Aditya Birla Sun Life Mutual Fund

Key Highlights of the 5th Bi-monthly Monetary Policy Statement, 2019-20, Reserve Bank of India

Dec 06, 2019
5 mins | Views 9083

  • Repo rate unchanged at 5.15%

  • Reverse Repo Rate unchanged at 4.90%

  • Bank Rate & Marginal Standing Facility (MSF) Rate unchanged at 5.40%

  • CPI inflation projection revised upwards from 3.5-3.7% to 4.7-5.1% for H2FY20

  • GDP growth forecast for 2019-20 revised downwards to 5% from 6.1%

The MPC voted unanimously to keep the policy rate unchanged. It, however, decided to continue with an accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target.

Outlook

Growth conditions to remain subdued. Fiscal slippage is likely to keep up supply pressure in the market besides constraining monetary policy space. As suggested by RBI governor, there is a need for coordinated fiscal and monetary policy responses.

It may not be the end of rate easing cycle, however, there are low chances of rate cut in coming months.

Given the uncertainty in both duration & credit, investors may consider short end AAA bond space as it aims to provide reasonable accrual with manageable duration risk. Investors with short term horizon can consider Ultra Short Term fund space while investors with longer horizon can consider funds from Corporate Bond fund and Banking & PSU Fund space.

Source: 5th Bi-monthly Monetary Policy Statement, 2019-20, Reserve Bank of India

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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