After the union budget presentation, all eyes would be on the RBI’s monetary policy committee meeting which begins February 4, 2020. The RBI’s monetary policy announcement, which would be first one in 2020, is slated on February 6. With rising inflation and lingering growth concerns, the RBI is expected to keep the status quo maintained as in December, analysts said. The retail inflation surged to 7.35 percent in December 2019 as food prices increased higher than the RBI target. Even as the repo rate is expected to be maintained at 5.15 per cent on account of high inflation, the market would be keenly watching the RBI’s commentary on growth slowdown and inflation, the analysts also said.
“With the CPI inflation expected to remain above 6% in January 2020, and record a gradual decline toward 4% over the next 8-9 months, we expect an extended pause from the MPC in H1 CY2020, along with a change in stance to neutral from accommodative in either the February 2020 or April 2020 policy reviews”, Aditi Nayar, Principal Economist, ICRA, told Financial Express Online.
The incoming data would be carefully monitored to gain clarity on the inflation outlook and the forthcoming union budget will provide better insight into further measures to be undertaken by the government and their impact on growth, RBI said in the December MPC announcement.
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“The budget doesn’t propose a big increase in the borrowing which may give room to the RBI’s monetary policy to cut rates. However, the RBI may wait a little longer to see the growth picking and inflation to come under its comfort zone before it cuts rates”, Sameer Narang, Chief Economist, Bank of Baroda, told Financial Express Online.
“Monetary policy seems to be on a pause mode at this stage as domestic food price uptick is putting an upward pressure on CPI although core inflation could remain subdued. The possibility of a rate cut at some stage has opened up with the collapse in global commodity prices. Otherwise the monetary policy seemed to have run its course for this cycle,” investment advisor, Sandip Sabharwal, told Financial Express Online.
On Saturday, the NSE Nifty, closed at 11,661.85, lower by 300.25 points, or 2.51 per cent, on its previous close. The BSE Sensex settled at 39,735.53, lower by 987.96 points, or 2.43 per cent on its previous close of 40,723.49. The fall was mainly due to the investors’ disappointment over the budget. Even in Monday’s trade, the benchmark equity indices stabilised only after taking some early beating.