How RBI scared Sensex, rupee virtually to death: 10 reasons why
Almost every analyst had predicted a repo rate hike to be announced by the RBI Governor Urjit Patel led MPC. While 50 bps hike was bandied about, what was mostly expected was a 25 bps hike. Instead, RBI shocked with an announcement of a status quo at 6.50%! This immediately sent the Sensex crashing by 900 points and caused the rupee to plunge to an all-time low of 74.290 against the US dollar. Here is how RBI fourth bi-monthly monetary statement for 2018-19 scared the wits out of the markets:
RBI keeps rates unchanged
1. RBI keeps key lending rate (repo) unchanged at 6.5 pc. Reverse repo rate stands at 6.25 pc, bank rate at 6.75 pc, CRR at 4 pc. (Image: Reuters)
Inflation Projection
2. Projects retail inflation to rise to 3.8-4.5 pc in October-March. (Image: Reuters)
Global Economy Outlook
3. Global economic activity becoming uneven, outlook clouded by uncertainties. (Image: Reuters)
Oil Prices
4. Rise in oil prices may have a bearing on disposable incomes, dent profit margins of corporates. Oil prices remain vulnerable to further upside pressures. (Image: Reuters)
Domestic Macroeconomics
5. RBI calls for further strengthening of domestic macroeconomic fundamentals. (Image: RBI Youtube)
Investment Activity
6. Global, domestic financial conditions tightened, may dampen investment activity. (Image: RBI Youtube)
Uncertain Exports
7. Exports outlook uncertain. (Image: RBI Youtube)
Fiscal Slippage
8. Fiscal slippage at the Centre/state to have a bearing on the inflation outlook, besides heightening market volatility and crowding out private investment. (Image: RBI Youtube)
Inflation Risk
9. Inflation outlook needs a close vigil over the next few months, several upside risks persist. (Image: RBI Youtube)
Global Cues
10. Trade tensions, volatile and rising oil prices, and tightening global financial conditions pose substantial risks to growth, inflation outlook. (Image: Reuters)
Next RBI Meet
** Next meeting of the MPC on December 3-5. (Image: RBI Youtube)