Highlights of RBI MPC outcome: Stock market did not bulge despite 50 bps rate hike

Highlights of RBI MPC outcome: Stock market did not bulge despite 50 bps rate hike

Rohit Kale
/ Categories: Trending, Mindshare

RBI Governor said that the depreciation has happened in an orderly manner. It was largely due to the strengthening of the US dollar but the rupee has flared well against its peer Asian currencies.

RBI MPC announced its decision on repo rate with immediate effect. The repo rate has been increased by 50 basis points to 5.4 per cent. It is now back to its pre-pandemic levels and is the highest since August 2019.  

RBI Governor stated that despite a fall in crude oil prices and commodity prices, inflation is at an uncomfortably high level. However, the domestic activity has been resilient while PMI in July is at an eight-month high. For the next financial year, RBI retains its CPI forecast at 6.7 per cent. 

Talking about the currency depreciation, RBI Governor said that the depreciation has happened in an orderly manner. It was largely due to the strengthening of the US dollar but the rupee has flared well against its peer Asian currencies. 

The forecast for GDP this financial year is projected at 6.7 per cent. With this, Nifty currently trades at 17,430 and is up by 50 points. Sensex soared 200 points while Nifty Midcap and Nifty Smallcap have climbed nearly half a per cent each. 

As RBI MPC outomce concludes, here's what Dr. Samantak Das, chief economist, and head of research and REIS, India, JLL, has to say about the policy outcome- 

India’s residential sector is in the middle of a prolonged and sustained growth cycle much similar to 2010-2012 period, but more driven by real market fundamentals in terms of homebuyer demand. In fact, sales in H1 2022 (January-June) were the highest in over a decade on same-period comparison and second only to H1 2010. The inflationary pressures and the resultant change in RBI’s earlier dovish policy stance couldn’t have come at a more inopportune time for the sector. However, we believe that the long-term prospects look healthy given that macro-economic dynamics will moderate to a more favourable one as growth remains intact and global headwinds ease up.

Likely transmission of another 30-40 bps increase in home loan rates may cause some mid-cycle slowdown for the residential sector and likely result in some ripple effect on the upcoming festive season. This could see some short-term disruption to the sales growth momentum. It is however a note of caution and not a reflection on the overall residential sector’s health, with the medium to long-term growth prospects remaining intact."

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