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Below the Quote On RBI Monetary Policy by Mr. Amar Ambani, Group President & Head - Institutional Equities, YES Securities (India) Limited

“The stock market was taken by surprise by RBI’s action to remove excess liquidity from the system, due to the influx of Rs 2000 bank notes, among other factors. RBI has introduced Incremental CRR (ICRR), to impound the effect of excess liquidity. This incremental CRR would be 10% of the increase of NDTL from 19th May to 28th July, which is INR 8tn and the impact of which could be around Rs1tn, from the banking system. The RBI maintained that there would still be adequate liquidity even after this move and however the existing CRR remains unchanged.

RBI decided to hold the interest rates steady, along expected lines. However, on the inflation front, the Central Bank sounded cautious, citing price pressures in the food basket and has revised its inflation outlook for FY24 to 5.4% from 5.1% earlier. The July Consumer Price Index (CPI) is anticipated to rise as high as 6.5-7.0%, primarily driven by inflation in perishable commodities. Nonetheless, we believe that this effect is transient; we expect the price pressure in perishable commodities to ease as we approach November - December 2023, which marks the onset of Rabi season. As for the interest rate outlook, the possibility of a rate cut is entirely ruled out for FY24.”

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