RBI raises rates for the fourth time – what can you do?

29 Sep 2022

The Reserve Bank of India, in its monetary policy meeting on September 30, 2022, has raised the repo rate by another 50 basis points, and the rate is 5.90% with immediate effect*.

Key things to know

  • The monetary policy committee has raised repo rates for the fourth time in a row since April. Repo rates have been raised by a total of 190 basis points since May 2022, when the rate hike cycle began.
  • It may continue to remain focused on the withdrawal of accommodation to ensure that inflation remains in its target of 4% for the medium term, within a band of +/- 2%.
  • The Indian central bank has lowered the FY23 GDP forecast to 7% from 7.2% earlier.
  • It has, though, maintained the inflation target for FY23 at 6.7%.

Central bank view

“The Monetary Policy Committee (“MPC”) is of the view that further calibrated monetary policy action is warranted to keep inflation expectations anchored, restrain the broadening of price pressures and pre-empt second round effects,” it said in its statement.

Kotak Mahindra Mutual Fund’s views?

A rate hike might be possible in December, but the overall pace of interest rate hikes could recede.

What can investors do?

  • The yield curve for Government securities has remained flattish, which enhances the case for investors to own the mid-end of the bond curve for now in the 3-5 year segment.
  • A staggering investment approach to fixed income could continue – both from carry perspective initially and potential capital growth subsequently.
  • The case for active and passive funds to co-exist, remains.
  • Investors may consider investing in target maturity funds, dynamic bond funds, and floating rate funds.

 


 

*Source: rbi.org.in, Data as on Sep 30, 2022

The information contained herein is extracted from internal research/different public sources. All reasonable care has been taken to ensure that the information contained herein is not misleading or untrue at the time of publication. This is for the information of the person to whom it is provided without any liability whatsoever on the part of Kotak Mahindra Asset Management Co Ltd or any associated companies or any employee thereof. Investors should consult their financial advisors if in doubt before making any investment decision.

The material includes statements/opinions which contain words or phrases such as "will", "believe", "expect" and similar expressions or variations of such expressions, that are forward looking statements. Actual results may differ materially from those suggested by the forward looking statements due to risk or uncertainties associated with the statements mentioned with respect to but not limited to exposure to market risks, general and exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on our services and/or investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices etc.

This is not intended for distribution or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation. The distribution of it, in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this material are required to inform themselves about, and to observe, any such restrictions.

Popular Articles

image

Starting Strong: Three Important Tips If You Are a First-time Investor

image

Secure your sunset years: Plan for your retirement now

image

Financial education: A Prevention against Bad Money Decisions

image

Starting Strong: Three Important Tips If You Are a First-time Investor

image

Secure your sunset years: Plan for your retirement now

© Kotak Mutual Fund.2022
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
© Kotak Mutual Fund.2022
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
© Kotak Mutual Fund.2022
Mutual fund investments are subject to market risks, read all scheme related documents carefully.