RBI Monetary Policy Review

The Monetary Policy Committee (MPC) today reduced repo rate by 25 bps from 6.00% to 5.75%. The stance of the policy was also changed from “neutral” to “accommodative”. The vote was unanimous for both the rate cut of 25 bps and stance change to accommodative.

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Equity Market Review

Indian markets were volatile in the month of May as sentiment remained fragile led by Lok Sabha polling and results along with trade tensions between US-China weighed down markets. However, a strong mandate to the incumbent government cheered the markets. Nifty and Sensex ended with (+1.5%) and (+1.7%) returns, respectively. During the month, Sensex and Nifty hit the all-time high of 40,312 mark and 12,103 levels, respectively.

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Debt Market Review

Indian sovereign bond ended 38 bps lower to 7.03% in May as decline in oil prices and expectations of a rate cut softened yields on government bonds. The yield has fallen the most since November 2016 helped by foreign inflows after Narendra Modi’s election win.

The central bank’s plan to infuse up to Rs 15,000 crore of liquidity into the system on June 13 through open market operations helped lift bond prices, driving yields lower.

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