Watch out for RBI Policy today: Why is it crucial for markets?
The first key scheduled policy announcement of the monetary policy review by the Reserve Bank of India (RBI) today will be keenly watched by the market participants.Currency Tips
The announcement is crucial for markets as RBI shifted to a neutral policy stance in its February meeting.
Markets will be looking forward to the details of the announcement and whether RBI will provide a guideline on what will be its stance on monetary policy as the financial year progresses.
RBI’s previous assessment suggested that both inflation and growth will pick up in 2017-18 and this assessment so far looks like coming true. This gives lot of confidence to the markets that there will be no rate cut in this particular RBI meet and that the status quo could be maintained. Stock Market Tips
However, in an attempt to curb excess liquidity, if the CRR is hiked, there will be a change in stance from RBI from neutral to contractionary and markets will look forward keenly to such details.
Markets will also focus on the prospects of introduction of new tools to better manage the liquidity condition such as standing deposit facility (SDF).
SDF will allow RBI to withdraw liquidity without having to post collateral. It is widely believed that such a tool will help reduce interest rate volatility and thus help in effective liquidity management.
The comments on exchange rate will also be keenly watched and are important for market. Expert believe Indian Rupee (INR) could be overvalued and RBI’s policy rate decision may influence indirectly where the INR trades.