Markets analyze RBI Governor Das’ issue and determine that monetary policy is actually “hawkish”

The markets appear to have agreed that the monetary policy decision is mostly hawkish after RBI Governor Shaktikanta Das asked the media, markets, and “informed circle” to estimate whether the MPC’s meeting outcome is hawkish, dovish, or “something else” totally. Despite the fact that investors had anticipated the repo rate increase of 35 basis points announced today, the markets have modestly dipped into the red from trading flat as a result of the Reserve Bank’s remarks. Sensex was at 62,522, down more than 100 points, while NSE Nifty was trading at 18,586 in the late afternoon trade.

Prabhudas Lilladher’s economist and quant analyst, Ritika Chhabra, stated that the rate increase’s size was as anticipated. The meeting’s atmosphere was a little more hawkish than what the markets had anticipated, though. The governor placed emphasis on limiting the effects of inflation and inflation expectations in the long run.

The consensus among experts is that the RBI’s outlook is still hawkish since it hasn’t switched its stance from “withdrawal of accommodation” to “neutral.” Suman Chowdhury, Chief Analytical Officer at Acuité Ratings & Research, stated, “We believe that RBI’s stance has remained moderately hawkish with the continuation of its stance of “withdrawal of accommodation.”

“The MPC maintained its position of withdrawing accommodations. The Governor’s statement highlighted the stickiness of “core inflation,” and this combined with the Governor’s unaltered stance and slightly hawkish tone caused a small increase in rates following the announcement of policy. We anticipate that the benchmark 10-year bond rate will remain in a band between 7.20% and 7.50%. Short duration products are thus advised for investors with 3–4 year investment horizons due to lower duration risk and volatility, according to Puneet Pal, Head–Fixed Income, PGIM India Mutual Fund.

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