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Below View On RBI Monetary by Mr Anand Varadarajan, Director, Acit C Mehta Financial Services Ltd.

"The Reserve Bank of India hiked the repo rate by 35 bps to 6.25% on December 7/today, continuing its fight against inflation. In the current financial year, the RBI has increased repo rate from 4.0% to 6.25%, however, the pace of rate is reduced from 50 bps in the last 3 hikes to 35 bps in this meeting.

This reaffirms our view that the US Fed would increase the rates by 50 bps in its meeting scheduled next week. Globally, the equity markets have factored this to some extent which has resulted in the rally in the last few weeks.

On a macroeconomic front, this will increase the cost of funds for financial institutions and thereby result in increased interest rates and EMI for people/households. This in turn should reduce demand and inflation due to lower purchasing power in the hands of consumers.

From an investor perspective, fixed income investors would benefit from high interest rates from FDs, debentures, bonds, etc. While equity investors will need to realign their investments from rate sensitive sectors like auto, consumer discretionary, etc"

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