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Below are Views on RBI Monetary Policy by Puneet Pal, Head-Fixed Income, PGIM India Mutual Fund

MPC remains Dovish with RBI Focus shifting to Liquidity management. The MPC meeting held today refrained from hiking the reverse repo rate, as we and a large section of the market had expected. Though MPC did not hike the reverse repo rate, RBI increased the amount of 14 day VRRR to INR 7.50 trn from Dec 31 2021, and also mentioned that “Liquidity Absorption will be undertaken mainly through the Auction route from January 2022 onwards”

 This, in our view,  means that the majority of the excess liquidity will be absorbed in VRRR Auctions near the policy repo rate at 4% and we continue to expect that the short term money market rates will inch higher.

 We continue to advice investors to remain invested in short duration products like Banking PSU Funds and the Corporate Bond category for investment Horizon of  1-3 yrs and Ultra Short and Money Market funds for investment horizon of less than 1 year.

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