Stock market investors raising cash pile, betting on hawkish RBI monetary policy

By: |
Updated: October 05, 2018 6:26 PM

RBI Monetary Policy: Equity investors are expecting an increase in borrowing costs and want to have plenty of money to deploy when it’s time to invest again.

RBI, RBI monetary policy, RBI Monetary Policy Review, RBI rate hike, rupee, rupee value, NRI bondsRBI monetary policy: A focal point for investors will be whether the central bank drops its neutral stance in place since February 2017. Stocks have declined since RBI last raised rates. (Reuters)

Equity investors in India have been increasing the amount of cash they’re holding ahead of the central bank’s interest-rate decision later Friday. That’s because they’re expecting an increase in borrowing costs and want to have plenty of money to deploy when it’s time to invest again. They’re also looking for the Reserve Bank of India’s comments on the outlook for inflation and economic expansion as soaring oil prices and a weakened rupee have triggered concerns over corporate-earnings growth.

“We’ve raised cash in our portfolios and our focus is to identify quality franchises that are approaching cheap valuations, particularly in the consumer space,” said Sunil Sharma, who oversees $1 billion of assets as chief investment officer at Sanctum Wealth Management Pvt. in Mumbai. “The markets are clearly suggesting worries about growth and would cheer if policy makers come out ahead of the curve.”

A focal point for investors will be whether the central bank drops its neutral stance in place since February 2017. Policy makers are expected to raise the key repurchase rate by 25 basis points to a 2-1/2 year high of 6.75 percent, according to 40 of 49 economists in a Bloomberg survey, with the rest expecting no change. An altered stance would be a clear signal that the RBI will continue raising rates in the coming months.

The S&P BSE Sensex Index has tumbled 9.6 percent since reaching a record in August, with almost $300 billion of Indian stock values vanishing as oil prices have risen, the rupee has dropped and a private lender has defaulted. India’s equity market has sunk below the $2 trillion value for the first time since August 2017.

Sharma isn’t the only one. Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance Co., and Vikas Gupta of OmniScience Capital have also been raising cash.

“We plan to buy some good quality — but expensive — stocks as they decline over the next four months,” Gupta, OmniScience’s chief investment strategist, said in an interview. “Market sentiment will remain weak as the RBI will have to turn hawkish and will be biased towards further rate increases.”

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Raw jute crisis: Govt may have to spend Rs 2,000 crore more to procure bags
2Fincare Small Finance Bank files Rs 1,330-cr IPO papers with Sebi
3FPIs withdraw Rs 5,936 cr from equities in May amid worries over 2nd COVID wave