October a good time to expect RBI rate cut, but need to be watchful of Fed: Envision's Nilesh Shah

Nilesh Shah, Envision Capital MD & CEO

The month of October would be a good time to expect Reserve Bank of India (RBI) to start cutting policy rates as that would prove to be a big booster for this fiscal year, Nilesh Shah, MD & CEO of Envision Capital, said on June 1.

Speaking in an exclusive interview to Moneycontrol, Shah also noted that RBI's decision will also be measured against US Federal Reserve's rate decisions. "Need to be watchful of what the US Fed does on interest rates," the market guru cautioned, adding, "If the US Fed stance is not that of an accelerated hike, then we should be fine."

Shah's comments come in the backdrop of the upcoming Monetary Policy Committee (MPC) meeting, scheduled for June 6-8, 2023. Several economists expect one more pause by the central bank's committee in view of the recent Consumer Price Index (CPI) and Core CPI numbers, as well as a better-than-expected gross domestic product (GDP) at 7.2 percent for financial year 2022-2023.

More so, in April, the Reserve Bank in a surprise move hit the pause button and decided to keep the key benchmark policy rate at 6.5 percent.

However, Shah also mentioned that if the US Fed stance is not that of an accelerated hike in the coming months, then the situation in India should be fine, adding that the "only joker in the pack is what the Fed does."

Meanwhile, news agency Reuters reported that Federal Reserve officials including the vice chair-designate pointed towards a rate hike "skip" in June, prompting a quick reversal of market expectations for another hike as the US central bank weighed the value of caution against still strong inflation data. The Fed policy meeting is scheduled for June 13-14.

Furthermore, talking about variables to be watched out for over the next few weeks, Shah mentioned Fed's decision and the upcoming monsoon "should not be a challenger."

That said, presenting an optimistic approach in view of the recent growth numbers and market upmove, Shah also said that India is in a Goldilocks situation despite economic tailwinds globally.

In a Goldilocks situation, the economy is not expanding by a huge margin with inflation or shrinking into recession. Such a scenario is said to be good for investors as companies perform well and stocks rally.