Majority of market watchers and economists expected the Reserve Bank of India (RBI) to maintain status quo and not change rates in this policy review. For savers and investors, that doesn’t sound encouraging, but that is how the policy played out. This month’s monetary policy review was overshadowed by the upcoming Union budget for 2016. As a result, even the RBI governor seems to have chosen to take a wait and watch approach, highlighting the importance of fiscal consolidation. There was no change on any of the policy rates. At the same time, the inflation expectation for financial year (FY) 2017 was maintained at 5%. One of the big factors that is expected to impact inflation and hence, the monetary policy stand, is the implementation of the 7th Pay Commission. The governor, however, mentioned that this is yet to be accounted for in the inflation target.
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