Below is the quote by Ms. Bekxy Kuriakose, Head – Fixed Income, Principal Mutual Fund on the First Bi – monthly Monetary Policy:
“As was widely expected by market, RBI kept key rates on hold and maintained their neutral stance with a vote of 5-1 in favour of the decision.
The lowering of inflation forecast for H1 2018-19 (4.7 to 5.1% range) and H2 (4.4%) is positive for the markets and should aid in rally in gilt and bond prices. However it is pertinent to note that while RBI has lowered their inflation forecasts, they still continue to sound a lot of caution of various fronts which pose upside risks to inflation- crude oil prices, fiscal deficit slippage risks, staggered impact of HRA increases, reversal in food prices, likely increases in MSP, and slippage in States fiscal deficit as well. Also its important to note that RBI’s household survey as well as Industrial outlook survey show that firms and households expect prices to move up.
Given the ample banking system liquidity and recent measures by govt and RBI on G sec borrowing program, bond prices should remain supported. We expect money market rates to remain benign.”
Attached is a photograph of Ms. Bekxy Kuriakose for your reference.