Perspective on RBI Monetary Policy Announcement by Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS
Below the Perspective on RBI Monetary Policy Announcement by Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS
“The RBI’s decision to cut rates by another 25bps was largely on expected lines. It also changed its stance from neutral to accommodating. This paves the way for further rate cuts in the upcoming meetings. With inflation cooling off, the regulator has revised its inflation forecast for FY26 downwards to 4% vs 4.2% earlier. However, amidst global challenges, the GDP growth rate has also been tweaked downwards to 6.5% compared to 6.7% earlier.
During the rate easing cycle, a general trend emerges: improved CASA ratios for banks. This has not been the case in Q4, with deposit growth being led by both CASA and TDs based on the provisional updates released by banks thus far. Systemic liquidity has been in deficit for the more significant part of the quarter, though it eased into surplus as banks exit Q4FY25. We expect the transmission on the CoF side to be slower vs the pace of transmission on the yields. Regarding margins for banks, we expect the full impact of the rate cut to reflect from Q1FY26, with a partial impact visible in Q4. We believe NBFCs like Bajaj Finance, Shriram Finance, SBI Cards and Cholamandalam Inv. & Fin. would benefit not only from the rate cuts but also from the RBI’s decision to roll back the higher risk weight on bank loans to NBFCs. Amongst banks, we prefer large private banks like HDFC Bank, Kotak Bank and ICICI Bank”.
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