As investors waited for new clues from the Reserve Bank of India’s bimonthly monetary policy review, Indian market indices mostly traded steadily on Tuesday morning. Investors eye policy outcome of the meeting, headed by RBI governor Shaktikanta Das, to be announced Thursday. A majority of analysts expect the RBI awill continue to keep the repo rate unchanged at 6.5 per cent. A consistent decline in inflation (currently at 18-month low) and its potential for further decline may prompt the central bank to put the brake on the rate again.
RBI’s consistent monetary policy tightening since mid-2022 could be attributed to the substantial decline in inflation numbers in the country.
The RBI in its April meeting paused the repo rate.
SBI Research said it expects the RBI to again pause repo rate in June policy meet. “We believe at 6.50 per cent, we are in for a prolonged pause….”
Barring April pause, the RBI raised the repo rate by 250 basis points cumulatively to 6.5 per cent since May 2022 in the fight against inflation.
Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
“…it is crucial to exercise caution as there is currently no clear trend in the market. According to Ameya Ranadive, an equity research analyst at Choice Broking, investors and traders should regularly follow market events and adjust their tactics as necessary.