RBI has cut their own GDP forecast for FY20 from 6.9% to 6.1%

Ms. Bekxy Kuriakose, Head - Fixed Income, Principal Mutual Fund

Quote from Ms. Bekxy Kuriakose, Head – Fixed Income,
Principal Mutual Fund   

“The RBI MPC cut key repo and reverse repo rates by 25 bps as was widely expected by market and us. Repo is now at 5.15% and reverse repo at 4.90%. 5 members voted in favour of 25 bps and 1 member for 40 bps. Accommodative stance also has been retained.

reserve bank of india

The MPC continues to accord primacy to growth in the
backdrop of the recent sharp decline as evidenced by the April to June qtr real
GDP growth at 5%. RBI has cut their own GDP forecast for FY20 from 6.9% to
6.1%, while more or less maintain their inflation forecasts. There is no
commentary on the recent tax cuts or their expected impact on the government’s
fiscal position.

Gilt yields rose mildly and prices fell post announcement as
the cut was on expected lines and RBI MPC did not do any aggressive cuts. Banking
System liquidity remains ample. IN this backdrop, as far as gilt yields are
concerned, supply will be the main factor moving prices going forward. We
expect money market yields to remain stable with a downward bias.”

Ms. Bekxy Kuriakose

Head – Fixed Income, Principal Mutual Fund

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