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Below the Quote on Monetary Policy announced today by Mr. Rahul Bhuskute – Chief Investment Officer, Bharti AXA Life Insurance

“With 1 year ahead inflation projected to be below 5% and closer to RBI target of 4%, RBI chose to maintain a status quo on policy rates, which was widely anticipated. Tone of the MPC was fairly balanced, with the focus on inflation target being partly offset by a fresh mention of risk of overtightening. The FY24 growth projection by RBI has significantly revised up to 7% . Not just that, the higher growth vibe has continued in FY25, with the RB forecasts for the first three quarters of that year being upgraded to an average of 6.5% - again higher than what the markets were expecting. Given the actual prints for FY24 are much higher than what the market expected at the start of the year (& much closer to RBI’s forecast), the market would give the benefit of doubt to RBI. What is also proving to be a tailwind is that the wider global growth estimates have also been revised upwards. Clearly geo-politically, politically and financially, India seems to be in a much better position as compared to almost every other large economy in the world. This can be clearly seen in the FPI flows, as well as the relative stability of the rupee over the last year, when there was significant turmoil happening around us. Concerns around election time populist measures on both the fiscal and monetary sides have also been allayed. With the outcomes of the last round of state elections, the comfort around political stability and policy continuity has also been reinforced. Systemic Liquidity in the banking system has gradually contracted since the last RBI policy, led by festive currency outflow and RBI interventions in the G-sec and forex market. Thus, RBI has iterated that the need for OMO sales has not arisen yet.

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