MUMBAI, 8 JUNE, 2022 (GPN):

Mr Arun Kumar, Head of Research, FundsIndia Quotes, “The rate hike of 50 bps was in line with market expectations. With this hike, RBI is closer to bringing the repo rate back to the pre-covid levels of 5.15%. The RBI has clearly acknowledged the inflation risks primarily driven by food and commodity prices and revised its FY23 inflation projection upwards by 100 bps to 6.7% (from 5.7% in the April meeting). The 2% to 6% inflation band is now expected to be breached for three consecutive quarters. Given this context, RBI is expected to front-load its rate hike actions. However, the growth forecast for FY23 remains unchanged at 7.2%. Overall, the focus at the current juncture is clearly on controlling inflation and the government has also joined the RBI in an attempt to contain inflationary pressures in the economy. As bond yields have increased over the last few months (factoring in for a large part of future rate hikes), debt fund yields are becoming more attractive (especially in the 3-5Y duration segments).”