RBI MPC meeting: How stock market will react if governor Shaktikanta Das cuts repo rate
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This time, the RBI’s monetary policy has to tackle both rising inflation as well as India’s GDP growth slowing down to 5.4% for the July-September quarter
India’s stock market is keenly awaiting the Reserve Bank of India’s (RBI) bi-monthly monetary policy announcement on Friday, December 6, 2024.
This comes at a time when the market is hoping for a liquidity boost, though a large number of economists expect the RBI to keep the repo rate unchanged at 6.5%, especially at a time when inflation is persistently high, according to a Moneycontrol report.
However, signs of a slowing economy are also part of the picture, with India’s GDP growth slowing to 5.4% for the July-September quarter. According to the report, this may result in a repo rate or cash reserve ratio (CRR) cut.
“The Indian economy is in a cyclical slowdown,” Nomura economist Aurodeep Nandi said in an interaction with CNBC TV18. “Lower credit growth will impact domestic demand, and government spending needs to ramp up to meet targets.”
A CRR cut, even without a repo rate cut can provide the liquidity boost which the markets are seeking, the report quoted Kranthi Bathini, director of equity strategy at WealthMills Securities as saying.
Markets are anticipating liquidity measures, the report quoted Ajit Mishra, SVP-Research at Religare Broking as saying. However, he also warned that a "knee-jerk reaction, especially in banking stocks can happen if a rate cut doesn’t happen.
This comes when the stock market surged on Thursday, December 5, 2024 due to global optimism and strong foreign institutional investor (FII) inflows worth ₹8,540 crore.
The benchmark BSE Sensex jumped over 800 points to close at 81,765, while the NSE Nifty gained more than 240 points to close over 24,700.
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