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RBI has increased the repo rate by 35 bps to 6.25% with immediate effect. The current hike is comparatively lower as against the last three consecutive hikes of 50 bps each.
Given the inflation concerns, the RBI continued to withdraw its accommodative stance.
“Inflation has ruled at or above the upper tolerance band since January 2022 and core inflation is persisting around 6 per cent.”, said RBI in a press release.
Sharing his views Nilesh Shah, MD, Kotak MF said, “In a world where central banks are fighting to regain credibility, RBI stands tall managing conflicting objectives of growth and inflation admirably. A data-driven RBI will keep on playing balls on merit and continue to keep the growth scoreboard moving with inflation under check.”
Raj Mehta, Fund Manager, PPFAS MF expects the central bank to pause after this hike or probably pause after one smaller hike. He said, “Given the commentary from RBI regarding the inflation remaining high for the next year or so, we do not expect interest rates to start reducing immediately. We may go through a period of a stagnant interest rate scenario in the near future.”
Nitin Shanbhag, Sr. Executive Group VP, Head - Investment Products - Motilal Oswal Private Wealth said that investors should in debt securities having maturity between 3 and 5 years. “For core fixed income portfolio allocation, we continue to maintain bias towards target maturity funds which invest in the 3-5-year maturity bucket with underlying portfolio being a combination of G-sec, State Development Loans (SDLs), and AAA-rated instruments,” he said.
