Views on Dec, 2020 RBI Monetary Policy from Industry Experts

Sudhakar Shanbhag, Chief Investment Officer, Kotak Mahindra Life Insurance Company Ltd

"The MPC has unanimously agreed to hold rates and the accommodative stance to support growth post Covid period while being mindful of the inflation numbers. Since liquidity measures are expected to continue which was one of the worries of the market before policy, yields are expected to remain benign with the steepness of the curve to continue."

Lakshmi Iyer, President and Chief Investment Officer (Debt) & Head Products, Kotak Mahindra Asset Management Company

"RBI has maintained status quo on rates in line with expectation. The policy continues to maintain its accommodative stance well into the next financial year as well. We view this move as a positive step towards anchoring bond yields and ease further from current levels. While inflation guidance has been increased, there seems to be no urgency to withdraw liquidity prematurely as growth considerations remain equally strong."

Mr. Mohit Ralhan, Managing Partner & CIO, TIW Private Equity

"Maintaining accommodative stance and status quo by RBI is on expected lines. It's encouraging to get confirmation from RBI on the economic recovery. RBI also continues to take measures to safeguard our financial system for long term stability and drive towards digital payments. The intent is extremely positive and the focus will be on the continuation of economic recovery. We believe that the Mar-2020 quarter is highly likely to mark the return to normality."

Ms. Padmaja Chunduru, MD & CEO, Indian Bank

"The tone remains dovish though repo rate change was kept on hold and adding a promise to take steps to boost growth. Continued accommodative stance will boost business confidence further. We can hope that signs of recovery in Q2 and positive growth projected for H2 will improve debt servicing capacity of corporates going ahead."

Mr. Raghvendra Nath, MD, Ladderup Wealth Management

"RBI has maintained its accommodative stance on interest rates which is in line with the broader market expectations.

With inflation already rearing its head, rate cuts are no longer an expectation. In fact the surplus liquidity in the banking system is effectively putting a cap on any upside to yields. Also any further rate cuts may not provide more impetus to the Economic Recovery. RBI has acknowledged the recovery in GDP and is hopeful that the GDP growth would be positive in the next half of the year, but is non-committal towards the extent of Economic Recovery. RBI has also indicated that they will manage the forex volatility, which effectively means that it would continue to buy the USD as the inflows from FPIs continue to remain strong, leading to stronger forex reserves.

There is still a lot of uncertainty around the extent of potential defaults in the loans that are under moratorium. This extent of risk is currently immeasurable and therefore has not been factored in the market yields. In case the defaults on moratorium loans are larger than expected, RBI would have to come forward and tackle the situation through its monetary tools."

Mr. Niraj Kumar, CIO, Future Generali India Life Insurance

"MPC has yet again delivered a 'Balanced Policy with a positive tone' and has conspicuously been more sanguine on Growth. MPC, while being cognizant and cautious on the elevated incumbent Inflation levels, has reassured the markets of continued accommodative stance with liquidity support to revive growth on a durable basis. The upgrade in the GDP forecasts and the extension of TLTRO's to other stressed sectors are some of the key positives. The growth optimism in the policy and undertone is quite encouraging as RBI had been advocating to do whatever it takes to support the economy and financial sector and that should provide a lot of comfort to the markets."

Mr. Rajat Bahl, Chief Knowledge Officer, Research Division, Brickwork Ratings

"GDP estimate of -7.5% for FY21 is close to Brickwork Ratings estimate of -7% and shows a sharp recovery from the doom- like-scenario of Q1; however, the elevated inflation projections for H2 FY21 and H1 FY22 imply that the space for any further monetary support is now dismal. Maintaining an accommodative stance under this elevated inflation environment is a risk, but augurs well for the bond market that had started showing signs of tightening especially for NBFCs.

A risk based supervision for NBFCs and an expectation of a stronger risk and governance framework from NBFCs is a welcome move that will strengthen the sector and provide confidence to investors".

Source : Equity Bulls

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