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MOSL: Morning India (07/June/19): 1. EcoScope (RBI cuts policy rate by another 25bp, changes stance to accommodative); 2. GAIL (The long-awaited final trigger disappoints); 3. Financials (RBI makes key announce

MOrning India (07/June/19): 1. EcoScope (RBI cuts policy rate by another 25bp, changes stance to accommodative); 2. GAIL (The long-awaited final trigger disappoints); 3. Financials (RBI makes key announcements on fees); 4. Bulls & Bear

 

Today’s top research theme

EcoScope: RBI cuts policy rate by another 25bp, changes stance to accommodative

• In line with market expectations, the Reserve Bank of India (RBI) cut its policy interest rates by another 25bp and changed its stance from 'neutral' to 'accommodative.' The repo rate now stands at 5.75%, while the reverse repo rate is cut to 5.5%. No other liquidity enhancing measures were announced.
• Although the RBI kept its FY20 inflation forecasts unchanged, GDP growth projections were revised down. Headline inflation forecast now stands at 3.0-3.1% for 1HFY20 (marginally higher than the prior forecast of 2.9-3.0%) and 3.4-3.7% for 2HFY20 (slightly lower than the prior forecast of 3.5-3.8%). Real GDP growth forecast for FY20 was also revised down from 7.2% to 7.0%.
• Our forecasts suggest that headline inflation would remain subdued at ~3.2% and real GDP growth would also be weak at ~6.2% in 1HFY20. If so, the RBI could cut rates again in August (and probably in October as well).

Piping hot news

RBI cuts interest rate by 25 bps, revises GDP growth to 7%

• The six-member Monetary Policy Committee (MPC) of the Reserve Bank of India reduced the repo rate at its second meeting this year by 25 basis points to 5.75% to address growth concerns. The stance of the policy has also been changed from neutral to accommodative. The decision was unanimous.