RBI Monetary Policy Review

The Monetary Policy Committee (MPC) decided to keep repo rate unchanged at 5.15%. The stance of the policy remained “accommodative”. The decision to keep repo rate unchanged and the policy stance “accommodative” was unanimous by the 6 member MPC.

The path of CPI inflation was revised upwards from 3.5-3.7 % in H2:2019-20 and 3.6% for Q1:2020-21 to 5.1-4.7 % in H2:2019-20 and 4.0-3.8 % in H1:2020-21. GDP growth for 2019-20 is revised downwards from 6.1% in the October policy to 5%. H2:2019-20 growth forecast has been revised downwards from 6.6-7.2% to 4.9-5.5%.

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Equity Market Review

Indian equity markets saw broader index declining in the first half of November on concerns around continued weak macroeconomic data coupled with Moody’s downgrade of India’s outlook from stable to negative. Sentiment improved in the second half of the month driven by both global risk-on and positive reforms locally. Market sentiment was buoyed meaningfully following the Supreme Court’s positive verdict on Essar Steel and the Government announcement of a framework for the resolution of systemically important NBFCs under the IBC process. Nifty and Sensex ended with 1.5% and 1.7% returns, respectively

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Debt Market Review

Indian sovereign bond ended flat at 6.46%, (as on Nov 29) almost flat from previous close. Market participant hopes for further easing of repo rate on December 5 to boost consumer sentiment amid macro-economic challenges. The 10-year benchmark G-Sec yield closed at 6.46%, nearly flat from its previous close while that on the short-term 1-year bond ended 17 bps lower at 5.14%. In the corporate bond segment, yields fell across the yield curve over the month. The 10-year AAA bond yield ended 11 bps lower at 7.45%, while the short-term 1-year AAA bond yield ended 20 bps down at 6.00%.

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