Oct 05, 2016 07:54 AM IST | Source: CNBC-TV18

RBI Monetary Policy: Rate cut in bag, market to now focus on macros, says expert

Vikas Khemani, President and CEO, Edelweiss Securities said market has got what it wanted - a 25 basis points rate cut, so now the focus will shift back to macros.

The Reserve Bank of India (RBI) on Tuesday cut its key lending—the repo rate—by 25 basis points to 6.25 percent

Read more at: http://www.moneycontrol.com/news/economy/rbi-cuts-repo-rate-by-25-bps-to-625_7569001.html?utm_source=ref_article
The Reserve Bank of India (RBI) on Tuesday cut its key lending—the repo rate—by 25 basis points to 6.25 percent

Read more at: http://www.moneycontrol.com/news/economy/rbi-cuts-repo-rate-by-25-bps-to-625_7569001.html?utm_source=ref_article
The Reserve Bank of India (RBI) on Tuesday cut its key lending—the repo rate—by 25 basis points to 6.25 percent

Read more at: http://www.moneycontrol.com/news/economy/rbi-cuts-repo-rate-by-25-bps-to-625_7569001.html?utm_source=ref_article
The Reserve Bank of India (RBI) on Tuesday cut its key lending—the repo rate—by 25 basis points to 6.25 percent,

Read more at: http://www.moneycontrol.com/news/economy/rbi-cuts-repo-rate-by-25-bps-to-625_7569001.html?utm_source=ref_article

The Reserve Bank of India (RBI) on Tuesday cut its key lending—the repo rate—by 25 basis points to 6.25 percent. The reverse repo stands at 5.75 percent and the marginal standing facility (MSF) at 6.75 percent.

Reacting to the news, Vikas Khemani, President and CEO, Edelweiss Securities said market has got what it wanted - a 25 basis points rate cut and so there is no reason to complain. However, now that it is done, the market will move its focus back to macros like economic growth etc.

With all of the six committee members of the Monetary Policy Committee (MPC) voting for a rate cut shows that all are on one side, said Khemani.

Below is the verbatim transcript of the interviews to Latha Venkatesh, Anuj Singhal and Ekta Batra on CNBC-TV18.

Anuj: The market is cheerful, the market got what it wanted, what next do you think the market will now price in more rate cuts going forward and how would you approach the market from here on?

Sivaram: If I see the data and if I understand whatever I have heard Latha’s talking if the RBI is to look at data and decide on that I am still very optimistic, because food inflation has been a big concern and from the way the rainfall distribution has been and from whatever I heard from agri experts this is being one of the best distribution of rainfall that we have got in many years.

As a result food inflation will come down, my view is that the inflation will surprise on the downside which will be much lower than what RBI is expecting. As the data continues to come there will be a room for some more rate cuts, so I am still optimistic I was very sure of a rate cut I was hoping for 50 basis point, but I think 25 basis point is what we have got, but I think the data would be supportive and we will get some more as the data improves.

Anuj: The market has got what it wanted. A 25 basis point rate cut. And the Bank Nifty of course, has been volatile, but the market now almost at the high point. Do you think the market would be happy with the overall policy?

Khemani: Absolutely. I do not think there is any reason for markets to complain. They have got what they wanted and now it is back to the normal situation of how the economy is picking up, corporate earnings growth is picking up. So, broadly, macro direction of the market is fairly alright and in place and this only is a comforting factor. It is nothing which is worrying.

The vote has been 6-0, so in that sense it also gives that entire committee is one side. So, broadly markets should have no reason to worry at this point in time as far as the economy policy is concerned.

Liquidity stands whether they have said something or not, but I think RBI is already committed that they will continue to maintain the easy liquidity situation and I do not think in this kind of a situation any reason for them to reduce liquidity or cut down on liquidity because we need that. So, broadly by and large, it has been in line and decent policy.

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