Signals, Powered By EquityPandit
The Reserve Bank of India’s Monetary Policy Committee (MPC), which is headed by RBI Governor Urjit Patel, is conducting its policy review meeting. The Fifth Bi-monthly Monetary Policy (2018-19) deliberations, which has started yesterday and led by the 6 member committee will last for 3 days and the decision of the MPC will be published in the afternoon of December 5.
As per Equitypandit opinion, there will be no change in the status quo of Repo Rate, which is currently at 6.5 percent. Repo rate is the rate at which the Reserve Bank of India lends money to commercial banks in the event of any shortfall of funds. Also, no other major announcement from the Reserve Bank of India is expected after the conclusion of the meeting.
RBI in its Fourth Bi-monthly Monetary Policy (2018-19) meeting, which concluded on 5th October 2018, decided by a 4 to 2 vote, to keep the policy repo rate unchanged after two days of deliberations and it decided to change the stance from neutral to calibrated tightening. The Repo rate was kept at 6.5 per cent with concerns issued over highly unsettled international environment, rising oil prices and tightening of global financial conditions that can adversely affect to the growth and inflation.
The main reasons that could influence the outcome of the meeting to the status quo of Repo rate can be linked to the slowdown in Retail Inflation Rate, which is based on consumer price index (CPI). According to Central Statistics Office (CSO), the CPI in October declined to 3.31% from 3.7% of the previous month, on the back of lower prices of pulses, vegetables and sugar. The Index of Industrial Production (IIP) also showcased a fall to 4.5% in September from a revised 4.7% in the previous month.
Also the risk to inflation due to global crude oil prices, which was primarily addressed by the central bank in October, has now came down significantly. Despite the surge in crude oil prices for the past two days, oil prices have slipped immensely by 26% since the October meeting.
Even the weak rupee which was trading above the 74 mark at one point, has now recovered most of its losses, thus mitigating the expenditure on imports and reducing domestic inflation. However, since the commencement of policy review, the rupee has weakened against the US dollar and surpassed the 70 rupees mark.
Therefore, the Fifth Bi-monthly Monetary Policy (2018-19) outcome, which will be released tomorrow’s afternoon, might have little impact on the stock market. Investors are keeping an eye on the upcoming State Assembly Election results and OPEC meeting in the month of December.
