Aditya Birla Sun Life Mutual Fund

Key Highlights of the Third Bi-monthly Monetary Policy Statement, 2018-19, Reserve Bank of India

Key Highlights of the Third Bi-monthly Monetary Policy Statement, 2018-19, Reserve Bank of India

Aug 14, 2018
5 mins | Views 3258

Key Highlights of the Policy Statement

  • Repo Rate – increased by 25 bps to 6.50%
  • Reverse Repo Rate – increased by 25 bps to 6.25%
  • Bank Rate & Marginal Standing Facility (MSF) Rate – increased by 25 bps to 6.75%
  • Cash Reserve Ratio – The CRR of scheduled banks remains unchanged at 4.0% of their net demand and time liabilities (NDTL).

In consensus with general market expectation, RBI hiked repo rate second time in a row by 25 bps.RBI continued to maintain its neutral policy stance, aligned with its objective of maintaining medium term inflation rate within 4%.

Key reasons cited by RBI forthe rate increase arehardening of inflationary expectations of households,upward pressure on input costs & selling prices in manufacturing sector, volatile crude oil prices, impact of hikes in Minimum Support Prices on inflation.

The inflation projection for Q2 FY19 is 4.6% and 4.8% for H2 FY19 with risks evenly balanced.

GDP projection unchanged at 7.4% for FY19 (the range is 7.5% - 7.6% in H1 and 7.3%- 7.4% in H2) with risks evenly balanced.

Interest Rate Outlook

RBI will continue to be data driven for its upcoming rate actions. A second consecutive rate hike marks quite a swift action by the RBI in reaction to the elevated inflationary risks.

RBI’s inflation projection is in line with our expectation and we believe the key data and the interest rates in the country are likely to remain stable over next 6 months unless any global events dent the sentiment.

Retails investors who wish to take exposure to low duration-higher credit quality funds may consider Aditya Birla Sun Life Short Term Opportunities Fund (An open ended short term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 1-3 years).

The investors may also take exposure to our credit portfolios like Aditya Birla Sun Life Credit Risk Fund (formerly known as Aditya Birla Sun Life Corporate Bond Fund) (An open ended debt scheme predominantly investing in AA and below rated corporate bonds) & Aditya Birla Sun Life Medium Term Plan(An open ended medium term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 3-4 years).

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

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