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RBI's first monetary policy review reaction by Mustafa Nadeem, CEO, Epic Research
The RBI rate cut had been widely expected, in its first monetary policy review for the financial year 2016-17, the Reserve Bank of India announced a 25 basis point reduction in the repo.Mustafa Nadeem, CEO, Epic Research Pvt. Ltd. post monthly monetary policy announcement , says: “The RBI governor was dovish in his first bi-monthly RBI Policy for FY 16- 17 and 25 BPS rate cut is delivered as expe
The RBI rate cut had been widely expected, in its first monetary policy review for the financial year 2016-17, the Reserve Bank of India announced a 25 basis point reduction in the repo.Mustafa Nadeem, CEO, Epic Research Pvt. Ltd. post monthly monetary policy announcement , says: “The RBI governor was dovish in his first bi-monthly RBI Policy for FY 16- 17 and 25 BPS rate cut is delivered as expected while other rates like CRR at 4% and SLR is reduced by 25 bps for scheduled banks of Net demand and time liabilities.
A lot of things are in perspective in present scenario as in Domestic front; with Fiscal Deficit in control along with declining CPI are major factors to act as cushion for RBI governor. While a decline in IIP, at 1.53%, in Jan 16 and unseasonal rains, low reservoir level along with extreme weather conditions projected by IMD makes it imminent in near term that some measures were need of the time. The RBI Governor in his statement has asked banks to pass on the liquidity and clearly maintained accommodative stance. In a Global and Domestic market where policy environment is easing, RBI would also need to keep check on inflationary pressures and also see base effect of reducing interest rates on small saving schemes. The Measures like open market operations and reduction in Daily maintenance of CRR from 95 % to 90 will give banks more space to transmit the liquidity. RBI has also given growth estimate of 7.6% in its meeting for FY17
With That, We believe Market has already discounted the 25 BPS and in near term 7950 -7970 is a strong supply zone which will act as resistance along with 50% retracement of 9119 to 6826 comes at 7985. Bank Nifty also faces resistance at 38.2% at 16350 along with downward sloping trendline from all time highs and it may see some profit booking at higher levels. These are Pressure reversal zones (PRZ) in indices. The downside support for Nifty comes at 7510 and 7290, while, in Bank Nifty 15750 and 15300 will act as support”.
