Mr. Amar Ambani, Head - Institutional Equities, YES SECURITIES
"RBI's MPC expectedly voted for a 50bps hike, replicating the endeavour of global central banks to protect their currencies from prevalent volatility. The central bank also retained its stance on withdrawal of accommodation, stating that liquidity conditions will remain accommodative given the higher government spending during H2 FY23. On inflation projections, the CPI forecast for FY23 is retained at 6.7%. Though falling Oil price is a positive, high Food prices pose an upside risk to the inflation forecasts. On the growth front, RBI downgraded the FY23 GDP projection to 7% from the earlier estimate of 7.2%. Nevertheless, the central bank remains confident of demand remaining supported during H2, thanks to stable private consumption, while rural demand is also picking up. On the future interest rate moves, though RBI's stance is more driven by domestic factors, the current landscape of aggressive rate hikes by the Fed and ensuing rupee weakness will compel RBI to closely follow the interest rate moves in the US. RBI will likely raise the repo rate by 35bps in September."