RBI maintained status quo and lowered GDP growth, market slips

In today’s RBI monetary policy, all the members of the Monetary Policy Committee unanimously voted for the status quo on repo rate and maintained an accommodative stance. Besides, RBI revised its GDP growth forecast to 5 per cent from earlier 6.1 per cent for the fiscal year 2019-20. In its last bi-monthly policy, the central bank had lowered the repo rate by 25 bps to 5.15 per cent. The committee members have decided to go with the accommodative stance as long as it is necessary to revive the growth.

The market participants were expecting a rate cut from today’s MPC meet as the Indian economy is going through a severe slowdown. In the recently released data, India’s GDP growth was at 4.5 per cent. RBI has lowered interest rate by 135 bps in the last 5 consecutive meetings.

With this outcome, the stock market witnessed a knee-jerk reaction and the BSE Sensex and the NSE Nifty went into the negative terrain from the positive one.

The recent Inflation data might have influenced the MPCs decision as CPI increased to 4.62 per cent in October from 3.99 per cent in the preceding month. RBI had set an inflation target of 4 per cent (+/- 2 per cent). In today’s meet, the CPI inflation forecast has been revised upwards to 5.1 to 4.7 per cent for H2FY20 and 4.0 to 3.8 per cent for H1FY21.