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The RBI move to cut SLR rate (by 50 bps) to 22.5%was a surprise. However, keeping the repo & MSF rates unchanged was in line with market expectations. If disinflation, adjusting for base effects, is faster than currently anticipated, it will provide headroom for an easing of the policy stance.
The RBI move to cut SLR rate (by 50 bps) to 22.5%was a surprise. However, keeping the repo & MSF rates unchanged was in line with market expectations. If disinflation, adjusting for base effects, is faster than currently anticipated, it will provide headroom for an easing of the policy stance.
The RBI move to cut SLR rate (by 50 bps) to 22.5%was a surprise. However, keeping the repo & MSF rates unchanged was in line with market expectations. If disinflation, adjusting for base effects, is faster than currently anticipated, it will provide headroom for an easing of the policy stance.
Dalal & Broacha Stock Broking Pvt. Ltd. Update on RBI's Second Bi-monthly Monetary Policy Statement, 2014-15 Key Policy points The RBI move to cut SLR rate (by 50 bps) to 22.5%was a surprise. However, keeping the Repo & MSF rates unchanged was in line with market expectations. Also, the liquidity provided under the export credit refinance (ECR) facility was reduced from 50%to 32%of eligible export credit outstanding with immediate effect; but a special term repo facility of 0.25%of NDTL was introduced to compensate fully for the reduction. CPI Inflation moderating: In March and April, CPI inflation has risen on the back of a sharp increase in food prices. While some of the rise is expected to continue into May, but it is largely seasonal. and notably, the CPI (excl. food and fuel) has been edging down. Balanced risks to the prediction of 8%CPI by January 2015: Upside risks to inflation include 1) a sub-normal/ delayed monsoon due to El Nino, 2) Geo-political tensions and their impact on fuel prices, and 3) uncertainties regarding the setting of administered prices, appear at well balanced by the possibility of 1) stronger Government action on food supply and 2) better fiscal consolidation and pass through of recent exchange rate appreciation. If CPIinflation trajectory stays on course (8% by Jan-15 & 6% by Jan-16) then the RBI indicates that further policy tightening will not be warranted. However, if disinflation, adjusting for base effects, is faster than currently anticipated, it will provide headroom for an easing of the policy stance. Outlook: We believe that the policy indicates a possible softening of the RBI stance. The move to cut SLR makes more funds available to corporate sector. Provided there isn't a spike in CPI rates, Rates should moderate going forward. The projection of Real GDP growth in FY15 in a range of 5-6%with the central estimate of 5.5%is maintained. We expect RBI to cut policy rates by 25bps in the next policy meeting if the inflation moderates in line with the assigned trend. The third bi-monthly monetary policy statement is scheduled on Tuesday, August 5, 2014. Policy Tools Post policy Pre policy Status Repo 8.00% 8.00% Unchanged Reverse Repo 7.00% 7.00% Unchanged - bps above Repo -100 -100 Marginal Standing Facility (MSF) 9.00% 9.00% Unchanged - bps above Repo 100 100 Bank Rate 9.00% 9.00% Unchanged - bps above Repo 100 100 CRR 4.00% 4.00% Unchanged SLR 22.50% 23.00% reduced by 50bps . . . . . . . . . .
Dalal & Broacha Stock Broking Pvt. Ltd. 2 RBI Policy Update @ Dalal & Broacha Disclaimer This document has been prepared and compiled from reliable sources. While utmost care has been taken to ensure that the facts stated are accurate and opinions given are fair and reasonable, neither the Company nor any of its Directors, Officers or Employees shall in any way be responsible for the contents. The Company, its Directors, Officers or Employees may have a position or may otherwise be interested in the investment referred in this document. This is not an offer or solicitation to buy, sell or dispose off any securities mentioned in this document. For Further details Contact Email ID Contact No. Sector Mr. Milind Karmarkar milind.karmarkar@dalal-broacha.com 022 67141445 Head Research Ms. Hiral Sanghvi hiral.sanghvi@dalal-broacha.com 022 67141444 Retail, Cement Mr. Kunal Bhatia kunal.bhatia@dalal-broacha.com 022 67141442 Auto, Auto Ancillary, FMCG Mr. Lalitabh Shrivastawa lalitabh.s@dalal-broacha.com 022 67141450 Financials & Capital goods Mr. Ankit Panchmatia ankit.panchmatia@dalal-broacha.com 022 67141444 IT Ms. Purvi Shah purvi.shah@dalal-broacha.com 022 67141446 Pharma Mr. Ankeet Pandya ankeet.pandya@dalal-broacha.com 022 67141443 Agrochemicals, Fertilizers, Address :- 508, Maker Chambers V, 221 Nariman Point, Mumbai 400 021 Tel: 91-22- 2282 2992, 2287 6173, (D) 6630 8667 Fax: 91- 22-2287 0092 E-mail: research@dalalbroachaindia.com, equity.research@dalal-broacha.com