Market Live: Indices erase gains, Nifty holds 12,100; PSU banks in focus – Moneycontrol.com, Moneycontrol.com

February , : PM IST

Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities: Even as the RBI kept repo rate unchanged at 5. 24 percent, the implementation of the revised liquidity framework as well as the start of Long Term Repo Operations (LTROs) of Rs1, , 0 crore for 1-year and 3-year tenors would lead to softening of market rates. RBI revised up its inflation projections with inflation reverting back to the 4 percent mark only in Q3FY 30. This possibly precludes any policy rate reduction in the near term. However, greater clarity on comfortable liquidity conditions persisting over the medium to long term will aid in transmission as well as lower cost at the shorter end of the curve.

With favorable impact on market interest rates and borrowing costs, the RBI’s announcement of lower CRR maintenance through reduction in NDTL calculation to the extent of incremental retail lending for automobiles, residential housing, and MSMEs could be positive for credit flow in the medium term. Overall, the RBI has delivered positively towards growth and credit without deviating from the inflation targeting framework. Evolution of borrowing costs as well as credit flows need to be carefully watched.