“In this backdrop, the MPC met on October 6, 7 and 8, 2021. Based on an assessment of the evolving macroeconomic and financial conditions and outlook, the MPC voted unanimously to maintain the status quo with respect to the policy repo rate To maintain the policy stance by a majority of 5 to 1,” Shaktikanta Das said in his statement.
“As a result, the policy repo rate remains unchanged at 4%; and remains in place for as long as is necessary to revive and sustain growth on a sustainable basis and continue to mitigate the impact of COVID-19 on the economy.” while ensuring that inflation remains in place. The target is moving ahead,” Das said.
The policy statement was in line with market expectations. However, some fund managers expected more than this.
“For all practical purposes, much was expected from this policy, but RBI maintains status quo in its monetary policy announcement. Repo rate remains unchanged at 4%, reverse repo rate remains at 3.35% and monetary policy stance favourable. Pankaj Pathak, Fund Manager, Quantum Mutual Fund said.
“This is at a time when oil prices, India’s bugbear, are looking ominous. Global demand is causing supply crunch and prices for various commodities to rise and at a time when ground level inflation is under-reported. We thought RBI could at least have directed the markets that rates would be raised in the coming months. RBI’s effort to suck up and manage excess liquidity is also minimal and its short-term interest There will not be much impact on the rates,” Pathak further said.
The MPC decided to continue with the accommodative stance for as long as necessary to revive and sustain growth on a sustainable basis. Market participants believe that this is good news for the market.
Anand Nevatia Fund Manager Trust said, “The 5-1 vote on the trend clearly shows that the majority of MPC is still comfortable and confident with a lenient stance. Governor announces higher VRRR to absorb excessive systemic liquidity While assuring adequate liquidity. mutual fund.
The “favourable” inflation trajectory and a downward revision of the CPI at 5.30% have allayed any fear of near-term rate hikes. CPI readings will be lower for the next few months. Inflation expectations are prolonged. Can lead to poor performance. Maturity bonds. Easier liquidity will support the performance of the debt. mutual funds Till the maturity of 3 years,” said Nevatia.
Mutual fund managers have been asking investors to invest in debt mutual funds with low maturity. He believes that short-term debt mutual funds are in a better position to deal with interest rate fluctuations in the near future. Similarly, floating rate funds have also been in the news for the same reason. With today’s policy, the risk of rising rates has been further averted.
“Currently, we believe a combination of liquid to money market funds to benefit from the rise in interest rates in the coming months; as well as stay in the form of short term debt funds and/or an allocation of low credit risk dynamic bond funds. The core fixed income allocation. The 3-5 year segment in government bonds appears to be the most attractive and a large part of our bond portfolio is located in that space,” Pathak said.