Kunal Shah, Fund Manager - Debt, Kotak Mahindra Old Mutual Life Insurance on First Bi-monthly Monetary Policy Statement, 2014-15
RBI has maintained status quo as per our and consensus expectations, though not clearly spelled out in policy but RBI is incrementally concerned about sticky growth underperformance, RBI has hinted that lead indicators do not point to any sustained revival in industry or services & hence believes that slower activity will help disinflate the economy which will support the fight against inflation. Till these processes evolve RBI feels current policy rates are appropriate and may not require further tightening.We expect current disinflation process to continue and core inflation to moderate further however sharp fall is unlikely in short-term. Monsoon will be key to watch as it can create short-term volatility in inflation path.
Bond markets should continue to trade in the narrow range in future till the time inflation actually drops; also key events like election outcome and budget will provide further cues. The focus has clearly shifted from external risks to domestic structural issues, and if new government addresses those issues with correct mix of policies and reforms it will provide impetus to growth and also bring inflation down.
Powered by Capital Market - Live News
