RBI ‘pause’ – impact on investment strategy
The market has generally responded to the RBI pause on rate hikes positively. The financial sector stocks, especially non-banking lenders, have attracted particular interest from investors and traders. The analysts have also been marginally positive on the sector post the shift in RBI stance. The RBI, in its latest policy statement, (i) paused the streak of rate hikes; (ii) maintained the “withdrawal of accommodation” monetary policy stance; (iii) upgraded the GDP growth estimates for FY24; and (iv) indicated inflation to stay closer to upper bound of policy tolerance range (4-6%) with upside risks. For a common small investor like me this translates into the following: (a) Banks may find it hard to hike lending rates, especially the floating rate loans indirectly pegged to the policy rates. It is pertinent to note that most banks did not pass on the entire repo rate hike of 225bps done in the past one year, to the borrowers. (b) The liquidit...