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The Reserve Bank of India (RBI) on Wednesday will kick off its bi-monthly policy review. In its three-day meeting from October 4-6, the Reserve Bank of India (RBI)-led Monetary Policy Committee (MPC) is likely to opt for another rate pause, experts have suggested. This would be the fourth consecutive policy where the RBI maintains the status quo in key interest rates.
RBI Governor Shaktikanta Das will announce the MPC’s decision on October 6.
“The RBI will have little reason to change the current policy settings, and we expect the MPC to keep the repo rate unchanged at 6.5 per cent, flagging waning core inflation, steady economic activity, and some risks of more supply-related price shocks, providing a little cue for a change in policy thinking,” Rahul Bajoria, MD and Head of EM Asia (ex-China) Economics, Barclays told Moneycontrol.
However, there is reported speculation in the market about a potential 25 basis points rate hike, which could take the key policy rate to 6.75 per cent, due to rising global crude oil prices.
In the previous policy review, RBI raised its FY24 inflation projections to 5.4 per cent from 5.1 per cent due to surging vegetable prices, which pushed headline inflation beyond RBI’s upper tolerance band of 6 per cent in June. Even though retail inflation eased to 6.83 per cent in August, RBI remains cautious due to the increase in global crude oil prices, exceeding RBI’s estimated average price of $85 per barrel for FY24.
While vegetable prices have moderated, concerns about uneven monsoons impacting crop yields and food prices persist. The CPI inflation is expected to ease to 5.6 per cent in Q3 FY2024 and further to 5.1 per cent in Q4 FY2024, but uncertainties regarding food prices remain.
The MPC is also concerned about the incomplete transmission of previous rate hikes totaling 250 basis points and the need to persist with current monetary policy settings. Additionally, recurring food price shocks pose a risk to anchoring inflation expectations, as highlighted by RBI Governor Shaktikanta Das.
The two key equity benchmarks, Sensex and Nifty, on Tuesday, closed in the negative zone amid a gloomy global sentiment. The S&P BSE Sensex fell 316 points to settle at 65,512. On the other hand, the NSE Nifty50 closed at 19,529, down 110 points. The domestic indices were off their respective intraday lows of 65,345 and 19,480.
IPO Updates
Plaza Wires IPO, with a price range of Rs 51 to Rs 54 per share, is closing on October 4. The IPO was subscribed over 27 times, with the retail portion oversubscribed 118.96 times. Viva Tradecom IPO is closing on October 4, and the subscription window opened on September 27. Akanksha Power & Infrastructure SME IPO also closes on October 4, beginning its subscription on September 29. Digikore Studios’ SME IPO is set to be listed on NSE SME on October 4. Electronics Mart India Ltd. IPO, with a price range of Rs56-59 per share, opens for public subscription on October 4 and ends on October 7.