Dear All,
Forwarding you the RBI Monetary Policy Preview.
Expect a 50bp hike
In the forthcoming Reserve Bank of India (RBI) Monetary Policy Review on May 3, 2011, we expect the central bank to come out of the gradual monetary tightening and hike both repo and reverse repo rates by 50bp each to 7.25% and 6.25%, respectively,
as inflationary pressures have consistently refused to abate. We expect the RBI to keep the statutory liquidity ratio (SLR) and cash reserve ratio (CRR) unchanged at 24.0% and 6.0%, respectively.
Inflation remains sticky with upside risks
Wholesale price index (WPI) inflation has consistently remained well above the RBI’s upwardly revised comfort levels. Even for March 2011, for which RBI had raised its projection by a full 250bp from 5.5% projected in November 2010 Monetary Policy Review to 8.0% in its March 2011 Monetary Policy Review, actual WPI inflation came in 100bp higher at 9.0%. In fact, this number could rise closer to 10% once provisional figures are revised (considering the recent trend in revisions).
Growth momentum moderating
Growth momentum of the Indian economy has moderated considerably over the past few months, as evident from IIP growth averaging 5.0% during October 2010–February 2011 compared to 10.4% during 1HFY2011 and GDP growth easing to 8.2% during 3QFY2011 from 8.9% in 1HFY2011.
Even though growth momentum has eased off post the gradual calibrated monetary tightening by the RBI, inflation has remained sticky (above the 8.0% level for the last 15 months). Hence, we believe the RBI is likely to resort to a bolder step and hike repo and reverse repo rates by 50bp each.
Kindly click on the following link to view the Report.
Monetary Policy Preview 02-05-2011
If you have any further queries, feel free to call us on 022 39357600, Extn: 6864 / 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6864,6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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