RBI Monetary Policy Committee: Today is a very special day for the Indian Stock Market. The market will keep an eye on the announcement of monetary policy by RBI (Reserve Bank of India). After the pace of economic growth of the country slowed down in the second quarter of the current financial year, does RBI reduce its policy rate i.e. Repo Rate to cut interest rates to give it a boost or not? Also, will RBI cut the Cash Reserve Ratio (CRR) to increase cash in the banking system? It will depend on these things whether the spectacular rise seen in the Indian stock market this week continues in the future or not?
Shaktikanta Das’s last policy
This is the last monetary policy of the second term of the current Governor of Reserve Bank of India, Shaktikanta Das. The government has not yet announced the extension of his tenure. His tenure is going to end on December 10, 2024. In such a situation, the market is keeping an eye on Shaktikanta Das whether he announces his last policy through monetary policy to give relief to people from expensive EMIs and end the slowdown in the economy. In the second quarter of the financial year 2024-25, the GDP growth rate has come down to 5.4 percent. In the Modi government, from Finance Minister Nirmala Sitharaman to Commerce Minister Piyush Goyal, opinions differ from those of RBI. These people are in favor of cutting interest rates to support growth. Whereas RBI’s priority has been on reducing inflation.
Repo rate cut from February 2025
According to brokerage house IIFL Securities (IIFL Institutional Equities), there will be no change in the repo rate in the current monetary policy and it will remain at 6.50 percent. Ignoring growth concerns, RBI has not cut rates due to high inflation rate. According to the brokerage house, it is very important to cut interest rates so that growth can be accelerated. According to IIFL Securities, the repo rate cut is expected to start in February 2025.
Reduction in CRR possible
The brokerage house said in its report that the pace of loans given by banks has slowed down. Private consumption also declined in the second quarter. In such a situation, to accelerate economic growth, RBI should reduce the cash reserve ratio by 50 basis points to the pre-Covid level of 4 percent, which is currently 4.50 percent. Reduction in cash reserve ratio will increase cash with banks and this will pave the way for repo rate cut in February. According to an estimate, CRR reduction will help in increasing cash in the banking system by Rs 1 to 1.25 lakh crore.
RBI will decide the market movement
It is the effect of RBI’s monetary policy being announced today that the Indian stock market closed with a spectacular rise on Thursday. Sensex closed at 81,765 points with a jump of 800 points and Nifty closed at 24,708 points with a jump of 240 points. Before the announcement of RBI’s loan policy, banking stocks are looking bright. Bank Nifty closed at 53,603 points with a jump of 336 points. In such a situation, whether the brightness which has returned to the market after two months will continue or not, its direction will depend on the monetary policy of RBI which is going to be announced today.
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