Fitch Solutions Forecasts Interest rates cut by RBI

Fitch Solutions Forecasts Interest rates cut by RBI in Next fiscal year

Fitch Solutions Forecasts Interest rates cut by RBI in Next fiscal year

Fitch Solutions Forecasts Interest rates:

On Monday, Fitch solutions reported from its initial assessment of a 40 bps cut, RBI is intending to reduce global interest rates by 175 bps during the financial year beginning on 1st April to curb the coronavirus crisis. 

In 2020-21 India’s real GDP growth expected to rebound marginally from its current estimated 4.9% to 5.4%.  Fitch Solutions expecting RBI going to cut its policy rates by 175 basis points (April-March) compared to 40 basis points. The repurchase rate of policy (repo) 3.40% and 3.00%, compared to currently 5.15% and 4.75%.

In the following months, inflation expected to significantly ease following the ongoing oil price war and also ease food inflation as winter feed (Rabi) harvest continues to run through February, according to Fitch Solutions.

The lower RBI inflation rate of 2-6% over FY20/21 would give the central bank a considerably easier monetary policy. This would make the central bank more flexible. 

“It is expected RBI will significantly ease inflation, as high inflation has previously restricted its ability to lower interest rates in line with other major global central banks,” it said. 

Nearly 8000 people dead with coronavirus across the globe. The Health Minister reported in India they are 147 people fighting with coronavirus, whereas 10 new cases filed on Wednesday from various cities of the country. 

Fitch Solutions: 

Fitch Solutions noted that, because of the high population density in its cities and the insufficient access to healthcare for their large rural population, the number of cases of coronavirus in India is “likely increasing.”

In view of the possibility of global and domestic worsening in the coronavirus outbreak, it has faced downside risks due to more work disturbance and an external demand shock. Meanwhile, compared to a prior estimate of 3.5%, Fitch solutions updated its inflation forecasts for India down to an average of 3% in the fiscal year 2020-21. 

Headline inflation in India already started showing symptoms of ease, 6.6% in February, 7.6% in January, backed by easing food inflation. To deal with Covid-19, some of the major banks held major emergency meetings. 

“Risks to our outlook are in the direction of more easing than we now expect. Higher inflation has reduced the willingness of the RBI to lower interest rates in recent months. 

Stock Market March 18th Update: 

On the third consecutive day, the stock market trading with the bearish trend. The Sensex trading with a loss of 1,254.73 points reached a 29,324.36 level with 4.10% down. Whereas Nifty trading with a loss of 375.35 points reached 8,591.70 level with 4.19% down.

In the border market, S&P BSE Midcap trading with a loss of 568.25 points reached an 11,101.91 level with 4.87% down. Whereas, S&P BSE SmallCap trading with a loss of 626.41 points reached 10,217.38 level with 5.78% down.

Top gaining stocks: Zee Entertainment Enterprises Limited, Yes Bank Limited, Infosys Ltd, Wipro Limited, and Tata Consultancy Services Limited.

Losing Stocks: Bharti Infratel Ltd, Indusind Bank Ltd, Kotak Mahindra Bank Ltd, Bajaj Finance Ltd, and Bharat Petroleum Corp Ltd.

Yes Bank share: The share trading with a gain of 6.80 points reached 65.45 INR with 11.59% up in NSE. Whereas in BSE, it trading with a gain of 6.20 points reached 64.85 INR with 10.57% up.

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