likely to stay in focus. Nifty trades at reasonable valuations of 20x its 12 Months forward EPS estimate of 850 Rs (at 5 years average multiples). We believe Banks, Manufacturing, Capex, Consumptions stocks are likely to outperform in medium term.

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