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Below is Statement on RBI-MPC repo hike By Dr Vikas Gupta, CEO and Chief Investment Strategist, OmniScience Capital

The RBI is clear on 3 things:

1. That the real driver of inflation is supply-side based and cannot be controlled by raising interest rates.

2. Interest rates have to be raised to keep the "inflation expectations" in check.

3. Liquidity has to be brought back to the pre-pandemic level while accommodating and supporting growth.

Growth in the economy is strong, exports are strong, imports of capital goods are strong, bank credit growth is strong and PMI (services and manufacturing) is strong, monsoon is expected to be normal. Forex reserves are at $600 billion+. Rupee is behaving better than most other currencies. Further, increases in interest rates are likely to keep matching the advanced economies central banks. Also, reduction in liquidity to pre-pandemic levels is likely. It will take all of FY23 to bring inflation under control as per RBI expectations

Market outlook

Most of the known negatives such as Reserve Bank of India (RBI) US Fed rate hikes,  Russia-Ukraine war, liquidity reductions, global supply chain constraints, high commodity prices, general inflation, etc. are priced in, However, what cannot be priced in at any point in time is black swans which are unpredictable.

Hence, at current prices, even with higher discount rates, both Indian and US equities are quite attractively priced and it makes sense to start allocating money to them over the next few months.

One can look at Defense, Railway infrastructure, and Digital transformation (mostly IT stocks with exports) companies; all these will not be impacted by recession at all since their order books are not consumer driven”

Growth outlook

There is some apprehension on account of increasing interest rates, related inflation, higher commodity and crude oil prices, and global supply chain constraints, etc. This could play out over the next few quarters with slightly slower growth and compressed margins in the near term.

However, a clear growth outlook over the next few years has boosted business confidence leading to large capex plans targeted at capturing growth, so I believe; overall the business outlook is quite confident about growth over the next three to five years"

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