Updated: August 2, 2017 7:40:21 pm
The Reserve Bank of India on Wednesday slashed the repo rate by 0.25 per cent to 6 per cent citing the sharp fall in inflation. Repo rate which refers to the rate at which RBI lends money to the other banks saw its first reduction since October 2016. The current rate is now at a six-year low.
Lauding the step taken by the central government, the Finance Ministry said that the decision is an important step to achieve sustained growth consistent with moderate inflation and India’s potential.
Economic Affairs Secretary Subhash Chandra Garg also said that the government welcomes the change in the repo rate. “We welcome the 25 basis points cut in the repo rate as an important step necessary to converge towards the appropriate real monetary conditions for sustained growth consistent with India’s potential and for stable, moderate inflation,” Garg said.
Here is how the corporate leaders have reacted
DLF CEO Rajeev Talwar: The decision to cut the benchmark repo rate by 25 basis points could not have come at a more appropriate time. The Indian economy is at a point of inflection. Easing procedural bottlenecks, speedier project clearances and reviving credit flows to the productive sectors such as real estate are critical for the economy to decisively move to a higher growth trajectory. Another small rate cut in the coming months should not be ruled out.
Lakshmi Iyer, CIO (Debt) & Head – Products, Kotak Mutual Fund: The cut was on the expected lines and that case for additional 25 bps could come up before the end of financial year of 2018. “The market has largely discounted this action and focus would now shift to global events and how they unfold going forward. The CPI target has been maintained for FY 2018. If CPI continues its softening trend, we believe case for an additional 25 bps remains live before end FY 18. Duration investors are advised to remain invested with the funds. Incremental allocation can be made into credit accrual funds and short term funds”.
CREDAI’s President Jaxay Shah: The cut before the festive season will help boost sales. “Banks should pass on the benefits to customers and the government should enforce and instruct banks to do so,” he said.
Adil Shetty, CEO and co-founder of BankBazaar.com: This is the beginning of the festival season across the country with Eid, Ganesh Chaturthi, and Dussera lined up over the next two months. Sectors such as realty, automobile, and consumer durables are expected to see much traction in the next couple of months. The rate cuts at this time mean that the cost of credit required to make big-ticket purchases such as a home or a vehicle comes down even further. This is a very good signal to the market and has the potential to push growth in several sectors.
Surendra Hiranandani, Chairman & MD, House of Hiranandani: While the demand for real estate in India remains huge, actual consumption has remained sluggish. Given the liquidity situation prevailing in the market post demonetization, there is scope for banks to cut their lending rate further. The amalgamation of lower interest rates coupled with various progressive measures taken by the government will hopefully help buyers ahead of the festive season.
Anuj Puri, Chairman of Anarock Property Consultants: Prices are unlikely to reduce further – and more than interest rates, it is property prices which affect buying decisions. Nevertheless, this monetary policy announcement sends out positive signals to global investors, who are already showing renewed interest in Indian residential real estate on account of the transparency reboot brought on by RERA and GST deployment.
Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel Broking: Going ahead, if market has to extend this rally, it would look for some other cues may be on the domestic or global front. But, we continue to mention that the index now needs some kind of a breather to maintain its multi-year bull run. We expect the index to consolidate first in a slightly narrow range of 200 – 250 points. As far as levels are concerned, 10150 remain to be an immediate hurdle; whereas, on the downside, 10030 – 9944 would be seen as immediate and important support levels. At this juncture, a prudent strategy would be to stay light on positions and concentrate more on individual stocks.
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