Nifty crosses 23,000, Sensex up over 800 pts after RBI revises FY25 GDP growth projection to 7.2%

RBI Monetary Policy June 2024, Stock market today: Benchmark equity indices gained on Friday, June 7 after the Reserve Bank of India (RBI) revised FY25 GDP growth projection to 7.2 per cent from 7 per cent earlier. Amid broad-based buying, the NSE Nifty rallied nearly 200 points to cross the 23,000 mark while the 30-share BSE Sensex rallied 817.95 points to the day's high of 75,892.46 in morning deals after the RBI MPC meet. 

Notably, the six-member Monetary Policy Committee (MPC) RBI decided to keep the repo rate unchanged at 6.5 per cent in its latest bi-monthly monetary policy meeting. The MPC voted 4:2 to maintain the key lending rate unchanged. Read more on RBI Monetary Policy June 2024

Here is what market analysts say about the June 2024 RBI Monetary Policy Review:

Manju Yagnik, Vice Chairperson of Nhar Group, Senior Vice President of NAREDCO

"The RBI's decision to retain the repo rate ensures economic stability amid global uncertainty and domestic inflation concerns. This stability supports the real estate market, making housing more affordable and boosting consumer confidence. It enables informed investment decisions, promoting sector growth and contributing to India's economic prosperity. With GDP growth projected at 7 per cent in FY25 and inflation at 4.5 per cent, the financial environment encourages long-term investments in housing. The recent Lok Sabha elections have further bolstered economic sentiment, enhancing investor confidence through political stability and consistent economic policies."

Adhil Shetty, CEO, Bankbazaar.com

"Inflation is on a declining trajectory, and GDP growth is optimistic. At this stage, the RBI has wisely decided not to lower its guard but to continue working towards ensuring that inflation aligns durably and sustainably with its target.

Borrowers may face continued high interest rates on loans. Since the repo rate directly influences lending rates, an unchanged rate means existing loans remain benchmarked to an elevated repo rate at 6.50 with the possibility of new loans being offered with lower spreads than older loans. Any rate cut in future would lead to lower rates, hence lowering the EMIs that loan borrowers have to pay. However, the fixed-interest loan will not be impacted because of this.

As the wait for rate cuts continues, borrowing costs are likely to increase. However, interest rates on fixed deposits (FDs) are also expected to rise, with banks offering competitive rates to attract more depositors. This is the best time to monitor rates as banks may offer higher interest rates on FDs to attract more deposits, as they try to balance their own lending and deposit rates. This makes it a favourable time for depositors to lock in higher returns on their deposits."

Dhiraj Relli, MD & CEO, HDFC Securities

"Continuing geopolitical conflicts, supply disruptions and commodity price volatility could make the last mile of disinflation protracted and arduous. Although headline inflation has moderated, RBI is targeting a descent of inflation to the 4 per cent target on a durable basis, which could take some time. Consequently, a rate cut seems unlikely in the near term."

V K Vijayakumar, Chief Investment, Strategist, Geojit Financial Services

"MPC’s decision to keep policy rates unchanged, though expected, has a surprise element since 2 members out of 6 were in favour of rate cut. Mr. Jayant Varma was in favour of a rate cut in the last meeting also. This means the number of members in favour of a rate cut is increasing. So a rate cut is likely in the next meeting.
Another positive from the Governor’s speech is the upward revision in FY25 GDP growth rate to 7.2 per cent from 7 per cent earlier. This augurs well for corporate earnings and, therefore, for the stock market."

Murthy Nagarajan, Head-Fixed Income, Tata Asset Management

"RBI governor referred to higher commodity prices as risk to CPI inflation forecast. Normal monsoon is expected to bring down food inflation in the coming months. RBI MPC maintained its stance of withdrawal of accommodation and keeping rates unchanged. 2 members have voted against this resolution. Normal monsoon and fall in commodity prices in the coming months may led to change in stance in August monetary policy. Given fiscal deficit is expected to come down below 5 percent, due to RBI dividend of Rs 2.11 Lakh crores against Rs 85000 Crores expectation, long end bonds are expected to be well bid in the coming months. The ten year is expected to trade below 7 percent in the coming months."

Parijat Agrawal, Head – Fixed Income at Union Mutual Fund

“The policy is clearly focused on price stability to bring headline CPI inflation to 4 per cent on a durable basis. Resilient growth, upgrade in fiscal 2025 GDP projection to 7.2 per cent, volatile food and commodity prices, budgetary announcements would keep the MPC on wait and watch mode for further data. The system liquidity is expected to ease as the government resumes spending.”

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