IGI Logo

CIE View & Forecast

RBI’s MPC unanimously voted to keep the repo rate unchanged, while reiterating its neutral stance in line with our expectation. GDP forecast for FY26E increased by 20 bps to 7.6%, whereas 6.9% expected in FY27E (assuming avg. crude oil at USD 85/b for FY27E)

Despite High-Frequency Indicators suggesting continuation of strong economic momentum, we expect growth in FY27E to remain at 6.8% (vs 7.0–7.2%). Growth would be affected by supply-chain disruption, impacting external and domestic demand on account of higher input cost and shipping cost. We expect credit growth to remain in 13.5%–14.0% range for FY26E and 13.0%–14.0% for FY27E, driven by negative impact of West Asia conflict on domestic demand. We believe we are at the end of rate cut cycle and expect a long pause (compared to a 25 bps rate cut by FY27E)

Repo Rate Maintained with a Neutral Stance; Upside Risk to CPI Inflation

* Both, Repo Rate (short-term rate) and Bank Lending Rate (long-term rate), were kept unchanged unanimously at 5.25% and 5.50%, respectively. Similarly, SDF Rate and MSF Rate (overnight rates) remained unchanged at 5.0% and 5.5%, respectively

* Rates were unchanged as the Monetary Policy Committee believes recent spike in energy price due to West Asia conflict and likely emergence of El Nino conditions pose an upside risk to CPI inflation forecast

* Core inflation pressure remains muted, although supply chain dislocation and the risk of second-round effect renders the future inflation trajectory uncertain.

Systematic Liquidity Maintained at Sustainable Level Since Feb-26 Policy

* Led by RBI’s continued liquidity measures, systematic liquidity under the Liquidity Adjustment Facility (LAF), stood at an average daily surplus of ~INR 2.3 Tn since Feb-26 policy. Surplus liquidity has resulted in satisfactory rate transmission in the credit market.

For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer
SEBI Registration no.: INZ 000160131