Credit Policy with Anil Singhvi: Why is market so happy with RBI announcement? Expert Ashu Madan explains

After RBI credit policy announcement today, stock market is in a great mood and is moving from strength to strength. Reason is that the RBI policy helped unleash some animal spirits that allowed the market to move a little more on the upside. Zee Business Managing Editor Anil Singhvi dissects the announcements made by Governor Shaktikanta Das with the help of expert panel. So, first of all, investors should know that there is nothing negative in the Policy today nor there are any major positives, says Market Expert Ashu Madan, (Co-Head Business Affiliate Grp & MD of JM Financial Services). Significantly, he added, "Relevance of RBI Policy has reduced in the markets over a period of time. Since the market momentum is extremely strong on the upside, policy or no policy would have no impact on the markets."  

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Madan said that Accommodative stand by the RBI is not negative for the markets either. However, Madan added, "Due to the strong liquidity flow in the markets, if RBI had focussed on improving credit growth within the system, then markets would have reacted strongly. However, RBI didn’t say anything regarding credit growth." 

The immediate takeaway for investors Madan said, is that Market momentum is extremely strong on the upside, if at all there is any fall in the markets, participants should use this as a buying opportunity to invest.  

Jimeet Modi, Founder & CEO Samco Group RBI maintained status quo in-line with street expectations and GDP numbers too have been revised upwards. He said that although increasing inflationary tendencies have been acknowledged, little seems to have been done to contain the price index. In Fact it is assumed that CPI will cool down to below 5% in H1 of FY21-22. In Modi's analysis, "In all likelihood, inflation isn’t going lower given the massive helicopter money across the world created by central banks and run up in commodity prices such as crude, base metals. It is likely to remain elevated given that import restrictions are in place to support the domestic economy."

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Jimeet Modi warned, "Such a growth recipe will have unintended consequences of higher inflation not only in India but across the world which will be the bigger animal to tame a few quarters down the line. However, in the near term this will support recovery in financial markets and will keep the bulls charged in the capital markets."