The MPC maintained its GDP growth forecast at 10.5% for FY22. According to RBI, the focus of Budget 2021–2022 on investment-led measures with increased allocations for capital expenditure, promoting the production-linked incentives (PLI) scheme, and rising capacity utilization (from 63.3% in Q2FY21 to 66.6% in Q3FY21) will reinforce the process of economic revival. However, the recent surge in COVID-19 infections adds uncertainty to the domestic growth outlook amid the tightening of restrictions by some state governments. For 2021-2022, RBI has decided to put in place what is termed as a secondary market G-sec acquisition program or G-SAP 1.0, to give it a distinct character. Under the program, the RBI will commit upfront to a specific amount of open market purchases of government securities to enable a stable and orderly evolution of the yield curve amid comfortable liquidity conditions. According to the governor, the endeavor will be to ensure congenial financial conditions for the recovery to gain traction. For Q1 FY22, RBI has decided to announce a G-SAP of Rs 1 lakh crore. The first purchase of government securities for an aggregate amount of Rs 25,000 crore under G-SAP 1.0 will be conducted on April 15. As per the RBI, food inflation trajectory will depend on crucial factors such as the progress of monsoon season, respite from the incidence of domestic taxes on petroleum products, and commodity prices. Taking into considerations all these factors, RBI’s projection of CPI inflation is revised to 5% in Q4 FY21. Further, the projection for Q1, Q2, Q3, and Q4 for FY22 stood at 5.2%, 5.2%, 4.4%, and 5.1%, respectively, with risks broadly balanced. The RBI has enhanced current limit on maximum end of day balance of Rs 1 lakh per individual to Rs 2 lakh with immediate effect. This is a welcome stop in enhancing financial inclusion and expanding the ability of payments banks to cater to the growing needs of their customers. Our View on Markets Today, Nifty reclaimed its 21- and 50-DMA, and managed to close above it. However, the distribution day count remains high (seven), with one expiring tomorrow. If Nifty remains above moving averages and advances from there, focus on quality ideas, ideally from leading and/or improving sectors and groups that are emerging from constructive consolidation. Avoid or reduce risk in lagging ideas, trading below major moving averages. On the flip side, we will change the status to a Downtrend if Nifty breaches its 50-DMA and if market leaders show signs of deterioration in their price actions. If that happens, investors should consider booking profits in stocks that have performed well and have advanced 20–25% from their ideal buy points. Even if the market undergoes a small correction, these stocks are more likely to consolidate and test their moving averages. Further, stocks slipping below their 50- and 200-DMA on above average volume should be sold. Consider exiting stocks that have declined 8% from your buy price.
- The MPC unanimously decided to keep the repo rate unchanged at 4%.
- It continues to maintain its accommodative stance as long as necessary to revive growth.
- Reverse repo rate remains unchanged at 3.35%.
- Marginal standing facility and bank rate remain unchanged at 4.25% each.
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