1 day ago
RBI May Hike Repo Rate as Experts Outline Investment Strategy
The Reserve Bank of India may make borrowing slightly more expensive next week.
It could raise its main interest rate by 25 basis points, from 5.25% to 5.50%.
The bank is considering this because prices have been rising and India’s economy is still growing strongly.
Higher oil prices and a weaker rupee could add more pressure to prices.
Other major central banks have also been raising rates.
Experts say investors do not need to sell their shares just because rates may rise.
They suggest that some investors could add short-term debt funds, especially if they can invest for about three years.
Some experts also favor financial, industrial, defence, capital-goods and selected consumption companies.
The RBI may raise its repo rate by 25 basis points to 5.50% on October 7, its first hike since February 2023.
Retail inflation reached a 20-month high of 4.82% in August, while GDP grew 7.8% in the first quarter of FY27.
Higher oil prices, a weak monsoon, a weaker rupee and global monetary tightening are increasing pressure on the RBI.
Experts do not recommend cutting equity exposure, saying a potential hike is largely priced into markets.
Investors with a three-year horizon may consider short-duration debt funds, while financials, industrials and select consumption stocks are among suggested sectors.
- Who
- The Reserve Bank of India’s Monetary Policy Committee, alongside market experts and investors.
- What
- The RBI may raise the repo rate by 25 basis points to 5.50%.
- Where
- India, amid changing monetary policy globally.
- When
- The decision is expected at the October 7 policy review; the article says the current rate has been unchanged since December last year.
- Why
- Rising retail inflation, higher oil prices, a weaker rupee, strong economic growth and rate hikes by other central banks are increasing pressure on the RBI.
Key facts
- Possible rate hike
- 25 basis points
- Potential repo rate
- 5.50%, up from 5.25%
- Current repo rate
- 5.25%, unchanged since December last year
- August retail inflation
- 4.82%, a 20-month high
- First-quarter FY27 GDP growth
- 7.8%
- Suggested debt allocation
- Short-duration debt funds for investors with a three-year horizon
- Suggested equity sectors
- Financials, industrials, defence, capital goods and select consumption segments
Quotes
V K Vijayakumar
Chief Investment Strategist at Geojit Investments
“There is a high probability of a 25bp rate hike next week. This has become almost inevitable amid rising prices and central banks like the Fed turning hawkish. Reducing equities in the portfolio is not necessary, since equities in segments like banking will benefit when floating rates rise. Investors with a 3-year time horizon can add short-duration debt funds to their portfolio.”
livemint.com
“After a steep correction, the valuation of the Nifty and the Sensex has turned attractive. Also, the market has already largely discounted a spike in oil prices and a monsoon failure. So, one should remain invested and buy the dips”
livemint.com
Sources
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