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MOSL: Morning India (3/August/17): 1. EcoScope 2. Marico 3. PNB 4. Shriram City Union Fin. 5. Solar Industries 6. KEC Int. 7. Capital First 8. Auto (Bajaj volumes nos.)

MOrning India (3/August/17): 1. EcoScope; 2. Marico; 3. PNB; 4. Shriram City Union Fin.; 5. Solar Industries; 6. KEC Int.; 7. Capital First; 8. Auto (Bajaj volumes nos.)

Today’s top research idea

Ecoscope: RBI cuts policy interest rate, but maintains neutral stance; Favorable data to lead to another rate cut in October

In line with market expectations, MPC decided to cut repo rate by 25bp to 6%, but maintained its ‘neutral’ policy stance adopted in Feb’17. The decision was taken with a majority of 4-2 votes. The move was in contrast to our fear that RBI would maintain status quo due to MPC’s bias towards not changing rates.

RBI has maintained its FY18 real GVA growth/inflation forecasts at 7.3%/~3.5%. However, it sounded extremely cautious on future inflation trajectory and is likely to remain data-dependent. We believe that retail inflation will undershoot RBI’s trajectory, remaining below-2% levels over next two months. Besides, GDP growth is likely to remain weak at 6.5% in 1QFY18 – the second straight quarter of sub-7% growth.

We believe that favorable data will prompt RBI to cut policy rates again on 4-Oct 2017.

Piping hot news

RBI makes heavy weather of 25-bps rate cut

After keeping the policy repo rate steady for nine months, the Monetary Policy Committee (MPC) delivered a 25-basis points cut, citing lower inflation, normal monsoon and a smooth rollout of the Goods and Services Tax.​